Financial results per Segment of operations

Generation Segment

The below table presents the Generation  Segment’s 2021-2022 results.

Generation Segment’s 2021-2022 results

Item (PLN m) 2021 2022 Change in %
(2022 / 2021)		 Change
(2022-2021)
Sales revenue 9 819 11 126 113% 1 307
electricity 7 298 8 317 114% 1 019
heat 1 006 1 112 111% 106
property rights related to guarantees of origin of electricity (energy certificates) 177 150 85% (27)
services – Capacity Market 642 676 105% 34
greenhouse gas emission allowances 654 750 115% 96
other revenue 42 121 288% 79
EBIT (25) (1 307) – (1 282)
Depreciation and impairment charges 1 400 528 – (1 928)
EBITDA 1 375 (779) – (2 154)

The Generation Segment’s sales revenue in 2022 was higher by 113% as compared to 2021, mainly due to the higher revenue from the sales of the electricity (the higher sales volume and the higher sales price), heat (the resultant of the higher sales prices and the lower volume), as well as the sales of the CO2 emission allowances (the resultant of higher prices and the lower volume).

The Generation segment’s EBITDA and EBIT results were lower in 2022 than in 2021. The results posted had been affected by the following factors:

  1. a lower margin on the sales of electricity as a result of the rising prices of the fuels and the CO2 emission allowances, the higher costs of the electricity buybacks, primarily due to the higher electricity purchase prices. The above effects were partially offset by the higher electricity sales prices and the use of the provision for the onerous contracts, which had been set up in 2021, as a result of the planned shutdown of the generation unit in the first half of 2022,
  2. a lower margin on the heat sales as a consequence of an increase in the costs of the fuels and the CO2 emission allowances, partially offset by the higher heat sales prices,
  3. completion of the transactions related to the CO2 emission allowances:
  • in connection with a delay of the commissioning of the 910 MW unit in Jaworzno and, as a consequence thereof, the lower production output, a significant surplus of the allowances contracted for the purpose of fulfilling the redemption obligation for 2020 above the actual requirement had arisen in Nowe Jaworzno Group TAURON’s portfolio. As a consequence, in March 2021, TAURON Capital Group had carried out the following transactions:
  1. restructuring of the above mentioned portfolio of the CO2 emission allowances with respect to the volume of 3 258 000 of the CO2 emission allowances with the collection date in March of 2021. As a result of the completed analysis of the new premises and circumstances, the Company changed its intentions regarding the above mentioned CO2 emission allowances and took a decision to roll them over along with the conclusion of the new contracts with the delivery dates in March 2022, 2023, and 2024. At the same time, those transactions were completed at the prices that were higher than the originally contracted purchase, and as a consequence, they led to an increase of the costs of setting up a provision by TAURON Capital Group for the liabilities related to the CO2 emissions for 2021 and for the subsequent financial years. As a result of the above TAURON Capital Group estimates that the total impact of the restructuring on the operating results thereof in the years 2021 – 2023 will not be significant,
  2. resale of the CO2 emission allowances held in the quantity of 691 000 EUAs that had also constituted a surplus above the redemption needs of the subsidiary for 2020 due to the delay of the commissioning of the 910 MW unit in Jaworzno,
  • as a consequence of a failure of the 910 MW unit in Jaworzno that had taken place in June 2021, which led to its shutdown in the subsequent periods, a surplus of the emission allowances had arisen in the company’s portfolio above the redemption obligation in 2021. Taking into account the need to match the delivery of the emission allowances and the cash expenditure, TAURON Capital Group made a decision to sell the CO2 emission allowances in the quantity of 1 717 000 EUAs,
  1. other factors, including mainly the PCC tax assessed on the acquisition of the Nowe Jaworzno Group subsidiary by TAURON Wytwarzanie, the sale of the assets of EC Stalowa Wola (the 2021 effect), the lower revenue from the sale of the liquidated fixed assets, and the higher result of the TAMEH Group’s companies, in which TAURON holds shares.

In addition, the Segment’s EBIT result was impacted by the booking of the impairment charges.

In 2022, TAURON Capital Group recognized, in the financial results, the booking of the impairment charges related to the loss of the carrying amount on the balance sheet of the Generation Segment’s cash generating units (CGU), whose total impact on the charge to the Segment’s operating profit reached PLN 75 million. The amount of the CGU write-downs in 2022 is lower than in the same period of the previous year, when it stood at PLN 941 million.

The below figure presents the Generation Segment’s financial data for the years 2021-2022.

The below figure presents the Generation Segment’s EBITDA, including the material factors impacting the change year on year.

The Generation Segment’s total capital expenditures came in at PLN 383 million in 2022, including the outlays on the following strategic investment projects:

  1. PLN 129 million on the replacement expenditures and the overhaul components at TAURON Wytwarzanie,
  2. PLN 56 million on the construction of the 910 MWe power generation unit in Jaworzno,
  3. PLN 29 million on the construction of the peaking and backup boiler houses at ZW Bielsko,
  4. PLN 29 million on connecting of the new facilities,
  5. PLN 23 million on the construction of the gas fired boiler with a capacity of 140 MWt at ZW Katowice
  6. PLN 17 million PLN on the Low Emission Elimination Program at TAURON Ciepło,
  7. PLN 17 million on maintaining of the district heating network.

Renewable Energy Sources Segment

The below table presents the RES Segment’s results in the years 2021-2022.

RES Segment’s results in the years 2021-2022

Item (PLN m) 2021 2022 Change in %
(2022 / 2021)		 Change
(2022-2021)
Sales revenue 661 909 138% 248
electricity 372 547 147% 175
valuation of the guarantees of origin of electricity 158 147 93% -11
sales of the guarantees of origin of electricity 117 198 169% 81
other revenue 14 17 121% 3
EBIT 224 292 130% 68
Depreciation and impairment charges 152 184 121% 32
EBITDA 376 476 127% 100

The RES segment’s EBITDA and EBIT results were higher in 2022, as compared to 2021. The results posted had primarily been affected by the following factors:

  1. higher margin on the electricity sales, mainly due to the higher sales price, the higher electricity sales volume by the hydro power plants, which was partly offset by the lower production output by the wind farms,
  2. lower revenue from the sales of the guarantees of origin of electricity, which is a consequence of the lower valuation thereof as compared to 2021,
  3. lower revenue due to the functioning of the Capacity Market,
  4. higher operating expenses, including mainly an increase of the cost of labor and of the maintenance (operation) of the power equipment.

The below figure presents the RES Segment’s financial data for the years 2021-2022 .

The below figure presents the RES Segment’s EBITDA, including the material factors impacting the change year on year.

The RES Segment’s total capital expenditures came in at PLN 459 million in 2022, including the outlays on the following investment projects:

  1.  PLN 162 million on the construction of the Piotrków wind farm,
  2.  PLN 78 million on the construction of the Mierzyn wind farm,
  3.  PLN 78 million on the construction of the Mysłowice PV farm,
  4.  PLN 35 million on the construction of the Majewo wind farm,
  5.  PLN 29 million on the construction of the Gamów wind farm,
  6.  PLN 20 million on the modernization of TAURON Ekoenergia’s hydro power plants,
  7.  PLN 18 million on the construction of the Nowa Brzeźnica wind farm,
  8.  PLN 11 million on the construction of the Proszówek PV farm,
  9.  PLN 8 million on the construction of the Warblewo wind farm,
  10.  PLN 3 million on the construction of the Choszczno PV farm.

Distribution Segment

The below table presents the Distribution Segment’s results in the years 2021-2022.

Distribution Segment’s results in the years 2021-2022

Item (PLN m) 2021 2022 Change in %
(2022 / 2021)		 Change
(2022-2021)
Sales revenue 7 099 7 611 107% 512
distribution and trading services 6 772 7 273 107% 501
grid connection fees 83 111 134% 28
revenue due for fixing power line collisions 68 52 76% (15)
lighting services 53 53 100% 0
other revenue (illegal consumption, construction and assembly services, maintenance and support services, goods and materials) 124 121 98% (3)
EBIT 1 767 1 679 95% (88)
Depreciation and impairment charges 1 200 1 260 105% 60
EBITDA 2 967 2 939 99% (28)

The Distribution Segment reported an increase of the sales revenue by 7% in 2022, as compared to 2021, mainly as a consequence of an increase in the distribution tariff as compared to last year and the completion of a significant grid connection for poly-metallurgy site of KGHM Polska Miedź.

The Distribution Segment’s EBITDA result came in lower by 1%, as compared to the previous year, and the change had been affected by the following factors:

  1. an increase of the average rate for the distribution service sales to the final consumers, as a result of an increase in the value of the regulated revenue and the change in the structure of the electricity deliveries,
  2. a decrease of the total electricity delivery by 288 GWh, including to the final consumers by 465 GWh, first of all in the A and C groups, as a result of a slowdown of the economy, the lack of the purchase orders in the steel making industry as a consequence of, among other things, the war in Ukraine, the curtailing of the electricity consumption or a liquidation of the business operations by some of the consumers in response to the several fold increase of the prices of electricity,
  3. higher costs of the purchasing of the transmission and distribution services,
  4. an increase of the costs of purchasing electricity to cover the balancing difference as a result of the higher purchase price, and the lower volume and a positive balance of the upward adjustment,
  5. an increase of the other revenues related to the electricity distribution operations, mainly due to the over-contracted reactive power consumption and the grid connection fees,
  6. a rise of the other fixed costs, including the labor costs as a result of the wages agreements signed with the workforce, the costs of the taxes on the grid assets due to the increase of the value of the assets as a result of the investment projects conducted, the higher costs of the external (outsourced) services purchased on the market.

The below figure presents the Distribution Segment’s financial data for the years 2021-2022.

The below figure presents the Distribution Segment’s EBITDA, including the material factors impacting the change year on year.

The Distribution Segment’s total capital expenditures came in at PLN 2 137 million in 2022. The main capex directions included:

  1. PLN 1 138 million on the investment projects related to connecting of the new consumers to the grid,
  2. PLN 852 million on the investment projects related to the grid modernization and replacements,
  3. PLN 79 million on the investments related to the IT and communications systems.
  4. PLN 60 million on the other investment projects, including buildings and structures, means of transportation, tools.

Supply Segment

The below table presents the Supply Segment’s results in the years 2021-2022.

Supply Segment’s results in the years 2021-2022

Item (PLN m) 2021 2022 Change in %
(2022 / 2021)		 Change
(2022 – 2021)
Sales revenue 24 134 35 491 147% 11 357
electricity, including: 16 348 24 553 150% 8 205
revenue from retail electricity supply 10 315 15 894 154% 5 579
greenhouse gas emission allowances 2 107 2 775 132% 668
fuel 1 896 4 341 229% 2 445
distribution service (passed on) 3 302 3 308 100% 6
street lighting service 123 130 106% 7
other revenue, including trading services 358 384 107% 26
Compensation payments (9) 482 – 491
EBIT (564) 550 – 1 114
Depreciation and impairment charges 40 44 110% 3
EBITDA (524) 594 – 1 118

The Supply Segment’s sales revenue in 2022 was higher by 47%, as compared to 2021, first and foremost as a result of the changes in the prices for the sale of electricity to the customers outside the ERO tariff introduced during the year in response to a significant change in the unit cost of sourcing electricity stemming directly from the market situation that had occurred in 2022 and the different demand profile reported by the customers. In addition, the increase in the revenues is also due to the changes in the tariff rates approved by the President of the ERO, albeit the pace of the changes was lower than in the case of the price list changes. The revenue from the sales of the CO2 emission allowances had also gone up, mainly due to the higher quoted prices of the emission allowances resold mainly for the redemption needs of the generation companies.

The Supply Segment’s EBITDA and EBIT results had been substantially higher in 2022 than in the previous year. The results posted had been affected by the following factors:

  1. a higher margin earned on the electricity sales as a consequence of:
    • having obtained a higher price for the sale of electricity, which is a result of the observed changes in the price trends on the electricity market as a consequence of the high volatility on the global commodity and energy markets as a result of the Russian Federation’s aggression in Ukraine, as well as an increase in the tariff approved by the President of the ERO,
    • having purchased electricity from the 910 MW unit in Jaworzno at a lower price as a consequence of the expiration of the contract between the subsidiaries for the purchase of electricity concluded based on the cost plus formula that had been in effect in 2021,
    • a change with respect to the obligation to present the RES Property Rights for redemption – a decrease from 19.5% to 18.5%,
  2. a lower margin on the sales of gas as a consequence of a significant increase of the gas wholesale price with no possibility to pass the rising cost on some customers,
  3. other factors

The below figure presents the Supply Segment’s financial data for the years 2021 – 2022.

The below figure presents the Supply Segment’s EBITDA, including the material factors impacting the change year on year.

The Supply Segment’s total capital expenditures came in at PLN 75 million in 2022, the amount spent mainly by the TAURON Nowe Technologie subsidiary, for the activities related to the maintenance and expansion of the street lighting in the amount of PLN 68 million.

Other operations

The below table presents the Other Operations Segment’s results in the years 2021-2022.

Other Operations Segment’s results in the years 2021-2022

Item (PLN m) 2021 2022 Change in %
(2022 / 2021)		 Change
(2022 – 2021)
Sales revenue 1 177 1 428 121% 251
customer service 250 285 114% 35
support services 545 603 111% 58
aggregates 119 146 123% 27
electricity 51 92 180% 41
biomass 113 197 174% 84
other revenue 98 104 106% 6
EBIT 92 163 177% 71
Depreciation and impairment charges 116 135 116% 19
EBITDA 208 298 143% 90

Other Operations Segment subsidiaries’ sales revenue in 2022 was higher by 21% as compared to the sales revenue posted in 2021, which was primarily due to the higher sales of the biomass, the higher sales of electricity as a result of the rising sales prices on the market, the larger volume of the support services completed for the needs of TAURON Capital Group’s subsidiaries, the higher sales of the rocks and the derivatives thereof as a result of the greater demand for this product by the power industry and the sales of the other services, including, among others, of the by-products of the combustion and extraction processes.

The below figure presents the Other Operations Segment’s financial data for the years 2021-2022.

The Other Operations Segment subsidiaries’ capital expenditures came in at PLN 391 million in total in 2022 and they included mainly the outlays related to the investments in the IT systems at TAURON Obsługa Klienta, including PLN 78 million for the broadband internet construction project as part of the POPC III program.

Mining Segment – discontinued operations

The operations of TAURON Wydobycie have been classified as the discontinued operations, as part of the Mining Segment, due to TAURON Group’s loss of the control over TAURON Wydobycie as of December 31, 2022, as a result of the sale of 100% of the shares in TAURON Wydobycie to the State Treasury, further described in Note 3 to the Consolidated Financial Statements.

The below table presents the Mining Segment’s results in the years 2021-2022.

Mining Segment’s results in the years 2021-2022

Item (PLN m) 2021 2022 Change in %
(2022 / 2021)		 Change
(2022 – 2021)
Sales revenue 1 467 2 680 183% 1 213
hard coal – large and medium size lump coal 393 1 116 284% 723
thermal coal 995 1 421 143% 426
other revenue 78 143 183% 65
EBIT (458) 490 – 948
Depreciation and impairment charges 328 291 89% (37)
EBITDA (130) 781 – 911

The Mining Segment’s sales revenue was higher by 83% in 2022, as compared to 2021, first and foremost due to the obtained higher price of the hard coal sold, which was a consequence of an increase in the hard coal prices on the domestic and international markets. The hard coal production by TAURON Wydobycie clocked in at 5.01 million Mg in 2022, and it was lower by 3% as compared to 2021. An increase in the production output was recorded at the Janina Coal Mine and at the Brzeszcze Coal Mine, which as a consequence of a more favorable configuration of the longwall fronts than the setup that occurred in 2021. The lower production volume at the Sobieski Coal Mine was due to the extraction works conducted on the longwalls with the lower reserves, which resulted in the geological and mining difficulties that prevented the normal exploitation of the longwall and made it necessary to carry out the mining prophylaxis measures in the section where the disturbances occurred.

The Mining Segment’s EBITDA and EBIT results were higher in 2022 as compared to 2021. The results posted were impacted by the following factors:

  1. an increase of the average hard coal price by 103% which was mainly impacted by the rise in the price of the large and medium size lump coal as well as that of the coal dust, including the coal products sold intra-Group,
  2. an effect of a change of the product structure (types) of the hard coal sold, i.e. the sales of a larger volume of the large and medium size lump coal, along with the lower sales of the coal dust for the energy industry, and the lower allocation of the costs to profit or loss due to a change in the coal inventory level,
  3. other – mainly related to an increase in the fixed costs, including the labor costs as a result of signed wages agreements, the cost of the electricity and the materials used in the production.

In addition, the EBIT result was impacted by the lower impairment charge than in 2021.

The below figure presents the Mining Segment’s financial data for the years 2021 – 2022.

The below figure presents the Mining Segment’s EBITDA, including the material factors impacting the change year on year.

The Mining Segment’s total capital expenditures came in at PLN 517 million in 2022, including the outlays on the following investment projects:

  1. PLN 337 million of the outlays on the preparation of the future production,
  2. PLN 130 million of the outlays on the replacement and upgrade works,
  3. PLN 44 million on the construction of the “Grzegorz” shaft.
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