Good morning, ladies and gentlemen. I would like to give you a warm welcome at the press conference of PGE GiEK concerning our financial and operating results in the 4th quarter and in the past year. We will have CEO Wojciech Dąbrowski, Vice President for Finance, Paweł Strączyński, and Director of Finance Division, Piotr Sudol. My name is Konrad Mróz, and I have the honor of being in charge of external communications and press office, and I will host today's conference. In a moment, I will give the floor to our management board members, and then we will proceed to the Q&A session. CEO Wojciech Dąbrowski.
Good morning, ladies and gentlemen. Ladies and gentlemen, we have behind us a difficult year, difficult for PGE GiEK, for the entire Polish economy.
We had to face difficult market, volatile market of fuel prices, CO₂, rights, and inflation caused by the Ukrainian war. The scale of the energy crisis, as you will have noticed, was so immense that it brought about intervention of the state and market mechanisms and in the operations of energy companies. Let me just remind you a few events that took place in Europe. Nationalization of Uniper, that was Fortum's subsidiary, or nationalization of EDF. In Poland, such an event that also affected the market and that resulted from this intervention was the abolition of exchange obligation. In spite of those difficult conditions, we were identified those who made some profit on growing energy prices or even we were believed to get some huge profits.
The data we are going to present to you today, that will be in line with our communication of the past month, all that denies the propaganda that was against us because PGE had no extraordinary profits. The increase in energy prices resulted solely from market mechanisms and energy crisis, which grow fuel prices. In 2022, recurring EBITDA was slightly over PLN 7 billion. That was 11% lower than in 2021. I would like to emphasize, and I'm saying this with full responsibility, that the situation of the group is stable, as confirmed by our credit ratings. At the end of January, Fitch maintained a high rating of PGE at BBB+ with a stable perspective for the future.
Slightly earlier, Moody's confirmed its rating, which shows that the rating agencies, international rating agencies, perceive our group as a stable market entity. The operations of the government and energy companies mean that the Poles do not bear the burden of energy price increases, and their bills are similar to what they paid last year. As regards the Price Difference Payment Fund, just in December, PGE, thanks to this mechanism, was able to freeze its prices and customers were able to pay as in the previous year. From PGE, this payment amounted to PLN 350 million. Strategic projects. 2022 will be remembered in PGE as a year that to a large extent, will determine the future of the group.
That was a year of intense activity throughout the entire group and holding all that aimed at preparing the company for energy transformation in the market. What we did, the work that we performed, will affect safe energy supplies in the future at prices acceptable to customers. Let me remind you that in 2022, we signed an agreement that paves the way for creating a National Energy Security Agency. We are at the last stretch of this process. Operationally, we are ready in PGE for this transaction, and we will be able to function fully independently. You will get some more information of that if you are interested. We can address it in the Q&A session we signed, and that's particularly important, the agreement to buy PKP Energetyka.
The takeover of PKP Energetyka will constitute a very important element of our development in energy distribution area. Thanks to this transaction, we will start our operations in the field of railway distribution. We will be an energy distributor in all voivodeships of Poland throughout the country, basically, because PKP Energetyka operates nationwide. PKP Energetyka is an important element of state energy security because PKP Energetyka distributes energy for the entire railway transport in Poland. That is a strategic company in terms of safety and security of the state, especially under circumstances of threats from the east. An important element of our activities was the commencement of the construction of nuclear power plant in cooperation with ZE PAK, which is a Korean partner.
Last year, as we informed you, we revised our attitude to nuclear energy. We signed a letter of intent with ZE PAK and with the partner who will allow us to safely build this nuclear power plant. Today, we are very active operating on this. We prepared preliminary seismic geotechnical studies. We have signed a document defining the rules of cooperation with ZE PAK. That was a term sheet for the agreement of establishing this joint venture that will operate to achieve this goal that will be a joint venture of us and ZE PAK, that will be PGE and ZE PAK, 50/50. This company will be the partner in negotiations with our Korean counterpart. We are working dynamically on this.
We are waiting for the Office of Competition and Consumer Protection. Once we get the consent from the Office of Competition and Consumer Protection, we will start talks with the Korean partner to establish the joint venture and drafting of the investment agreement. It is also important to us to have received the final decision on Baltica 2 and 3 wind farms with contract prices at PLN 319 60 groszy per MWh, and the valorization of the price, the adjustment of the price since 2021, will apply. We are now working on procurement in this project. We are also working on getting funding for the project. This project will be done under the project finance formula.
In connection with that, we are talking broadly with various institutions, financial institutions from across the globe that are potentially interested in participating in the project by providing funds. Last year, we also issued bonds. That was a successful issuance for PLN 3.2 billion, as a result of which, the funds can be used for investment in distribution network and in renewable energy. That was precisely defined as the purpose of the proceeds from the issue, and we are consistent in spending the money for those purposes. At the turn of 2022 and 2023, we signed two agreements with EIB for the total amount of EUR 3.4 billion. These were also related to investment in network.
That shows that in the upcoming years, this year, in the short-term perspective, we'll invest heavily in our distribution. From the perspective of the completion of our plan, it also matters that by 2030 we plan to invest about PLN 70 billion. We won an auction for Rybnik gas unit, which paved the way for work on this investment. In the energy mix, we have gas and PGE. We believe energy diversification is necessary. That is, by the way, our second major investment of this type, with Dolna Odra in Zachodniopomorskie Voivodeship being far advanced, and this one will be another investment in a gas unit or gas units rather, that will ensure diversification of fuel in the future for energy generation. Coal in the future will be replaced with other fuels.
The situation that we are facing right now shows that having our own resources, lignite, charcoal, protected Poland in this difficult wartime period, allowing us to be self-sufficient in this respect. We had this basic fuel, which allowed us to supply our power plants that were capable of producing electrical energy, which meant security last year. I leave aside the question of coal import, because that was important mainly for individual customers. It was not intentionally imported for.
Institutional partners. Our primary partner is Polska Grupa Górnicza, Jastrzębska Spółka Węglowa, and Węglokoks. We rely primarily on national producers and national suppliers. From our perspective, it is also important that we started the feasibility study for another energy storage facility and power plant that will be in the southwestern Poland. Today, the global trends of developing those energy storage facilities that will allow us in the future to store surplus energy, mainly in renewable energy sources, and then using this energy when it is most needed and most expensive. In the future, this project will be an important element contributing to a balanced funding of energy supply in Poland. The first days of 2023 were also important.
If I may, let me cast more light on the early days of 2023. I'm sure you have followed that. Four location licenses for offshore wind farms have been settled in our favor. PGE alone and with partners received the highest score, and all together, this is 3.7 MW, which really secures our strategy. The strategy of PGE Group makes it clear that it is our ambition that by 2040 we would have 6.5 MW of installed capacity with offshore wind farms. In terms of Rybnik, we signed the contract for the construction of that power plant. We also signed the agreement with ZE PAK to set up a SPV, and we continue to arrange financing for our projects.
We signed a contract with a bank consortium for PLN 2.3 billion, and this is a lending facility that is related to ESG rating, which means that we are really turning around, and we are very responsible about our communication to the market and to the stakeholders. We do consider ourselves accountable and responsible. We really want to prove to the stakeholders and the market that we are changing our profile and hence this lending facility for PLN 2.3 billion that is directly related to ESG rating. The changes that are along the line will just confirm the consistent approach that we have to the energy transition. The market is evolving very dynamically, and the situation is changing at a fast pace.
We have decided to revise our strategy to keep it updated and to account for important projects that I mentioned, namely, expanded operation in the distribution area, nuclear power, and the shutdown or actually the spin-off of coal assets to the National Energy Security Agency. The strategy that after the update will be presented in June. I think that I should mention the lignite imports. I know that it was a popular topic in the media, but not only in the media. Our customers were also scratching their head over it, whether Poland will have sufficient supply of lignite for the heating season. Now, no one has any doubts about it. We managed to close the loop and now we are at the onset of the spring, and the heating season is coming to the end.
Let me revisit, well, the action that we launched as PGE. We worked with other players, but we were the leading company that was orchestrating the action to secure energy security. We imported nearly 10 billion tons by March this year. I want to thank the staff of PGE. There was a number of our companies that were engaged in that process. It was a tedious process to import coal and then to actually have the distribution to reach different locations in Poland so that the end customers have access to the fuel throughout the winter season. We succeeded.
Now, I would like to acknowledge the Prime Minister Morawiecki and Prime Minister Sasin and his ministry, and also the Ministry of Climate and Environment and the local governments that we're willing to work hand in hand, and together we were able to get the job done. In other words, we were able to deliver or to secure steady supplies of coal once there was an embargo on Russian coal announced. That would suffice for the introduction. Now let me turn the floor to Mr. Strączyński, who's our CFO, and he will discuss financial performance of the group, and later on, we will be ready to take your questions.
Ladies and gentlemen, as always, let me start with the national power system for 2022.
Q4 of 2022 showed that generation has been declining, or I should say it was slowing down. We were down by 2.6 terawatt-hours compared to the Q4 2021. The reason for that was that gas-fired generation was down by 1.13 terawatt-hours, and the coal generation was down by 1.10 terawatt-hours. We were able to offset that decline by renewable sources to some extent. The renewable sources were developed at the fast rate last year. The PV capacity reached 12 GW, which means that throughout the year, we were up by 4.5 GWh.
Over that period, the consumption of electricity was down by approximately 4% because of the conducive climate environment and because of the fact that the COVID-19 situation was contained and faded away. The price per MWh in Poland was one of the lowest in Europe. The average annual price was 775 PLN per MWh. Let me just remind you that in the neighboring countries, like Germany or in the Czech Republic, the price was over 900 PLN per megawatt-hour. Summing up, Poland was the country that ended up to be the exporter of electricity, approximately 0.2 terawatt-hours.
If we take a look at the electricity prices, and please note that the average price on wholesale market were in conventional generation and heat was 505 PLN per MWh. On the same chart, you see the average annual price for on the forward markets and on the next day market. The conclusion is that the last year prices that surged at some point, the surge in prices were a one-off event. At the end of the year, the prices of commodities were down. That was true for coal, because let me remind you that at the turn of July, August, the price of coal was approximately $400 per ton, and at the end of the year, it was down to $200 per ton.
We've also seen high fluctuations in natural gas prices. At some point, the prices were reaching EUR 300 per MWh, and it was at the turn of July and August. At the end of 2022, this price was down below EUR 50 per MWh. Let me remind you that before the Russian aggression in Ukraine, the average price was EUR 40 per MWh. If we look at the cost of CO₂, as this is a main cost, one significant cost driver, in Q4 2022, the price of CO₂ allowances was between EUR 70 and EUR 90. Currently, it's between EUR 85, EUR 87.
In Q4, the exchange obligation was lifted, namely the obligation to sell electricity through power exchange, then price limits were set for the generators and maximum price levels for selected groups of generators. If we take a look at the next slide, you will see the summary of 2022 for the PGE Group. As in the national power system, in PGE, we've seen declining generation of electricity. It was down by 4%. In our case, we had declined coal generation, and we were down by 16% year-over-year. With the gas turbines, we were down by 34%.
We focused on lignite units, and that was necessary because we had to restock, and at the same time, the operator required us to operate mainly our lignite fire units. As the consumption of electricity was down, the distribution of electricity was down by 2% in terms of the volume of distributed electricity. I always emphasize that this is strictly related to the breakdown of off-takers that we have in our jurisdiction. We have fewer industrial clients, we have more retail customers. The situation in the market has changed. As you may know, most people are back to the office and children are back to school. They don't need to stay at home for online classes. Now, looking at the sales. Sales in 2022 was declining.
We were down by 9% year to year, that was specifically true for Tariff B. The reason is that more and more corporate customers are switching to renewable sources, so they diversify their energy mix. When we look at the G tariff, that number was down because prosumers that are having some limits for their electricity generation are able to recover some part of whatever they generate, and therefore, they do not use the electricity that we are generating or other generators. Decline in heat sales. Again, the reason is a higher temperature during the season. The average temperature was higher by 1.4 degrees in 2022 compared to the previous year. If we actually look at EBITDA value drivers, as the CEO said, the reoccurring EBITDA was PLN 7.1 billion .
The negative impact that we've seen with the electricity generation was translated in PLN 816 million. The underlying reason was that the variable cost of generation had much greater dynamics, and they were growing at a faster rate than the prices. Again, let me remind you that we are speaking about higher commodity prices. Coal was up by PLN 18 per gigajoule, and CO₂ allowances were up tremendously, over PLN 170 per ton. Increase in revenues from electrical energy sale was at PLN 15.8 billion and reflected the high dynamic of electricity prices in three segments: conventional energy, heat, and renewable energy. Compared to 2021, the growth was by PLN 260 per MWh.
We also had a growth in the prices of emission rights following the price increase. The volume of those emission rights and the amount I quoted previously as the increase, we can talk about PLN 12 billion growth, while on raw materials, PLN 14.4 billion. Additionally, in trade, we recorded high margin on sales of electricity. If we look at headcount personnel cost, PLN 658 million up, and that is mainly the costs of collective bargaining agreements and increase in minimum wages. We can recapitulate that EBITDA, recurring EBITDA in 2022, decreased by PLN 1.9 billion year-on-year.
One more important item among the factors driving EBITDA, namely other costs. Here under other costs, you can see a positive balance of provisions on claims from contractors, in our build sector, higher cost of third-party services and the two related costs of transportation. If we move on to capital expenditures, increase in CapEx, and that is a significant item, almost PLN 2 billion increase in capital expenditures. Leaving aside conventional energy because that was basically expenditures on modernization and restoration. Partially, we also included here the amount related to the new unit number seven in total at PLN 14 million. As regard distribution, here we have CapEx mainly related to new connections. We are intensifying the program related to the new connections and modernization of low and medium voltage networks.
In Gryfino 250, that is, on the premises of the former Dolna Odra power plant, we are now building gas units, and the CapEx was mainly related to this project. That means low emission energy sources. Now, if we look at heat. Here CapEx is mainly linked to the new Technical project. In renewable energy, capital expenditures are mainly linked to modernization of the water power plant Dębe and Porąbka Żar power plant. These were the key elements behind the growth in CapEx at almost PLN 2 billion as compared to 2021. If you consider our debt at the end of 2022, net cash balance was PLN 2.666 billion. Debt, net debt to EBITDA ratio was at 0.31.
Economically speaking, if we consider CO₂ settlements, our debt increased by PLN 3.3 billion. That represents the debt ratio, net debt to EBITDA ratio increase quarter-over-quarter at 2.2. We have two slides showing the prospects for 2023. At the beginning, I would like to notice that the key impact on the results of 2023 will come from the laws approved in October, November 2022, about extraordinary measures that limit, on the one hand, the price of electricity and on the other hand, support some recipients or relieve some recipients. There is also the executive resolution specifying the manner of calculation of electricity prices.
Another important element affecting conventional energy segment and heat energy will be a significant increase in CO₂ costs. We expect the CO₂ cost increase. At some point in December, the price exceeded EUR 100 per ton. As regards renewable energy, the arrow points down, and that is because those executive orders came and those laws were approved at the end of last year. Other elements, other factors are positive, like new photovoltaic capacity and month-to-month improvement on power plants. If there is any change
In those legal regulations, automatically the arrow in renewable energies will change, showing a growth. As regards the structure of heat tariffs, the increase in costs will not be carried over in the following years. If we experience an increase in prices on raw materials needed to generate energy, or if there is an increase in CO₂ prices, we will see a decrease. In trade, regardless of the offsets. Well, there will be major pressure coming from the legal regulations on extraordinary measures, and that in turn will affect margin on products, mainly, on tariffs. Distribution is positive on positive track. Here, we have regulators go ahead for the program that we had intended to...
As regards CapEx, we had conventional energy that was higher. Additionally, the process of offsetting the coal sector to the National Energy Security Agency is underway, so I don't want to comment on this. This will be basically CapEx related to modernization maintenance of this segment. Elsewhere, we will essentially continue to build the Gryfino unit, and we will commence work on Rybnik unit. The same situation in renewable energy. We have extensive photovoltaic program, offshore wind farms, also onshore wind farms will develop. Here we expect significant CapEx in this area. Distribution, where the key outlays in the context of new connections, new potential customers with cabling and with investments and tangible fixed assets.
I think that distribution and renewable energy will be the two principal drivers that we will see in our group next year. Dziękuję bardzo, pani Bryksy.
Thank you, both gentlemen. Ladies and gentlemen, this is what we prepared for you. As you know from the past experience, we collected questions already yesterday after we published and announced the report. Let's start with the emailed questions, and then we will turn the floor to you. The first question is about the National Agency for Energy Security. Are you prepared for that, and when we may expect that to happen? Over to our CEO.
We are actually disinvesting our coal assets. I've already said that we are finalizing that.
The decision of Minister Sasin is that the final arrangements will be done at the end of March and beginning of April. We believe that the State Treasury will confirm that they want to make the acquisition of these assets. We are ready in terms of operational aspects. This transaction is fully prepared. Operationally, we are also fully prepared for that. Because of the social agreement that we have with the social partners, we have the provision for the bonus for the employees who will leave the structure of PGE. Hopefully, the proposal that we'll get from the state will meet our expectations. Hopefully, the final transaction will take place in Q2 of 2023.
These decisions will be signed at the turn of March and April, and the final decisions, like fully endorsed, will become effective in Q2. If final decisions are made, we will keep you informed. We are really finalizing this process, and we've been talking about it for a long time, so I do not need to tell you that this is a breakthrough for the Polish power sector. It will change the markets. This is not a straightforward operation. It affects a lot of stakeholders. It also involves many other electricity generators, so the process is highly complex, but we are really finalizing it.
Thank you. The next question is about our contract with PGG and whether we have the price set for 2023, the price of coal. Yes.
We agreed on the price and the volume of coal that will be delivered to us, we should finalize everything by the end of the month. We negotiated everything, so there are no outstanding issues that need to be covered. We have peace of mind when it comes to supply of that fuel.
Okay, we've got a handful of questions that are about our new loan that is linked to ESG. How does it work, do you intend to continue such financing in the future?
Well, as you know, ESG policy plays a major role on the financial markets, it is really important when you want to arrange financing from the commercial banks or international institutions.
For the very first time, we dealt with ESG policy, or we got the rating that is related to ESG policy and was actually used in our financing. I will have to say that, yes, we will definitely continue along these lines. We will promote sustainable projects because this is in line with ESG policy. At the same time, ESG policy has an impact on the margin that we pay on the loan, and we want to make sure that the cost of lending, of borrowing is the lowest we can get it.
I may confirm that we will continue to work on the ESG implementation, especially that we have a very challenging expenditure program, capital expenditure program, and the financing that we are going to arrange, is not just raised here in Poland, but primarily in the international markets, and this is where ESG policy is appreciated. Thank you.
Thank you. Some questions that we got are about Price Difference Payment Fund. Mr. Dąbrowski mentioned the cost for the last year, but what is the expectation for Q1 2023 and throughout 2023?
As far as 2023 is concerned, as of today, I may just say the same that our CEO said, that at the end of Q4, so December 2022, in total, we contributed to the Price Difference Payment Fund, PLN 351 million.
As far as 2023 is concerned, I do not want to come up with any answers to these questions. I cannot give you any accurate answer because there is a number of drivers here, well, and prerequisites, for instance, National Energy Security Agency. The assets will be transferred there. We have open position. We have high volatility in the spot market. At this point in time, we are not really able to give you any meaningful answer to the question about the total contribution that we are going to make to Price Difference Payment Fund in 2023. If electricity prices in 2023 are down, then contributions to the fund will be lower, but at the same time, our revenue would be lower.
Let me just remind you that the maximum allowable price, according to the regulation, guarantees the transfer of costs. For the coal units, it's higher than the price that you get on the wholesale market. The price per lignite, the limit is PLN 700 per megawatt-hour, and for the coal, it's PLN 1,000 per megawatt-hour. The sale price was PLN 505 per megawatt-hour. The tipping point is really renewable power. PLN 355 per megawatt-hour is the price limit, and this is important to watch the spot market for renewable electricity because renewable electricity is all about spot market. To give you more precise answer, we have to wait a bit. This is premature to come up with any sound estimates.
I believe that midyear we will be able to provide more answers to such questions.
Okay. Another question that we got is about the dividend payment. PGE is not going to pay the dividend this year. Is it something that is going to stay with us?
Well, as a management board, we really made a decision that Not the decision, recommendation. Sorry. Recommendation for the general shareholders meeting. General shareholders meeting will make the decision. We made the recommendation. On one hand, we are facing the acquisition of PKP Energetyka. At the same time, we have a very challenging capital expenditure program in the distribution sector. We have offshore wind farm projects, and we are preparing for the nuclear power project.
Putting all these things together, we need to make a recommendation not to pay a dividend this year. Especially that our profit is PLN 3.3, I'm talking about the consolidated results for the capital group, which is modest, and you have to admit it, compared to financial outlays that are ahead of us if we want to deliver our CapEx program. Thank you.
Thank you. Promise this is the last emailed questions, and I'm going to turn the floor over to you. Distribution from 5.8% to 8.5% in 2023. Why do we have this increase in the distribution sector?
Well, mainly, this is driven by the decision of the regulator and there are two factors to be considered here, costs and our expenditure program and investment projects that we are carrying out. We have high costs related to the connections. We are really waiting for the connection of the new wind power farms and the entire program for this sector, which is PLN 130 billion until 2030, requires a lot of funding. If WACC is not approved at 8.5% to reflect the market conditions, we would not be able to deliver the CapEx program. Let me remind you that WACC includes 1% that is strictly dedicated to investment capital expenditure program. The regulator simply accounted for market situation that we have today. Okay.
We still have time to take a few questions from the audience. The floor is open for any of you.
Hello. My name is Tomasz Brzeziński. Can we revisit EBITDA? Can you actually say what was the contribution of renewable sources or PGE renewables?
PLN 1.9 billion. Approximately PLN 1.9 billion. We will get the accurate number shortly. Okay. Can you PLN 1.7 billion. Renewable segment was PLN 1.7 million in terms of contribution to the EBITDA.
Now my next question is about CapEx for 2023, and what is the, again, the contribution of the renewable or the share of the renewable in this total CapEx?
I think that we showed it on the slide.
We believe that this cost share would go up because of the PV farms projects that are going on. We launched important projects between 200 MW and 300 MW, and this is about the PV generation. Possibly at the end of 2023, we will have the first CapEx for offshore farms. We are not able to come with a really accurate forecast. We have not announced that yet. When we look at the outlook, we can tell that distribution and renewable segment will be leading the way, and they will be the driving force for our CapEx. Unfortunately, the question is not asked for a microphone. The answer is that this is PV.
Please, be mindful that, as my colleague said, we are not able to give you, like, the total breakdown of this cost, and we are not able to say at this point how much CapEx will be spent on renewables because the wind power law has been amended, so, and there might be some projects here. There might be some additional PV projects coming up. We are part of all the projects that involve development, but also acquisition. Throughout the year, we will see the evolution of this share in the CapEx. To us, this is a priority segment in addition to the distribution and Certainly, we are going to have major spending in this segment to further develop it.
Well, when you look at the segments and you have renewables, I think that you have not really accounted for the acquisition of three wind farm projects on the slide. What we had on the slide was just the material expenditure, so whatever we spend. It is true that we made the acquisition, 84 MW of wind farms. PLN 900 million minus cash. Cash flow effect is approximately PLN 800 million. PLN 6.6 billion of total CapEx, that should be PLN 6.6 billion-PLN 6.7 billion is the total CapEx. We should add up this acquisition. CapEx plus acquisition was PLN 7.5 billion for the last year.
Okay, I understand that you are interested in, not only like, projects that are under development but also operating wind farms.
Yes.
In terms of prospective acquisitions, we are actually engaged in many ongoing acquisition projects. We shall see what will be the outcome, so we are looking for the most profitable options.
Thank you.
Bartłomiej Sawicki, Rzeczpospolita Daily. I have a recurring traditional question, which is about the contract or agreement with the Ministry of Climate and Environment to cover the cost of purchase of 10 million tons of coal. When do you expect that happen, and what kind of cost was incurred by PGE to make this procurement? I would like to ask about the contract with PGG. It was to be signed by the end of the year. Is it going to happen? Let me ask the CEO to repeat your opinion about Złoczew, unless you changed your mind.
If I remember well, prior to COVID, you were saying that Złoczew should be dropped because it's not profitable. As we know very well, now Złoczew is coming back with your updated strategy and with, sort of, differences in the opinions about it.
In terms of the agreement that you're asking about with the Ministry of Climate and Environment, everything has been agreed and negotiated. We are just waiting for the signature of the ministerial officer to sign the agreement. In terms of import of coal, I can give you the volume. Nearly 10 million tons was imported. 8 million plus was sold to end customers under within the framework of this project.
In terms of Złoczew, this is we sustain our position, and that will be up to the National Energy Security Agency, whether they want to carry it out or not. As PGE, we are not getting involved in this discussion because we presume that this decision will have to be made by the new entity, and the new entity will have to consider whether they want to follow in this direction or not. We agreed all the terms and conditions, so everything has been negotiated, everything has been agreed. We are just waiting for the final signatures on the contracts. We reached a consensus, so we have the peace of mind in terms of supplies or deliveries of fuel from PGG.
Maciej from Bloomberg News. I have two questions.
First of all, about National Agency for Energy Security. You said that it's about to be finalized, that the ministry should approve the terms and conditions for that agreement. Do you actually expect some cash flow coming in from substantial price that will be paid for these assets, or is it going to be symbolic and it will not help you cover your substantial expenditure? The other question is about the strategy that you were talking about and how you see the group operating in terms of financing. Well, the financing is very expensive. You mentioned ESG, and you said that it's mostly international markets. Shall we expect the entire financing for the new company? Okay, not entire financing, but let's say the majority of that would be placed on the financial market because it's more cost efficient.
Are you going to look for other options in the local market in Poland? Are you really looking at issuing bonds or some bank loan, or what are the amounts and what are the dates that we are talking about?
If I may, I will take this question. In terms of national agency, I cannot really answer this question today. When you ask me how much we expect to get, all I may say is that we are finalizing valuation processes, and the Ministry of State Assets is doing their valuations, and only at that time we will know how much it's worth, and we can have discussions about the price. In terms of the second question, I may say that yes, we are open to all the financial institutions. We are not ruling out anything.
We don't have any preference for international players or local players or state-controlled financial institutions. Obviously, what matters here is that we need to also look at the Polish banks, because they still have some capacity to carry some of our investment projects. Financing and the main part will be arranged in the international markets, and that would be off-balance-sheet. Which means that we will either have project finance formula or, as you mentioned, we will issue bonds, especially that we do have room for green bonds and Eurobonds. I think that we will accept any financial arrangements and structures that would help us deliver our investment projects. As you said, project finance, the cost of project finance is higher than the regular bank loan.
Unfortunately, our capacity to take on such loans, because we are speaking about many billions of zlotys, may not be sufficient. In terms of the nuclear power, I believe that it's premature to speak about the financial structure of this project. Thank you.
Bartek Kubicki, Societe Generale . I have a few questions. The first is related to the valuation of assets for the National Energy Security Agency. In your books at the end of the year, PLN 31 billion is the valuation of conventional assets. You did not make any major reinstatement, increasing or decreasing that value. Is that your accurate estimate of what those assets will be worth?
Net assets amount to PLN 12 billion, and we have to look at the entire company, not just the assets, alone.
Thank you very much. In the context of renewable energy, where the energy prices are today and where the price limit is there any risk that this price limit may be extended over to cover 2024?
I think the price regarding price limit should be addressed somewhere else. You should ask the ministry, not us, whether this validity of this limit is extended or not.
What is your assessment of this risk? That was my question. The third point is about trade. When coal assets are set off out of your company, how your trade will function in the context of energy prices in the market, in the context of certain activities that are performed for conventional energy segment. What will be the new modus operandi of the segment after setting off those assets to the National Energy Security Agency?
We will continue to contract as we have contracted so far. The exchange functions, there is a platform that we have for our group. We will have to secure the contracts for trade. We had previously this exchange obligation way with sales being recognized inside the company. Now with no longer the obligation for exchange, we can have a variety of practices. There was another question here.
Ireneusz Chojnacki, WNP.pl. I have four questions. The first is about the planned date of opening Dolna Odra gas unit. When is it planned to happen? The second about coal. What is the future of the coal business? I mean, will you continue imports on such a large scale? Will you keep this fuel in your group, or will it be set off and directed to the National Energy Security Agency? The third point, when you have projections for nuclear energy, do you assume any public assistance in the form of a contract covering price difference on a different set of rules than the generally applicable rules. The fourth point, I think, you talked about the significant decrease in the volume of distributed energy as a result of self-generation prosumption.
Let me start with coal. There is a kind of fuel which remain within the structure of PGE. We have a subsidiary, which is our heat generating company. This subsidiary will continue to function, and we will continue to provide the services to the market. As regards coal more broadly, that is a topic that should be considered on a greater scale. I assume that the embargo on Russian coal will continue. Meaning that probably, it will be necessary to import coal to secure it for individual recipients, not institutional, but individual ones. We have this initial agreement with PGG now, which should be officially confirmed in the upcoming days.
For sure, PGE will perform the tasks if it is tasked with securing coal for individual recipients. It seems as of today that this need will be there. We are prepared for that. We have proven pathways along which we can proceed. Everything will depend on the volume. Financing of power plants, nuclear power plants. We expect this nuclear power project to be a purely business project. We have financial projections, and we have a model of funding that is going to be done in the project finance formula. As of today, we do not expect any public aid to support this investment.
We expect this investment to be purely a business one, probably secured with some PPA contract for funding institutions, because it is evident that the funding institutions will want to get some sort of security, so we will have to obtain the security. That's the model, and it seems that in this formula, it should be perfectly feasible. There is a lot of interest on the part of financial institutions in funding this specific investment. I'm talking about global financial institutions, but also we have Korean institutions that want to provide funding for this particular project, and that according to our assumptions, would be about 20%. 20% our own funds, and 70% or maybe 80% would be external funding based on that. The question is asked off the mic.
For sure, we will have to get some guarantee, some sort of security of the funding. That will be very much linked to the expectations of funding institutions. We as PGE, might be a recipient because the energy from the nuclear power plant will be needed in our system. We as PGE may also potentially participate in this PPA and secure receiving supplies from this power plant. As regard distribution, as I said previously, corporate customers diversify their energy sources. They build more and more photovoltaic farms or panels.
Dolna Odra. Well, Dolna Odra is progressing on schedule. As for the key milestones, there are no major risks, but always with such investments, you can expect some problems. This is the largest investment of this type in Europe.
It will be one of the largest gas power plants in Europe. For sure, it is the currently the largest investment of this type in Europe. There are some problems, but we do not see any obstacles that could drastically delay the completion or cause any major disturbance. Fortunately, there are no such risks. We are in close cooperation with Polimex and GE. We are in constant dialogue. There are several hundred people on this construction site, so things are moving on. The contractual completion date, I think, is the end of this year. We'll see whether we keep this exact completion date, but as of now, there are no signals of any dramatical delays there.
I have two more questions of more general nature. The first to Mr. Strączyński.
What is your forecast concerning energy generation in Poland this year? Do you have any estimate of what the production and consumption might be? The second question is about strategy. You mentioned update of your strategy or revision of the strategy. Given that you are the most important producer of heat in Poland, are you considering including SMRs as something for energy and heat for individual recipients?
SMRs. Well, let me comment on the first part of your question, production. This year we expect a downward trend, and I think the decrease will be similar to the one we had in 2022. From 2024, this trend should reverse and go slightly up. That's what our forecasts expect.
We hope the production of renewable energy will have an increasing share in the total market. As you well know, this is an unpredictable segment. What about SMRs? We are looking closely at all technologies that appear in the market and that could, in the future, replace coal. Generally, we bet on a large-scale nuclear energy. This is where we focus our operations, distribution, renewable energy sources. Obviously, we are also in talks with the entities that operate in the field of SMRs, KGHM, ORLEN, Enea, the companies that run such projects. Just to be abreast of the latest developments.
When a new technology becomes available, we are open to implementing it, but we are still waiting for the first installation in Poland to assess its functioning, to see what kind of certification it gets. SMR is a small plant. Maybe some legislative changes should be introduced. Whether the power plant is small, medium-sized or huge, it needs to meet the same legal requirements. Let's not forget the role of the public opinion. Nowadays, there is much more public approval for nuclear energy in the context of the war situation. The Polish society sees the construction of nuclear power plants as a necessity to ensure energy security in the country.
SMRs are also an element of this, broader policy. Today we bet on those large-scale nuclear power plant that we are going to do with the Korean partners and ZE PAK as a Polish partner.
I'm asking because in April or May, Orlen Synthos is to specify several dozen locations of future reactors that are expected to be situated at, in bigger cities and medium-sized towns. Isn't that your potential, competition?
No, we are not afraid of competition. The requirement for electrical energy will continue to grow, and the departure of fossil fuels is something natural over the next 15, 20, maybe 30 years. No, we are not afraid of competition. We rather cheer everyone who focuses on the energy market, because energy security is our primary objective.
We will also build offshore, we will develop renewable energy sources, we will have nuclear energy, so we will decarbonize heat, and there will probably be some progress in the development of new technologies. We can see certain changes, trends that would change the heat provision. The world is changing. We cannot close our eyes to those changes and refrain from development activities, hoping that there would be no competitors. There are competitors, and there will be new ones. Several years ago, some competitors appeared. As regards generation, for sure, there will be new competitors. It's good that it is done by Polish companies with state treasury holdings.
That will be good that these are the companies that are not driven only by the will to gain short-term profits, and instead will be responsible for the business and for ensuring energy sovereignty.
Thank you very much. We are coming to the close of this conference, but if we have any other questions... Okay, that's it. Thank you very much, and thank you for online questions.