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

Good morning, good afternoon ladies and gentlemen. Welcome to the conference -- earning conference representing the financial results of Tauron Group for first half of this year. We have with us Grzegorz Lot, President of Management Board of Tauron Polska Energia; Krzysztof Surma, Vice President of Management Board for Finance; Pawel Jablonski, Executive Director for Portfolio Management; and [indiscernible] Executive Director for Investments. My name is Urszula Podraza. I am responsible for operations of press office of Tauron Polska Energia. After the presentation of priorities of management board, Mr. President, please.

Good afternoon ladies and gentlemen, both present offline and online. Six months ago, we had the first meeting review. We promised that it would be our good practice. We are in the full team here. We have a bit of a vacation time now. therefore, our colleagues are traveling. However, we are confirming also, but we have excellent directors and lady directors that are with us. So we have directors, the Mrs. Director as well for communications. We have the entire team. We are at your service during the conference and also after the conference. And of course, just as you have already experienced 24 hours a day 7 days a week. Ladies and gentlemen, 6 months ago, we presented in front of you our directions of our operations. I'm referring to what we've managed to achieve, what we continue doing and how much determined we are to have the vision that we outlined for you during the press conference to implement it. Let me start with what is most important, what is the core of our company, the 6 million customers connected to the grid -- distribution grid who are buying electricity from us and our will is to have this energy to be green and best it would be produced using our assets. Customer in the center, a few other things. The organization is changing in this direction, the individual lines of business starting from the distribution, customer service, supply heat are converting to become more customer-oriented. The organization built in such a way, the KPIs are set in such a way so as to see, first of all, the customer in front of us. All we do is customer, the distribution model that we are building for a long -- for some time now has a customer as its focus. So our paradigm for the distribution line of business, it's a very competitive line of business. Ladies and gentlemen, a customer who comes today to Europe has a choice between Poland and other countries. If he comes to Poland, he can choose our competitors or Tauron distribution. We, with our grid connection conditions, with our approach to the customer, flexibility of a grid and security, safety and the distribution rates, we either attract or repel this customer with investor. And in the long term, we would like to place -- to set ourselves very ambitious KPIs, not only in categories based on number of connections, but the sales of distribution services and obtaining -- acquiring new customers because there are more investments, the more customers on our territory and Tauron's historical area of operating nationwide, but the area where our core business is located. It will be growing, will be expanding. This is good for the local communities, local government. This is also good for inhabitants of this region, and this is the main element, a strong cooperation between the utility, electric utility, distribution company, the supply company and the local institutions, the population and the local business. In order for it always to happen, I'm looking all the time with the customer. We're not talking about the strong distribution, efficient and safe, but also green energy. We have had tens or hundreds of meetings with various investors, customers who speak unequivocally to invest here. I need to have grid. I also have -- must have green energy VSG requirements. The competitive market requirements, what we are operating on are clear, the price and also green energy, these are the main directions of our operations. Here also, not to keep you any longer because we got your feedback, but we should be a bit briefer in the communications and give some opportunity for bilateral conversations. We promised on the 22nd of June, we put forward a new offering Tauron New Energy for our customers, up to now 34,000 households took advantage of our offering, 9 years of price guarantee of totally green energy, energy coming from our wind and PV sources as well as hydroelectric. 34,000 times the average volume of 2.2 megawatt per hour -- that's almost 7 gigawatt hours of guaranteed electricity supply over the coming years. This shows our -- demonstrates our business model, but indicated, based on our customers, cooperation with our customers, who we are building our assets and the energy we are producing using our assets, we are placing -- offering to our customers in order to build comfort, trust, confidence, ecology as well as a competitive advantage. At the same time, in line with the same model, 3,500 business customers [indiscernible] offering. This offering time is for 5 years. So this is the point of view we are showing, somewhat 70 -- 170 giga of energy electricity contracted with a guaranteed price and electricity coming from our sources. This demonstrates the potential for our growth, our investment capabilities, opportunities in these areas. Today is 28 terawatt hours of sales. That's the first thing. I'm talking to you about the spinning off of coal assets. I know that some questions come up during the bilateral meetings. Ladies and gentlemen, how determined we are to offer a green energy. We are also working on spinning off of the coal assets. The product is still live under way, we are keep talking to the Ministry of State Assets. Our works are being continued to be one of the highest priorities at our company, but I'll -- also would like to say that after the 6 months of our work and managing this company, I know that irrespective of the decision that will be taken according to one model or the other model, the company will continue to operate and determination over time frames, but you define within the European Union will bring about the full independence on "CO2" and will guarantee for customers cheap and green energy. So there'll be many questions, so I will not continue this topic. The compensation of the heat segment, very key aspect again. Our colleagues from the heat line of business will present in 2 or 4 weeks, the full strategy for decarbonization today, unequivocally it's not a single one good technology that could bring about certain decarbonization. Therefore, we are developing hybrid solutions both electrodes stores and energy storage facilities and the gas engines and the biomass-based solution with a hybrid solution, depending upon the specifics of a given area. However, in the plans that we are talking about, we have a full decarbonization in the business -- of this line of business, and the goal is to have an efficient energy company will be providing green energy and energy at the socially acceptable prices because this element, the price of heat is a very socially sensitive element. It's not the point to build or invest, but to build in such a way and invest in such a way to transform this heat segment in such a way so that our customers are able to consume this heat. The expansion of renewable assets. From the beginning, we started meeting we knew that 0.7% of capacity installed at the end of this year. We have practically 1 gig on the projects underway. Once we start discussing it matters, we'll talk to you about which projects will be connected -- will be electrified already this year. We have a pipeline of projects for the subsequent years. And with like a waterfall force, we are moving in this direction. We are developing renewables, energy segment. I talked to a number of partners about the corporation. We also ideas how to build it from bottom up. So this will be -- the details we'll be sharing with you energy storage facilities. We are at the stage of so-called permitting certification, we will be entering the capacity market as of -- at the end of this year. We'll be submitting such applications. It's a several hundred megawatts that we want to submit, but we are thinking about this initiative in the categories of such a business. We see the price differences during the 24-hour time frame. They are getting bigger and bigger, and we are offering a large business potential. This is the direction we are going in. Regarding the distribution, the projects are going in line with the plan, are on track, 2.9 billion last year we had. Let me look at Krzysztof -- 2.7 today. We are already topping 3 billion and this is the direction we are moving in. Distribution requires a lot of CapEx, but also, we're looking according to such a model that attribution is not only reactive actions, but also proactive to build such areas as we explained in such areas where we'd like to proactively invest in the grid. So jointly with local governments, cities, the local community to invite, attract investors here to develop of economic power of this region. Financial stability. Krzysztof will share the details of that, but however the covenant is at the level of 2.3, so it's a comfortable level. We'll talk about the write-downs and the thing that happened, why it happened about the company is stable in the business sense, respect for the shareholders and [indiscernible], I don't have to repeat it. Because we are here also I had a number of meetings between the earning conferences with you each time when any investor in a way that is in line with regulations and principles, ask us for a meeting, for an interview, we are ready. There's been several meetings. At least several that took place. I'm looking at Pawel -- you're confirming that we are always ready to meet and we cooperate it. And ESG, we keep emphasizing. We are operating according to the values, according to the rules, all the processes and transition changes that we are implementing must have that DNA of ESG changes. We are working very intensely on the strategy, and that's what we're working on now. We had the stage of the first strategy that we did at the group wide level, also preparing the operational strategies for each business line that we have in our group. And I think as of the end of this year, we'll be presenting a group-wide strategy as well as the operational strategy. We are moving the bottom up and the top -- top-down and we combine these 2 approaches. We'll be showing you -- will demonstrate to you how we want to proceed and work on the -- in the subsequent years. We also introduced a new business model for the entire group. This is the operational model or business model based on the business units. We divided it all in the business unit. So creating value, creating products, starting with [indiscernible] generation through renewable distribution heat. As part of those business units, we have subsidiaries consolidated. We are looking from a business point of view as the group for all these business units as well as creating value, of course, form of management according to the commercial companies. But the main management body of a so-called business review meetings but define and verify and of course, the just activities taken within each business unit. By the end of this year, we will also implement -- will update the group's code that demonstrates not only from the business point of view but how formal this should work, how the decisions are taken one of the elements, if it so the reduction of so-called [indiscernible] management. So we're inviting heads, bosses of individual business units to manage the group. So part of the AGM will be -- VGM will be representatives of our all business units with respect to unbundling to principles. You take the decisions from the group point of view, which all will lead to the situation with the competitive advantage that we have to build and maintain is realistic. Ladies and gentlemen, these 6 months 80%, 90% or even more of our energy was spent on the business area, creating value, customer infrastructure relation, but also the time during which we are performing audits, we are verifying everything, how the group is operating, what can be improved. This time of audits, the first day only condensed during the March -- July time frame this year. The main areas we are verifying, it's not everything, but the main area that we focused upon, whether sponsorship deals, the CSR contracts, communications, all the court administrative proceedings, cybersecurity and the issues related to the human resources management of recruitment, the compensation, bonuses and so on, please excuse me. Okay. At that time, we completed 16 audits, very specific detailed audits. What's most important is the fact that we took the decision, those audits are performed in-house. So using the internal audit team that is reporting to me partly. But first of all, is reporting to the Audit Committee and the Supervisory Board. So the structure is in line with the best practices regarding internal audit. And the main areas of those audit that I mentioned, the sponsorship agreements, CSR, external and internal foundations, grid assets selected areas, so-called spotlight was placed on the selected elements, cybersecurity, how we are prepared, what can be improved in best respect. Promotions, compensation, bonuses, renewables, investment projects, how this process was carried out. A lot of things were happening. The purchasing process as well as the assets sales, these are the main topics. The effect of these activities include 3 cases reported to prosecution office. Sponsorship and CSR agreements which is the PLN 8.5 million. This is the amount that was reported to prosecution office and the prosecution office has accepted it and of course, partly accepted, partly not. The donations made, this is PLN 4.1 million that was also reported to the prosecution office and the issues related to the grid assets was more than PLN 1 million. These are the main -- 3 main elements we reported to the prosecution office, where the outcome also, the audit that we completed, there are several hours activities that will be now carried out. I don't want to talk about it upfront. I will show you later on the effects, the outcome of several activities regarding foreign investigative auditing. Now we selected external companies. There are 3 companies that are supporting our TPE headquarter -- head office, but we will undergo the same process, repeated at the business units of our subsidiaries. And these are areas starting with deepening of the sponsorship deals, sponsorship issues. We have several projects that in our opinion, shouldn't be implemented, several investment projects related to the purchasing. And I will be talking about it once we have launched this process, and I will talk to you about the earnings conference call. If you have questions, I will answer. But for me and for the entire management board and I can say for the entire management, we have a clear message here focus on positions on the customer and grow, the expansion. These are the natural things, let me put it this way, but the audit for us is a natural element. We are improving the organization, enhancing it and we're doing -- will be also continued over the next several years. And to during the time, we will no longer be members of management board. Subsequent management board should continue that because in the world as today, only continuous improvement enables successful competing -- can be successfully for customers and to maintain the competitive edge. So much for me as far as introduction now. Krzysztof?

Welcome. Ladies and gentlemen, I will speak about the financial results of the group over last 6 months. I'll start with the operating data because, first, we determine the financial results. If you look at our key segments, in the Distribution line of business, we had a slight decrease of volume of electricity distributed. This is, of course, in line with what we can see in the macroeconomic areas of economic growth and the overall increase of consumption of electricity in Poland. Regarding the Renewables, we also had a slight increase versus the first half of 2023. However, here, there was a certain allocation of sources. We produced a bit less electricity using the hydroelectric power plant. The hydroelectric conditions were weaker during the first 6 months of this year, but we produced a little bit more electricity using the wind farm, mainly thanks to the newly deployed wind farms. Regarding our conventional energy electricity generation, these are the weakest results in other -- 6 months. What we recorded, a decline of production by 7% this time, our [ 12 ] megawatt units. Other units are closing the system basically and the first ones to be shut down by the operators. That's why the production in these generation, these 2 units, is dropping as compared to first 6 months of 2023 by as much as 17%. The next segment that -- where we also observed the decline is the Heat segment. Here, it just happens that the volume of Heat also declined as compared to the first half of last year, but it is mainly caused by the outdoor temperature in the first half of 2024. Outdoor temperature was significantly higher as compared to first half of 2023. Regarding the Supply segment to the final customers, retail supply, also, we observed the decline versus last year. Reasons for several, we did include some large customers leaving us that also led to a large volumetric decline. But also, we are dealing with a regular trend of production increases by our customers, both consumers in the household segment, but as well as in the small and medium enterprise segment. There's more and more installations, speedy installations but satisfying some -- meeting some of the demand of those customers. That's why the trend of -- downward trend of decrease in volumes year-over-year is also visible. If you look at the financial results, which I also mentioned determined by the operating data, we have a major significant decline of revenue of 35%. This is some of factors I've already mentioned. So the decline of Supply sales to the customers and the decline of production in the Generation segment were the reasons. But also, we were dealing with a significant decline of electricity prices on the market, and the volumes times -- the price led to the situation where we are dealing with a 35% decline of revenue year-over-year. Regarding EBITDA, also, we observed an almost 30% decline. But on the subsequent slides, I will be explaining to you. But we -- as a matter of talking about the significant decline in reported EBITDA level, if you look at the comparable EBITDA, then the decline, of course, is there but is no longer as material year-over-year. If we look at the net profit here, this net profit is -- the loss, as a matter of fact, at the net profit level is caused by 2 major material events: first of all, a large impairment charge of a write-down in the conventional electricity, both in the Generation as well as Heat segments. As I mentioned in the beginning, the coal-fired units at [indiscernible] are demonstrating an ever-lower profitability, so based on the new price projections recently that we adopted and the impairment test related to recurring value led to the PLN 1.6 billion, the write-down impairment charge in this segment; and the second reason for -- was -- net loss was the issue of write-down of the assets due to the deferred tax. Since we roll down a lot of significant portion of Generation assets, so we will not be able to recover the losses from the [ previous ]. So as part of tax was also had to be written off. Regarding the capital expenditures, we are flat practically year-over-year. However, I'd like to draw attention to the fact and my colleagues will -- Mateusz will probably be expanding, elaborating on that on the [ further ] side. But I'd like to indicate here, about 75% of spending was allocated to the Distribution line of business. Another 12% was allocated in the Renewable segment. I mean, it's almost 90% of our capital spending is carried out in the 2 segments of our company, namely the Distribution segment and the Renewables segment. Regarding the net debt-to-EBITDA ratio, as the CEO mentioned, it's stable year-over-year. I will be elaborating, talking about the debt and financing, but this ratio is at a stable and safe from the covenant point of view level. Let me hand over floor to Pawel Jablonski, who will speak about the trends on the market, and then I will continue talking about the results at the EBITDA -- comparable EBITDA level and the individual segments.

Good afternoon. Let me give you a brief information on the market, exactly the same way as it was presented during the previous earnings conference calls. We are presenting prices of key instrument that have an impact upon the results of TAURON Group as well also a certain backdrop for what will be presented for later on in the presentation, that of the individual segments. It's clear that these prices, to a large extent, determine the margins that we are achieving, earning individual lines of business of our group. It's important to indicate that the horizon, the time frame that we are showing these 4 graphs, I will cover them in more detail in a second, this time frame is not accidental. It indicates how we are looking at the market based on what time horizon, time frame we are undertaking hedging activities so as to preemptively take up certain actions and hedge the commercial, the trading position of our group. It's also worth mentioning that our hedging policy is a preemptive policy, to a large extent. Its purpose is, of course, to support the strategy that the CEO described in the beginning, in particular, the element related to the financial stability. So the goal is to build the profitability of trading units of our group, but what's important, while protecting the risk. Hedging is the risk related that to as a group, TAURON Group, we have a low risk appetite related to the offering on the market. So to that extent, preemptively, we are analyzing the market and take actions way ahead of time. So we can see here a 3-year time frame on these graphs. It's also worth mentioning the fact that the group has been changing recently and will be changing even faster. So we are placing our bets on the renewables, and we are changing the offering for the customers. The President was talking about the 9-year offering for the households, which also requires a change in the hedging policy, and this is being actively undertaken by our group. Now moving smoothly over the 4 graphs. Of course, the most important one, the key one is the price of electricity. On the graph in the upper left corner, we can see the futures prices. And in the blue, we can see the spot market prices. You can clearly see that we are continuing the downward trend, a very strong downward trend following the crisis that took place in 2022. The entire 2023 meant that it declined by half, so from the PLN 1,000 per megawatt hour to PLN 500. The spot market for first half of the year was at the level of PLN 370, so more than 30% lower than a year ago and more than 50% versus the futures market. There are several reasons for that. The most important one's being the fact -- the changes on the cost factors of price of fuel, price of hard coal and the price of carbon credits. I will expand on that in a moment. Definitely, the economic situation impacts [indiscernible], so the change of structure generation in Poland. We've seen major changes over the last 2, 3 years: of course, material increase of production by the Renewables; the increase of the production by the photovoltaic farms, more than 35% on PVs; on wind farms, 25% year-over-year, talking about the first half of this year versus the first half of last year. Regarding the electricity imports, which also has a major impact on the prices, this is a similar -- flat versus last year. We're observing a slight decline, but it continues to be at the 2 terawatt hours levels. This all means that the units that are closing -- the system -- the hard coal-based fired units are being pushed out. That's why we're observing the declines of production as President Surma mentioned in the first part of the presentation. Regarding the coal prices, we are showing here 2 graphs, one global one, the ARA futures contracts for the delivery of coal, and the Polish index PSCM1, which is -- has a bit of a structure, namely demonstrates what is the price of coal that was delivered to the coal-fired units. So this is, in fact, exposed index. And you can see a certain shift between both graphs. However, in both cases, we're observing here the declines in this year. Regarding the first half of this year in terms of hard coal in the Polish market, this has declined by about 30%, from the PLN 31, PLN 32 per gigajoule level down to about PLN 22 per gigajoule. ARA prices, also we have declines, a bit slower because ARA responds faster than our index, the first half of this year versus the first half of last year. It's a decline in the region of about 20%. Regarding the carbon credit, the CO2 emission level, it's the left graph at the bottom, we can also, here, downward trends with the correction in the second quarter. Of course, this also determines the declines of prices on the Polish market. However, we can observe very high volatility of this index. This year, practically PLN 30 spread between minimum and maximum, making high and lows, quite a material volatility versus last year. Of course, there are several reasons here: definitely, the demand side, so a lot of production using the conventional units; but also the supply issues. So the increased volume on the primary market due to the REPower program in place. And the final graph on the -- in the right-hand bottom corner, so the output, the outcome kind of result in the graph from the previously -- 3 previously discussed, so CDS, so Clean Dark Spread, so the difference between the revenue/incomes of energy and the variable costs. Here, based on the spot market prices, so the 2 graphs -- why 2 graphs? Because we are presenting 2 efficiencies. The first 35% is of 200-megawatt units. And the other one for the 1,000-megawatt unit, so better efficiency rate, 45% of less efficient units. This index is at very low level, so, which in the case, there is no possibility to place them on the electricity market. Regarding the battery units, we can see it's closer to 0 on the futures market. It looks a bit -- battery, it enables us to place those units on the futures market. However, here, the comfort of its hedging is much lower in this profitability despite the fact that part of our preemptive actions, we have positions hedged and we take actions to have the best hedging to protect this value in the conventional line of business. Still, this element has a negative impact upon our unit. Thank you very much.

Thank you, Pawel. Let me go back to the EBITDA issue that I already indicated at the very beginning. We were trying to show to you a comparable EBITDA. We adjusted EBITDA by stripping out in -- the first half of last year and the first half of this year, but stripped out the one-off events. And having adjusted, stripped out the one-off events, this EBITDA -- comparable EBITDA is slightly lower. And as a matter of fact, it's reached in the first half of this year around PLN 3.5 billion, so less than 5% lower than we reported in the first half of last year. The main event had an impact upon it. You probably have already seen it, and you -- both in first half -- or first quarter of 2023 and the first quarter of 2024, these are the revaluation effects in the Distribution segment. That's the key factor of that -- it's the difference between the 2 individual years. We also had the write-down or charged to the difference -- price difference payout. We had damages paid out based on the settlement agreement regarding the Jaworzno megawatt -- 910 megawatt unit in Jaworzno. We had also another event related to the positive tax interpretation regarding the bonus of PLN 185 received by the customers, namely the VAT tax that's accrued can be deducted so -- which means that the provision that we set up last year, we're able to release part of it in first quarter of this year with respect to the VAT tax. So this means that the EBITDA is slightly lower but not as material or that you would have an impression of when you look at the reported value. Moving on to the individual segment results. It's worth emphasizing again that the key segment for TAURON is Distribution segment, again, more than 50% contribution to EBITDA coming from this segment. As I mentioned, if it weren't for the events related to the revaluation of the balancing difference, this contribution to EBITDA would have been even higher. It's worth noting here the good results, good earnings of Supply segment the first half of the year. I will elaborate on the second half of the year when I discuss the results of this segment. At the same time, I like to emphasize the weaker results of the Generation segment. You can see that this segment in this first 6 months of this year had the lowest contribution to EBITDA. I'm not talking about the EBIT that I already mentioned and the write-down impairment charge. But at the EBITDA, we only have 156 million coming from this segment, which indicates a worsening situation, deterioration of the conventional energy segment and the coal-fired units. Comparing to the other 2 segments, the Renewable segment and the Heat segment, one can say that both these segments have installed capacity several times lower than the Generation segment. However, the EBITDA is significantly higher, which just demonstrate the situation related to the potential spinning off of those assets or the economic operation. Cost of operation of those units in the future will be of key importance for the entire group. Moving on to the next topic, namely the individual segments. Let's start, of course, with the key segment for our group, namely the Distribution segment. As I said, EBITDA -- reported EBITDA year-over-year, significantly lower. However, we have this effect that was already presented in the first quarter of this year, so the issue of revaluation. Let us remember the revaluation of the customers -- just a few more words on this topic. I think it's a topic that's difficult to grasp. But the customers -- not all customers are -- they're reading some [indiscernible] on an ongoing basis, especially in the G tariff and the smaller households. At the end of the year -- at the end of each reporting period, there's the revaluation, and this revaluation of electricity consumed by the customers, as a matter of fact, reduces the balancing difference. But we -- in the financial statement, we are talking about the difference period-over-period. And individual periods, the price is -- there is different of electricity. This electricity was much more expensive in 2023. This year is much -- the price is much lower, therefore a comparison of 2 balances. Effectively, it reduces this revaluation as adjustment in the grid losses. However, in fact, due to this -- due to the fact that the price this year is much lower means that the balance-versus-balance comparison means that we have a negative result. Of course, this result is not directly cash result. It's a booking. It's an accounting effect. As we declared during the previous earnings conference call, we are working on a model that -- to a less and lesser degree would have a lesser, lesser, lesser impact upon the results of the Distribution line of business period-over-period. And the first element of this change should be stronger feeding of -- to the model with the readings from the remote readout meters. Because today, we have around -- 1,250,000 of significant portion -- more than 20% of the customers have such meters. And if we manage to feed that data from those meters, it will mean that the effect -- this effect will be smaller in the subsequent period. The second effect will be the lower volatility in the market. Pawel mentioned the price was dropping from a very high level in 2022 through a relatively high level of 2023 and now low and lower level in 2024, and we have a stability of the price on the market. And it seems that if the stability in the subsequent years continue, so the impact on the result of the segment will be getting lower. Regarding the other effect of the government in Distribution segment, the positive impact of the regulatory account. Again, we are talking about the balance year-over-year because of regulatory accounts still in 2024 is being accounted for, for distribution. It gives a negative result for the Distribution segment. Next year, it should be reversed this trend. But year-over-year, this is a positive effect. This year, the difference -- so the charge due to the regulatory balance is lower. Regarding the margin on the Distribution service, here, the main business element, it is higher year-over-year, first of all, due to value of regulated asset base and the higher WACC that was accepted for this year. But remember in 2023, we were dealing with about 18.5%, now we have 10 -- about 10.5%, and we will be observing what will be happening in the subsequent years. The other results are -- as a matter of fact, we have additional revenue due to the resolving of the power collisions and additional grid connections. Regarding the quality parameters that are already displayed on the screen, basically, the group, as of now, fulfills majority of quality parameters. We are on the Board regarding the time to install new grid connections, but -- jointly with TAURON Distribution subsidiary, we are discussing this. And we are doing our best, that the parameter is set by the President of Energy Regulatory Office are not exceeded. And in subsequent periods, we'll be working on optimizing these areas, so over the time it takes to connect the customer to grid is as short as possible. Regarding the interruption durations, we at a safe level versus the targets set by the President of the Energy Regulatory Office. Because of that, we're not expecting any risks regarding the lowering of our tariff in the subsequent years. Moving on to the next segment, the Renewables Energy Sources. We have a significant increase of EBITDA year-over-year, the key element being the price effect. Here, one could be -- start thinking about it why -- since the prices are dropping year-over-year, we have a positive impact. But let us remember that, last year, we were dealing with the freezing of the prices. The renewable sources had a predefined -- upfront predefined price. Therefore -- and -- thus, the abolition of this freezing means that we had a positive price effect year-over-year because the margin from electricity generation is purely market-based. Regarding the volume, as I mentioned, a slight increase year-over-year, transferred between the hydroelectric power plants and the wind farms. And the negative impact on -- was affected -- the same as the negative impact there, carbon credit prices, property rights prices. In addition, it was -- additional negative impact came from the fact that some of our wind farms lost the right to receive green certificates. You know it very well. After 15 years from the -- starting operating wind farm, the wind farm under the old regime was losing these privileges. So in this first 6 months of this year, one wind farm lost it totally, and we have one -- another one lost some of it. Moving on to the next slide. We have the Generation segment that we already described a bit today. Pawel also show to what the prices were like and the CDSs. Unfortunately, the declining profitability of these power plants means that year-over-year, we have a very material decline of the margin. If we were to answer why the comparable EBITDA year-over-year was lower, one can say that was the segment that was the main reason behind the lower and comparable EBITDA after stripping out the one-off events, so the main reason being the much lower profitability and the lower CDS on the coal-fired units. The positive impact came here -- in this segment came from the heat tariff and the reduction -- slight reduction, maybe not a slight but a decline of fuel price. We are talking about, first of all, coal. This had a positive impact upon the Heat segment, heat that is being generated by -- partly by these units. Additionally, this year, we didn't have this one-off effect related to the settlement agreement, related to the construction of a 910-megawatt unit in Jaworzno. That's why this EBITDA in this segment is significantly materially lower year-over-year. Moving on to the Heat segment. In the Heat segment, similar in case of electricity, we are dealing with a negative comparison year-over-year, the same reasons behind it. So the profitability of sales generated by the coal-fired unit is much lower, but we have a clear positive effect of a positive tariff on heat tariff and additionally supported by the operation of the biomass-fired units and the lower cost of purchasing coal. If you look at the comparable EBITDA, year-over-year, it's almost flat because we stripped out the TAMEH result. Then this EBITDA, year-over-year, would have been almost flat. Let us remember, the much weaker result of TAMEH is what we communicated already now at current reports, together with filings. One of the subsidiaries of TAMEH holding -- TAMEH holding has 2 subsidiaries, TAMEH Poland and TAMEH Czech Republic. TAMEH Czech announced its bankruptcy. -- declared its bankruptcy. That's why, this year, we have no financial results coming from them in this area, that's why a much lower impact up on the Heat segment that TAMEH was assigned to. The Supply segment, as I mentioned, to good results -- good earnings in this year. We had a full coverage of, first of all, G tariff. All the costs were covered. So that's why the margin in this segment was positive. We were also dealing with things that had a negative impact on the segment, unfortunately, what I already mentioned, the loss of volume and customers. A positive one-off effect was tax interpretation that I already also mentioned. What we would like to highlight, talking about this segment is -- let us remember, we published it in our current report. Let us remember, so from July 1, the tariff was changed. The tariffs will not cover the costs in the second half of 2024. Therefore, one should assume that this result cannot be easily multiplied. You can easily multiply the first half of the year times 2 and have earnings of Supply segment in the second half. The other piece of information, we also provided in the archive vault, assuming there will be no changes, the tariff was set for 18 months. Therefore, the 18-month tariff will fully cover or should cover those costs that would not be covered in the second half of 2024. Therefore, we should -- the return on the tariff should be visible in 2025. That's why -- why am I talking about it? Because this is -- as we are talking about the outlook for this year. So this outlook, because of the fact that this tariff was changed, tariff from July 1, then this outlook for this segment also changes at this point in time. As a matter of fact, one more piece of information, very brief, about the financing and debt. As the CEO mentioned at the very beginning, we have a stable level of financing, a stable level of financial stability of entire group. The first thing you can see here, that the net debt dropped by around PLN 2 billion year-over-year. This is a positive effect. However, I will have to add here that, this year, also the regulation change regarding the timing of redeeming the CO2 emission allowances. The CO2 emissions allowances last year had to be redeemed by April latest for the previous year. This year, we can redeem those carbon credits until September. And of course, due to the value of money over time, we are taking best -- the best option. And these emission allowances, to a large extent, were purchased after June 30, which, of course, has an impact upon the level of net debt. The second piece of information in the context of -- to emphasize the stability of group regarding the financing availability. At the end of June, we had a close to PLN 6.5 billion of available financing. And the group, for a number of years, has been conducting a safe, secure financial policy assuring its financing at least 12 months ahead of the need for such financing. And this financing, the number gives us an assurance that the group has a guaranteed financing for at least 12 months forward. Regarding net debt-to-EBITDA ratio, as I mentioned at the beginning, it's a stable level, around 2.2. Of course, this is significantly lower, below boundary level that is outlined in some financing covenants, which is 3.5. That's all for me. Let me hand over floor to Mateusz, who will present the CapEx in our group over last 6 months.

Ladies and gentlemen, regarding the CapEx activities, in first half of 2024, we spent PLN 1.865 billion (sic) [ PLN 1.859 billion ]. It's an amount that's similar to what we reported in the same period of last year. However, the restructure of capital spending has certain differences. In the current year, it was mentioned, 75% of CapEx was allocated to our Distribution line of business, which means PLN 1.4 billion spent on installing new grid connections, refurbishments and replacements of grid assets. It was also worth mentioning this amount, about PLN 180 million higher as compared to the same period of last year. The second key segment regarding our CapEx is the Renewables segment. The investments in this segment first half of this year came in at PLN 232 million. They are related, first of all, to the projects that are underway now, these are 8 renewables projects, but I will elaborate on more in a moment. However, what's important, this amount is related to the work progress for these investment projects, acceptance of individual milestones. So between periods, these amounts might fluctuate a bit. Generation, PLN 40 million of CapEx, exclusively, practical refurbishment, upgrade CapEx related to our Generation assets and the overhaul schedules of such units. These are related to the life cycle of individual units -- of individual assets. The Heat segment, PLN 53 million (sic) [ PLN 43 million ] of CapEx in first half of 2024, allocated, first of all, to the new district heating connections, new consumers and maintaining and upgrading both district heating and the Generation assets and the implementation of projects in the gas units in Katowice. And the other operations segment in this year, first of all, the IT investments in our customer service, about PLN 82 million and the operation of our lighting business, which is roughly PLN 30 million in CapEx. Next slide, please. Yes. On this slide, we can see our Renewables projects, which are currently underway. As I mentioned, these are 8 projects with a total capacity of 364 megawatts. I think general message would be that all these projects are being implemented without any material schedule overruns. And moving on to project by project to the most advanced ones, Mierzyn to start with. It's a project that's practically we can say is at the stage of commissioning. It generates -- so this still, we are at the home stretch. Regarding the format, like to be able to say that the project has been completed. Warblewo, Gamów, let me speak about these projects jointly because they had a similar work progress level. As a matter of fact, we are conducting the acceptance activities from our contractors, works, and up to now, no major surprises, no major comments. So I can say that the deadline indicated here is not under threat. And 2 projects that are a bit of an earlier stage of implementation: Nowa Brzeznica, first of all, 19.6 megawatts. We just completed the GPO, the main -- energizing the main power supply point, and we are about to deliver the wind turbines to the site. We did an initial route review. Everything's prepared, and we are inviting contractor to start the installation; Sieradz is relatively early stage. We are preparing the foundations for mounting the -- for installing the wind turbines. Up to now, it's all according to the -- going out in schedule, right on track. So we cannot -- we don't have any complications, but it's end of 2025. The completion date is under any risk. And the PV farms, PV projects, the Proszówek photovoltaic farm, they're advanced -- highly advanced project. The PV farm already generating electricity. The acceptance work's underway, and the final aspects of calibration related to this, after the end of this month, we should have it as part of our assets. Balków, an early stage of implementation project, was important. This is our own development -- in-house development project. We had the stage of preparing the engineering documentation. The key components have been all that we are waiting for. The deliveries, we are preparing the construction site. Similar situation regarding the Postomino project. These projects were -- this was taken at the similar time. So the work progress on these projects is very similar. It's worth mentioning regarding the Postomino project, this is our cable pooling project, which is connected to our wind farm in Marszewo, so the first contribution of this type, but we're implementing it in our group up to now.

Thank you very much, gentlemen. Now the time has come for the Q&A session.

Let's start with the questions from the audience present here. [Operator Instructions]

[ Piotr, High Voltage PL ]. I'll ask several questions at one go. The first one regarding the spin-off of the coal assets. Based on the statement made by the Minister [ Worowski ], it seems that it's not going to happen very fast. So the question is what's the strategy of a group versus these -- respect to these assets? Are you planning to put forward some of -- all of coal units for -- submit them for the additional auctions between '26 and '28? The assumption that already is also clear, there will be no auction for 3 years, but it'll be 1 year auctions. And the business has not been taken. When will the decision be taken? The second question is related to the decline of sales. Can you show, as PGE, the assets in what segments the sales decline? One -- PGE has 1 terawatt in the A segment, Group A, which is very interesting. What's the situation in your case? That's all for now.

Let me start with first question. First thing is that as a group, we have 2 options. We can spin off those assets. We don't have to spin them off. We can spin off some of them. Regardless, the company will survive in the market. The second thing is that we're fully determined to implement the program of becoming more and more green. That's one thing. Whether the assets will be spun off now or in a year time or in 2 years' time, will not answer because it's clear that it's a decision-making process, to a large extent, is beyond our company scope. Our message is -- but for us, the spinning of hard coal assets for us is a highly preferable solution because it gives us a lot of investment options, and this is the main element. However, if spinning off of Laziska doesn't materialize, so we'll still be implementing it. But based on various models, it doesn't have to be based on the balance sheet. So therefore, we are preparing for each of those scenarios. Which scenario will be the ultimate one? We'll see in the coming months. Based on that, we will present our strategy. Regarding the capacity market, that's true. For a long time, we were fighting. But in the business sense, we're fighting for the freer capacity market because this would have been an optimum solution from the point of view of investing overhauls that we have to carry out. It would be ideal solution for us, as we communicated before. And I did -- I can say that the capacity market ends in 2025. And starting from 2026, there are only 2 units on the capacity market regime. I'm talking about the 200 megawatt units capacity will not be there anymore. And while the support with today's prices of electricity and what Krzysztof mentioned, they will not be cost efficient. Well, the economic -- prove themselves economically. So the existence of 200 megawatt units is dependent upon the support mechanism. And where do we stand? Gentlemen, we are counting -- we're calculating the spending the CapEx required for overhauls. That will be quite depending on how much money we'll have to spend next year for the operation of such a unit in 2026. So based on that, we'll be taking by decision. So if you really think of it, practically, I'm talking about something like that we have 10 units that we can place on the capacity market. However, each of those units will have a different pricing, so will be a different strategy. But these are details that I have to leave within our organization because it's an element of our strategy. We are preparing for that, very much detailed, very, very much these levels, not only to the trading, but also the technology, because part of the technicals of each of those units, each of those units requires different level of CapEx for upgrades, refurbishment and overhauls in 2025 for them to be able to operate in the subsequent years. Have I answered your question?

Regarding the second question, we were -- displayed this information, if you could again display Slide #17. And that's where we are showing -- 16, yes, 16. And here, it's -- we are clearly showing that the loss of volume took place in all customer groups. But that's true, the larger decline we reported we observed in Group A. So I think without disclosing the name in the previous year, a customer for our Supply subsidiary was one of the distribution companies. This year, it was no longer our customer. So this is the -- had the largest impact on loss of volume in Group A. In the G and C group, especially, we have an increased number of customer generation. And the full volume is declining year-over-year. The same number of customer consumes a lot of volume basically because they self-generate. They're using their own general structure [indiscernible] distribution companies due to the fact that the operators organized tenders or so-called losses and the -- so that's why you can withdraw those customers. It's a highly specific and maybe individual discussions. In the off-line, we can discuss the details. But of course, if you want to know more about it, of course, we'll be able -- we can answer it here.

My name is [indiscernible] 1:02:25, [ Business Other Poland ]. I have 2 questions. The first question regarding -- the President already mentioned it a bit, but I'd like to get more details on because there's a program to refurbish that 100-megawatt units. A lot was talked about it over the last few years. What is the prospect of refurbishing these units to bring them to a condition to a more flexible ability to operate? And the second question regarding the CapEx issue, the pump storage Roznów 2 hydropower plant that has plans to expand this power plant last year mentioned. Is this still being implemented? And according to what schedule? Has there been a decision -- CapEx decision made?

Well, I will continue the spin-off over units. Well, you rightly mentioned that a lot was being talked about it. And I will draw the curtain on this topic. There was time to prepare -- [indiscernible] units to make them flexible. Today, we have -- September, the capacity market expires next year. And the prospect for further operational 200-megawatt unit is highly restricted. And who will spend hundreds of millions or billions of PLN for this type of investment project without a guaranteed return on this investment. So this is the decision that would have to be taken. Looking at our units, they can operate until 2028, 2030. So we are able to invest in those. At least, they can survive until that time. We can present such an offering, we can function until 2028. These are relatively rational outlays. But following 2028, for various reasons, those outlets will have to be much higher. But easily -- but until 2030, these units can be operated. But to invest as a Management Board, for us to invest in those units, we'll have to know that there is a prospect of getting a return, a payback on this business. So this is the question. And now in a situation where we have contracts or auctions, 1-year contracts, so looking at such units as with a 1-year prospect, 1-year outlook, so to submit an offer, a bid on the capacity markets, so I will see that there's a probability of winning this auction. When? We'll prepare it, and we'll be operating. And it is also a chance that in the subsequent year, the entire year, we'll be submitting the bids of those units that will be used in first year. We'll strip out those units that require more spending in 2025 and less efficient. Those units that will not be used under the capacity market will have to be shut down to replace. I mean, we'll have to develop other solutions for commercializing the so-called sites. This is one of our strategic elements and a place where we're -- it's an excellent infrastructure. So the post coal development is under special care in our actions. So those units that will win the first -- recruitment of first capacity market auctions have a chance to take part in the subsequent so -- and so on and so on. So we have a 3-year time frame, 3-year outlook. So to move -- to look beyond that, it's difficult for me to speak of any details. So we look at it from a commercial point of view. But once there's a demand for such services, on the market, we are able to submit such a bid, of course, on the economic terms.

Regarding the pump storage project, power plant projects, let me confirm, that project is being continued. Let's start with the [ mantle ] issues. We believe that such a project is needed in the national power system. Secondly, we believe that we own one of the best sites in Poland regarding -- in terms of building such assets. Currently, the project's under -- on the -- at the planning stage, working on developing the optimum variant version for implementing this project to bring it to the stage where it'll be ready for construction. As far as the investment decision, it's difficult to say today when this decision will be taken. The process of preparing expansion project, it takes some time because, definitely, it'll be dependent upon the level of CapEx for this type of project available, support mechanism and, as of the moment, of taking such decision and the system services in the interest of various partners in this type of investment projects.

Please speak to the microphone.

Well, the situation is as follows. It's a very costly difficult investment project. It could be an excellent investment project. On one hand, we have a large energy storage facility that will be operating in several years' time. And situation is such that today -- situation is that we, as a sector, but not only company, but in the current circumstances, specific segments, we are talking about the coal sector, about the growth of -- expansion of renewables, we're talking about the energy storage facilities, we're talking about the peakers of gas engines that have to -- issue of capacity availability rate. So much -- so many answers and so many unknowns. We're taking a decision here and now with an option of commercialization in more than dozen years. It's very dangerous. So when decision was taken a few years back in -- on investing in large coal-fired units, so we can see today, looking back, if someone had known once the decision would come like we have it today, so would the decision have been taken to build such large coal-fired units? Maybe different mix could have been -- but it's easy to look at it in hindsight. But you are not doing that. But we need to draw conclusions from what has happened then. We are preparing this project. It seems very interesting, but this project, Roznów, will be competing against [indiscernible] storage facilities that are being implemented now. So we have to think of -- count what the demand and supply of the large [indiscernible] will be and whether a room for such a large storage facility and whether there's a chance to get profitability out of this project. But let me put it this way, that under the model that we are developing, such a project needs partnership. There must be a number of parties involved, interested and engaged in order to have potential benefits, and the major risk with our involve here could be spread over a number of entities.

Pawel Puchalski, Santander. I'd like to continue the topic of 200 megawatt units. You mentioned that you are at the end of a curve. Is my understanding correct? The capacity market, that is to provide the support still, is kind of like a solution for everything. But we, in fact, don't know what values we are taking for everything? Is it so that the amount's supposed to come to TAURON would be unsatisfactory? Will TAURON proceed to shut down those 200 megawatts, they are at the end of the curve, that life cycle will be pushed out?

Well, in this way, it's difficult to maintain the units that aren't generating a positive result, even at the 0 plus level. So we are preparing ourselves. So the messages that we are providing to you and to the shareholders, we're also conducting these communications with our people, the social board, the people, the workforce, we say, unequivocally, the coal-fired units, that the capacity market will make expiring, those [indiscernible] will not be profitable, have to be shut down. And instead of them, we'll have to find a different solution, a different model, business model we are looking for. As a matter of fact, each case, each site is being analyzed on the basis that's where we want to position our new business. But truth is that it was a capacity market auction. We put -- submit 10 units today and 6 out of them just to have more, just on purpose. I'm giving you this example. There are no -- there's no specific numbers behind it. But let's assume 6 of them will be under the capacity -- will be operating for another year. The other units will have to be shut down as of the end of '25. And instead of that, we have to find some new business. But as of now, in our considerations, we are not accepting such a model. But the units will not have a -- not be under the capacity market, will not be operating, will be maintained just to keep the fleet -- maintain the fleet.

Clear. But in line with the same topic, one of pains up to now in the first half of this year in the commercial generation for TAURON is the expensive hard coal that was purchased before and is still being burned. I'd like to find out if the current volumes of hard coal consumption by those units, until what time you will have enough of expensive coal? Or to rephrase it, when the results of the segment will improve, for this very simple reason that the expensive hard coal will be burned and new one will be -- that was purchased at lower prices will be used?

Let me answer the question regarding the expensive hard coal, these are the -- well, the contracts concluded for 2024, in particular. And now we are bringing down our inventories, and we are replenishing it with the new contracts that replaced very expensive hard coal with cheap hard coal. So next year, probably there will be not too much excessive volume that was bought at the high price. On average, we'll have fuel price at the market level.

Let me add to what Pawel mentioned. Let us remember because it's also -- the accounting method is very important because in the financial statements, you will actually see the hard coal is valued at an average price. So it's not first in, first out. It's -- gradually, the cheaper coal bought on [ going banks ], we'll be gradually reducing the price and thus will lead to an improvement of the earnings. Partly, it already can be seen. If you're talking about the Heat segment and the Generation segment, part of this cheaper fuel is already there. But so far, it hasn't pushed out fully the more expensive fuel that was purchased. And Pawel mentioned the positive messages, that gradually, we are reducing the high hard coal inventory levels. And in subsequent year, it'll be better seen the cheaper purchase of fuel.

Based on what I hear in here. The second half of this year, still, you will be burning the expensive coal from last year's purchases, correct?

Partly. As I said, it's not so.

Okay. And another question. You mentioned about your large potential pipeline in the energy storage projects can be implemented only you obtain significant or some auction-based support. Or are you also considering the construction of such projects even without the auction-based support?

The capacity market is on the -- has a certain percentage share in this business. However, we are -- irrespective of capacity market for energy storage facility, we are preparing the entire investment pipeline as a business that strongly interconnected to the expansion of Renewables. I have a question from you, whether the storage facilities -- the [ last case ] storage facilities in a reasonable amount, plus the distributed to disperse storage facilities, we are working on that. We have 6 million customers. As a product, we are also strongly engaged in. Plus Heat, that's, for us, is an excellent energy storage that we can take advantage of. This is the model that we are building. And based on that, we'll be doing our CapEx projects. Respective of capacity market, the energy storage facility that you mentioned is an important, strong element of our strategy. To add to what our CEO mentioned, let us remember the big projects that -- and [indiscernible] environment protection fund launched. We also launched a large energy storage facility program. It's in initial state. But also, we are hoping that the energy storage facility will not join capacity market. Some of the environment do not -- are not applicable to the capacity markets. Some of them can use this aids, funds or -- so from a business point of view, we're going to do that, but also looking at other available fund in the market. So we're not going to see a program but will provide subsidies under the national environment protection fund. Let me just add with the model that I keep describing, we have to provide to the customer -- to the business customer in the household, 100% of green energy. Green energy understood is a low carbon because it could be nuclear, all the other elements that are considered as low carbon or 0 carbon. This will be possible once we have an excellent management system. So power is possible for creating such a model -- management model, which, on one hand, will combine generation production on one hand and the customer and the storage -- energy storage facilities. So storage facilities, production, generation and the DSR, these are components that are required to make sure that we can meet the demand for electricity at the reasonable prices and meet the demand using the low emission, 0 emission, 0 carbon electricity.

Another question. Offshore, along with PGE, you are co-owner of one of the licenses. Are you taking part in any conceptual works when these license of yours, yours and PG, could be partly involved, participate in the auction or you're not dealing with it for now and this is up to PGE?

We are a minority shareholder of the projects. So our role is more passive. But we are very open, however. But once offshore comes online to be a counterparty with [ BPL ], it'll happen some time in the future. But to answer your question on yes or no, yes, we are more passive. We are focusing on other areas more.

Robert Maj, Securities -- Ipopema Securities. I have a question regarding the gas projects because recently, speculation surface but PSE -- the TSO might encourage companies to build the gas-fired projects despite the units. So if it were to happen, out of your portfolio of current Renewables, can anyone be converted into gas? Lagisza, once there was a concept to convert it. If not, any other projects could be in line with that strategy?

Well, large-scale gas-fired units, we are looking at it, but it's a very difficult project. So this is not -- the construction of such a large-scale gas-fired unit, it's a very difficult project. But what you're saying, the so-called peakers or gas projects, gas units that could satisfy the demand for the -- during peak time, talking about a few percentage during the year of electricity demand, we understand that. We can create such an offering. We are conducting analysis. We are looking at our site where we have such types, where we have access to gas, with accesses of -- commonly available in Poland today. So once such demand comes up, surfaces for such a service, we are -- we'll be able to invest in such a project. I know we have the capacity.

Well, yes. I'm returning to the question. There was a project to convert Lagisza to gas large unit is not probably an option.

Well, let me just mention, but there was not a project to convert coal-fired unit with a gas-fired unit. We have a project where it was supposed to -- a new [indiscernible] unit was to be built. And of course, we are analyzing that we are -- haven't struck down this location yet. Beside, we are preparing it analysis for the heat market because this unit was supposed to be basically mainly a unit for the [indiscernible] heat market in the Silesia and Zaglebie metropolitan area. But we are analyzing it now, and we are looking at what capacity will be optimal based on the current situation on the heat market. So the Lagisza unit is definitely being taken in account. However, we haven't made a final decision about its size.

Regarding the contention, the dispute with TAMEH. Could you give us some update? What's the situation as of today?

Well, generally, the dispute with TAMEH or dispute with Mittal regarding TAMEH, in fact, but we are still at the stage of conducting a dialogue. We don't want to get into too much details of dialogue, but of course, we'll set ourselves a deadline. If nothing happens by the deadline, that it's possible that we will file a lawsuit to the -- arbitration, we'll take this case to the arbitration court, for this court to determine who's right regarding those shares. Of course, we're not excluding an out-of-court, an amicable solution regarding this aspect.

Last question about the [ Chase ] assets. Are you looking at this process of selling these assets? Are you actively taking part in this process?

The process is underway. We were looking into it, not -- so that is an easy product. It's process underway. We're analyzing it, but we haven't taken any decisions as of now. We are waiting for the move -- next move of selling party.

[indiscernible] News Agency. The President already partly answered my question. Let me make it more detailed. As I understand, as of today, you allow for possibility where the spinning of the coal assets will not materialize at all. So when do you expect the final decision of that issue? Or when the ultimate model will be developed, be defined?

Six months ago when I was here, I told you that I hope -- I wanted it to happen by the end of this year. So I can confirm that it's recorded and that was my message. Well, is it going to be successful? I don't know. It's not all up to me. The majority of it is out of -- is not up to me. However, regarding the portion related to the company strategy, let me emphasize, we are submitting such an offering, such a proposal. We are prepared for that organizationally as well as conceptually, and this is one of our strategic directions, our initiatives. Nevertheless, we are prepared, and we are preparing ahead also for the scenario when the spinning off of coal assets will not materialize. And we take on to ourselves the entire transition with that automation. So each of those would have this advantages for organization of spinning off the asset, and the main benefits for us will be to launch much larger CapEx capability and the traditional -- the transition. But we are not also disregarding the option of taking on this transition ourselves. So in our main [ term ], we have a transition of [indiscernible] capital market, taking part in the capital market, one that 200-megawatt units are not operating will be shut down. They will not be covered by the capital market regime, so developing such a business instead in those sites to generate business, generate revenue. So we are optimistic about these options. Also, we are obligated to give jobs for our people. That's also one of the strategic elements, that our declaration, our statement, that mentions that with the business, we want to have a business case, safety for people, security of the people, so the jobs for the people and the development for the regions. There's number of element that I want to repeat, but that's what the ESG is all about. The sustainable strategies, sustainable development consists in the fact that all these elements are taken into account. So as I said, irrespective of there will be the spin-off or there will be no spin-off, we will continue implementing our strategy, transition strategy under different -- under various models, the same way we will be implementing the CapEx spend. Maybe not all be done on the balance sheet, maybe using other models, but our in-house resources and internal sources and financial resources have to -- invented [indiscernible]. We will not be telling you the details of it about all the models. But we are working upon in order to be prepared for the -- to be able to operate in 2025. A technical question. Have I answered your question? [indiscernible] possible with all due respect that I can -- I'm not able to tell you everything.

[indiscernible] Daily. I have several questions. I'd like to ask regarding -- continuing the Lagisza topic. I understand that the project is under review, but will not be submitted for this year's capacity market.

We're talking about the gas-fired units. Yes, I confirm it's being analyzed. As probably mentioned before, those large-scale gas-fired projects are difficult today due to the fact that the gas is not a preferred source, according to the European Union. There are number of things must happen. We think this is going to go under a specific option. We're analyzing it so we know how we could take advantage of that but also have other alternatives, such as regarding what to do at that side. So this year, we will not submit such a declaration. Thank you.

Let me just say that this unit is heat generation unit. It's very important. It's a unit that is to provide the maximum cogeneration, and we are considering this unit. It's not a typical condensation-based unit for the capacity market.

Regarding Skawina, you mentioned that the process is underway. Am I correct in understanding, does it mean that you're interested in taking over the gas-fired project that is communicated some time ago?

Well, that's -- too much has been said. This is a long-term business we are considering. We're open to various types of industry projects, but we have to have a very good economic justification of the business.

I know talking about the Skawina, what we are talking about there, sales process of [indiscernible] assets in Poland. If so, where to, I don't know -- yes. But at the same time, as communicated, but they would like to build a gas-fired unit there, probably, as I understand, so instead of coal and gas projects together.

As I have -- CEO mentioned, that we're operating on the Upper Silesia market. In the Upper Silesia, it says -- has its assets in Chorzów. Probably this asset potentially could be the subject of interest. I'm not saying we are in part of any process, but it could be potentially -- we could be potentially interested in that due to its location. But Skawina is outside of our heat market, and definitely, we will not take part in such a project of entire assets -- sale assets we are not participating. So we are not interested in Skawina itself, as such.

Okay. So I have impression that Mr. President Surma contradicted what the CEO mentioned to you. Are you interested or not interested, depending on what?

Krzysztof Surma said that Skawina -- we are not interested in Skawina. I'll confirm what Surma mentioned. But if you're asking whether we are considering certain things, well, I said that yes, we are not limiting myself -- not defining specific detail, but the Upper Silesian, the [ Graby ] area, where we are conducting our business operations. And if there was an opportunity, an interesting proposals in the area of operations, of our heat operations, we are open for the discussion. So I can't give you more precise answer. Okay. Now it's clear. I think we are coherent now, yes?

In the context of the capital market in the list of works of the government, we are talking -- we are reading about the 1-year contracts. The CEO mentioned that the 3-year contracts will be best on the capacity market [indiscernible] if the assumption goes through for another 3 years of capacity markets. But based on 1-year contracts, would it be profitable for you in case of your 10 units that could stop operating soon?

Based on profitability, of course, this could be very profitable if we get as much money from the capacity market as required to maintain this asset. So this is determining factor. Again, there will be some demand for service because I assume there are 41 200-megawatt units in Poland. I can be wrong, but not much. If there are 41, the question is all 41 will apply for this capacity market, will all pass through first [indiscernible]. So I assume that the 41 company plays all of units on the market, and they'll be placed for this 1-year contracts. And those who didn't win the capacity market auction, so in those cases, they'll be shut down because probability of doing business in the subsequent 2 years, including the necessary required CapEx on refurbishment and overhauls will be very difficult. So looking at what we have today, I can say on behalf of my company, of our company, the fact that we will go all out in order to apply for the capacity market and will place those elements on the capacity market. We make bids, and we'll see which ones will be -- will pass this verification and which fail to pass verification. But...

Again, I understand. I have a question regarding the spinning off of coal asset. Are you planning -- as your market competitor has selection of a partner that could prepare a model to spin off the coal assets, as PGE selected PwC. Are you planning to do -- find a partner to [indiscernible] you or using your own analyst team?

Up to now, we have been focusing on our own resources, in-house resources. I mentioned about the audit and developing all the models on the assets that we are doing. We are doing internal, in-house. We are using external companies when we do due diligence of acquisition projects. Up to now, regarding the spins off and the models, we are working in-house. Once a certain solution is selected, that will be accepted by all the parties and it'll be right time we will come for it. But I don't want to say when will this happen. I assume that there will be a need for external company to do appropriate valuation, appraisal, confirmations and so on.

One last question from me. Yesterday, again, your market competitor share such a reflection, such a -- photovoltaics in the case of current [indiscernible] markets from the middle of June is less and less profitable due to negative prices. And they are planning very selective, let me quote it, "approach to the photovoltaics business" and an expansion of growth. This would be large farms or hybrid ones or cable pooling, but such farm that there is some land available and we're building it. We're not planning it anymore. So do you see the need for a change of your optics or the view of PV?

I must compliment the competition. It's very reasonable what the CEO said, I guess. This has been an element of very beginning, as long as we've been present in this market, as long as we've been analyzing projects. We know for now that PV, photovoltaics, in itself -- in and of itself is a very difficult business. So investing in photovoltaics requires a very good model that involves the location of this electricity energy to the customers or storage thereof. Photovoltaics today at this current pricing and the shutdown in the CapEx as of today, it's a difficult business. So today, we have an oversupply of photovoltaic offerings on the market. Therefore, investing in this technology must be very reasonable as we also communicated for PV by itself, no? But PV with the wind profile -- in combination with wind profile, with energy storage facilities, with allocation of electricity to customers, with heat is a good complement, a good element of the strategy. One have to think in a comprehensive manner [ for ] this technology.

[indiscernible] One more question to get more details. Two years ago, you signed out on a contract or letter of intent with KGHM regarding the development of SMR technology. Also, it was mentioned that the installation or construction will take place on those sites. I understand post 2,000-megawatt units, that will be the site. During what time certain change took place regarding this vision? Regarding vision itself, are you still thinking about in the context of this SMR, as I said, in future and over time, 15-year time frame? Or is it a topic that's been put on the shelf.

We have a very serious approach to this topic. We're interested in such a technology and such a solution. Looking at this energy mix that we have now, looking at the potential that we have in the area that we are operating in SMR would be a very nice complementing. I think we have an interesting site where we could place it. We are waiting for the technology. So if an offer comes, definitely, we'll be talking about it. However, irrespective of that, we are giving it a -- subjecting to a very intense analysis. But we don't want to declare that it will be 5, 10, 8, 15 SMR because there is no ready technology yet. But if something like that comes up, that as part of the energy mix that has to be built. So what the customer base could be fed with green energy. This is a very interesting solution. The same way we look at the large-scale nuclear project that might be built, they're looking at the possibility of contracting electricity from this unit. This could also be a very interesting option.

I have two brief questions. The first could you be -- are you able to disclose the number of hours that coal-fired units were operating for -- during the first 6 months of the year? How many hours they were operational?

I'm talking -- let me put it this way, I don't know the answer. We'll send you an answer.

Second question assuming that they will not be covered by the capacity market, is there a chance for them to be maintained as a peaking units that we'll be earning on the -- during peak hours. How much peaks would have to be?

I don't have any Excel in front of me to answer your question, but the 200 megawatt, they were never designed as peaking power plants. So let's not have any notions here, but the power plants that were built in the '70s. One can today, in a very flexible manner, to make such changes for a little money to make them operate as peaking plant. This is not stable -- they can operate in a stable manner because we switch on and off but I have a 7-minute start-up, and then after 2 hours, I shut down such a unit, and I started up in another 4 hours. That's not the type of technology that can be applied, it can be used here. So I don't see any potential, but those units -- those power plants that will not be covered by it. As a matter of fact, it can be used as such a backup peaking power plant. Of course, this is a technology that can guarantee security of supply. However, this is not a technology that could be required using the system as equalizer of peakers. If something happens, it stopped going, it has fast response on large scale in various locations to add quickly more capacity.

How many of those units are generating heat? Have you taken any action to inform the local government those units could be shutdown after [ 25 heats ]?

Local government we're working with and those units that have heat generation units, we are conducting that [indiscernible] that is buying electricity heat from us. We have district heating, a joint entity. So looking at the fact that these units will be shut down at some time, we are preparing the entire farm of shutting down the coal-fired units and the guarantee that the heat will be provided -- ecological heat at a good price. So the entire project, the strategy for heating segment takes into account the fact that we are obligated to deliver heat.

So no agreements, no contracts have been terminated for supply?

They were terminated, that's according the law. But we are in a dialogue with local government when the Mayor is present in the city, but we are giving a full declaration that will ensure the heat supply. These are legal and technical nuances. However, what we are doing will not lead -- cause a situation where the local government or the city will not have heat supply. This was our commitment irrespective of what the transition of large utility scale. Power industry will be conducted. No customer will suffer for that reason and the heat will be and electricity supply will be guaranteed.

Let me ask whether we can say something about the CapEx for the second half of the year. Can we expect better to also be similar to last year's?

I think we can expect that it will be even a bit higher. This is, first of all, due to the specifics of our -- success projects which are renewable projects we are implementing. We are at the stage of acceptances so the CapEx so far was based on advance payments. It will be included in the financial statement. So I can expect the CapEx will be a bit higher.

If no more questions from the audience. So the time has come for the second round. Questions asked online. Could you give us information about the plans on decarbonizing of the heat segment in the TAURON Group for fuels and energy source would you prefer?

I already mentioned there is no one excellent technology that would make sure that the heat segment will turn green, would be cheap and cost effective and efficient and so on. Our goal of our company for the entire segment is cost effective. So you can connect further customers. We're changing the entire model paradigm of district heating. It's not only just heat generation, heat production, also the second dimensions of the energy storage facility. It's a combination of generating renewables capacity, including the photovoltaic that could very well cooperate with heat. And for instance, we are a very good supplier of electricity regarding the hot water, regarding the energy mix, definitely gas, and definitely power to heat, so talking about the heat pumps. We are talking about the electrode boilers. We're talking biomass. These are the things that we are developing at each unit. So we are developing a building a unit today. We are thinking this is a biomass. We are building or designing along -- next to it and the heat or energy storage facility, but also thinking about the small gas-fired units. But on one hand, need the demand at a certain point in time, but it can also be used potentially if there's market opportunity. So that is being built. So depending upon the geography, what the characteristics of the given heat market that's how the given energy mix is being developed.

Let me just add in case of investment projects have to be based on gas. We are also intensely analyzing the option of using the decarbonized gas in a certain time frame and for each option or we are approaching it in -- based on various variants. So we don't have one select variance for each location. We are also testing the market, analyzing the regulatory environment. We are preparing ourselves for taking optimum decisions.

Next question, does the company, there's a possibility for a lack of the full spinning of all coal assets?

There is an option of gradual shutting down of the coal units as part of TAURON Group. There will be the single point of contact regarding the spin-off. We are taking into account all alternatives we are saying that if it's a full spin off, it will be excellent. We'll be growing. We'll be investing in the distribution grid in the heat, in turning heat into green energy and the customer and the energy storage facilities and the renewables and so on. So these are large actions at a quick pace. And if it don't have a spinoff, we'll take on to ourselves the large commitments to implement the energy transition. So we'll be operating on the commercial market, we'll be competing for the capital market, we'll be -- if it's not possible, we'll be developing new business, but we guarantee for our people that we'll have for them jobs. [ Whether there is ] job organizing -- in the organization of the transition operation of the land, maybe in the new construction projects, definitely the size that equipped with excellent infrastructure, located in the centers of town in the world, let's put it this way, we want to take advantage of them and build new business there. We're also allowing for the possibility of a partial spin-off. Various scenarios could be developed here, but I don't want to do this here. We're considering technical acceleration in each scenario and answering the question very precisely, yes.

As we're talking about spinning off coal assets, when are you planning to [indiscernible] then the strategy on the spinoff of the coal assets, how do you -- the value-added scenario, B scenario taking -- materializing towards? If there's no scenario B, what's the option of doing the spinoff of coal assets under different strategy?

Security agency, it's 50-50 question. I'm just joking, difficult to answer this question precisely because there is no method to calculate that probability. We are focusing on our company on what's best for the customers, shareholders, work employees. This is our domain, and I put it this way that we are prepared for any scenario that materializes, therefore, it's not a determining factor for the company to grow, to expand, to develop the advantage and generate value for customers and shareholders. This is the measures that I'm convinced about. And that's it. There is a national agency for energy security or this agency does not [indiscernible] in what form, but a totally different thing. I can only speak about what TAURON can do. And as I just said to you before, there are three options -- strategic options. Each of them is possible, which will -- one will be selected. We still do not know, but developing strategy, developing long-term business plans, so we are taking into account each of those options. But let me emphasize once again that none of them blocks in any way for us, the strategic objective, which is to bring about to achieve the Climate Neutrality in 2050 and to guarantee an excellent grid in case in terms of balancing price, efficiency, quality, it's not the point to have something very expensive, but something super efficient and very safe of green energy, but will be accepted on accepted price levels by the customer.

Another question. Thank you. What is the current cost of building 1 megawatt of the onshore farm following the RTD stage?

I think I'm not surprised you here answering. It depends upon the quality of specific of the project. I think this starting with benefits of terrain where wind farm is position plus the transportation and the type of turbines that had to be included in the project that all has an impact on the productivity out of the 1 megawatt of that farm and determine the price to give you a specific range. So based on a bit on market analysis that we have exposed to and the offerings that, to be frank, come, to our desks. I would indicate between PLN 8 million and PLN 12 million per megawatt, but [indiscernible] lower range of it.

Not so common question from Mr. Andrzej Rembelski from Biuro Maklerskie. Will the last year's [ range ] be repeated where the distribution result in the second half of the year, especially in Q4 2023, was markedly lower than the first half of that year?

First of all, we are not publishing forecasts. Therefore, I will not answer very precisely this question. Definitely not in respect to specific quarters in this way. But this year, I would expect more a stable result for the first half and the second half of this year. So the relation between the 2 halves of the low should be more in line.

At what stage, we have -- we are preparing ESG report? Have you completed the area analysis?

Of course, we are working intensely on the sustainable development report. It will be done for the year 2024 first time. So the works are highly advance. We have completed first analysis, area analysis. We are looking at a number of risks, but we've already identified. Now we are selecting the key ones for the report and those works are at a highly advanced level. So in the near future, we'll be -- we're conducting [indiscernible], we'll be looking at the things that we are preparing for what allow us to design the correct report at the end of the year.

We are here using an external expert assistance. It's a new, large topic, a new one. So we need an external resource and how it's team has been built dedicated for ESG and it's a long-term story, although we needed, in this case, some support, and we are using such support.

The CEO mentioned the audit and the cases reported to the prosecutor's office sponsorship and CSR were for the amount of PLN 8.5 million, what are the case reported is applicable to? And the second question was about the further cooperation between TAURON and Polish Olympic Committee?

The cases reported to prosecutor's office PLN 8.5 million update on our analysis. I indicated that the product that this money would spend on is not -- should part of the given the field [indiscernible] and this should be carried out. At this stage, I will leave it because this is -- which is heavily volatile so I don't give you the details but we have grounds for reporting developers [indiscernible] the confirmation being relatively some of those indications, the prosecutor's office already in its message they have accepted, and we have some information that they accepted it. So that's one thing. Regarding the Polish Olympic Committee on Tuesday, we passed the resolution of the Management Board that as follows, will terminate -- that we are terminating the agreement with the Polish Olympic Committee. As I mentioned before, we are -- our actions are based on the rules and the values, the brands of the company is a key element of developing our competitive advantage and building trust among customers. And what is happening now doesn't give us comfort. It doesn't give us a guarantee. On the contrary, it works the other way, and the brand of our company can suffer because of that. So that's why we took the decision. We didn't see any option on any wish to introduce an improvements in this relationship. So definitely, this is not clearly not implementation of the goals that we assumed in our -- as part of our sponsorship projects. Let me say that we are not leaving sport -- will join some sports at all, and the sport that gives positive energy, sport generates joy, value is fair, is honest and it works in line with Olympic values, Olympic principles when we sign an agreement with the Polish Olympic Committee for the subsequent year -- excuse me, please cut it out. Agreement with the Polish Volleyball League. The project is for 4 years. As part of the project, we're operating in the men's volleyball. But what I'm super proud of is that energy -- the energy of woman -- we are title sponsor of women's league, and we are very proud of that and very -- the distinction for the company. That's what we are building our future not only based on this product, but also on many others that will be communicating one at a time when we are presenting our strategy because the sponsorship strategy -- marketing strategy was also an important part of the business strategy.

Taking the account of the negative electricity prices, are you planning to change the outlook for electricity volume generated by the PV, photovoltaic segment?

Let me answer the question. To what extent this answer was already given earlier by President Lot. PV is a higher risk -- elevated risk source. So we can see both change of conditions regarding the balancing had an impact upon the deepening of the price values in the day the -- but our goal is to build that to grow green energy. So PV, as a stand-alone product, is the higher risk -- the project we combined it with energy, storage facility, allocate along with wind profile to the customer that generates value for the organization and also allows for obtaining a good price for the final consumer.

And the final question out of the line that we received so far, how development does take part in regulation products in the renewables segment? If so, what are the effects?

Let me answer the question and split this answer this into 2 technologies because we have a different approach to PV and approach to wind farms is wind farms is different. Let's start with the fact that we have a long -- large pipeline of development projects. At this point in time, it is more than 1 gigawatt worth of product that could achieve [indiscernible] soon, and we have an extensive pipeline of projects, as part of acquisition processes. We are looking seriously at each project that comes to our desk. In the PV segment, we are here much more selective due to -- much more picky due to issues that I call this a moderately beneficial production portfolio, which is an impact upon the [ lower ] sales prices. And here, if possible, we try to -- we have to optimize the CapEx here. So the answer to certain approach is mainly in-house development and the cable pooling solutions, but of course, we are not saying no to the acquisitions. We're looking at each attractive projects. In the wind segment, the market situation is a bit different due to the constraints for citing of such project. Also, the ability -- as a consequence, we are more strongly involved in the acquisition process. The question is what's the effect of such activities, acquisition projects by definition, are highly competitive. It seems to me that we are an investor knows very well what we want. We have a strong exposure both [ of it ], probably large portion of our portfolio comes from acquisition products. So we approach this process very consciously. Assessing the effectiveness of our processes, I would say it's not deviating from the market average for competitive acquisition processes.

When you make a decision about the acquisition process, the first thing is that the electricity generated by the given asset must be possible to allocate to final consumers, not just to build but also to manage this electricity in appropriate way. And the business, of course, because this is a prospect. Let's spell it out very precisely, we don't want to depreciate the PV, photovoltaics. Photovoltaic is an excellent technology, very good one. However, looking at the development of photovoltaics and the assets that we have and for any company, the competition also mentioned that. To talk about the balanced elements moving too much into PV generates a profile that is very disadvantageous. It means that the cost of profiling the appropriate products for the customer is very expensive. Therefore, the sense of building photovoltaic is strongly interconnected, intertwined to building, developing wind-based power. We have an oversupply of the solar projects today, but the number of wind products is not sufficient. It seems that after the regulation that we've heard earlier, that will be a shortening, that will be stronger [ investment position ] wind power, either it will be more projects, those wind projects will be developed and the structure will be develop then there will be more space for photovoltaics as well. But this we have the model in the back of our head and mind. And we are committing to it. But what will really happen, we'll see that's ahead of us. So step by step, it's important that as part of the transition that is very dynamic, very rapid, carries a lot of technological uncertainties, a lot of regulatory-related uncertainties. Those steps must be taken in a very stable manner. You don't need to do big leaps, but to have this more approach of a sustainable development that we are preferring. Ladies gentlemen, thank you very much for your questions, both offline, online, which was a big intellectual challenge for us. Thank you very much. Since it's always a great challenge and a great pleasure, great honor to be here, we're also declaring that from the next meeting will be coming as well with more information. We will bring more information, also show you what is the progress of our strategy implementation. Maybe we will show you the results of our activities regarding our development or acquisitions processes. And we'll show you what are the results for Q3 and Q4. Let me hand over to Urszula to tell you how it's going to...

Thank you very much. Thank you, ladies and gentlemen. Thank you for the day, and see you all. [Statements in English on this transcript were spoken by an interpreter present on the live call.]