Internal factors

The operations and earnings of the Company and TAURON Capital Group were impacted in 2022 by the factors presented in the below table:

  1. actions with respect to optimizing the processes taken by TAURON Capital Group’s subsidiaries,
  2. decisions with respect to the implementation of the key investment projects and the intense activities with respect to searching for new energy sources projects,
  3. loyalty building measures aimed at retaining the existing customers and the marketing activities with respect to acquiring new customers,
  4. TAURON Capital Group’s centralized financial management area, supported by the use of such tools as: corporate model of financing, financial liquidity (cash flow) management policy using the cash pool mechanism, risk management policy in the financial area, insurance policy,
  5. TAURON’s purchasing processes management, in particular, the management of fuel purchases for the needs of TAURON Capital Group’s , generation entities,
  6. expectations with regard to the increase of the compensation (wages) at TAURON Capital Group’s ,
  7. geological and mining conditions for the hard coal extraction,
  8. decision on the development of the District Heating Line of Business as part of TAURON Capital Group’s ,
  9. implementation of the activities related to the sale of 100% of the shares in TAURON Wydobycie in connection with the transformation of the hard coal mining sector,
  10. implementation of the activities stemming from the transition of the power sector in Poland, including the implementation of the agreement between TAURON, PGE, Enea S.A. (Enea), Energa S.A. (Energa) and the State Treasury on the cooperation with respect to the spinning off of the coal assets and the integration thereof within the National Energy Security Agency (NABE), including the incorporation of the the New Jaworzno Grupa TAURON subsidiary into the structure of TAURON Wytwarzanie,
  11. works related to the fixing of the failure of the 910 MW power generating unit in Jaworzno and the need to carry out the additional works as well as the unit’s resynchronization with the grid,
  12. implementation of the settlement agreement between EC Stalowa Wola and Abener Energia (Abener Energia), including the completion of the mutual settlements,
  13. acquisition of the wind farm and photovoltaic construction projects at the ready for development stage with a total capacity of 224 MW,
  14. adoption and implementation of TAURON Group’s Strategy for the years 2022-2030 with an outlook until 2050,
  15. setting up of a provision for the onerous contracts in the Generation Segment.
  16. Adoption of TAURON Group’s OT Management Policy.

The year 2022 was characterized by the above average volatility of the environment in which not only TAURON Group, but also the entire energy industry was operating. At the beginning of 2022, the aggression of the Russian Federation on the territory of Ukraine took place, which was the main factor contributing to the significant disturbances in the macroeconomic environment not only in Poland, but also in Europe and worldwide. As a consequence, an energy crisis was triggered, bring about the changes in the level of the energy and fuel prices of unprecedented, up to now, volatility and scope. For TAURON Group, it was a year of a very high exposure to the risks arising from the market, macroeconomic, as well as the regulatory and geopolitical situation.

The detailed information related to the impact of the above mentioned factors on the financial result achieved in 2022 is provided in sections „Results”. The effects of such an impact are visible both in the short term, as well as in the long term outlook.

As of December 31, 2022, the impairment tests related to the fixed assets and goodwill were performed, taking into account the following considerations:

  1. Company’s market capitalization remaining at a level below the net carrying value of the assets in the long term
  2. material rise in the global prices of the energy commodities, electricity and the prices of the CO2 emission allowances,
  3. limited supply of fossil fuels resulting in their price increases,
  4. high volatility of the electricity prices on the forward market (along with the low liquidity) and the persisting high prices on the spot market,
  5. introduction of a mechanism to limit bids in the electricity balancing market,
  6. publication of the RePowerEU package aimed at accelerating Europe’s independence from the Russian fossil fuels before 2030, temporarily reducing energy consumption and diversifying the sources of raw material supply,
  7. works on reforming the EU ETS market to bring the system in line with new, higher CO2 reduction targets,
  8. rapid growth of RES, in particular the prosumer sub-sector and micro photovoltaic installations,
  9. effects of introducing the provisions of the Winter Package, including the emissions standard, adversely affecting the possibility of the participation in the capacity market by the coal fired units after July 1, 2025,
  10. tightening of the emissions standards and the persisting adverse market conditions from the point of view of the profitability of the conventional energy,
  11. an increase of the inflation rate,
  12. a rise of the risk free rate.

As a consequence, the booking of the impairment charges related to the loss of the carrying value of the tangible and intangible fixed assets in the amount of PLN 75 million was recognized in TAURON Capital Group’s FY 2022 results in the (Consolidated Financial Statements of TAURON Polska Energia S.A.) Capital Group in accordance with the International Financial Reporting Standards approved by the European Union for the year ended on December 31, 2022 (Consolidated Financial Statements of TAURON Capital Group).

In addition, an impairment of goodwill in Energetyka Cieszyńska, a subsidiary belonging to the Generation Segment, in the amount of PLN 18 million was identified as part of the impairment test performed as of December 31, 2022.

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