TAURON Group against the market backdrop – Poland

Apart from TAURON Capital Group, three large, vertically integrated energy groups are currently operating on the Polish market: PGE, Enea and ORLEN Group’s Energa S.A. (Energa). Furthermore, innogy Polska is conducting its operations in Warsaw, managing Warsaw’s power grid.

TAURON Capital Group’s competitive environment based on the available Q1-Q3 2020 data

According to Q1-3 2020 data, the consolidated energy groups (PGE, TAURON, Enea, Energa) held a 67% market share in the electricity generation sub-sector.

*In order to make the segments presented comparable the Generation Segment includes also Mining, RES and Heat.

Source: Companies’ interim reports.

GENERATION

TAURON Capital Group is the third largest electricity producer on the Polish market. TAURON Capital Group’s share in the domestic electricity generation market, based on the gross electricity production output, stood at approx. 8% after the first three quarters of 2020.

TAURON Capital Group’s generation assets are concentrated in the south of Poland. The deposits of the hard coal used to fire TAURON Capital Group’s power plants and combined heat and power plants are also located in that region. The location of the generating assets in the vicinity of the hard coal deposits allows for the optimization of the costs related to the transportation of this raw material.

As of the end of 2020, 89% of TAURON Capital Group’s generation assets are hard coal fired units, 25% of which are modern high efficiency generating units. TAURON Capital Group’s total installed capacity reached almost 6.1 GW as of December 31, 2020, with the renewable energy sources accounting for almost 0.7 GW of that figure.

Wind farms’ installed capacity represents 6.3%, hydroelectric power plants’ installed capacity accounts for 2.2% and biomass fired generating units’ installed capacity constitutes 2.4% of TAURON Capital Group’s total installed capacity.

TAURON Capital Group produced 12.5 TWh of electricity in 2020, with 1.9 TWh coming from RES.

Nationwide, after the first three quarters of 2020, TAURON Capital Group’s hard coal fired units’ installed capacity accounted for approx. 14% of the total installed capacity of all hard coal and lignite fired generating units in Poland. With respect to the installed capacity of the wind farms, biomass and biogas fired power plants as well as hydro power plants, the share of TAURON Capital Group came in at approx. 6%, 13% and 6%, respectively.

According to the data after the first three quarters of 2020, PGE Group is the largest electricity generator in Poland, with its share in the domestic electricity production market in the third quarter of 2020 standing at approx. 41%, and the installed capacity of 17.8 GW. ENEA is the second largest electricity producer in Poland, with a market share of approx. 16% and the installed capacity of 6.3 GW. Energa, on the other hand, has the largest share of electricity produced from the renewable energy sources (RES) on the Polish market and Energa’s total installed capacity stands at approx. 1.4 GW. Energa produced 2.2 TWh of electricity in the first three quarters of 2020, with approx. 1.0 TWh (i.e. 47%) coming from RES.

Source: Agencja Rynku Energii (Energy Market Agency), information from the companies published on their websites.

DISTRIBUTION

TAURON Capital Group is the Polish market leader in terms of the number of distribution customers and volume of electricity distributed. TAURON Dystrybucja’s share in electricity distribution to the final consumers reached approx. 36% in the first three quarters of 2020.

TAURON Capital Group’s distribution grids cover more than 18% of Poland’s territory. The volume of electricity delivered to the final consumers came in at approx. 50.3 TWh in 2020. TAURON Capital Group is Poland’s largest electricity distributor also in terms of revenue from the distribution operations.

TAURON Capital Group’s distribution operations, due to the natural monopoly in the designated area, are a source of a stable and predictable revenue, representing a material part of the consolidated revenue of the entire TAURON Capital Group. The electricity distribution’s geographical area on which the Distribution Segment’s and the Supply Segment’s subsidiaries are historically operating is a heavily industrialized and densely populated area and therefore the distribution grid is very well utilized.

In 2020, the number of the Distribution Segment’s customers reached approx. 5.7 million.

Source: Agencja Rynku Energii (Energy Market Agency), information from the companies published on their websites.

SUPPLY

TAURON Capital Group is Poland’s second largest electricity supplier. The Group holds a 25% share in the electricity supply market to the final consumers in Poland.

In 2020, the volume of the retail electricity supply of TAURON Capital Group came in at 32.4 TWh. The number of customers served by TAURON Capital Group’s Supply Segment is 5.6 million.

PGE is the largest retail electricity supplier with a 32% market share. The other two groups, Enea and Energa, hold a 15% and a 14% market share respectively.

In the segment of electricity supply to the households the individual energy groups are geographically linked, first of all, with the areas in which they are acting as an ex officio electricity supplier. The need to submit household tariffs for approval to the President of ERO leads to limited options for positioning prices in the product offerings, and what follows, it impacts their attractiveness for the customers. Such restrictions do not apply to the business and institutional customers. A broader and more open competition exists in those sectors.

Source: Agencja Rynku Energii (Energy Market Agency), information from the companies published on their websites.

*Volume of gross electricity generated in the first three quarters of 2020

Source: Agencja Rynku Energii (Energy Market Agency), information from the companies published on their websites, own estimates in case of the companies publishing the net production.

The period under review was characterized by a decrease of the demand for electricity due to the outbreak of the COVID-19 pandemic. The decline of the demand contributed to a decrease of the electricity production in Poland, and thus to a lower level of the distribution and supply volumes. The analysis of the largest energy groups operating on the domestic market points to various sources of competitiveness in the selected segments of the energy market, depending on the operations conducted thereby.

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Financial results and prospects by operating segments (lines of business)

Key financial data