TAURON Polska Energia S.A. ($TPE)

I'd like to welcome you during the press conference please. [Foreign Language] Vice President of Management Board for Asset Management. Vice President, Manager of Finance, Krzysztof Surma and Vice President of the Management Board for trading, Mr. Piotr Golebiowski. Meeting traditionally will be divided into 2 parts. First the presentation of the earnings and then questions. Both those that you will ask in the room as well as the ones that will be asked by our viewers who are watching our broadcast. And I'd like to welcome them. I'd like to hand over to the President of the Management Board, Grzegorz Lot.

Thank a lot. Good morning. It's been 2 years since we've been here with you together. So thank you for the 2 years on March 7. That's the anniversary. When we have a pleasure to present what happened in 2025, 2 years ago when we met, and we spoke about the strategy of about potential dividend. That's the first message. But we, as the management board, we are recommending the payout of a dividend for 2025. The details will be provided by Krzysztof. And that's one of the most major news that we delivered for '25, very good earnings. Probably you already became acquainted, if not, Krzysztof will be giving you the details, PLN 7.5 billion of EBITDA. PLN 3.3 billion in net profit. These are very good numbers. Almost PLN 6 billion of CapEx on the investments, renewables, heat with a year of very hard effort, a lot of hard work, but also very good results, very good outcome, but the market seasoned where customers see. I mean we are very proud of that. In our strategy, we communicated that 20%, 30% of investment funds, investment outlets will be acquiring from [indiscernible]. And I'm proud to then here, but almost 20%, we already achieved. So we are the market leader regarding the obtaining our funds, including National Recovery Plan. The team that is taking on the challenges. We believe that thanks to that -- we will not only accelerate the transition that we planned, but also -- what we are doing steadfast. And in our renewable strategy is the strategic direction. I'm sure. That's the main part of our investment plan. We tapped 1 gigawatt this year. And this is the direction that we are steadfastly taking. Will have a chance to present to you the product that we've done and the ones that are being planned [indiscernible] will be implementing. Definitely Also, we had the [indiscernible] questions about SMRs, all those new technologies. We'll present to you and we'll be ready to answer as part of the Q&A session. Battery energy storage facilities, renewables and grid investments, all those things are important, but on one condition, whether at th end there is a customer, as we said in the strategy, what's the core of the strategy 6 million customers connected to the grid. Everything we do takes into account the point of view of a customer. What we've done is, first of all, the quality of customer service, improvement. Of course, we are not perfect, but we are far from it. However, every day, we are 1 day better, we get better. An example of that is an invoice that's been implemented without any regulations without any pressure from the outside. Our people implemented and prepared it. It gave us at least 12 less fewer contracts regarding customer billing. This is an impact not only by the customer service quality, but also up on the cost. As you will see on the slide, all the metrics that we are measuring, quality of metrics, NPS, CSI indicate that we are moving in the right direction. However, with each quarter that we are implementing something, customers are asking us to implement new things. The main element being digitization and simplification over 90% of customers who already have electronic invoice. This is specific savings and specific quality, also handling -- remote handling. 1 Million contacts per month, 50% of those are remote contacts. We are talking about the online and so on. So please note that if it wasn't for digitization, we wouldn't be speaking about it. So digitization is key -- was also important. Customer service is not only sales and the customer service -- in this strategy, we have a rapid pace of growth of distribution and the customer orientation. I'll give you an example. Working on the expansion of a grid. The first thing that the distribution line of business did is a dialogue with the local government units and the social partners who work there before. The grid expansion plans was developed with the dialogue and discussion took place, where this grid is to be expanded. The next thing is the fact that 50% of the grid connections for the household segment are issued electronically easy [indiscernible] things, but they make life easier and automatically improve customer service. Okay. The strategy that we discussed, we also take into account very strongly the so-called just transition. It's both just and profitable because these 2 things we take into account in our work. Mainly, it is focused on the conventional energy. That's the main part of the strategy. In line with our declarations, we didn't withdraw for any area that we are operating in. We are building a new life everywhere. On one hand, we are maintaining the conventional energy because it's necessary to supply energy here. Now the economy also to supply energy for the transition. We won the capital market for over 200-megawatt units, full stabilization of a 910-megawatt unit. So the conventional energy is doing well. We are preparing now for the subsequent auctions for '27, but in each area, we are conducting the social dialogue, both by people in the local communities. We are building new solutions. Michal will describe to you what's happening to [indiscernible] when we won the capacity market for the [ King Gasified unit]. We are working on the better energy storage systems. We are building also hydrogen hub so in each of the areas that we were conducting operations and we are conducting operations. We will continue conducting operations. Of course, profitable from the investors' point of view, what we are looking at, we are listening to what's happening. What is the -- what are the trend expectations. We are talking about the local content. We are speaking about building the competitive advantage of the Polish economy or so wherever we can provide support, of course, respecting the legal element, the competition. We are conducting, maintaining such a relationship with the suppliers. Let me tell you that when the [indiscernible] at least 90% now of local content, you can look at what the new tenders. The way we need is done for the mid-energy meters [indiscernible] when we look at the supply market, and we are making sure that we have fair, very fair competition. And excellent thing that we managed to do, maybe not to manage, but just debt is to reduce the entry barriers for the small entities. 2 years we were looking at the organization that was highly centralized. So as a matter of fact, only large consortium, large companies were able to take part in tender proceedings. We split those solutions. We allowed a lot of small companies. This way, we are building those local markets. Now a lot of small companies can start working with us. And what we can see what's important is those companies have the basis to start investing. I mean the entry barrier or growth barrier for the small and medium enterprises -- was the fact that energy companies such as ours were unpredictable regarding the CapEx, regarding the expansion, regarding the delivery on what they were declared would do after those 2 years, those companies have become convinced and with this PLN 100 billion plan that we announced as being fastly implemented. And based on that -- those companies can invest in automation, in new solutions that we can see that. And this means that vertically on the support that we get is much more advanced. And the final thing regarding we deliver is I'd like to demonstrate how we approach the communication issues. You can see what's the position of Tower on? How is positioning itself? You want to promote the brand that is for the customer, and this is most important. It's important how being perceived other things that happened during that time. The [indiscernible] Silesia, we have our customers, but it's also a unique special place and wonder if people that we can work with. We became -- we acquired the naming rights sponsor of Silesia park. It's a place in Silesia's. Very important that people have meetings there. We've been conducting a very good cooperation with [indiscernible]. We continue that. We are instead of Polish Volleyball league and the hockey league. Currently, we are working on third projects, maybe as an opportunity, I'll be able to tell you that. And if there are questions, we'll share our insights. So looking from the point of view, whether we deliver. It's subjective assessment. We do deliver. Let me end of the floor to the colleagues. It's also important, excuse me. Two things I'd like to bring up yet. When Piotr Golebiowski was still a member of our Management Board, I must say it because he's watching us. You have greetings and he thanks for that. But here, Krzysztof have asked. He is the head of the trading, of course, of the entire customer. So in 2026, that's the composition, a very strong full of energy. So welcome Krzysztof on board. And now officially moving forward to 2026. Thank you very much.

Good morning, ladies and gentlemen. It's a great pleasure for me to be here after more than 10 years. Let me move on to the details. The situation on the energy market. Let me bring -- present several key facts regarding 2025, which certainly extent, characterized the past year increase of into the spot and balancing market price amplitudes. This is asset -- due to asset and system problems and an opportunity for optimization, but we'd like to take advantage of. This optimization can be done through buying of renewable energy and to -- and by buying in at a higher price. For stance, this price enables putting online a bit medical [indiscernible]units, for instance. The prices that will cover the operations at least for the 90 hours of a system. The increase of installed capacity in photovaltic farms, quite a big growth, 11.6% in 2025. So this also has an impact upon the problem that I just brought up. The growing number of negative hours in the absolute values, we are not big volumes, but they show a certain trend and problem. But in my opinion, we'll be reappearing in the recurring and the subsequent. We also observed the rising CDS in 2025. That's true. By the price of the coal went down 30% year-over-year almost. However, carbon permits went up and the electric prices went up. We had also lower average outdoor temperatures in 5, let me refer to impetus when I present the data on the sales and supply of heat and production from our sources. A slight decrease of national electricity consumption. It's an interesting piece of information when GDP went up 3.3%, and the national consumption didn't go up. This indicates 2 phenomena. So first of all, the correlation of GDP [indiscernible] consumption, power consumption definitely dropped down. This correlation, a few years back, was [indiscernible] but as the GDP went up, the national consumption went up. Now we don't see this correlation. We don't see for second reason -- we have a decline of coal-fired production, 2.7%. This was replaced with renewables and cross-border exchange close to 1 terawatt hours. That's the imports balance, just a piece of information in the context of what's happening now. And the situation related to the Middle East conflict, we can see that there's been a change now. The balance, almost 1.5 terawatt hour. Situation supports that the situation of expertise pushed to adjacent [indiscernible] where [indiscernible] actually so much higher than in Poland. And redispatching, that's also quite [indiscernible] a feature of 2025, almost 90%. Let me just remind you that to end of 2025, where dispatching was 0.9 gigawatt hours. Now we can see this problem growing. It's related to the increase in volume of renewables in the system. Annual contracting starting from '25 -- '22, '23 and plus 1 plus 2 and plus 3. You can see the trend regarding [indiscernible] contracts is a downward trend. Let's say, 2027, it became flat and now the prices are stable. Our generation portfolio regarding the electricity production, net electricity production, we have an increase, plus 7% in the left down corner. At the bottom, you can see the competition of base production. It's mainly related to the production from conventional resources. We had an increase in renewables, but the share in the entire energy mix is not too high. Let me just draw attention to the hydropower electricity production, quite a significant drop, hydroelectricity production in 2025 were dramatically bad. In the first quarter of this year, we don't see any improvement. Similar as in case of wind conditions, an increase of heat production, 11.4% peta joules. This is related to the previous year's temperature. So we have an increase of CO2 emissions back plus 6%. The cost of deemed is lower than in 2024. This is due to -- in fact, but we contracted prices of 2025, 2024 and the increase is related to 2025, consumption of coal plus 4%. I'm talking about our conventional sources. And we have an increase of renewables in net production 15. 3%. That's in line with our strategy. This share will be going up renewables production curtails. And this is a strong growth here. I will elaborate on that in a moment. Self curtailments are redispatching. These our actions, selfcare [indiscernible]. We want to avoid the negative prices. We can see a clear increase. However, we have an enormous growth, and the limitations were due to the limitation of a system. System operator is quite clear. The energy, it's not including in the National Power Center solution over the next few years, is better in energy storage facilities and were able to use this energy where it's not using the system, but it's enormous growth year-over-year regarding the [indiscernible] availability. I will not be describing it in detail, but this is a very bit of our units versus the average -- a little bit rate in the national power case of hydro policy. So we are about the average value. However, in case of a coal fire units [indiscernible] we are below. The sales -- supply portfolio, electricity supply, we have a decline almost 6% down. You can see clearly that the decline is mainly to the business customers and mainly the SMEs, almost 1 terawatt hours in those low-margin segments. Now stats [indiscernible]. But we want to acquire customers at appropriate level of margin. We are trying to restore this volume in the subsequent years, assuming the minimum profitability that we have assumed. The increase of cleaning of our supply, 13.6% this year. We assume in line with our strategy, this growth will be continuing in the subsequent years. The electricity fed into the grid by the consumers, the old system under in force until 2022 until April. As a matter of fact, this difference is due to the production volume, but the new system, the net billing system. The number of consumers feed well into the grid is going up 20% year-over-year. Heat supply to the market, 13.8% in peta joules. We can easily calculate. We take in account our production about 17% of energy we buy from other sources. And a few comments about our flagship products related to our tariffs, the new energy products, fixed price product over a 9-year time quite a rapid growth of a product that was launched in 2024 in June, 16,000 customers. In January, we acquired 13,000 new contracts, mainly via households [indiscernible] 166,000 consumption points [indiscernible] via end SMEs customers. And the cheap hour products. A very interesting product for customers who are highly conscious, highly aware of electric consumption. We can manage the consumption to appropriate hours. We have 26 different hourly rates that we can adjust, adapt to our devices. So it leads to major savings, 25,000 customers at the end of January, another 6,000 customers. The priority of this product is going up. And on this slide, we are showing it is in transparent manner. For the first time, we are showing this slide what type of auctions want what revenue will be expected stemming from those capacity markets until up to 2046. Regarding the auctions, 1 in 2025, we have gone [ PNL 4.5 billion ] maybe a preemptive answer to a question. How much capacity we have contracted? About 70% [indiscernible] In 2025, we had 9% of capacity under auctions versus in 2026, is 78%. But we assume that will be taking part in the additional supplementary auctions, and this ratio will go up to the level that we observed in the previous year. Let me move on to the financial data and hand over floor to shut.

Thank you. Ladies and gentlemen, we are talking about the record-breaking year, as [indiscernible] mentioned very beginning, the financial results had a record-breaking level. Although revenue is 3% lower. However, this is impacted by the market conditions, the decline of electricity price, withdrawal from the compensation payment system and a bit lower volume, as Krzysztof mentioned, in the supply line of business. If you look at EBITDA more than PLN 7.5 billion, a record-breaking result, more than PLN 1 billion more than last year. I will elaborate on the individual detail on individual segments. [indiscernible] move to the net profit, more than PLN 3 billion, we haven't yet recorded such results. This, of course, impacted, first of all, by the good operating results, but also let us remember 2025. We didn't deal with any impairment charges with important any write-downs. These write-downs were affecting the group very strongly in the previous years. And the second thing, the write-down on the result, the deferred tax year-over-year was also better. Very good financial results. Enabled us for the first time after 11 years to recommend the payout of a dividend more than PLN 350 million, that's PLN 0.2 per share. We recommend it as of now to -- in June to be the day of record. So the beginning of July, we could pay out the dividend for the shareholders. Regarding the level of capital expenditure, went up by 10% year-over-year. It topped PLN 5.6 billion. Michal will elaborate on that during his part of prevention. Regarding the net debt-to-EBITDA ratio, it went down significantly material year-over-year. It was impacted by the good earnings, operating results, very good EBITDA, but I mentioned before on the other hand, the lowering of net debt, I will elaborate on that further on the presentation. What's important is worth noting that reported EBITDA and the comparable EBITDA at a very similar level, and we're talking about the one-off events that took place in 2025. They were fully focused in the supply, concentrating the full line of business -- in the supply line of business, and they offset 1 another and the positive impact of the result of the tariff implemented in 2025. We mentioned in the beginning of 2024, the President of [indiscernible] said that target for 1.5 years, we start in 2024 was at the level but didn't fully cover the cost. Therefore, the earnings of '24 in the second half of the year. In the details, negative -- we showed it on [indiscernible] EBITDA for '24.