Financial capital
Human capital
Intellectual capital
Natural capital
Production capital
Social capital
The activities undertaken and the achieved values (levels) of the strategic goals, the Efficiency Improvement Program and the Strategic Initiatives are the result of the implementation of the Strategy.
TAURON Capital Group’s strategic goals realized in 2020
Export to Excel
Strategic goal |
Realization in 2020 |
|
|---|---|---|
| 1. | EBITDA above PLN 4 billion in 2020 | The goal was realized by the core operations of TAURON Capital Group’s business segments. In 2020, EBITDA of PLN 4.2 billion was achieved |
| 2. | Net debt/EBITDA covenant below 3.5x | Maintaining the covenants is both the consequence of actions leading to the improved financial results as well as actions aimed at improving the investment efficiency. As part of the Strategy the investment portfolio was optimized and modern financing in the form of a hybrid bond issue was obtained.
As of the end 2020 the net debt/EBITDA ratio came in at 2.5x. |
| 3. | Maintaining a high Customer Satisfaction Index (CSI) | TAURON Capital Group is an industry leader in customer service quality. The annual customer satisfaction surveys performed by an external company confirm a high satisfaction level of TAURON Capital Group’s customers.
The results of the December 2020 CSI survey were as follows: for households 83 points, for small and medium size enterprises 74 points, and for the business customers 77 points. |
| 4. | Power plants generating positive cash flows by 2020 | Achievement of this goal will be the consequence of a number of actions undertaken within TAURON Capital Group, among others: optimizing the costs and outlays related to the generating units, TAURON Capital Group’s trading strategy, as well as the impact of the external environment, both the regulatory one, as well as the market one
The goal was achieved for 3 out of 5 power plants: in 2020, positive flows were obtained at the following power plants: Łagisza, Siersza and Stalowa Wola. The goal for the Łaziska and Jaworzno Power Plants was not achieved. The lack of positive cash flows in 2020 by the Jaworzno and Łaziska branches is due to the accumulation of investments: in 2020 the Jaworzno and Łaziska Branches were implementing the key stages of the program for adapting the units to the BAT Conclusions, incurring investment outlays in the amount of PLN 239 million for that purpose. Taking advantage of the shutdown of those units, major and medium scope overhauls were also carried out for the total amount of PLN 181 million. The revenues resulting from the participation of those units in the new support mechanism on the electricity market, which is the Capacity Market, will have a material positive impact on achieving positive cash flows by TAURON Capital Group’s generating units starting from 2021. The revenues expected to be obtained by TAURON Wytwarzanie from that source in the time frame until 2028 have already been contracted as part of the completed capacity auctions. |
| 5. | Maintaining the customer base | TAURON Capital Group is Poland’s largest electricity distributor and the second largest electricity supplier. Maintaining the customer base constitutes for TAURON Capital Group a long-term growth platform and is implemented by both, actions improving the quality of the services provided, among others an expansion of the customer communications channels, as well as a broad product offering.
As of the end of 2020, TAURON Capital Group provided services for approx. 5.6 million customers of the Supply Segment and approx. 5.7 million customers of the Distribution Segment. |
| 6. | Unit margin leadership among Poland’s 4 largest electricity suppliers | Maintaining of the leadership position is based both on maintaining a high volume of electricity supplied, as well as the ability to generate a positive financial result. TAURON Capital Group, by focusing on the customer, is developing a broad, profitable base of products and services.
Based on the data for the first three quarters of 2020, TAURON Capital Group maintained the leading position among Poland’s 4 largest utilities in terms of the unit margin, calculated as the Supply Segment’s EBITDA attributed to the electricity supplied to the final consumers. |
| 7. | New businesses are to account for at least 25% of the revenue / margin in 2025 | The largest project as part of the implementation of the goal with respect to the New Businesses is the broadband internet access deployment. This project is composed of the Digital Poland Operational Program (POPC) implemented in 7 regions of southern Poland and the construction of structures enabling taking advantage of the business potential of the infrastructure within the Business Services Center at TAURON Customer Service.
In 2020, connecting of 100% of schools to the network was completed and the construction of broadband access for households was continued, which was a significant milestone in the implementation of the project. The attractiveness of the project is additionally enhanced by the amount of the subsidy that is ultimately worth PLN 187 million. With respect to the development of eMobility, TAURON Capital Group is building an infrastructure for charging electric cars. As of the end of 2020, after more than 2 years from the commencement of the first activities with respect to electromobility, the charging network of TAURON Capital Group is composed of more than 70 charging stations in operation, which puts it in the 4th place in Poland in terms of size. In 2020, the works related to the construction of the cogeneration engines were continued based on the model assuming the optimization of the use of methane obtained from the mining headings at Brzeszcze Coal Mine (Zakład Górniczy Brzeszcze – ZG Brzeszcze). The commissioning of the units as part of Stage 1 took place at the turn of January and February 2021. |
Ensuring TAURON Capital Group’s financial stability is achieved through the Efficiency Improvement Program, the implementation of the Strategic Initiatives and the improvement of the investment efficiency.
The implementation of the Efficiency Improvement Program was completed in 2018. The implementation of the program brought savings of PLN 1,719 million which represented 132% of the planned savings, with PLN 1,067 million impacting EBITDA and PLN 652 million having been due to the reduction of the capital expenditures.
As part of the implementation of the Strategic Initiatives and the rationalization of the investment outlays for the years 2017-2020, it was assumed that the financial effects at the level of PLN 3.4 billion would be achieved
Assumptions of the Strategic Initiatives and the CAPEX rationalization in the years 2017-2020
In 2020, the Strategic Initiatives brought a financial effect of PLN 673 million, with PLN 587 million impacting EBITDA, and PLN 86 million having been due to the reduction of the capital expenditures. The Generation and RES Line of Business (PLN 342 million) and the Supply Line of Business (PLN 181 million) made the largest contributions to the savings achieved. The cumulative effects achieved as of the end of 2020 amounted to PLN 4,210 million, with PLN 2,123 million having a positive impact on EBITDA, and PLN 2,087 million coming from the reduction of the investment outlays.
Implementation of the Strategic Initiatives in the years 2017-2020 (cumulatively)
Pursuant to the Update of the Strategic Directions, maintaining financial stability is to be supported by a market verification of the strategic options: disinvestments in the Mining Line of Business and in the Heat Line of Business.
In 2019, a decision was made to carry out the market verification of the sale of the Janina Coal Mine (ZG Janina). The goal of this decision was to make TAURON’s portfolio of assets more flexible by adapting the mining assets to the planned demand for fuel. On December 10, 2019, the process of searching for a potential investor was ended due to the lack of interest in the acquisition of the Janina Coal Mine (ZG Janina). The strategic option of adapting the level of fuel production to the future needs of the coal generating units that will continue to be operated within TAURON Capital Group remains valid and the conceptual and analytical works are underway, as a result of which alternative solutions should be developed.
TAURON is continuing its works on making the Mining Segment profitable, among others, by implementing the Turnaround Program for TAURON Wydobycie.
The project involving the sale of the shares in TAURON Ciepło was implemented during 2020. The most advanced talks (exclusive negotiations) were conducted with PGNiG. On January 29, 2021, PGNiG S.A. disclosed the information on the discontinuing of the negotiations aimed at the acquisition of the shares in TAURON Ciepło.
TAURON Capital Group is offering a rich product and service portfolio for the customers. The measures aimed at developing the Supply Segment are also supported by the dedicated projects as part of the Strategic Research Agenda (Strategiczna Agenda Badawcza – SAB) adopted by the Management Board in 2018. Works are underway on improving high customer service standards and developing modern and integrated sales and customer service channels.
The regulated assets that deal with the operations with respect to electricity and heat distribution are an important link in TAURON Capital Group’s value chain. A significant portion of the capital expenditures is spent on the construction and refurbishment of the distribution grid. TAURON Capital Group invested PLN 1 908 million in total in the Distribution Segment in 2020, while at the same time implementing initiatives aimed at improving the Segment’s cost and organizational efficiency. The main activities involved unifying the processes and systems as well as implementing an optimal and coherent structure of TAURON Dystrybucja.
The steps aimed at improving the economic efficiency of the generation assets held were continued in the Mining Segment and the Generation Segment in 2020, thanks to the optimization of the costs and capital expenditures related to the assets that will not generate positive results in the future, the optimization of the production assets and the sale of the redundant non-production assets, the streamlining of the employment (headcount). The refurbishment investment projects are conducted as part of the undertakings aimed at adapting the generating units to the BAT Conclusions requirements. As a result of concluding agreements, as a consequence of taking part in the capacity market auctions conducted, TAURON Capital Group’s generating units will be receiving additional revenue.
As part of the Update of the Strategic Directions, the new schedules for the 120 MW and 200 MW unit shutdowns were developed and adopted. As of the end of 2020, all of the 120 MW units were shut down, except for the two units at the Stalowa Wola branch, that were shut down on February 1, 2021 (970 MW in total). In the years 2026-2030, further units with a total capacity of 2.5 GW will be decommissioned, mainly the 200 MW units. In connection with the implementation of the Strategy, in particular the change of the energy mix, works are underway to launch a comprehensive program for the transition of the Company consisting in the preparation and commencement of the activities aimed at adapting the organizational and production (technical) structure to the above mentioned change, including the competences of organizational units, potential protective programs, method of consultation and communication, and other important issues related to the permanent shutdown of the selected units from the operation and the management (utilization) of the remaining production assets.
As part of the implementation of the assumptions of the new green policy, TAURON Capital Group acquired 5 wind farms in September 2019, with a total installed capacity of 180 MW owned by the in.ventus group, and as a result of the deal its installed capacity in wind-based technology was doubled. On December 15, 2020, TAURON EKOENERGIA, through the acquisition of the WIND T1 shares, obtained a 30 MW wind farm project ready for construction (FW Piotrków project).
On January 2, 2020, TAURON EKOENERGIA, through the acquisition of the AVAL-1 shares, acquired the Choszczno photovoltaic farm project with a total capacity of 6 MW (ultimately 14 MW). At the same time, the works related to the preparation for the development of photovoltaic installations on TAURON Capital Group’s land (sites) that is not used commercially are in progress. The construction of a 5 MW photovoltaic farm on the land owned by TAURON Wytwarzanie was completed in December 2020.
TAURON declares its readiness to take part in offshore wind farm construction projects. In December 2020, the Company signed a cooperation agreement with OW OFFSHORE S.L., regarding the development of offshore wind farm construction projects in the Polish Exclusive Economic Zone on the Baltic Sea. In January 2021, PGE, TAURON and Enea signed a letter of intent on the cooperation in offshore projects, in which it was agreed that a special purpose vehicle would be established and it would apply for new licenses.
The basis of the operational model is process-based management and the division of the tasks and responsibilities among the defined units: Corporate Center, Lines of Business and Shared Services Centers (CUW). TAURON Capital Group’s cooperation with start -up companies has become important, apart from the traditionally understood research and development activities, as part of the innovative culture. TAURON Capital Group’s new proposal for startups is the TAURON Progres (TAURON Progress) acceleration program enabling a quick presentation of the solution to experts, without waiting for the call for applications to be opened.
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