TAURON Polska Energia S.A. (TPE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen on the conference for the media, investors and analysts with respect to the TAURON Group's financial results for the third quarter of 2023. The host of today's meeting is Mr. Krzysztof Surma, the Vice President of the Management Board for Finance. My name is Lukasz Zimnoch. I'm the Press Spokesman of TAURON Polska Energia Company, and I will be conducting today's conference. Ladies and gentlemen, the presentation will be conducted in Polish, alongside with simultaneous interpreting into English. Outside of the broadcast, you can also listen into today's meeting using the teleconference mode of operation. Already I'd like to ask you to send questions using the form that's available on the broadcast website. That's the only option that you have to ask questions. So, please use that form. Mr. President, let's move on to the presentation. Then traditionally, we'll be holding a Q&A session. Please, let's go ahead with the presentation.

Good morning, ladies and gentlemen. I had the pleasure to conduct the conference for Q3 2023. In Q3 2023, we were dealing with good financial results posted by the group. On one hand, very good financial results, on the other hand, much weaker operating results. This mix of data means that in total, we've dealt, we had -- we're dealing with good data, data regarding revenue and EBITDA themselves were at historical highs. The group posted the EBITDA after Q3 close to PLN 5.5 billion. At the same time, the group also generated higher revenue, more than 20% higher year-over-year, generating more than PLN 32 billion after 3 quarters on a cumulative basis. At the same time, Q3, on a cumulative basis, we posted the net profit of PLN 2,258 million. These good operating data meant that our net debt to EBITDA ratio after Q3 came in at 1.6, and thus, it was at a satisfactory and a very safe level from point of view of a financing agreement. With respect to CapEx, they went up by 11% year-over-year. I will be elaborating on that on the subsequent slides regarding the weaker operating data. Here we are dealing -- unfortunately, we have a decline of the volume of electricity distributed, which is about a 5% decline, regarding the first 3 quarters of this year versus first 3 quarters of last year. We were dealing also with a decline of electricity production from renewable energy sources. The main reason for that decline is the decline of a biomass fired generation unit's output, and the high price of biomass. Regarding the production of coal-fired units, we have a significant decline year-over-year, more than 20% decline. And this was caused both by the electricity consumption decline in Poland, the decline of the production [indiscernible] in the subsequent slides. At the same time, the high coal prices, higher coal prices and the merit order over coal-fired units owned by TAURON Polska Energia. Also regarding based on the profitability of those units in the Polish in the National Electricity System -- National Power System. At the same time, we also dealt with a decline of heat generation. Here, the weather conditions are the main reason behind this. Last year the temperature was lower than the average -- the average temperature was lower than in the first 3 quarters of this year. We are talking, first of all, among, I mean, here the first quarter and the end of Q3 as well because they, as a matter of fact, determine the intensity of the heating season. Regarding the retail electricity supply, also a minimum drop regarding the comparable data year-over-year. Let's move on to the data for Q3 alone. Here, the trends are similar. In terms of EBITDA, very good quarter. In terms of revenue, slightly smaller rise quarter-over-quarter. I will expand on that on the subsequent slides. Regarding the operating data, they are also very similar to the one sort of 3 quarters. Here, what's worth mentioning, the first one -- the first aspect worth noting is the positive growth rate of volumes from the renewable energy sources. And the second aspect is a greater decline regarding heat generation. Here, one have to say -- one has to say that the heating season began last year in September. This year, September was very warm and thus, the heating season got shifted till the next month. If we look at the highlights of this year, most of them have already been discussed by us during the Q1 conference call and the H1 conference call. Let me remind you that the main aspect that was the subject of works of the group, of key importance for the group is works on the negotiations of the key terms regarding the spin-off of the coal assets. We expanded on that during the last conference regarding the events that took place after the balance sheet date, and after the last conference -- earnings conference call. Here what's worth mentioning is the signing of the agreement BGK were of PLN 750 million is revolving credit agreement. And the second important event that's very important from the point of view of TAURON Group is a matter of ratings assigned by Fitch Ratings. Again, TAURON got the investment-grade rating BBB with a stable outlook. And so with significant pointing to distribution as our key segment based on which the earnings and the financial stability of TAURON Group is built upon. Let us move on to the CapEx. Here, we are observing an increase year-over-year by 11%. What's worth noting is that the beneficiaries of that growth with respect to the individual segments year-over-year is the distribution, the renewables lines of business. Let's remember that last year we also used to have the mining subsidiaries in our structuring of our group. And the lack of investment in this area basically shifted significant degree to distribution. It's more than 30% up, the CapEx in that segment. And practically in the distribution line of business, the CapEx came in at close to PLN 2 billion. The key area, more than 50% of the capital spending was allocated to the new grid connections, new consumer grid connection, PLN 1.060 billion. In addition, also the grid refurbishment overhaul spending went up year-over-year. The second beneficiary, the renewables line of business more than 30-plus percent increase year-over-year. Currently, we are in the process of constructing 6 new generation sources, 2 photovoltaic farms and 4 wind farms with a capacity of close to 230 megawatts. The other lines of business, also the CapEx in the heat line of business, the refurbishment, replacement capital spending in generation and quite significant expenditures in the IT and Lighting areas. The very macroeconomic situation of this year was marked by slowdown -- economic slowdown. For quite some time, the PMIs have been coming in a little below 50 points, which means that they continue to indicate a recession environment. This had to be reflected in the decline of electricity consumption. This decline is close to 5%, if we compare the data year-over-year. This, in turn, has an impact upon the decline of production output, this decline of electricity consumption alongside with increase of the imports. Obviously, we know that last year, Poland used to be the exporter and export of electricity prices in Poland were lower than the adjacent countries. This year, the situation is reversed, has been reversed. The pricing in Poland are higher than the neighboring countries. And thus, we are dealing with a change in the balance of the exports and deposit. This year, we are a net importer of electricity. These 2 factors, the economic slowdown, the decline of electricity consumption, plus the electricity imports from outside Poland means that we have a close to 9% decline of electricity generation in Poland. And what's worth noting here is how this decline of production is spread over individual sources. This partly explains the weaker operating results in our generation segment at more than 20% decline. Regarding the volume of electricity generated -- because in Poland, we observed a significant increase of production in the renewables area. We are dealing here with a very close to 20% increase year-over-year. We have a clear rebound, a strong rebound in the production from the gas-fired units. The key factor, of course, is the issue of a significant decline of the gas prices, natural gas prices year-over-year. And we had a very significant decline of production, both from the lignite-fired units as well as the hard coal-fired units. And in the case of hard coal-fired units, as you can see on this graph, generally, nationwide, it is more than 13% decline. In case of our units, it's more than 20%. As I mentioned, this is the result of profitability rates ranking in the merit order. And we, unfortunately, are the negative beneficiary of a decline of electricity consumption or electricity generation from the hard coal-fired units. Let us move on to the detailed financial data for the first 3 quarters of 2023. Here, let me go back to the issue of the revenue. As I mentioned, the revenue, we had a more than 20% increase year-over-year. The main issue here is the increase of electricity sales price. And the second key factor is the increase of the rate, of the price of the distribution service. Here, the rate for the distribution of electricity services, and these 2 factors, to a large degree, determined this increase year-over-year. If we talk about the net profit, here, one can say that for first time since a long time, we had a time when we didn't have major impairment charges, write-downs related to the assets on the Group level. And therefore, the net profit generated year-over-year is significantly higher this year. Second part of it is related to EBITDA. EBITDA also recurring year-over-year, adjusted by one-offs, stripping out one-offs is significantly higher base. Looking at the number of one-off events, we can see how many one-off events took place this year too. Let us remember this year is quite special because practically, there's no segment in our group, which didn't -- that wasn't impacted quite significantly by legislative regulations, which were introduced at the end of last year and also this year. And they had an impact, both on the recurring earnings as well as the one-off events. And this is worth remembering, discussing the full-year results this year. But that's true. EBITDA year-over-year is significantly higher. A positive impact on this EBITDA came from the balance of the -- sorry, one-off events is the balance of the upward adjustment in the distribution line of business. The negative impact came from the provision set up in Q3 in the supply segment to reduce the household bills by PLN 125. An additional positive impact was the -- came from the Rafako damages. And EBITDA alone -- recurring EBITDA is a bit lower than the reported value due to a number of significant one-off events. And on the other hand, it's significantly higher versus last year. Let us remember then, at that time, we had a number of events that had a negative impact, especially on the generation segment. I will expand on that later on. Regarding Q3 alone, here, a significant market improvement regarding quarter-to-quarter comparison. But let us remember, this is the time when last year, we were setting up, first of all, a provision for onerous contracts. Secondly, last year, we were also dealing with an outage of the Nowe Jaworzno into operate. And at that time, at the worst moment regarding electricity prices, we were doing a lot of buybacks on the market. So, that's why such a big difference in the results year-on-year in Q3 '23 versus '22. And looking at individual segments, again, one should emphasize that our key segment is distribution. As always, its results, its earnings make up the key part of our EBITDA. The distributions EBITDA after 3 quarters is close to PLN 3.5 billion. What's worth noting is good or very good results of the generation segment this year. After a very weak result last year and the big loss, wide loss this year, EBITDA in the generation segment already topped PLN 1 billion. Moving on to Q3. Here you can clearly see that the distribution segments are a key line of business, more than 90% of the earnings in Q3 came from the distribution line of business. The negative impact on EBITDA came from the one-off event. This is the provision that I already mentioned. The provision set up in the supply line of business, which is due to the regulation that was introduced. And it translates into the reduction of bills for all the consumers that meet the criteria defined in that regulation. The provision of that, to remind you, that we disclosed, it was PLN 566 million. Moving on to EBITDA and the distribution of EBITDA, demonstrating the impact, how the EBITDA was changing in the individual lines of business year-over-year. Again, you can see clearly that the biggest contributor to the earnings were distribution and the generation segment. As I mentioned, the distribution segment after a very wide loss last year, we have clearly better results and that's why such a big difference in the earnings year-over-year, more than PLN 1.7 billion. In the distribution line of business, let me draw your attention to one-off events. And here, the upward adjustment balance -- I will come to that when I discuss the segment. Regarding the other segments, especially the renewables and the supply segments, one should emphasize here that the earnings of these segments were impacted by the legislative events and the one-off events. The one-off events are related to the supply segment, first of all, and the provision that was set up. Regarding the renewables segment, here, we have the impact of regulations and the price caps that were imposed based on the act and the regulation that had been passed at the end of last year. If we move on to the results for Q3 alone, you can see that 2 segments have a positive big impact upon the increase of EBITDA year-over-year. And the negative impacts came from the distribution and generation, of course, whereas the negative impact comes from the supply segment, as I mentioned before. Here, on this Q3 alone, results, you can see best -- the impact of provision that was set up determined the earnings in Q4. Moving on to the -- in detailed analysis of individual segments. In the case of distribution segment, I would like to draw attention regarding the positive aspects of impact on PLN 3.5 billion EBITDA. I would like to draw attention to 2 aspects. The first one is the upward adjustment balance. I already mentioned it third time because since Q1, this effect can be observed, but it is worth noting, once again, the pricing implication of this adjustment is around PLN 600 million. And it's worth noting in the Q1 of next year, looking at the market trends and the current price on the market, which will be the basis probably for agreeing upon the price with the President of Energy Regulatory Office. In Q1 next year, we'll be dealing with a reverse effect. This is worth noting. We've been noting that since the beginning of this year, it is, to a certain extent, in effect technically one-off. And it's very highly dependent upon the price difference in the market. We do not expect this to reverse, to apply to the entire amount, PLN 600 million, but a part of that will probably reverse in Q1 next year. The second aspect that had a very positive impact upon the earnings in the first 3 quarters is the margin on the distribution service. As a matter of fact, an increase of distribution rate is of WACC and the increase of the distribution rate. As a result, this has a very positive impact and is spread uniformly throughout the year, whereas from the cost point of view, the level of the [ spread ] is impacted by the cost of a difference of the balancing differences, covering of the balancing differences. This balancing difference is not spread so uniformly throughout the year. It's more heavy. The company's more burdened with differences in the first and fourth quarter, especially Q4, the company's burdened most by that. So that's why I'd like to draw your attention to the fact that the earnings per quarter will not be spread uniformly. Already you can see it in the first 3 months, and the earnings for Q1 and Q4 probably will not be spread evenly. Of course, we will be waiting until we watch the final result on the burdened difference. But statistically, it's not spread uniformly throughout the year. This year, due to the cost of balancing difference, it has a significant impact upon the earnings, which you can already see after Q3, because the distribution rate already includes this cost of revenue part, already includes this uniform distribution of costs, while the cost -- this is where the balancing differences themselves are estimated, adjusted after each quarter and they are not distributed evenly uniformly. So, that's why the difference between quarters could be significant. In terms of the negative impact in this segment, 2 issues should be noted. The first one is, of course, the settlement of the regulatory account. We already brought it up before. As a matter of fact, in case of a change in volume in the given year, if we had a positive impact for that reason, [ the interim ] won in a given year, it is placed on the regulatory account. Then plus 2 periods, it is deducted. And by deducting this positive result from the previous year, so then they had a negative impact. So, a good year, 2021, had a negative impact upon the revenue in 2023. And the volume that we are now showing as a second negative impact, the second [ PLN 273 million ], that happens to be the same number. They had nothing to do with each other is a good -- a weaker result this year. The decline of volume, PLN 193 million is also placed on the regulatory account. It will be a return to the company in the end, plus 2 periods, if this balance stays at that level until the end of this year. Regarding the Q3 alone earnings, here we can clearly see that you don't have such a big price impact regarding the upward adjustment. But as I mentioned, this is more visible in Q1. And it's worth noting again that an even distribution of distribution rate versus the cost of balancing difference. Looking at the quality parameters for the distribution segment here, another quarter during which all the parameters set by the President of the Energy Regulatory Office has been met. So as of now, we don't see any risk as far as there's a negative deviation and the impact of a negative deviation on the tariffs next year. So, no negative impact upon the tariff in the subsequent years because we meet the parameters required. Moving on to the renewable segment. In this segment -- as a matter of fact, let me start with the positives. The positive impact came from the volume of electricity generation. Remember that the renewables does not include the biomass-fired unit. This segment only includes the production of hydropower plants, wind farms. And the photovoltaic farms this year is getting better and better year-over-year, mainly due to production of hydroelectric power plants. This volume is roughly about 10% increase year-over-year. We have a slightly higher production from the wind farms. But let us remember that we commissioned new capacities. So the very wind conditions year-over-year have been a bit weaker. And these were the positive impacts, whereas the negative impact comes from the issue of the pricing and the price caps. But we're in a good base pursuant to the act, legal act, and the second negative impact is the declining prices of the carbon credit. The obligation to redeem green certificates was lowered by an impact automatically upon the price on the market and had an impact upon the earnings of renewables segment. Regarding Q3 alone, the impact of those factors had an impact upon the renewables segment is very similar for the first 3 quarters. So, volume production continues to have a positive impact, a little better. The negative impact comes from the pricing issues, both prices of electricity as well as the property rights. In the generation segment, I already touched certain -- some issues, but I'll go back to the last year's issues. Last year, we are dealing with 2 issues. First of all, for a large portion of the year the Nowe Jaworzno unit was not operational, especially in the second part of the year when the unexpected failure occurred in August last year. The company had to buy back electricity at very high prices on the market, which generated, of course, a large loss. We disclosed that in our regulatory filings. In addition, the company had to set up a provision for onerous contracts. Let's remember that last year, the hard coal prices went up significantly. And it led to a lack of profitability on some contracts concluded in the preceding years on the market, and we are not dealing with the situation this year anymore. This year, the prices of contracts, of course, concluded still in 2022 versus the forward prices of market in 2022. They cover both the hard coal prices, which, of course are high. In addition, this year, we are dealing with a stable operational unit. And even if buybacks, for instance, due to the fact that the units are not operating due to the recommendations of [ TESA ] or due to the profitability of it. From a commercial point of view, we are dealing with a positive result on the buybacks of the year. Over here, situation is completely different. Last year, we had to buy back at very high prices, much higher than the ones we had contracted. We generated a major loss for the TAURON generation subsidiary. This year, situation has been reversed. All the buybacks that we do on the market generated positive result, which means that year-over-year, we have a significant -- very significant leap in the EBITDA generated. The second factor, which is of lesser importance, but still significant had a one-off event that we also mentioned during the previous conferences is the settlement of Rafako contract and the damages received because of that in the amount of PLN 225 million. Regarding the earnings of Q3 in the generation segment, you can see even more clearly the difference that I mentioned. Let us remember, August last year, failure of Nowe Jaworzno unit. In addition, we show provisions for onerous contracts. These 2 factors, stripping them out, means that year-over-year, we have very strong growth of the earnings. However, you can see the EBITDA itself for Q3 is quite strongly normalized. And in general, it's not as high, PLN 128 million. Also, to a certain degree is due to high hard coal prices on the market. If we move on now to the supply segment, here the key element is a one-off event that I already mentioned, the setting up of a provision were of PLN 125 million of provisions set up in Q3. It significantly reduced the earnings year-over-year. However, here it's also worth noting certain positives. Regarding the positive aspects, again, this year, we have fully passed on cost in tariff G, which, of course, had a positive impact upon the earnings of the segment. Negative implications, negative impacts come from the write-downs, from impairment charges. The financial condition of some customers has deteriorated, and therefore, for some accounts receivable, we had to book a write-down impairment charge. And this impairment charge had a negative impact on the earnings of the segment. Another negative impact comes from the value of write-down of -- the majority of the write-downs in TAURON in contrast to the other electric utilities in Poland, and this is focusing TAURON in a supply agreement about 30 plus -- PLN 30 million plus has been booked as this write-down, had a negative impact on earnings. If we move on to the Q3 earnings of the supply segment, as a matter of fact, the key event that I again repeat is the provision that was set up. And this provision meant that practically, the entire EBITDA result in this quarter was consumed by the provision that was set up. Moving on to the debt and financing topic. Now as I mentioned, after the balance sheet date, we signed a loan agreement with BGK. At this point, we have about PLN 4 billion of available financing. The maturities over the next few years are not very large. Of course, they are significant, but not very large. And the earnings generated at the EBITDA level, as well as good management of working capital means that after Q3, we have a net debt-to-EBITDA ratio of 1.6, which is a very satisfactory level. Nevertheless, the key aspect for the financing area in the subsequent months, years, will be the issue of spinning off generation assets, because this will determine the ability to obtain financing. Also from the liquidity point of view, the issue of payment for the CO2 emissions will be a certain challenge in the subsequent years. If this segment were not to be spun-off from a point of view of provisions of a finance agreement, not so much the availability of the financing itself. That's all regarding the data and the presentation. Let's have a Q&A session.

Number of questions have been sent. Some of them very elaborate. Let me remind you that the only way that you can ask questions is to use the form available on the broadcast website. The first question. What is the reason for such small write-downs for the price change fund payout? It was PLN 450 million. At ENEA, it is PLN 2.1 billion. And at PGE it's PLN 4.8 billion. So, Mr. President?

Well, first of all, let me start with the structure of the production supply and sales of individual utilities. Let us remember, in PGE, first of all, in their case, the structural electricity generation production is totally different than in case of TAURON. TAURON basically is player #3 on the market, with relatively small share in electricity generation market. PGE is #1 player. ENEA, number 2. So the generation segment in our group has a much lower weight than the other energy groups. Secondly, the issue of profitability of those units. Let us remember that we have a lot of 200 megawatts units now in our group already. In our presentation, you could see how low the production is, how much it dropped year-over-year in the generation segment and plus the amount of impairment charges. Of charges -- I'm talking about the charge in the generation segment. As I mentioned in the presentation, major portion of charges or charge in the supply segment. Of course, the price caps are different in this segment. This price cap is based on the margin. And basically, the charge appears in the supply line of business in TAURON Polska Energia around the PLN 30 million, PLN 35 million. And the generation segment is only PLN 65 million. As I said, it is due to the volume that is generated and the profitability of electricity generation. That's such why -- the reason for such a big difference in the charges between our energy groups.

Another question on a group of questions. Does the company see the risk of setting up a provision in the supply segment with the company's interpretation of the President of Energy Regulatory Office? Regarding the incorrect settlements performed by the electric utilities in case of TAURON, in contrast to PGE, we see higher bills invoicing for customers versus what's legally required. Was it justified? Were the customers excluded from the act on the cap on the margins?

I will not be answering for PGE. I will start with a simpler part of the question. I haven't analyzed the approach of PGE regarding the issue of incorrect billing. As of now, no one has determined that yet. First of all, we are dealing with certain interpretation of the President of the Energy Regulatory Office. Of course, in our company, we reviewed it. We are analyzing it. We're also conducting legal analysis regarding this topic. However, let us remember that the first analysis in the case that -- in the case then why one should make a charge based on -- book a charge based on the hypothetical revenue, based on the initial review what was not published on the Energy Regulatory Office's website is difficult to agree with this approach. However, let us remember that here TAURON is a member of [ energy ] trading association. This association also sent a letter regarding this topic to the President of Energy Regulatory Office. Of course, we identify aligning with this position. As I said, we are in the process of analysis. If that situation were to occur, the company came to the conclusion that its approach is incorrect regarding making charges to the price difference fund. That would make the calculations that we have to set up a certain provision and make an appropriate disclosure, regulatory filing in such a case. But as of now, as I said, we are in the process of analyzing this topic. And the first review indicates that calculating the charge on the hypothetical revenue -- revenue income is not justified.

Next question. Has the company taken part in this year's renewables auctions? What capacity does the company require for what sources? Did the company receive the entire amount of claims agreed upon as part of the settlement agreement with Rafako? And once again also let me read the number 3 question, number 4 regarding the Rafako deal. Have all the provisions of the settlement agreement with Rafako being implemented? Did TAURON and Rafako cooperate regarding the Jaworzno project or any other project?

Well, let's go one by one. Have we taken part in the auctions? No, we have not taken part in the auctions this year. Regarding the receipt of the funds, yes, we have received relief from Rafako for bank guarantees. Yes, the funds have been received. Have everything been fulfilled? Basically, yes. Of course, we have one more item regarding settlements with the insurance company. Here, we both ourselves and Rafako expect a certain payout of damages from the insurance company, but it doesn't have an impact upon the implementation of the provisions of settlement agreement that was completed. So let me confirm that all the funds we have received and the settlement agreement has been implemented, has been performed.

Regarding to what was -- do TAURON and Rafako still cooperating regarding any project or any other projects?

Well, TAURON having -- following the conclusion of settlement agreement, TAURON fully supervises the operations and is operating Nowe Jaworzno unit. Rafako is not involved in that. I'm not familiar with any projects where we were to cooperate as of now with Rafako.

Another extensive question from Editor, [ Savitsky ] from [indiscernible]. In conjunction with a tariff-related regulation, the reduction of electricity prices for household by PLN 125, will TAURON submit requests and application for an adjustment of tariff for this year still? What is the position of TAURON regarding the guidelines, regarding the price difference payout charge? Do you share the charges also related to the -- applicable to the compensation for the profit, loss? So how much would TAURON have to pay back, if we were sticking strictly to the guidelines of Energy Regulatory Office?

So let's start with those questions first. So in conjunction with the tariff regulation and the reduction of household invoices, will TAURON submit a petition, an application for an adjustment of the tariff for this year? TAURON hasn't submitted such an application. And as of now, as far as my knowledge is concerned, it's not intending to apply application for a tariff adjustment for this year. However, in line with the regulations, of course, we have submitted the tariff applications both in the supply area and the distribution area, and we are in the process of -- tariffing process regarding the tariffs for next year. And of course, those tariff applications may also be referring, may also have references regarding to the payout to the customers of PLN 125?

The second question. What is the position of TAURON regarding the guidelines for the calculation of a charge to the price difference fund? Do you share -- do you agree with the interpretation of the President of Energy Regulatory Office that the charge should also be applicable to the lost revenue payout? How much would TAURON have to pay back if you were to -- in line with the interpretation of Energy Office?

Well, I already answered this question partly. It seems that this interpretation is excessive, I would say. It would also be applicable to the hypothetical revenue. Of course, for our own needs, we are calculating that, but we are in the process of calculations, how much it could be. It's not a simple calculation. We are practically looking into each contract. We're trying to make these calculations. However, this position that was presented as of now seems excessive.

Next question is related to coal contracting. What is the situation regarding the coal contracting for generating units for 2024? Have the contracts been already signed? And why the CME price -- hard coal price was at such a record level despite the fact that we already passed that peak of energy crisis?

Well, regarding the contracting issue, we are in the process of commercial negotiations. I don't want to disclose too much. Of course, we are very highly sensitive. And that 2 of the companies is in the process of agreement. Some of the contracts might be close to finalization. Regarding the rest, with reference to the index, let us remember that the index has had historical feature and contracts are also historical. So, this was reflected also in our earnings, both contracts for electricity that we are performing today, as well as the hard coal contracts were concluded to a large extent last year, so during the energy crisis. And as I said from my point of view, we take decisions on signing contracts based on the margins of CDS that we can obtain. So if the contract has a high electricity price, then the hard coal price can also be higher. So this index, in fact, reflects the situation from last year and the performance of last year's contract, not so much. It doesn't reflect the current market situation, the contract from subsequent years. However, in the subsequent years, we will see factoring the execution of the index in the company's report.

There is a fourth question from [ Antoine Savitsky ]. We are seeing the extension of a decision about maintaining 100 megawatt units until the end of 2028. According to the decision -- in line with the decision following the trial, your opinion on this? Does this -- is this decision about the extension of the 200 megawatt unit extension by 3 years is final? Will there be some overhauled plan and the potential correction of settlements with NABE, National Energy Security Agency?

Well, in the impairment test, we assume the estimated revenue from potential capacity market. Of course, this capacity market has not been finally approved yet. So, this does not predetermine definitely, either the extension of life cycle of these units or about the overhauls. This is just an assumption, an assumption that was made for the impairment test purpose. I mentioned about the -- already answered about the overhauled. The correction of the settlements with NABE, National Energy Security Agency, it's difficult to speak about it. Let us remember that we have prepared everything for the spin-off of the coal assets. What will be the formula of the spinning off of those assets? We'll probably find that out in the coming weeks or months at a time when the government will be formed. It's a government concern. Therefore, we are, of course, prepared for the spin-off, but it's difficult to speak about the correction of any settlement because National Energy Security has not been yet set up.

Ladies and gentlemen, and Mr. President, this was the last question that we have received. As we refreshed, just to check if there's anything else. No. That was the last question during today's earnings conference call. Let me invite you for the next meeting directly following the publishing of 2023 full year report. We will provide the information about the date of the conference in a traditional manner. Thank you very much, and see you next time.

Also, thank you very much. Goodbye. Have a nice day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]