Ladies and gentlemen, welcome to the press conference of PGE Polish Energy Group, devoted to financial and operating results in Q3 2024, with the participation of COO Maciej Górski, CFO Przemysław Jastrzębski, and the finance division director, Mr. Piotr Sudoł. As you will have known, we would, as you must have been acquainted with, traditionally we start with a presentation from us, and then we'll have a time for the Q&A session, both sent online as well as asked locally. Over to Mr. Maciej Górski after this brief introduction.
Good afternoon. A heartfelt welcome, ladies and gentlemen. We'll be switching the slides, right? I'll try to be brief today because when I heard the brief comment from the room that we are foreseeable, nothing much changes without building too much tension. Indeed, we are quite predictable, and our results meet the market expectations.
I'd like to give you some context because it seems that our meetings can also have an interactive nature and to be placed in the context. So we'll be more than ready to share our thoughts, not only about what's going on in our company, but also about why it is the case, because I think it's much more crucial than just reading out the information that you must have read someplace, be it in our quarterly report or investor presentation. What I'd like to start with is the fact that today we are facing a situation where energy consumption is at a very comparable level to last year. We have no major changes. What is changing and what will be the leitmotif of this presentation is a significant change of the generation structure. The energy mix has started changing dynamically. Actually, it started changing several years ago.
We can already see the effects, and they are starting to show at the macro level. And what we can see is that in Q3 2024, we have noted an increase in the volume of energy generated by 4%. However, in that period, generation from renewables grew substantially, and the share of that energy in the mix by 29% from eolic sources, 1.4 TWh when translated into volumetric measurements. Today, we have actually over 30 gigawatts of power installed in weather-dependent sources, two-thirds in PV, one-third in wind. And next year, we will have to face that. It has some positive effects as well as some downsides. And we will have to struggle with those downsides. We will also be struggling with them next year. We have observed a decreased generation based on hard coal by 17% countrywide. The production based on lignite increased.
We've also assumed an increase of generation based on natural gas. What's important is that we are following the market, and I'll tell you about it later. When it comes to the energy imports, we still remained a net importer. We imported way lower than before, 0.2 TWh. That's less than a year ago. We mostly exported in the periods of high generation from PV sources, which is quite natural. In the next slide, we can see what it means for prices, for fuel prices, and their reflection in electricity prices. When it comes to contracts for the next year, forwards, we had a decreasing trend. Currently, it's EUR 435 roughly per megawatt hour. This is mostly derivative of the prices of hard coal. When it comes to CO2, we can see a lot of volatility.
When it comes to one ton of CO2 in Q3 2024, it ranged from EUR 88-100 EUR. In Q4 2024, it was 70 EUR per ton. In February, 75 EUR per ton. So when combined with the strengthening of the zloty against the euro, it impacted the overall decrease in the emission rates in the market. When it comes to the electricity prices, the situation is much more dynamic in the spot market, and we've permitted ourselves to show two days from Q3, 28th of August and 28th of November. August 25th, that was a Sunday, low consumption, high generation, both from PV and wind. Prices on the second fixing below 2 PLN. September 28th, a Saturday, low consumption, high wind, prices below 20 PLN within the 13 hours per day on the second fixing.
This is a situation we will have to get accustomed to, mostly in summer. I think it was a unique Q3, very warm, very sunny. There were some days that were both windy and sunny. We approach the market signals in a very serious manner. When combined with the operators' activities, which obviously takes care of the stabilization of the power grid, we can see, on the one hand, the necessity to take care of generation flexibility, generation capacities, flexibility, which translates into the power storage. But we also understand that it has to translate into the way we manage trade risk. On the next slide, I'd like to show you that it's not just our specificity, luckily and unluckily, at the same time.
I mean, the fact that this is happening this year and that weather-dependent sources are pushing out the more stable and more expensive sources from the Merit Order is a situation we're facing throughout Europe. Here we have a number, a slide showing the number of negative hours. The lighter bar depicts the negative hours in the first three quarters of 2023. In 2024, we have negative price hours in 2024. The situation is that the increase in Poland is 189 hours in 2024 versus 43 negative hours in 2023. That's a very significant growth. What follows is obviously the discussion on the decisions of the grid operator about the market-oriented dispatch. It will mostly relate to PV farms as well as offshore farms. We're talking about the reduction of RES. What does it mean?
That means that once the reductions occur, we have high volumetric levels in the intra-grid interchange. We try to export it to Germany, and at the same time, we face a situation that at those hours, the RES share in the energy mix reaches 50%-60%. This stems from the fact that right now we still have some power plants that have to be working based on non-renewable sources, but this trend is very visible. We also have the flip side of the coin, meaning that we have a situation where that when weather-dependent sources don't generate power, and as it was formally told about the Dunkelflaute in Europe, that was not a situation that happened in Q3, but on November 6th, we had a situation where between 4:00 P.M. and 7:00 P.M., that was the co-op period.
This showed that the swinging condition of the power grid, I mean, luckily, the transmission operator acted very efficiently, and we, as market participants of the balancing capacities, also added something from us. But this stemmed from the fact that in the EU countries, the price for energy reached EUR 3,000 per megawatt hour. So this shows what can be happening to electricity prices going forward from the macro point of view. Whereas we're not saying whether it will be growing or decreasing, it's hard to tell. But we definitely know that we can expect a way greater volatility, what was shown by the second half of 2024. We have volatility. And what's also important is that other than the volatility triggered by weather-dependent generation sources, we also know that the new architecture of the balancing market is working.
We, as PGE Group, are part of that market, and we know how to take advantage of the adjustment implemented on June 15th, not only by being a responsible participant in being the owners of a very significant proportion of conventional or renewable sources, but we're also trying to make money on it. On the next slide, a very brief presentation of our operating results. As said before, we are following the market. Our net power generation is slightly higher in Q3 2024, 13.2 TWh versus 13.1 TWh last year. Distribution, that's a good sign. I mean, if the volume of power distribution is growing, this reflects the fact that the economy is growing more or less, and the demand from larger enterprises was also visible. When it comes to the sales to end users, we had a drop.
This is also a response to there being ways of, especially for large end consumers to find some diversification. They are also moving towards non-metered installations and are trying to manage their volume of energy purchased. [Foreign language] . And as regards heat, there is just a minor change, slightly greater increase in the volume of heat sales. That is the response to a slightly lower temperature in the third quarter. An interesting detail: I don't know how carefully you studied our quarterly report and the presentation for investors, but I will briefly talk you through our investments of strategic nature. Some of them are the continuation of the decisions that were made in previous years, but some of those investments result from our changing vision of the demand for generation sources and installations that can allow us to be more flexible in energy generation.
We have a new segment added to our activities, and we recorded a major success because we managed to obtain a license, which might be a surprise to some of you: Gryfino 2050. Now it's called Gryfino Dolna Odra, Lower Oder. We changed the name of the company that is responsible for the completion of those two units. And why we did so? In order to show you the consistency in our continuous activity. And it was also the reflection of our estimates of how we can merge new energy sources with the traditional ones. So when we put up two ultra-modern units that will be fully utilized right from the beginning, we want to show that we work closely with the local community and we are forward-looking. Rybnik is also an excellent investment. We have a perfect location.
In fact, it is somewhere where you can visit to see how a modern gas unit is being built. Today, we are on schedule. We have laid the foundations for the key infrastructure. We have started erecting the structures of the key buildings. The supporting structure for the boiler has already been delivered. That is a major project. It seems to us it's going to be the first in a series of our investments in Rybnik, our investments in modern energy. Gryfino Dolna Odra was also the first step in our efforts to invest in modern energy in the vicinity of Gryfino. That is where we will try to build a storage place for energy, at least one such storage facility, maybe two. As PGE, we will also invest there in modernized heating systems. In Rybnik, similarly, we will want to make it a first step.
We are in the dialogue with the operator as well as the local authorities regarding a greater number of investments there. Now, offshore wind farms, I didn't prepare this slide, and that's why it didn't show us the first bullet. That would be my choice. Because if we consider Dolna Odra and Rybnik as about PLN 8 billion in CapEx, Baltica Project is the largest project within PGE. Altogether, it will cost us about PLN 30 billion. We share this with Ørsted. And we are on the eve of the final investment decision. So when we had a meeting here some time ago, we told you that with superhuman efforts, we were trying to finalize funding for that project. That is indeed a very large project. And if you ask bankers, you can find out that our project is more complex in terms of its structure than the Orlen's project.
Still, we managed to attract a lot of interest from the financial sector, which is interested in participating in the project. I think the fact that we are on the eve of the final investment decision means that within up to weeks, we will know what this decision is. It is in weeks that we count the time for closing project finance funding, the first very large funding in this project finance model in the PGE Group. I think this is the direction which we will very seriously consider as a way of funding of our other investments within the group. Regarding what is going to happen next year, an auction is planned for the fourth quarter 2025. We are preparing to participate in this auction. We have some variable elements still regarding the rules of this auction.
We know that the law on offshore energy is being amended now. And the ministry is about to announce different prices for different areas. We follow this process with interest, and we hope that the milestones that were set at 512,000 will be kept. And we for the less demanding projects. And we also hope that our arguments regarding projects which are maybe not further offshore, but which have a longer connection both under sea and on land and are located on more demanding ground require higher prices. That is, unfortunately, the development worldwide. The fact that the Capex in Baltica 2 that we have right now is a new reality. The components of offshore wind farms are very different from what they were two or three years ago when we started contracting for Baltica 2. Today, we are talking about higher Capex by 20%-30%.
This is the narrative that we keep internally regarding our participation in auctions in 2025. There is another one in 2027 and 2029. Our ambition is to take part in the one in 2025 as an important participant with full rights. Hopefully, we will also be able to obtain support for our projects, land-based onshore renewable energy sources investments and energy storage facilities. As you know, we are today the largest operator of energy storage facilities in Poland. We have installed over 1,000 MW in those storage facilities. We are able to manage these facilities. We know how to make money on them. In particular, this year, we have been earning on them as an active participant of the Balancing Market services. Likewise, we want to be a major player in the market of chemical storage facilities. That is the last bullet point here.
An example is the one in Żarnowiec with 263 MW connection capacity, altogether 900 MW. We like this project very much, and we see huge potential here. As you might know, we have received two bids, two offers in the tender for this facility, one from LG, another from Kora. Now we are studying the bids, and hopefully, this will be the first of the large storage facilities which we will implement as PGE. In addition to that, we have significant appetite for developing such large storage facilities. Additionally, we also are interested in developing smaller storage facilities, the ones that we already have as the projects for which the first stage of the procurement procedure is already underway, so a lot is going to happen as regards our investments in storage facilities, and as for PV, here probably we will wind down our interest slightly.
Zwartowo, that was a large PV installation, was opened. That is considered as a success. We will continue with this PV facility. We will expand the photovoltaic capacity by the end of the year, but I wouldn't expect any spectacular achievements here. That might sound exciting in terms of installed capacity, but efficiency, productivity of photovoltaics is lower than that of wind farms offshore or onshore. So that contributes to our shaping of the generation mix. Here, the contribution of PV will be relatively low. We have finished modernization of Dębe. When you go sailing on the Zegrze, you can see it. That has the capacity of over 20 MW, a large one. We have managed to successfully modernize it. That's a valuable asset on which we are earning.
Not in the third quarter, but after the balance sheet date, we included Porąbka-Żar in the system that is now in the process of modernization. That cost us significantly over one billion PLN. [Foreign language] . That's a very interesting project. I do encourage you strongly to go there and see what those structures look like. This hydro technology infrastructure is really impressive, and the modernization was carried out by the same company which some 30 years ago built this facility. That was a Swiss company, Voith. Everything went smoothly. We started refilling it with water, and we are now restoring it to the system. That is relevant because these are the assets that allow us to mitigate the risk which emerges in connection with the share of weather-dependent factors in the system.
So if we have negative prices, such a power plant allows us to pump water to this upper storage facility, and then we reduce the level of water there. So these are also the assets that allow us to participate in auctions for balancing capacities, for balancing power. We will continue to operate Porąbka in the next months and years. Three out of four hydro units will be operated. There are four big hydro units, 140 MW each. And today, we have put into operation the first one. We will modernize the other ones as well. As regards heating, here we are doing a large investment project to decarbonize this business line. Czechnica. Czechnica, that's a project that has its history and some delays. We're actually at the last lap. The first fire started on gas turbines.
When it comes to the technological running, we are at the stage of coordination with the contractor. We have good prospects when it comes to the full utilization of Czechnica. The boiler room in Lublin and also the line in Rzeszów is at the right stage. One of them is at the commencement stage. The other one is at the final stage of installation. We'll be making new decisions when it comes to CapEx in district heating. One of them is in Kraków. We'll be telling you more about it because the decarbonization of district heating as a program is quite complex and requires quite high CapEx. However, it seems that we're doing better and better with that business line. The regulated distribution is roughly 0.9 billion PLN in CapEx. Our main two companies, PGE Dystrybucja and PGE Energetyka Kolejowa.
We spent PLN 940 million in the rail company. There's nothing new about it. We keep pursuing projects when it comes to distant reading meters and the modernization of existing lines. However, we are also trying to look into the fact whether we are reaching the expected effects. We're also trying to connect as many new consumers as well as new generators. I'm sure you've been reading about the dialogue we're in when it comes to the changes to the issuance of connecting decisions. That's a step towards increased discipline both from us and the investors when it comes to the application and obtaining of terms and conditions of connection. We'll see how it works. I think it might be a step in the right direction. As you will probably have seen yesterday, PGE Distribution concluded a new contract with Ericsson for the supply systems in LTE 450 systems.
That's one of the projects which is being pursued as planned when it comes to the distribution segment. That's it when it comes to the most important operating issues and most important Capex-related issues. I'll give the floor over to Mr. Jastrzębski, CFO, and we'll pass on to the figures.
Good afternoon, ladies and gentlemen. Recently, while presenting the Q2 results, we mentioned that the diversified structure of the group's business gives us a financial stability level, and today, the quarterly results support that thesis, that statement, because at the reported EBITDA level, today's result is the same as the comparable period of the previous year up to the million, and that's all under the conditions of variable market conditions, which obviously meant that the structure of that result and the share of the items is significantly different. First of all, the generating segments contribute to that with conventional generation.
For the first time this year, had a positive result. Gas-fired generation owing to the launch of the Gryfino power plant. Dolna Odra first obtained a positive result in its brief history. A positive result on generation is also district heating and RES. As part of renewable energy sources, we have the pumped storage plants that are also operating and providing their services in the balancing market. Additionally, as always, the strong distribution adds to the result. When it comes to the second part of that puzzle, we have the trade, which generates a loss of PLN 100 million. And we have a pressure owing to the lower rate pressure. When it comes to the net result, it was lowered by a third, by a fourth, sorry. But this stems from the financial activity. The financial income dropped, financial expenses increased.
When it comes to the structure, I'll relate to that area further on through the presentation. When it comes to the main major EBITDA items constituting the EBITDA, it was mostly owing to the drop in the sales of electricity by generators by PLN 2.5 billion. That's owing to lower energy prices, a drop by 208 PLN per megawatt hour year on year, slightly offset by the effect of a higher sales volume. But of course, this has not significantly balanced the situation. Mostly, we have a contribution from the gas-fired Gryfino power plant, the newly launched power plant that did not perform in the previous quarter, I mean the comparable Q3. At the same time, on conventional sources, we had a decrease in the volume. A significant component was, of course, the price difference fund, Price Difference Disbursement Fund that charged the result in Q4.
In 2024, we didn't have that factor. It occurred in the previous year. We also observed lower CO2 cost by PLN 1 billion. This stemmed both from the drop in the unit price as well as a lower volume, mostly owing to the smaller hard coal-based generation. Of course, at the scope of roughly PLN 600 million, we had a contribution from lower fuel prices and the prices of other materials. When it comes to the trade segment, the lower component was roughly PLN 600 million. That was the effect of higher portfolio balancing services. And when it comes to distribution, the margin was higher by PLN 180 million. And we had a higher WACC and WRA level. The margin on distribution in rail energy in Q3 this year at the level of PLN 380 million was also higher by roughly PLN 40 million compared to the reference period.
Of course, in Q3, we also observed higher revenues from the sales in the power market as well as the services that have been observed. And since June, that's by PLN 0.2 billion. Among more interesting items, you might be interested in personnel-related costs, PLN 182 million. This stemmed from the costs of social accords. It was a one-off event, which is negligible of PLN 4 million versus PLN 8 million last year. And as a result, the EBITDA reported in Q3 2024 amounted to PLN 2,458 million, which is almost identical to the reference period. When it comes to CapEx, the COO discussed it in greater detail. I won't be repeating that. My comment is that as compared to the previous period, we had an increase by 11%, PLN 272 million.
What stands out is mostly gas energy, but gas-based energy, which was connected with the commissioning of the power plant in Rybnik and Gryfino. And when it comes to the nearest future, the power plants connected with energy to come into fruition, as we all expect and believe so, then in the ensuing quarters, we will be able to observe an increase in renewable energy. Passing on to the indebtedness, the situation is that if we look just at the figures, the situation looks enticing because at the end of the quarter, our net debt amounted to less than PLN 4 billion. And the debt to 12 months EBITDA was less than 0.50. But if we take the economic debt, which is adjusted by future payments and CO2 settlements, it goes back to PLN 19 billion.
The ratio increases to over 2, which is still safe, and that wouldn't constitute a problem. However, in the case of indebtedness, it's not ratios that constitute a problem. It's the willingness and capacity of financial or willingness of financial institutions to provide us with funding. Both concentration limits for banks are a problem, as well as the limitation of the number of potential lenders owing to the functioning of coal-based assets in our structure. That's definitely a limit. And it makes sense to take a look at the relationship where actually PLN 4 billion is the basic debt, but as much as PLN 15 billion that stems from CO2 purchases, CO2 right purchases.
And this shows the scale of the group. Supposing something changes in this area. When it comes to. [Foreign language] . As regards our outlook for 2025, if we look at segments renewable energy, the outlook is neutral.
On the one hand, we assume the results of pumped power plants can be higher. Greater generation volume is expected, but probably as a result of decreasing prices, we will record lower revenues from the rights. As for gas energy, here the outlook is positive. Gryfino is going to work all next year. So that is evidently the source of revenues for us, and we will incur no cost of starting up this installation. In conventional energy, we expect lower margins on sales. Probably we will experience significant pressure on generation volumes, and there will be a positive impact of decreased per unit cost of fuel consumption and CO2 emission rights. But for sure, this will not offset the previously mentioned factors. Heating, here we expect slightly lower per unit cost of fuel consumption, hard coal and gas. And the same goes for CO2 emission rights.
We will have a slight increase in the tariff, and we expect lower prices of energy prices. But overall, the outlook is positive. The next segment that is distribution, rail energy, and trade, here we expect neutral developments. For sure, higher value of regulatory assets as a result of the investment that we are carrying out. And as for the level of WACC, this is now being agreed. So it's hard for me to make any firm comments on this. In rail energy, we assume WACC at a similar level. In trade, theoretically, trade has lower base, but there is a serious risk of lack of coverage of risks by the energy costs as a result of regulatory changes that are now being discussed. That's it from me. Thank you. And I think we can move on to the next part of the meeting.
Thank you, gentlemen.
We have received some questions, so let me start with the ones that have been submitted by mail, and then I will give the floor to those present in the room. The first, in connection with a lack of decision on non-separation of the assets, are you planning to present a new strategy for the upcoming years? Maybe Mr. Górski?
Thank you very much for this question. The person who asked it is not the first to do so. We are asking this question ourselves as well in the context of a new strategy, and we seem to be reaching the conclusion that it is a topic that should be revisited every now and again and communicated transparently. I can declare that we will communicate to you all our plans, both midterm and long term, very transparently.
It is also a fact that in the public domain, a more or less intense debate about spinning off coal assets reemerges. I think it's a good thing that a step back was taken. What does it mean to spin off coal assets? Who and why and how should participate in such a process? We are more the receiver of information than a giver of information in this context because we are waiting for decisions at political level. Nevertheless, it seems to us that understanding the level of complexity of this matter, as the management board of PGE, we are taking steps with regard to our individual business lines. You know perfectly well that today we are operating in an extremely volatile market.
The first slides in this presentation were intended to show you that the market is so variable that we do not have the comfort of waiting for any decisions regarding our new investments, directions of development, or anything else until a formal or less formal decision regarding update or revision of the strategy is made. I think the message from us today is that in spite of this high volatility in the market, in spite of there being no principle assumption that theoretically should be at the root of strategy revision, we as PGE are trying to think about our individual business lines in the context of those challenges that emerge in the context of building the value of PGE within the space we operate in today, so we carry out the investments in gas capacity. We are taking active steps aimed at building new energy storage facilities.
We continue our efforts related to offshore wind energy, and we are also trying to make sure that our investments generate the desirable returns. I know that is a bit of a roundabout answer, but that is what I can tell you.
Thank you very much. That brings me to the next question. In the draft law on extraordinary measures regarding freezing energy prices in 2025, there are provisions regarding change of tariff for the energy for the second half of 2025 and new rights of the regulator, how that will affect the results of the company? Mr. Jastrzębski, if we are talking about the results.
For the time being, it is only a draft law, and we will probably participate in the consultation process of this draft law, submitting our comments. But assuming that this law is actually adopted, we can expect a negative impact.
I don't want to comment on amounts, but it would be hard to give any other answer. According to this draft law, by 30th of April 2025, we should apply for a change of tariff for households. Although our tariff is approved for the period from July till the end of December 2025, that would be change of the rules, change of conditions during the game. We'll see how this develops. And then when we have our greater knowledge, we will be able to share more information on this.
Thank you. Now, I think that should be another question to Mr. Górski, who has already mentioned Żarnowiec. Will this storage facilities project be completed?
I hope it will. We would very much like to move with this project to the next stage. And the next stage is the actual completion of the project.
As you well know, we as PGE carry out our investments under the law on public procurement, and in the case of the storage facility in Żarnowiec, we are at the stage where, after receiving bids from two companies that I mentioned earlier, we are now analyzing the bids in formal terms, in terms of whether they meet the terms and conditions. As you might have read, these bids are above the estimated value of the order. Therefore, as of today, we need to do some more studies and analyses regarding profitability of the project. We know that what happened in the market of regulatory balancing services provides some prospects for the developments in the upcoming years, but we know that investment in storage facilities is a long-term investment. We are talking about expenditures of PLN 1.2- PLN 1.3 billion , so that requires careful poring over the numbers.
It's going to be the largest in Poland energy storage facility, and that will also affect the market of balancing services. So if I were able to decide, I would very much like this project to be completed. Nevertheless, we still need some more time to finalize our internal analyses. And as soon as we are ready to make the final decision, we will announce it, communicate it as stipulated by legal regulations. We will announce it to both participants of the procurement procedure and to the entire market, which does not change the fact that it is hopefully the first project of large-scale energy storage facilities. And as soon as possible, we will launch the next tenders. And another project on which we pin great hopes is the Gryfino project, where we intend to build the storage facility with 400 MW connection capacity.
And then we want to develop similar projects and complete them. Although, in spite of being an experienced player in this market, we as PGE are still learning how to invest in this field. There are some bottlenecks. It is a large project because a connection of a facility of 250 MW to the national power grid is not like 250 mega coming from 1 MW facilities. That's a different project entirely. And different rules have to be applied. So I hope this project will pave the way for the next investment in this sector.
Thank you. Another question regards the power plant in Rybnik and Dolna Odra. The participation of those power plants in the Capacity Market by 2028 could change the situation or not?
I will take this question.
I'm sorry for speaking so much, but I try to be as transparent as I can in explaining to you our way of thinking as the management board of PGE with regard to very relevant areas of activity. We have an ultra-modern enterprise of this storage facility in Żarnowiec that is top of the top in the development of the Polish energy sector, and on the other hand, you have a question about Dolna Odra. This is a conventional power plant fueled by hard coal, which celebrated its 50th anniversary earlier this year. Always the common denominator is the requirements of the Polish power grid. Both assets operate within their own economic context, but also they operate within the context of their relevance to the Polish power grid.
We say Rybnik and Dolna Odra in the same breath, but because they are in some way similar, and it seems they might be treated similarly, but we are fully aware that these are very distinct projects, large projects, almost 1,000 MW assets. As for Dolna Odra, we have already dedicated a lot of funds to put up another gas unit, 166 MW power plant operates already there, and then on the other hand, there is this Dolna Odra, which is not profitable, unfortunately, so the question is, first of all, whether that power plant is needed to PSE. And we are in the process of dialogue with PSE because this is the first answer, the first question that we have to answer. If so, we approach it in a different way. If not, then the dialogue is different.
Supposing PSE no longer needs to be using that power plant, then we have some remedies to act accordingly. Would that change the situation of the market or the situation if we were to participate in the Capacity Market until 2028? I think yes and no. It's not a deal breaker or a deal maker. It's not a matter of a year. It's a permanently unprofitable asset. We are dedicating a lot of attention to that problem. We're trying to correctly address the expectations of individual stakeholders. This is PSE employees, the local community. That's some history and heritage of the people working there. I have a meeting with the social party even tomorrow. We will be talking about what's going to happen going forward. Rybnik and Dolna Odra. Rybnik is a different asset. You have to keep in mind that we bought Rybnik from EDF.
It's a different organizational structure, different organizational culture. Rybnik is closer to the source of fuel. Let's just say it's located inside Silesia. The gas-fired unit is only being built. We know that until the end of 2026, there will be no new generating capacities. And that's very transparently being communicated to PSE. And probably the analyses from PSE are also underway when it comes to those CapEx projects. And I mean, it would be better if that were the case because then you could just think about the extension of the power plant's life. We rather need it from the point of view that, I mean, about what the optimum calendar or timeline is for that power plant. Given that there are 450 employees working there, some of them will find employment in the new gas-fired power plants and as well as new CapEx projects.
I mean, we are at a very early stage. We're just the same sort of developer of storage facilities or flexible generation resources as any other developers. It's very hard to tell at an early stage of the development. But hopefully, in Rybnik, we'll be able to manage that in a streamlined way. I mean, I realize it's a roundabout answer. Partially, that loss would be covered. But the challenge about Dolna Odra is much more than just the participation in the Capacity Market. The challenge for Rybnik, as of today, is probably half the beat before that, owing to the rhythm of CapEx into gas-fired capacities. Thank you very much. Now, I'll give you an opportunity to have a cup of water because I'm sure that Mr. Jastrzębski will be willing to answer the question about the KPO amounts, I mean, REPowerEU fund amounts.
I mean, what we can be talking about today is about the applications from PGE Distribution that have been positively evaluated and recommended for funding, for subsidizing. We're also in the process of being prepared to conclude the contracts. The total amount is slightly below PLN 200 million when it comes to subsidies. Also, activities and intense work is underway for Baltica too. Moreover, as part of the multi-annual CAPEX programs, we submitted two applications for loans in November 2024 for distribution and PGE Energetyka Kolejowa Rail Energy. When it comes to the amounts, I wouldn't like to comment on that because applications is one thing and the amount appropriated is a different issue. Once we get the decision, we will be obviously informing you. But I can only share with you that these amounts are very significant, and we are hoping for a positive resolution of those applications.
That's it from me.
Thank you very much. So I think we can just distribute the mic. If I could just ask Mr. Górski, those 13 million for Baltica to its current prices or current?
I thought it would be. I'm saying it's roughly, and I wouldn't like to get into details. Like you know, as you know, it's a highly complex project other than CapEx. There are also costs involving the running of the projects, developing it historically also. Just to give you a sense of how significant and large the project is, I guess that's the range of amounts.
Yes, if you can just use the mic as you ask the questions.
Ireneusz Chojnacki. Can you hear me?
Very loud and clear. Two questions.
First of all, I'd like you to answer what CDS and CSS ratios were in Q3 when it comes to generation based on coal and gas and what the trend for them is or will be, in your opinion. And the second question, I think, is quite obvious, but let me ask it. Given the repeatable EBITDA in conventional power generation, you mentioned about the pressure on volumes in human terms. Do you expect a drop? Do you expect a drop in the generation based on coal in 2025? And if so, which coal? Brown coal or hard coal? Thank you.
When it comes to CDS, I won't be able to quote the exact figures, but I'm sure the pressure on CDS is greater and greater, which is also connected with your latter question.
The volumes and CDS are getting constrained, and hence the outlook in conventional energy for 2025 is negative. Unfortunately, we don't hear the question. It's off the mic. We're looking at that in total at the segment. As you can see, the results are not positive. So the answer is self-evident.
The question is off the mic. We don't hear it. Sorry.
As we said at the beginning of the presentation, lignite has rebounded a little bit. We had an increase, but it was less than the decrease on the hard coal throughout the market. The situation could be just converse in the total market. A lot will depend on the prices offered by the suppliers of Polish hard coal.
I think to make it more precise, yes, we can observe the trend of lowering the hard coal prices as of the beginning of next year, which will trigger the fact that lignite might suffer more when it comes to the production volumes. This information is seriously being considered by us. In our short-term plans, we're also considering the potential long and mid-term proportions, but this is potentially also an argument that we are sharing with decision-makers when it comes to issues connected with the maintenance of coal-based assets in our asset mix. When we're saying that lignite will be suffering, I mean, it's still ourselves only because hardly anyone is using lignite these days for power generation. Yes?
But when we Sawicki, Rzeczpospolita Daily, two questions to get along the topic of lignite. It's very interesting.
You are informing us that Q quarter on quarter increase is 11% on lignite. At the same time, you're saying that the emission rates dropped by 22% year on year. And we can see on the slides that your forecast is that brown coal will be positively contributing to the generation. So my question is about the forecasts for next year in the context of lignite to continue along what you just said. Do you expect that generation based on lignite will be growing next year, or will it be on the decrease as compared to this year? And I'd also like to ask you about the effect of your cooperation with PwC when it comes to the separation of coal-based assets. You also talked about the conclusion of cooperation with an external advisor. When it comes to coal-based assets separation, you started this with cooperation in Q2.
Now we're having the report for Q3. The question is what PwC has been able to provide you with calculations when it comes to the separation of coal-based assets.
Thank you very much for those questions, and let me just put it this way. They're highly interesting. My hope is, however, that we will be reaching such a moment in time, both yourselves and myself, that I mean, that I will still be COO and you will, you as journalists, will be talking more about modern power generation and we'll be talking less about less modern power generation. This is my wish for myself and for you. Starting with the latter question, PwC is an advisor to the board of PGE Polska Grupa Energetyczna when it comes to the separation of coal-based assets.
And actually, from our point of view, this cooperation is highly satisfying because people who have seen many more such examples globally and their objective when it comes to the numbers and assumptions in that kind of activity, and they're telling us what the possible scenarios are as well as the possible consequences should those scenarios fall through. We tried to touch base with the Ministry of State-owned Assets along those scenarios. Some of them aroused some interest. Others did not. I mean, it's an interactive dialogue, and it's good to have launched such an objective advisor to objectivize it because we, as the management board, have some view. It's appreciated, but if we can base it on analyses developed by a recognizable company from the strategic consultancy market, that it helps.
We have extended the cooperation timeline with PwC because we can see that the Ministry of State Assets also realizes that it's a topic that requires slightly extended analyses, and like I was saying, we are a recipient of that timeline and the decisions made. Therefore, we are trying to be prepared to be able to answer the questions and to deliver such a scope of information and analytics that is necessary for the decision-makers to be able to run their own analyses as well, so to answer your second, so that's for the second question. When it comes to the second question, the first question, actually, the generation structure in Poland is indeed shaped by the market. At the end of the day, we have the merit order system, which determines what is being generated, and that determines the fuel structure of power generation in Poland.
We can see that this market is slightly shaken. We probably don't have expectations for energy prices to grow quite conversely, but on the other hand, we know that there will be much greater volatility than you might expect on a summary basis this year. So next year will be very similar to what was happening in Q3 rather than what was happening in Q2 before the sub-balancing market being implemented.
What can it end on?
[Foreign language]. Well, it can end with a greater negative effect on lignite power plants than on hard coal power plants. And I would end with this, unless you, Piotr, want to share some other opinion or would like to add anything. I think we have repeated this already three or four times today.
lignite is facing a great challenge in 2025, and in all our operating systems, the negative outlook relates to lignite in particular.
Barbara Oksińska, XYZ, I have two questions. The first is about distribution tariff. Does the company assume an increase in the distribution tariff for next year? And if so, how can it affect the entire bill for energy on condition that the price is frozen? And regarding the second question, I would like to continue on this topic of offsetting the assets. The journalist received the information from the Ministry of State Assets that companies would not have any problems in obtaining funds if the process of setting off the assets does not occur. And that was your main argument. You need to do that; otherwise, you won't have money for investments. What is your response to this?
Which you? There are four of us. Good.
It's not me. As regards your first question on distribution, you know well the distribution is a law unto itself. We are, of course, interested in following its dynamics and the process of setting the tariffs. It's not a revolutionary business. It's an evolutionary business with a certain element of cost inflation, labor costs, CapEx discussion on RAB. So I would not expect any major changes here, in particular in the context of the decisions being made by the government in order to make sure that consumers are taken care of. You have to remember that the government and we fit into what is happening in the entire European Union. We need to take care of competitiveness of the overall economy. We would like the energy prices to be lower because that allows us to generate higher financial results. But it is a short-term activity.
It is in our interest to make sure that Polish economy is competitive. So we understand those activities and try to think about our investments in a long-term perspective. Therefore, we do not expect to obtain any higher-than-standard profits when the government is freezing prices. We don't want to increase prices aggressively while the government is freezing them. That's a very natural tariff process, which follows its course very much like it did in previous years. So I would not expect any major differences in the process as compared to what it was like in other years. And your second question regarding spinning off the assets, I know that it is an interesting topic. And as regards comments on the ability to obtain funding, Maciej Cieśliński has already covered it.
We have this difficulty that it is not only a discussion about net debt to EBITDA ratio being at one level or another. I think the context is broader. We are indeed facing a major challenge today in our talks with financial institutions and with insurance companies. Sometimes these are interrelated. In particular, with regard to the willingness to fund PGE as a holding that has as one of its business lines coal and fossil fuels. So regarding our EBITDA and our very disciplined manner of taking care of our relations with financial institutions, you could say that this problem should not occur at all.
But then when we go down to the nitty-gritty of everyday business relations, in the second sentence of our conversation with financial institutions, after being told that we are nice, predictable, and they would be very willing to fund us, they say, "But their policy established in Paris, London, Frankfurt, New York, Dubai, or some other major city that constitutes a financial hub does not allow them to do that." So we finish our coffees and we arrange another meeting once decisions higher up have been made. I don't want to be overly pessimistic, and that's why we try to respond, react to this situation. And one of our responses that we are offering with Ørsted is the Baltica project. Somebody might say that we have a great interest in subscription for Baltica 2 project, great interest from all financial institutions. We have BGK, which is very active.
I'm full of appreciation for the management board of BGK regarding their attitude to the dialogue with us in the context of the future funding of Baltica. Nevertheless, this is, well, this is one of those projects that we are successful in completing. You need to be able to fund your own contribution and so on. Anyway, the bottom line is that as of today, we are taking steps with regard to investment activities for the projects that are on the table that we are trying to implement. We are also effectively obtaining funding for those projects. However, in long-term and middle-term, the fact of having a significant exposure to coal assets may reduce our investment capacity and may reduce the capacity of PGE and projects that transform Polish energy market.
Maybe I would like to add something to this.
You need to take into account the fact that various energy groups have various structures, and in PGE, our challenges related to coal assets are the greatest, probably, so you need to approach this and analyze this case by case. In our case, the challenges are really significant. We have lignite. We have hard coal. So the scale of challenges in PGE in this regard is really significant.
Julia Cydejk o, Polityka Insight. I would like to go back to Żarnowiec. Can this project hope for support from KPO, taking into account that in the tender documentation, the completion date was moved from June 26 to April 27? And another question regards this year's main auction of the Capacity Market. Will PGE participate? And if so, with which projects? Will Żarnowiec be among them?
If one of the legs on which Żarnowiec stands limps, what is going to be the future of Żarnowiec? I just imagined limping KPO and limping capacity auction and was not very successful in conjuring up this image.
True. As you know, this is the second procedure in which we are trying to select the contractor for this large-scale storage facility in Żarnowiec. We previously hoped we would have been able to do that under the previous schedule. Now we had to align the deadlines with the new situation, so the final completion date was extended. All of us would like this KPO or the funds from KPO to be spent in a way that drives investment in modern electrical energy.
In line with the current provisions of the KPO program, we have a very high probability of not being able to take advantage of that, which does not mean that we don't want to participate in a dialogue which would allow us to modify those provisions in some way and finally take advantage of the funds. We do not have any control over this process, but we are monitoring the developments. It seems to us the project is important, and it would be nice if it could take part and benefit from the funds. But then again, we remember that KPO, in fact, also has a structural delay. So it's not only us who are late, but also on account of political decisions which took eight years to emerge. We had difficulty in spending money from KPO. So it would be good to engage the money effectively.
We are moving together with those who decide on how the funds are going to be distributed, and we are preparing for the auction. It seems that the storage facility is an interesting asset for the participants of the auction. It is one of those assets that we are analyzing in the context of taking part in the auction, and for sure, we will take into consideration the scenario in which we do take part with Żarnowiec. However, the decisions have not been made yet. The auction is governed by a determined schedule. We understand the schedule quite well. Now we are doing our final analytical studies. We are on the last mile in the process of analyzing the bids we have received.
So that is a coherent decision-making process, and that is how we will want to operate, increasing the population of projects which we want to present in the auction in December 2025. Thank you. Are there any other questions?
Paweł Puchalski Santander. I would like to continue on this question about capacity in December 2020. For what capacity do you want to submit for the auction in renewable and in traditional energy? And the second question, could you share some details of how you contracted the capacity? Did you hedge positive CSS for two years? Did you get any contract for gas with a fixed price? Anything that would help me understand the possible efficiency in terms of EBITDA in generating? [Foreign language] . And thirdly, I'd like to make it more precise because the COO mentioned the offshore costs at PLN 30 billion.
Is that the PLN 30 billion that you would have spent on Baltica II if you were contracting today, or are these your realistic CapEx expenditures? Could you just make it more precise?
Starting with question three, it's rather the order of magnitude for the projects that were contracted when we were contracting Baltica II. Unfortunately, you need to add today, I mean, to the CapEx amount, which is included in that amount. It's a round number that we are using for everyone to be able to remember it so you can imagine the scale of it. Today, if we were contracting it, we would have contracted it much higher, and we're being open in our communication to the decision-makers, to the Ministry of State-owned Assets when it comes to the price determination process.
It's understandable from them because if we were to translate our CfD that was at level of EUR 319 and you translate it into what we have right now, it's EUR 400+ , so that's the base price that was determined by the Ministry of Climate and the Environment, and the government said that those prices should be diversified and consider that there are different projects on the Słupsk Shoal and other shoals, so that's it. When it comes to our gas-fired assets, I think we've said everything we could have said, and I think we've written it in our reports. I don't really want to go too far when it comes to information from the nitty-gritty of our operations. If anything is not understandable in our reports, just share it with us. We'll try to make it better going forward.
When it comes to the capacities for the upcoming auctions, I think what I can share with you is that we will be more active participants in the Capacity Markets than participants of auctions for new areas because I think that's the way it looks from our perspective. I promise that I'll share more about it in the next conference.
Exactly. About the spreads on gas, you're showing gas-fired power plants, maybe? It would make sense to separate them as well, also to be able to see the spread. It would bring more clarity because as compared to gas-fired power plants, they have much greater power. That was the suggestion.
When it comes to the old capacities in Rybnik, coal-fired capacities, do I understand it right that they will not be decommissioned in 2025 because it will be determined by the discussions with PSE and you might not be able to decommission that? Or is it like a binary answer, yes or no? And the question is whether you have bid the ČEZ capacities offered or that were you even interested in it or not? Thank you.
The suggestion when it comes to the way of presenting our financial data is, I mean, we've heard it, not declaring that the point is taken. When it comes to ČEZ, ČEZ, we're not talking. We're not entering into discussion whether we participate in something if we did not buy it. We don't have too much appetite when it comes to the expansion of our assets in conventional energy.
When it comes to Rybnik, it's a complex matter. We are really sharing what we can do, whatever we can say. On the other hand, we're trying to sensitize you to the fact that it's not like the closure of an automotive workshop. These are power plants that are playing a role in the grid. We have to look at it through the lens of the profitability of projects. We'd like some decisions to be made earlier than later. On the other hand, there is a procedure in place regarding the decommissioning of the power generated, and we're sticking to that. Yeah, that's it, period.
Thank you very much. That's the last question.
W ysokieNapiecie.pl. I have a question about the modern power generation. Have you analyzed the reasons why such high prices have appeared on the tender for Żarnowiec?
Because, as you can see, the prices for storage facilities have dropped substantially. This is also visible by the bids or proposals received by your competitors in the Polish market. So what happened that made the prices so high? How much did they get?
It's enough to take a look at ERCOT, about $2,000. It's much lower than you—not sure. On ERCOT, you can see it. Like I was saying before, it's not a project that is comparable to any other project that has been carried out in this part of Europe. Without getting down to the nitty-gritty, I mean, to build a 250 MW connector is a project in itself. It's not simple anyway. It's not a long, bumpy road. You have to get through with it, and we understand it. On the other hand, we have some capacity expressed in megawatt-hours.
Quite frankly, I'm not sure if that's a project which still has synergistic effects or lack of synergy effects owing to the complexity level. Have you included Chinese bidders anyhow on that tender? I don't think so. One more question, perhaps. What's your evaluation of what happened regarding the freezing of the prices? ERO froze the prices, after which the legislator summoned you to lower the tariffs, to lower the rates. In disregarding what the regulator, what ERO said, I mean, it doesn't mean the transfer. Is that a question to us or the president of ERO? No, to you. It's about the way you have been treated by the legislator. I think I've touched upon that topic. It is a form of changing the rules of the game, but, well, that's the way it is. I mean, you could appeal. You could complain.
All the aspects of that matter are being analyzed. It's hard to discuss the details here in public. Since it's a change of the rules of the game while the game is in progress, it should be appealed against. I don't really want to comment on that at this moment. We are living in certain realities, so to say.
Thank you very much.
Thank you very much, members of the board. Thank you very much yourselves for coming, those online for attending. Thank you very much. This concludes our conference, and we'll see you in a quarter. Thank you very much.