





Below are presented the most material risk categories identified for TAURON Capital Group. Each of the risks is also assigned a trend and a materiality level, as indicated below:

The most material risk categories identified for TAURON Capital Group
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RISK NAME |
RISK DESCRIPTION |
TREND AND RISK MATERIALITY |
RESPONSE TO RISK |
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TRADING |
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1. |
Market risk
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The risk related to unfavorable changes in prices on the wholesale electricity market and the energy related product markets, which adversely affect the financial results. | ![]() |
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FINANCE AND CREDIT |
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2. |
Interest rate risk |
Risk related to an unfavorable impact of interest rates on TAURON Capital Group’s financial results. | ![]() |
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3. |
FX rate risk |
Risk related to an unfavorable impact of FX rates on TAURON Capital Group’s financial results. | ![]() |
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4. |
Liquidity risk |
Risk related to the lack of TAURON Capital Group’s ability of to pay its liabilities on an ongoing basis and difficulties in accessing capital, changes in the conditions for obtaining and servicing the financing already contracted and planned (incl. due to the tightening of the EU climate policy). | ![]() |
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5. |
Financing risk |
Risk related to the difficulties in accessing capital, changes in the conditions for obtaining and servicing the financing already contracted and planned (incl. due to the tightening of the EU climate policy). | ![]() |
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6. |
Tax risk |
Risk related to incorrect or untimely payment of the tax obligations. | ![]() |
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7. |
Credit risk |
Risk related to a potential occurrence of overdue accounts payable or a conclusion of a contract with a counterparty (business partner, contractor) that may turn out to be insolvent. | ![]() |
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ENVIRONMENT (STAKEHOLDERS) |
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8. |
Reputational risk |
Risk related to the current and future impact on the company’s revenue and capital (equity) due to the negative public opinion backlash, including the risk related to not following the market trends related to the climate protection. | ![]() |
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9. |
License risk |
Risk related to the lack of the possibility to conduct operations as a result of a prolonged process of obtaining a license or amending the licenses held, as well as the unfavorable legal changes with respect to the licensed operations. | ![]() |
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10. |
Macroeconomic risk |
Risk related to the changes in the economic situation of the country, instability of the financial markets resulting in a decrease of the demand for electricity. | ![]() |
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11. |
Climate change risk |
Risk related to the tightening of the EU climate policy, as well as the environmental requirements resulting from the climate change, activities supporting energy efficiency (prosumer development, support for the thermal insulation, construction of in-house energy and heat sources, departure from coal as fuel), change in the conditions of TAURON Capital Group’s operations (the need to adapt the company to the challenges of change resulting from the climate change).
The implications of the risk include: difficulties or increase in the cost of raising capital to finance operations based on the fossil fuels, the need to incur additional capital expenditures for adapting the assets to the environmental requirements, an increase of the price of the CO2 emission allowances, declining demand for the products offered by TAURON Capital Group’s subsidiaries. |
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TECHNOLOGY, INFRASTRUCTURE AND SECURITY (SAFETY) |
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12. |
Environmental risk |
Risk related to the impact of the business operations conducted on the natural environment and the use of its resources, including, in particular, the loss of control over the process that would enable the prevention of excessive pollution, damage, disruption or failures of the installations or equipment that would have a negative impact on the environment.
The risk also related to the possibility of: lack of the validity of environmental decisions, depositing waste in places not intended for such purpose or not in accordance with the conditions of the use of the facilities intended for such a purpose, the occurrence of a crisis situation (e.g. fire, displacement of earth masses, extreme conditions), the use of the waste not in accordance with the authorized destination (intended use), the lack of the appropriate safeguards limiting the negative impact of TAURON Capital Group’s operations on the environment, release of the hazardous substances into the environment, social protests. The implications of the risk include: degradation of the natural environment and penalties for a failure to comply with environmental requirements, the need to remove such substances, the curtailment of the production, delays in the implementation of the investment projects, pollution of water sources in a way that would prevent their use, destruction of a habitat, object or valuable natural area – environmental compensation, restrictions on a further expansion of the business operations, a loss of the image of TAURON Capital Group, limitation of the ability to use the financial assistance programs. The risk also includes an increase in the environmental requirements due to the tightening of the EU’s climate policy. |
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13. |
Weather risk |
Risk related to the more frequent occurrence of the weather anomalies, including relatively high temperatures in winter, higher rainfall intensity that can cause floods at any time of the year, uneven precipitation, resulting in longer periods of no rainfall, intermittent abrupt rainfall, and the intensification of the evaporation processes, increased frequency and intensity of the hurricanes, strong winds incidentally accompanied by tornadoes and lightnings, more frequent occurrence of droughts and restrictions in access to water related thereto, as well as an increased risk of fires, a very high risk of weakening of the stands, making trees more susceptible to the damage caused by the wind.
The implications of the risk include, in particular: a decrease of the volume of electricity and heat supply, a decline of the production volume, the deterioration of the quality indicators and an impact on the regulated revenue. |
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14. |
Company asset failure risk |
Risk related to the machinery and equipment failures, distribution grid failures (electricity, heat) caused, among others, by the operation thereof, but also by random events including those related to the extreme weather conditions (storms, floods, hurricane winds, heat waves, fires) as a consequence of, among others, the climate change.
The materialization of the risk affects the availability of the assets and results in downtime related to the asset failures, increased costs of the rectification thereof. In addition, it may also be a failure to meet the capacity obligation, resulting in the need to conclude transactions on the secondary market or the payment of the financial penalties to the TSO (PSE). |
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15. |
IT risk |
Risks related to the IT infrastructure security, failures of the IT infrastructure. | ![]() |
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16. |
Asset (property) security and protection risk |
Risk related to compromising the integrity of machines/devices and to the security of information, including its improper processing and unauthorized disclosure. | ![]() |
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17. |
Geological risk |
Risk related to the impact of geological factors on the mining operations. | ![]() |
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WORKFORCE AND ORGANIZATIONAL CULTURE |
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18. |
Social dispute risk |
Risk related to collective disputes, strikes, social conflicts being the consequence of a lack of the personnel’s satisfaction with the economic and social situation. | ![]() |
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19. |
Human resources risk |
Risk related to the employee issues, including also diversity, participation, employment and labor conditions, relations with the trade unions and respect for the right to freedom of association, human capital management, career path and recruitment management, training systems, health and safety at work as well as, in the long run, the need to restructure employment due to the climate change, forcing a change in the profile of the business operations.
The materialization of the risk may result in interruptions or disruptions to the operations, employee complaints, collective disputes, strikes, loss of specialized staff and difficulties in recreating it. |
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20. |
Risk of the lack of the employees’ due diligence |
Risk related to non-compliance with the procedures and the lack of the employees’ due diligence in the performance of the official duties. | ![]() |
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21. |
Pandemic risk |
Risks related to the persistence of the pandemic disrupting Poland’s economic system and administration and causing significant changes in the market environment, impacting the operating conditions of TAURON Capital Group’s subsidiaries. The increase in the number of infection cases leads to the curtailment of the economic activity, affecting the level of demand for the products offered by TAURON Capital Group’s subsidiaries, including, in particular, the electricity distribution and supply volumes. | ![]() |
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22. |
Work Health and Safety (WHS) Risk |
Risk related to ensuring health and safety at work.
The materialization of the risk results in an employee injury, a loss of health or excessive exposure of an employee to factors harmful to health, the compensation paid out for personal injury. |
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23. |
Communications risk |
Risk related to providing inaccurate untrue information or a lack of information disclosure at specific time. | ![]() |
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COMPLIANCE |
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24. |
Internal fraud risk |
Risk related to the appropriation or use of the Company’s assets, its devastation, theft, the use of the official position for personal gain resulting in the financial losses, criminal and administrative sanctions, criminal and civil law liability. | ![]() |
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25. |
External fraud risk |
Risk related to the occurrence of an external fraud (abuse) that affects the operations of TAURON Capital Group through: disclosure of information to unauthorized persons, loss of information, commercial espionage, terrorist attack and hacker attacks, tax fraud, theft, vandalism, counterfeiting, money laundering, terrorist attack. | ![]() |
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26. |
Risk of unethical behavior and mobbing |
Risk related to the occurrence of unethical behavior resulting, in particular, in the lack of cooperation, bad atmosphere in the team, mobbing, harassment, insulting, discrimination of the employees. | ![]() |
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27. |
Legal risk | Risk related to non-compliance with the legal provisions, misinterpretation of the new laws and regulations, the requirements imposed by the regulator and the supervisory authorities.
The materialization of the risk may result in the financial penalties, criminal and civil law liability, a loss of the image of TAURON Capital Group. |
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28. |
Risk of a breach of the contractual provisions (default) |
Risk related to a breach of the contractual provisions with respect to the contract parameters or a failure to perform the contract (default). | ![]() |
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29. |
Personal data protection risk |
Risk related to inadequate storing and processing of personal data resulting in an undesirable leak or violation of the rights of data subjects related to personal data protection. | ![]() |
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CUSTOMERS AND COUNTERPARTIES (BUSINESS PARTNERS, CONTRACTORS) |
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30. |
Customer service risk |
Risk related to non-compliance with the customer service standards leading to customer dissatisfaction with the service, customer complaints, loss of customers. | ![]() |
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31. |
Risk related to performance of agreements by contractors and subcontractors |
Risk related to the improper performance by the contractors and subcontractors of the works commissioned, the termination of the agreement and delays, changes to the budget and scope related thereto. | ![]() |
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32. |
Volume and margin risk |
Risk related to the decline in the volume of the sales of the products offered by TAURON Capital Group’s subsidiaries, in particular as a result of the development of the energy efficiency solutions, building insulation, prosumer development (growth), the impact of the climate factors causing a significant temperature deviation from the planned values.
The implications of the risk include, first of all, the loss of revenue in the individual operating segments of TAURON Capital Group due to the reduced demand. |
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33. |
Purchasing process risk |
Risk related to the purchasing proceedings conducted, their erroneous implementation, an unplanned increase of the purchase costs, including the methods used to prevent violations of the human rights by the business partners, counteracting corruption and abuse (fraud) in the purchasing process and compliance with the ethical and moral standards during the implementation thereof.
The materialization of the risk results in unfavorable purchase agreements, the need to cancel the tender procedures, a loss of the image of TAURON Capital Group and its credibility with the stakeholders. |
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REGULATIONS |
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34. |
Regulatory risk |
Risk related to the change of the existing regulations or the introduction of the new regulations that affect the operations of TAURON Capital Group and the need to adapt to the regulatory changes, in particular those resulting from a significant increase in the requirements of a specific regulation, including the environmental requirements stemming from the climate change, the support for the pro-climate activities (prosumer development, thermal insulation, development of in-house production sources).
The implications of the risk are primarily: the loss of revenues in the individual operating segments of TAURON Capital Group, the increase in the operating expenses as a result of the need to adapt to the legislative changes. |
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RISK CATEGORY MAP
Below is presented the classification of risks based on TAURON Capital Group’s operating segments. The risk categories indicated below are consistent with the Risk Model adopted by TAURON Capital Group.
Classification of risks based on TAURON Capital Group’s operating segments
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RISK |
TERM |
OPERATING SEGMENT* |
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Short |
Medium |
Long |
Mining Segment |
Generation Segment |
RES Segment |
Distribution Segment |
Supply Segment |
Other Operations |
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1. |
Market risk |
x | x | x | 3 | 5 | 5 | 3 | 5 | 0 |
2. |
Interest rate risk |
x | x | x | 2 | 2 | 2 | 4 | 2 | 3 |
3. |
FX rate risk |
x | x | x | 1 | 3 | 2 | 1 | 0 | 3 |
4. |
Liquidity risk |
x | x | x | 4 | 4 | 2 | 2 | 2 | 2 |
5. |
Financial risk |
x | x | x | 5 | 5 | 3 | 3 | 3 | 3 |
6. |
Tax risk |
x | 3 | 3 | 3 | 3 | 3 | 3 | ||
7. |
Credit risk |
x | x | 1 | 1 | 1 | 3 | 4 | 1 | |
8. |
Reputational risk |
x | x | x | 1 | 1 | 1 | 2 | 2 | 1 |
9. |
License risk |
x | x | x | 3 | 3 | 3 | 3 | 3 | 0 |
10. |
Macroeconomic risk |
x | x | x | 4 | 4 | 3 | 4 | 4 | 2 |
11. |
Climate change risk |
x | x | x | 5 | 5 | 4 | 4 | 4 | 4 |
12. |
Environmental risk |
x | 2 | 2 | 2 | 1 | 0 | 0 | ||
13. |
Weather risk |
x | 1 | 3 | 3 | 3 | 2 | 0 | ||
14. |
Company asset failure risk |
x | 5 | 5 | 4 | 4 | 0 | 1 | ||
15. |
IT risk |
x | 3 | 3 | 1 | 3 | 3 | 4 | ||
16. |
Asset (property) security and protection risk |
x | 2 | 3 | 2 | 3 | 1 | 2 | ||
17. |
Geological risk |
x | 5 | 0 | 0 | 0 | 0 | 0 | ||
18. |
Social dispute risk |
x | 4 | 4 | 2 | 4 | 3 | 2 | ||
19. |
Human resources risk |
x | x | 3 | 2 | 1 | 3 | 2 | 2 | |
20. |
Risk of the lack of the employees’ due diligence |
x | 2 | 2 | 2 | 2 | 2 | 2 | ||
21. |
Pandemic risk |
x | x | x | 4 | 5 | 3 | 5 | 2 | 3 |
22. |
Work Health and Safety (WHS) Risk |
x | 3 | 3 | 2 | 3 | 1 | 1 | ||
23. |
Communications risk |
x | 2 | 2 | 1 | 2 | 2 | 2 | ||
24. |
Internal fraud risk |
x | 2 | 2 | 2 | 2 | 2 | 2 | ||
25. |
External fraud risk |
x | 3 | 3 | 3 | 3 | 3 | 3 | ||
26. |
Risk of unethical behavior and mobbing |
x | 2 | 2 | 2 | 2 | 2 | 2 | ||
27. |
Legal risk |
x | 3 | 3 | 2 | 3 | 3 | 2 | ||
28. |
Risk of a breach of the contractual provisions (default) |
x | 2 | 2 | 2 | 2 | 2 | 2 | ||
29. |
Personal data protection risk |
x | 2 | 2 | 2 | 3 | 3 | 3 | ||
30. |
Customer service risk |
x | 1 | 1 | 0 | 3 | 3 | 1 | ||
31. |
Risk related to performance of agreements by contractors and subcontractors |
x | 2 | 2 | 2 | 2 | 1 | 2 | ||
32. |
Volume and margin risk |
x | x | 5 | 4 | 4 | 5 | 5 | 2 | |
33. |
Purchasing process risk |
x | 2 | 2 | 2 | 3 | 1 | 2 | ||
34. |
Regulatory risk |
x | x | x | 5 | 5 | 3 | 4 | 4 | 2 |
*values signifying the impact of the individual risks on TAURON Capital Group’s operating segments: 0 – neutral, 1 – immaterial on the Company’s level, 2 – material on the Company’s level, 3 – serious on the Company’s level, 4 – material on TAURON Capital Group’s level, 5 – serious on TAURON Capital Group’s level