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TAURON Capital Group’s core products include electricity and heat as well as hard coal.

Additionally, TAURON Capital Group is trading in: electricity and energy market products as well as coal and gas, and it is also providing electricity distribution and supply services, including to the final consumers, heat distribution and transmission and other services related to the operations conducted.

Lp. Production and sales volumes unit 2019 2018 2017 Change in % (2019/2018)
1. Commercial coal production Mg m 3.78 5.01 6.45 75%
2. Coal sales by the Mining Segment Mg m 3.80 4.87 6.77 78%
3. Electricity generation (gross production), including: TWh 13.88 16.21 18.41 86%
4. Electricity generation from renewable energy sources, including: TWh 1.38 0.97 1.3 142%
Production from biomass TWh 0.34 0.25 0.29 136%
Production of hydro and wind power plants TWh 1.04 0.72 1.01 144%
5. Heat production PJ 10.85 11.29 12.2 96%
6. Electricity and heat supply by the Generation TWh 13.16 15.68 19.61 84%
Segment PJ 14.55 15.23 16.38 96%
7. Electricity distribution TWh 51.73 51.97 51.37 100%
8. Electricity supply by the Supply Generation Segments TWh 33.73 34.52 34.94 98%
9. Number of customers – Distribution ‘000 5 651 5 598 5 533 101%

Coal sales

At TAURON Capital Group, coal sales are carried out by TAURON, with respect to supplying the production subsidiaries of TAURON Capital Group, and by TAURON Wydobycie, with respect to the sales on the domestic market and to TAURON.

With a view to implementing its tasks with respect to the fuel (coal) trading, TAURON continued, in 2019, to sell the fuels solely to TAURON Capital Group’s subsidiaries, i.e. TAURON Wytwarzanie, TAURON Ciepło and Nowe Jaworzno Grupa Tauron, based on the purchase of fuels on the market and from within TAURON Capital Group – from TAURON Wydobycie, which is described in more detail in section 2.4.2. of this report.

TAURON Wydobycie is selling coal from its own extraction and production, offered for sale on the market in coarse, medium coal assortments and as steam coal dust as well as methane being the accompanying mineral from the Breszcze deposit.

Depending on the coal assortment, coal has the following commercial parameters

  • calorific value from 19 MJ/kg to 30 MJ/kg,
  • ash content from 6.5% to 31.5%,
  • sulphur content from 0.2% to 1.2%.

TAURON Wydobycie conducts the sales of coal in 2 directions:

  1. sales of fine coal (coal dust) and coal sludge to power plants and co-generation plants, mostly within TAURON Capital Group (via the Company),
  2. sales of large and medium size lump coal as well as a small amount of coal dust assortments through the nationwide organized sales network, primarily on the domestic market

TAURON Wydobycie is selling coal mainly in southern and central Poland, in particular in the following regions (provinces): Silesia, Małopolska, Podkarpacie, Świętokrzyskie and Lower Silesia, both to enterprises as well as the individual consumers.

The hard coal sales by TAURON Wydobycie to TAURON Capital Group’s Generation Segment companies reached approx. 3.8 million Mg in 2019, including 3.0 million Mg (approx. 80%) to TAURON for the needs of TAURON Capital Group’s Generation Segment subsidiaries. It means a 18% decrease as compared to 2018 and is due to the lower commercial coal production by the individual coal mines. Sobieski Coal Mine (ZG Sobieski) suffered the biggest drop, which was due to, among others, the performance of the additional mining works to reinforce the longwall complex and fire in 547 coal face area. The lower extraction output by the other coal mines is a consequence of deteriorated geological and mining conditions.

Summary of the Company’s 2019 coal shipments (Mg m)

Sales of generated electricity and heat

TAURON Capital Group’s electricity and heat generation (Generation Segment’s operations) is performed by:

  • coal-fired and biomass burning power plants and combined heat and power plants
  • hydroelectric power plants,
  • wind farms.

Generation Segment’s operations also include trading, distribution and transmission of heat.

The total installed electric capacity of TAURON Group’s generation units reached 5.2 GWe of electric capacity and 2.4 GWt of thermal capacity at the end of 2019.

The below figure presents the structure of installed electric capacity as of December 31, 2019 (as compared to 2018, the installed capacity in wind farms increased by 180 MW).

Structure of the Generation Segment’s installed capacity as of December 31, 2019

In 2019 TAURON Capital Group’s subsidiaries produced 13.9 TWh of electricity (including 1.4 TWh from RES), i.e. 14% less as compared to 2018 when the production of electricity reached 16.2 TWh (including 1.0 TWh from RES). It is a consequence of lower sales of electricity from own production year on year and a result of the adopted trading strategy. Higher production from RES is due to more favorable wind and hydrological conditions and the increased wind farms’ installed capacity.

Sales of electricity from own production plus energy purchased for trading (resale) purposes reached 13.2 TWh in 2019, which meant a decrease by 16% as compared to 2018.

In 2019 the electricity produced by TAURON Capital Group’s subsidiaries was sold on the domestic market, first of all to TAURON Capital Group’s Supply Segment companies (38%), as well as on TGE(38%) and on the balancing market (PSE Operator) (24%). The share of electricity sales on TGE (due to an increase of the exchange obligation) was materially higher in 2019 versus 2018.

Heat sales by TAURON Capital Group’s subsidiaries reached 14.6 PJ in 2019 and it was lower by 4% as compared to 2018. The share of the heat generated from own sources in the total heat sales reached 60% in 2019. TAURON Wytwarzanie subsidiary’s power plants are selling heat in Upper Silesia and  Zagłębie, and also in parts of the Podkarpackie region – Stalowa Wola and Nisko supplied by the Stalowa Wola Power Plant and Małopolska region – a part of Trzebinia supplied by the Siersza Power Plant.

Heat is sold mainly via the heat distributors: TAURON Ciepło, SCE Jaworzno III, Przedsiębiorstwo Energetyki Cieplnej Tychy and others, and on the Podkarpackie market – Przedsiębiorstwo Energetyki Cieplnej sp. z o.o. and ENESTA sp. z o.o. Small volumes of heat are sold directly to the consumers located in the vicinity of the generation companies.

On the other hand, TAURON Ciepło’s heat sales market – mainly for heating purposes, production of hot water for domestic use, process water, includes diverse consumers: Cooperative sector (47%), Private sector – multi-family buildings (housing communities) and single family houses (15%), Municipal sector (17%), Offices and institutions sector (11%) as well as the Industrial sector and other (10%).

In addition, TAURON Capital Group’s generation companies obtain certificates of origin due to electricity generation from RES and in co-generation, which are subsequently purchased by the Supply Segment companies and submitted to the President of ERO for redemption (retirement).

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Sales of electricity distribution services

TAURON Dystrybucja is a company conducting sales of electricity distribution services in TAURON Capital Group and, pursuant to the decision of the President of ERO, it is a Distribution System Operator (DSO)  operating under the natural monopoly conditions.

The regulated market on which TAURON Dystrybucja is operating includes the operations of 5 large distribution system operators (DSOs) that are subject to the full regulatory model. Each DSO is operating on the territory defined in the license. Following changes to the law, also more than a hundred of small distribution system operators are operating on this market serving small portions of the market (small market share), with respect to which the President of ERO is applying a simplified regulatory model. Their operations are local, based on the technical infrastructure held. One of the larger entities holding a license for distribution operations nationwide is PKP Energetyka sp. z o.o.

TAURON Dystrybucja is providing electricity distribution services for approx. 5 651 000 final consumers. The above company covers with its operations the area of about 57 thousand km2, located mainly in the Lower Silesia, Małopolska, Opole and Silesia regions and, in addition, in the Łódź, Podkarpacie and Świętokrzyskie regions. The operational functions are performed by 11 branches located in: Bielsko-Biała, Będzin, Częstochowa, Gliwice, Jelenia Góra, Kraków, Legnica, Opole, Tarnów, Wałbrzych and Wrocław.

Sales to the tariff eligible consumers on individual voltage levels: high voltage (A group), medium voltage (B group) and low voltage (C,G,R), represent 96.6% of the distribution services sales volume. The total electricity volume supplied to the tariff eligible consumers connected to TAURON Dystrybucja’s grid in 2019, as part of the sales of distribution services, reached 51.7 TWh (estimated) and it was slightly higher, as compared to 2018, by approximately 0.2 TWh, i.e. by 0.5%.

Structure of electricity distribution by tariff groups in 2019

Sales of the distribution services are carried out on the basis of comprehensive agreements as well as agreements on the provision of distribution services concluded with the consumers. The first type of the agreement covers both electricity supply by the companies of the Supply Segment as well as the delivery of this electricity by the company acting as a DSO. The second type of the agreement regulates only the delivery of electricity by the company acting as a DSO. In case of this type of agreements, the purchase of electricity is governed by separate electricity supply agreements, concluded by a consumer with the supplier selected thereby.

Wholesale and retail supply of electricity and gas

Electricity supply is conducted by the Supply Segment companies, with respect to the wholesale trading of electricity, natural gas and other products of the energy market as well as with respect to retail electricity and natural gas supply.

TAURON’s wholesale trading operations comprise mainly wholesale of electricity, trading and management of CO2 emission allowances, property rights arising from the certificates of origin of electricity as well as natural gas, primarily for the needs of securing the buy and sell positions of TAURON Capital Group’s entities.

TAURON is actively participating in auctions related to the cross-border (interconnector) exchange of electricity transmission capacity on the Polish-Czech, Polish-German and Polish-Slovak border, managed by the CAO auction office. Trading on the German market with respect to trading in financial instruments such as futures, is mainly carried out through the EEX exchange. On the other hand, on the Czech and Slovak markets trading is performed through a subsidiary – TAURON Czech Energy. In addition, the Company is operating on the KOTE a.s. (Czech Republic) and OKTE a.s. (Slovakia) exchanges.

The Company is operating on the wholesale markets both in Poland and abroad, also on the SPOT market and the RTT market. The Company is an active participant of TGE and the OTC platform run by a London energy broker – Tradition Financial Services.

With respect to the wholesale gas fuels trading operations the Company is an active participant of the gas market run by TGE, carries out transactions on the SPOT market as well as on the RTT products. It is involved in the proprietary trading activity on the international gas exchange POWERNEXT Pegas (as of January 1, 2020, The European Energy Exchange). The Company is present on the following hubs: GASPOOL, New Connect Germany and Tittle Transfer Facility. TAURON is operating on the foreign markets due to the agreements concluded by the Company with the German transmission system operators: GASCADE Gastransport and ONTRAS Gastransport GmbH as well as Czech NET4GAS s.r.o.

Furthermore, the Company is a participant of the Intercontinental Exchange (ICE) on the National Balancing Point (NBP) hub. Gaining access to new hubs is a consequence of the activity aimed at increasing TAURON’s gas related competences and access to new sources. The volume of the OTC market transactions concluded by the Company is also successively increasing. By operating on the gas market the Company is securing the commodity supplies for the entities of TAURON Capital Group; moreover, proptrading operations are carried out on the RTT market, aimed at taking advantage of the volatility of gas prices to generate additional margins.

TAURON is also a participant of the European transmission capacity trading platform PRISMA European Capacity Platform GmbH, where purchasing of inter-system (interconnector) transmission capacities take place. With respect to booking transmission capacity on the Polish market the Company is operating as a participant of the GSA GAZ-SYSTEM Aukcje.

Electricity and natural gas retail supply – to the final consumers – is conducted by TAURON Sprzedaż and TAURON Sprzedaż GZE subsidiaries.

The customer segmentation applied by TAURON Capital Group (strategic, business and mass customers), depending on the volume of electricity consumed, is aimed at tailoring the product offering, sales channels and marketing communications to the expectations of the specific customer segment.

The below table presents categories of TAURON Capital Group’s final customers, resulting from the market segmentation used and the specific nature of their business operations.

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Lp. Customer group Description of customers
1. Strategic customers Customers with the annual potential energy consumption at a level not lower than 40 GWh or strategic business partners of TAURON Capital Group, i.e. mainly entities representing the sector of heavy industry, among others: metallurgical industry, chemical industry, mining industry, automotive industry.
2. Business customers Customers with the annual potential energy consumption at a level above 250 MWh (other than consumers), or purchasing energy based on the provisions of the act of January 29, 2004, Public procurement law, i.e. entities representing the other sectors of the manufacturing industry, producers of equipment, consumers from food industry, public sector, construction sector and municipal services sector.
3. Mass customers – small and medium-sized enterprises Customers dealing with sales, services, banking, catering and small businesses.
4. Mass customers – households Households

The supply companies were operating in 2019 in a market environment where the level of competitiveness in the individual market segments did not change significantly as compared to the previous years. The household market (individual customers) continued in 2019 to be covered by the obligation to have the electricity sales prices approved by the President of ERO.

According to the ERO data, from mid-2007 until December 2019, i.e. since the beginning of the electricity market liberalization process, approx. 657 000 households and approx. 210 000 institutional entities switched their electricity supplier.

In the institutions and business entities (business customer) market segment the competition is strong and companies have already been taking advantage of the liberalization of electricity prices for several years. The progress of the liberalization has resulted in the increasing awareness of business customers expecting competitive solutions. The enhanced sales activities of the energy companies exert ever increasing price pressure. Business customers are willing to switch their supplier. The consequences of such a situation include activities aimed at protecting own customer base against the actions taken by the competition by introducing loyalty building agreements.

The household segment, where the number of supplier switch cases represents a small percentage, is considered to offer a strong potential. In 2019 more than 61 500 consumers of electricity switched their suppliers (including approximately 8 900 institutional customers and approximately 52 600 households). In 2019 the rate of supplier changes in case of households dropped, as compared to 2018, by 9%, and in case of institutional entities, by 30%.

The offering of TAURON Sprzedaż for the business segment in 2019 included 2 media: electricity and gas fuel. The above company continued its activities geared towards building customer loyalty, with particular emphasis placed on developing an offering that would meet customer expectations. Customers were offered a number of products to choose from, taking into account their needs and the specifics of electricity consumption, including ecological, exchange based and technical products.

The sales of the TAURON Giełda product, structured based on the market prices set based on the RTT TGEindices performance, were continued in 2019. Furthermore, in order to intensify electricity and gas contracting, the TAURON Multipakiet product that provided simultaneous customer contracting with respect to both media within a single contracting negotiations process, continued to be a part of the offering. The Wakacje od faktury product was very successful with its sales rising almost four times in 2019 versus the previous year.

The process of mass segment customers (individual customer and small and medium size enterprises) migrating from the tariff based pricing to the product based pricing, was also observed in 2019. As of the end of 2019, TAURON Capital Group was selling electricity under agreements guaranteeing commercial terms over the specified period to 43% of the segment’s customers (loyalty building agreements), while 57% of the customers were buying electricity at tariff based prices.

The key element of the commercial offering for the mass customers in 2019 were the combined products: Elektryk and Serwisant, based on the assistance functionality, that were used by more than 1.5 million customers (medical packages were launched, the functionality of the Serwisant 24h PLUS product was extended).

Furthermore, in 2019 the range of products addressed to the customers was extended by adding specialized products, e.g. TAURON Smart Home, with its sales in 2019 reaching 16 000. The assistance products will represent the core of the offering also in 2020.

In 2019 the retail supply of electricity by the Supply Segment companies to more than 5.5 million customers reached approx. 33.7 TWh, i.e. 98% of the 2018 level when the supply came in at approx. 34.5 TWh. Decreased supply volume was visible primarily in the Business Customer Segment, which was due to the loss of customers and the declining demand or the number of the consumption points at the customers’ included in the portfolio of TAURON Capital Group’s supply companies.

The below table presents information on the volume of electricity supplied by TAURON Capital Group’s subsidiaries conducting operations related to the retail electricity supply to customers, as well as the number of customers, broken down into individual customer segments, in 2019.

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