Dzień dobry. Good morning. I think we're online. On behalf of PGE board, I'd like to welcome you to today's conference devoted to the Q3 2022 results. Thank you for coming to the studio. We're glad to see you. Of course, the conference is devoted to the financial results of Q3, we will try to address the current events. I think the situation in the power gen sector requires that at the end of the meeting, we'll have a Q&A session, traditionally, we'll start with the questions sent to us, for which I wish to thank you, then we'll give the floor over to the attendees, representatives of the media, as well as representatives of the capital market. Today, the conference will be held by the CEO, Wojciech Dąbrowski.
Good morning.
The CFO, Lechosław Rojewski.
Hello.
Piotr Sudoł, the finance director, finance division director. Over to you, Mr. President.
Thank you very much. Good morning. We're meeting at the summary of Q3. This is another meeting that was very demanding for companies for, from the energy sector today. Knowing the scale of changes in the sector, we know that the ensuing ones might be even more demanding. I'd like to start on a positive note. It's been five years today since the establishment of PGE Energia Ciepła. This is an example of the successful repolonization and integration of district heat. Owing to this, the company that is the change leader in district heating and regulations, it's working today under quite different standards than five years ago.
It's been pursuing its strategy in a consistent way. We're very proud of it because over five years, we've been able to shift it towards a state-controlled company that has prospects of development, of growth. It's been five years today since PGE bought PGE Energia Ciepła heat energy and integrated it. We included other cogeneration plants, and today it's the single largest heat producer in Poland. It's worth remembering that this activity was one of the reasons of putting forward the NABE project, which is supposed to separate coal-based assets, and district heating is supposed to be one of the pillars of our activity over the next couple of dozen years. That's our plan. We're supposed to be one of the largest district heat producers in Poland.
What have we done to make sure that that NABE arises? You always ask these questions, we've been consistently pursuing all organizational activities to prepare the group for NABE. We have transferred six companies that are controlled by PGE GiEK. We've also pursued some separation and trading of purchase of raw materials so that NABE can operate on a standalone basis, which has been raised in the consultations among analysts. These activities have to be separated and prepared so that NABE can work on its own. It has to be separated from PGE. We have organized the IT model and regulated relationships between PGE S.A. and PGE GiEK and the power market. We have prepared preliminary due diligence reports.
We are actually prepared for the asset separation, and we're waiting for any financial reconciliations as well as consultations with the social side. The consultations with the social party are in progress. A vast majority of all the issues have been addressed. We have consensus on that. At the end of the day, this will be communicated once the agreement has been initialed by all the parties. I'd like to address the regulations in the energy market because it's a very important area raised by you as analysts as well as journalists. A lot has been going on in the energy market, especially. Well, in the power gen sector, but especially in the energy market.
We're facing the energy crisis that we've been struggling with since the war started in Ukraine, Russia's aggression against Ukraine. That caused a dramatic increase in fuel prices, and consequently, it contributed largely to the high inflation that the whole world is facing because it impacts all the global markets, especially EU markets, and we are a large country, being an EU member state, so we're affected. The government is running a lot of regulations to make sure that this impact is as little perceptible to the society as well as enterprises. We have many regulations arising in the market. We're analyzing them in depth. We have some concerns, just as you have such concerns. We have concerns about maintaining the scale of our investments and consequently, also the rate of energy transformation. You know our plans.
You know our ambitious strategy. We've been pursuing it on a consistent basis so far without stopping, despite the difficult market situation as of today. We've been analyzing those regulations. We don't know the shape of them, at least not all of them, and how deep the impact will be of those regulations is still being analyzed by us. Because in many aspects, there's still some interpretation, there are still interpretation uncertainties. We have to cover the investments connected with multiple billion CO2 emissions. Today, the cost will amount to PLN 20 billion, and in 2023, we're talking about PLN 26 billion or even PLN 27 billion. These are very significant amounts which will flow out of the company, of the group.
Let's remember that today's operating costs are higher than our market capitalization, so we have to take care of every single zloty, and we will be doing so in the following year. On a positive note, only until the end of this year, we will have spent over PLN 6.5 billion on CapEx. Let me emphasize that the investment rate it has been unhampered. We will be spending PLN 6.5 billion. I think it's a good result given the difficult market situation or global situation. In the next years, our transformation CapEx has to increase. In our plans until 2030, we plan to spend PLN 75 billion. In one and a half months, we'll have 2023, so we have seven more years to pursue those CapEx projects.
We're preparing for it very meticulously. However, those means have to appear. We hope to be able to pursue those investment projects without any obstacles, but there are many components to that. The war in Ukraine has to stop. The crisis we're facing has to stop so we can fully responsibly towards our customers, our owner, our shareholders, to pursue this policy. I'd like to emphasize that the limitation of price increase for the society is necessary, and that's a right direction, because the economy constitutes a whole. If we're facing a difficult situation, we have to spread it to all the areas, all the sectors. We have to spread this difficulty and share the risk.
However, I'd like to draw your attention to the fact that despite our realizing that, what the situation is, we cannot operate below the cost because this might lead to the company's collapse. Today in the public sphere. Well, it doesn't pertain to you, the attendees, because we happen to. We know you. You are, the industry, journalists, but there is some information in the public sphere about excessive profits, extraordinary profits. I hope that today's conference will dispel all sorts of gossip, rumors, misinformation about our extraordinary margins and profits.
We'll be soon presenting the specific results because today we're not talking about any potential extraordinary profits, which is testified to by the EBITDA, which is 9% lower on a year-on-year basis, which is evidence to the fact that the fake news that we're struggling with, it's difficult to fight them because today, social media, the internet is actually something that can hold everything with impunity. It's sometimes very difficult to fight this. The most important projects still is the offshore wind farm project. Recently, we received the environmental conditions on the onshore connection for Baltica 2 and 3 that we obtained, and the tendering of the general contractor of the onshore project and for the contract engineer for Baltica 2 and 3. Also preparing to obtain the building permits for Baltica 1.
The environmental studies in the offshore and onshore part have started, and we have acquired the land at the port in Ustka for operations and maintenance base for the company's and offshore wind energy center. Some of you were present with us at the celebration.
It is extremely important to us to have acquired this maintenance harbor at this particular location in the context of our operations on and along the Baltic Sea. We are really satisfied, and we have already announced a tender for a program, operational, and maintenance program, and we want to complete this investment as soon as possible. Hard coal. That's also of great interest to you, I'm sure. That's of interest to our shareholders and our and the journalists. For the last four months, this has continued in the headlines. We, as PGE, have been tasked with bridging the gap that was left after the Russian coal disappeared. PGE has repeatedly offered to keep its promise. Today, the situation bears those promises.
We have coal. It is being distributed by us, by local distributors, through our storage units. Until today, we have supplied almost 5 million tons. We have signed agreements with 220 local governments concerning distribution of coal. Coal distribution companies divided Poland into sections, and we were given 600 municipalities for which we are responsible, where we have to provide fuel. With 220 out of those 600, we have already signed contracts for sale and distribution of coal. It should be emphasized that this was a special task which required a mobilization within the group. This was indeed an uphill operation. All those logistical things are still underway.
Let me just remind you that previously, we have only offered coal for large recipients, power plants, and now we went down almost to the level of individual users. For us, it represented a major organizational challenge. As regards main issues, that would be roughly it from me, and I hand over to Lechosław Rojewski, Vice President of Finance, CFO. Then we will be open to address your questions.
Ladies and gentlemen, I would like to briefly comment on our financial results. Of course, our presentation will be traditionally shaped. We will start with a brief overview of what has happened in the national energy system overall, then about prices. Then we will talk about the PGE Group itself, zooming in on the results in our four principal segments.
We will briefly talk about investments, debt, obviously the prospects for the upcoming future in the context of legal regulations that have appeared recently and the regulation on price limits. Let me start briefly with the national electrical energy system. With regard to the third quarter 2021, now if we compare 2022 with 2021, we see a decline in production of electrical energy, and the drop was on average 4% year-on-year. If we represent that in volumes, that's 1.9 TWh . This decrease in production was driven by a lower production on hard coal to 0.8 TWh and gas at 2.4 TWh . It was partially offset by the renewables market.
As I mentioned at our previous presentation, last quarter, we clearly see a growth in the number of photovoltaic installations. This growth in the number of photovoltaics with good atmospheric conditions contribute to a growth in production from those sources quarter-over-quarter, and this growth was at 2 TWh . If we look at energy consumption, also the national energy system shows that the quarter-over-quarter consumption was 1.5% lower, which we interpret as being linked, above all, to the increase in the average daily temperatures by half a degree per day. Poland was the cheapest country in the region in terms of electrical energy prices. The average price was at PLN 1,050 per megawatt-hour.
Let me remind you that in Germany, this price stood at roughly 770, in the Czech Republic, more than PLN 1,800 per megawatt-hour. The increased consumption, compared with national output forced us to change the directions of our international exchange. In the third quarter, 2023 as compared 2022, as compared with the third quarter, 2022, was shifted towards imports. 1.2 TWh was the net result. If we now move on to the price. In all months of the third quarter, we recorded growth in the price of electrical energy. The price was over PLN 1,500 per megawatt-hour. We link that with the growing prices of raw materials, commodities.
In connection with the armed conflict in Ukraine, the price for contracts on hard coal, ARA, was at $400 per ton initially. We also recorded major variability in the prices of gas. Within a record period of a price of gas reached EUR 300 per megawatt-hour. Let me also remind you that an additional factor which contributed was CO2. CO2 also fluctuated between EUR 70 and EUR 100. All of these factors contributed to this high price on the base market, but also a high price in the spot market. The price at the spot market on the spot contracts for 2023 reached PLN 2,500 per megawatt-hour.
Today, after the introduction of the recent regulation, the price dropped to more or less PLN 100 per megawatt-hour. As the CEO has already mentioned, those prices mattered significantly for the economy, hence, there have been certain constraints which resulted in the decrease of this price and quite considerable decrease of the price. You might have noticed that the commodities exchange obligation was lifted. If we look at our group specifically and focus on our four pillars, and that is production, distribution, sales and heating sales, you will notice that as in the national system, also in our group, we recorded decreases on generation by about 10% compared with the same period, 2021.
Here, the decrease on hard coal, 22%, on gas, more or less, 50%. On lignite, we had demands from the operator to use our units on lignite. At this time, we also had to restore our stock on hard coal, so we had to work in parallel. Also consumption and distribution of electrical energy, 3% drop was recorded. That was related, first of all, with the higher share of photovoltaics. On the other hand, well, that was related to the structure of recipients in our region. The structure being different from the structure of recipients serviced by other groups. In general, in our region, there are more individual customers and fewer industrial ones.
When it comes to retail sales to end users, also in Q3, as in the previous ones, we observed a drop by 10% and That's mostly in tariff B as well as tariff G. In this case, we observed that this was first of all owing to the increase in energy collected by prosumers who generate PV energy. We also observed a decrease in heat sales by 3% owing to higher average temperatures vis-a-vis of a comparable period of 2021 by 1.7 degrees Celsius. If we now take a look at the major factors or major value drivers for our EBITDA, we observed an increase in the positive effect for electricity and power generation, and owing to this, we had a higher lignite generation as compared to hard coal.
Owing to this, we observed a higher price increase dynamics compared to the variable costs of power generation, and that positive effect translated into PLN 709 million. Also, in the analyzed period, our power generation revenues increased by PLN 4.7 billion, which also reflects the high price dynamics in the market. Let me remind you that the price increased by PLN 333 per megawatt-hour vis-a-vis the comparable period. This price increase also was also reflected by the increase in the CO₂ emission rights by PLN 169 per ton, and also a significant increase in fuel prices by PLN 1.3 billion.
Also, in Q3, we observed a drop in the power market as well as the systemic service prices, which amounted to PLN 55 million. Personnel costs owing to the signature of social contracts increased by PLN 171 million. In the item presented here as other, we had, first of all, the effect of external services, which followed the increase in inflation, environmental fees, as well as lower capitalized costs. We have to emphasize that the EBITDA level, we had a drop by PLN 184 million in Q3.
We also need to emphasize that we had a change in the recultivation provision of PLN 422 million , which reflected the update of the inflation level as well as the update of long-term, the long-term discount rate. Because let me remind you that we compare it to three periods, and in the longest periods, for 25 years, there have been slight decreases. As we pass on to CapEx, for the first time for a longer time, we can say that the CapEx has significantly grown on a quarter-to-quarter basis by almost PLN 1 billion. Actually, three investment projects that have been pursued in three segments, which was conventional generation. We incurred large CapEx for the gas unit in Dolna Odra. It has been separated from conventional generation, the Gryfino, PGE Gryfino 2050 company.
Another driver that caused such a significant increase was distribution. In CapEx was distribution and the cabling, cable laying for low voltage grids, as well as the connection of new customers. The third driver was renewable energy. Here we have the modernization projects of the hydropower plant, Dębie, and the pump storage power plant, Pomorzany. As we take a look at our indebtedness, our indebtedness versus the comparable period of 2021 dropped by PLN 1.26 billion . The cash balance at the end of Q3 2023 amounts to 1.3 billion .
As we take a look at this, and this, unfortunately, this amount has grown as compared to the previous period by PLN 1.3 billion, and this indebtedness at this moment amounts to PLN 11.1 billion, which means that our net debt to EBITDA is at the level of 1.31. To wind up, let me tell you that the prospects for 2023, which are quite demanding. The outlook for 2023, we don't expect that the EBITDA might be at comparable levels at the end of 2023. We expect that the EBITDA will be decreasing for most of the segments.
As you can see, practically in four segments, conventional generation, district heating, renewables, and supply, we have a dropping trends which stem from the implementation of the Act on Extraordinary Measures and the price cap of electricity and district heat. In district heating, you should take pay attention to the fact that the increase in the raw material prices is not translated right off. It is with some delay. We are also skeptical in terms of district heating. Only distribution is our segment is the only segment where we are taking we have a stable outlook for distribution. We expect that ERO might increase the WACC to 7.8%.
We also expect a possible additional investment, premium for reinvestments and the significant investment project, the money that we obtain for recapitalizing, prompt us to expect for this segment to grow. Thank you very much. Let's, I'm ready to take your questions.
Thank you very much to the board members. We'll try to start by addressing the questions traditionally that have been sent online. Let me try to take the questions that have not been addressed in the presentation. One of such topics is obviously nuclear energy. Someone is asking for the presentation of the actual status of work for nuclear power plants.
Well, the only thing we can say is what you know from public information.
The LOI has been sent, in the LOI, we have agreed that by the end of the year, along with the partners, we will be drafting a development plan for this location. First of all, it's about checking whether at the end of the day, a nuclear power plant can be built in the location on the site, whether geological conditions permit that. Secondly, in the development plan, there's supposed to be an initial plan, including the financial model and the schedule or timeline. The work is underway. The group of our Korean partners have visited the site in Pątnów, I think it was 10 days ago. The Koreans perceived that location very positively, at least on a preliminary basis now.
Analyses will follow whether that location meets the geological and seismic conditions, because this is the most important requirement for taking further steps in this investment project. To continue along that line, hopefully we'll finish on that. The key question is why PGE wants to invest again in atomic, in nuclear energy, since it was not part of the strategy. There have been extraordinary events. The war broke out beyond our eastern border, this caused for us, not only us, actually, I think most companies have reviewed the strategic assumptions, not only power gen companies, but also, I think it's true for all major companies operating in the market, broadly understood market, not only state-owned companies or state-controlled companies. They are verifying their strategies.
I think that our major assumption is to pursue the strategy towards climate neutrality. Obviously, the role of gas as the transitional fuel, because we have been analyzing it, and it's very hard to plan on it in a longer, on a longer-term basis when it comes to the availability of that fuel compared to other low-emission fuels. Before you ask those questions, we obtained an offer to build a power plant in Rybnik. We're analyzing this, but the ultimate decisions are still ahead of us. Right now, we're analyzing the offers that have been, or bids that have been submitted to us. Let me remind you that since the publication of the report, the gas and other fuel prices have grown five-fold, CO2 emissions three-fold. Of course, the energy prices have to follow.
This is natural. There is significant factor impacting the ultimate price. It all changes the economics of the projects. In terms of thinking about nuclear energy, that the increase in fuel prices has meant that investments into nuclear generation has become comparable to other sorts of power generation. Of course, with a proviso for the initial CapEx, because in terms of nuclear power plants, the initial cost is much higher, but in terms of the longer term, today, nuclear power plants have become more attractive, hence our interest in the potential construction and being a partner in the construction of nuclear power plants.
It's also important to observe the increasing social acceptance when we run such a survey two years ago or even more about the social acceptance for nuclear power plants, than only around 25% of the society expressed their approval. Today, it's 85%. This shows how the threat that we have beyond our eastern border has increased the consciousness. Also, the education from the media, from the state go a long way. We're also trying to add to this about how the energy transformation is supposed to look like to be safe, to generate at an acceptable price for customers. I think that 85% of support for nuclear power plants also results from this.
Let me remind you that this project will be pursued as a government. I should correct myself. A government project will be implemented. The one that we are implementing right now is commercial business project. In terms of the model of financing, we will be able to talk about the details once we've come to the stage of details. The pace at which those things are developing is very rapid. Our Korean partner is also a proven partner with a track record of building nuclear power plants in Korea and in Saudi Arabia. Also done on schedule and within the budget. We will see how the situation develops.
Another topic that has already been mentioned when we talk about our outlook for 2023, but it is so essential for our company that we will address another question concerning our overall assessment of the impact of regulations on energy prices, on the result of the company in 2023, and also how it will affect our individual segments. Could maybe Mr. Rojewski can address this?
Ladies and gentlemen, as I have said, as of today, the exact assessment of impact of this regulatory document that is intended to protect consumers of electrical energy, cannot be provided today.
We are not able to give you any details on this, because first of all, we are analyzing the provisions of this law, and we are making an effort to interpret the provisions of individual regulations correctly. On the other hand, we still do not know how the macroeconomic environment is going to develop. We do not know what the market situation will be. Also, we are analyzing our cost levels. As I said before, in those four segments, those things will have a major impact on our EBITDA levels. That is what we are expecting. We cannot say as of now how big this impact is going to be. For sure, next year, 2023, is going to be a major challenge, both in conventional energy sources and in renewable energy, in trade.
We will be able to present more realistic impacts for us next year once we have completed all those studies. Theme that goes across various topics. There have been concerns that maybe PGE would be left with high prices of imported coal for next year without the cost being carried over in the light of this special means regulation. We will not be left with coal. Secondly, I cannot imagine a situation where we do not carry over the cost of settlement of our coal costs. Definitely this cost will be included in the total cost.
T hank you for this comment. I think that should clarify this point. A question regarding capital market.
One of our competitors informed about regulations on freezing energy prices in 2023 as not permitting to cover the costs. What is the price with Bełchatów, Turów, with comparison with the 7.8 cost?
Mr. Rojewski?
The unit cost for nine months of 2022 and throughout 2021 stood at similar levels to what the law suggests. That is, they were within the range PLN 7 and 8 on gigajoule. On three-quarters of output costs are fixed costs, and the main driver of those fixed costs are the headcount costs. Those unit costs depend, first of all, and to a large extent, on the assumptions that we made on volumes and on inflation levels, because that translates into a cost increase.
How that will impact 2023 is something that we are currently analyzing, but I can say unequivocally that there is major risk, in effect, the price of PLN 7.8 per gigajoule, which is stated in the law, will not be sufficient to cover this cost, unfortunately. Thank you very much.
Thank you. Among the topics that we have not addressed yet, there is something that might be of interest to you as well. PKP Energetyka. Can you add anything on the talks that are in progress regarding this entity, PKP Energetyka?
I can just say that we are looking for opportunities to acquire new entities. Had we made any specific commitment, we would have communicated that to our shareholders. That's our obligation.
If we make any key decisions whatsoever that might affect the functioning of the company or the expenses of the company, immediately this information will be provided to you and market.
Thank you. There are a lot more questions. We would also like to give the opportunity to the representatives of media and capital market, the present in the room. The floor is yours. Bartłomiej Kubicki, Rzeczpospolita, Parkiet.
Mr. President, I would like, first of all, to ask you about imports of coal for individual users, but in the context of the contract that you were supposed to conclude with the Ministry of Climate and Environment precisely to cover the cost. At which stage are you in the talks with the Ministry of Climate? What amount can we talk about?
This dynamically changing price of hard coal, ARA coal, maybe this will affect the dynamics of the whole process. We know that imports usually were more expensive. In some cases, that was profitable. Yet, the question arises whether the task or the hugeness of this task with the decreasing price of coal may deteriorate your whole business concept here. As regards our business concept, this was somewhat forced. Let me just remind you that we were ordered specifically by Prime Minister Mateusz Morawiecki to engage in this project in order to bridge the gap that was left when Russian coal disappeared. We chose contracts in October, September. Of course, the price of coal was completely different then. We had a highly unpredictable situation regarding the heating season.
That is the season we are in right now. Hence, the contracts were concluded at higher prices. It is natural. Well, that's the global market. We are part of the global economy. Today, of course, the price of forward contracts is higher. Most contracts were concluded in autumn. This agreement that you specifically asked about will ask all costs, all differences that will appear between the price at which we sell to individual customers or local governments and the price at which we buy. That is the cost, because it is not just the purchase price, transport, sifting, all that counts. We are now at the final stages of consultations with the Ministry of Climate and Environment, and I hope within the upcoming days, we will sign this agreement.
This agreement will cover all our extraordinary costs that might appear in this situation. It has covered all differences between the set the Statutory price and the actually incurred cost. We will not sustain any loss whatsoever.
I have a few questions regarding coal. The data show that you have seen a great cost in coal, about PLN 25 up per gigajoule. I would like to ask which portion of coal in that period came from imports? I mean, coal that was used in PGE power plants. I'm not talking about entire coal, but only what the coal that you actually consumed in your power plants.
As regards the price, it follows from the fact that we negotiated the agreement with Polska Grupa Górnicza. We informed the market about that. We are now in talks about deliveries for 2023. As for imports, frankly speaking, Well, it would be difficult to give a share, percentage share. You know that historically we have used imported coal along the coastline. That is with cogeneration. We didn't have any deviations. The weather helped us, the atmosphere in which we all found ourselves also helped the whole market. Also it helped the society and consumers who can afford to spend less on energy because the weather is warmer.
The situation in which Poland European economy has found itself is actually helped by the weather conditions. Paradoxically, the energy company should want to have the temperatures to be lower than they are now. From the point of view of broadly understood interest of our climate, and if you look at our long-term operations, of course, our objective is not to kill Polish clients and to stifle Polish business. As you know, our objective is to support Polish business and Polish economy. We have a majority stake of state in our sharing structure. We run our operations in the optimum way so as to satisfy both our majority shareholder and our minority shareholders.
Coming back to this question about the percentage, that depends on what portion PGG delivers or does not deliver to us. Let me be more specific about my question. Out of this almost PLN 8 growth of price per gigajoule, most results from the growth of price at PGG rather than imported coal. Okay. That means that now the coal costs about PLN 40 per gigajoule. Where? At PGG. It was 14 plus 27, you get over 40. You have to ask PGG. Probably they have various rates and various prices for various clients. On average, that is the result for you. We assume that PGG would treat us as its biggest recipient, therefore giving us somewhat different treatment as compared with the rest of the market.
The year is coming to an end, we will also complete our negotiations regarding the price for next year. Maybe the actual price is similar to what you calculated.
Will you want to accept such a price for next year?
We are now in talks. I will not make any comments on the number that you have mentioned. You should ask PGG and ask them about their offer. We have presented ours, this is not the right time for me to discuss the price per gigajoule. We are still in negotiations, that would be against simple rules of negotiations.
The offer for end users or for businesses for next year. If you analyze the impact of the law, will you be able, we are still analyzing it.
Will you be able to prepare an offer for businesses that are not covered with a shield, where the prices have higher than those protected?
The next question, whether you'll be taking part in the tenders for local governments, whether it pays off?
Starting with the last question, we've been analyzing all the regulations. They have not all come into force yet. We are generally part of the tenders, but we're also analyzing the impact of the regulations on our offers because they'll be impacting the bidding process. When it comes to energy prices owing to the systemic regulation that we also partially initiated to impact the price limitations in the market. In August, there was a moment when
Some offerings appeared then, and owing to this print system when the highest top fuel price determined the price of a day, it was mostly gas-based prices, not ours, actually. It wasn't us who determined the price. We were also accused by some people from the media of it. Well, the market is organized in such a way that it's transparent and it determined the price, but we didn't actually sell energy at so high a price. Today, the price is, I believe, well, for forward contracts, it's about PLN 1,000. I haven't checked it today, but I think it's around PLN 1,000. This is probably the price that we will be bidding on at the market price. It would be hard for us to bid on a lower price.
Yes, but I mean, the margin which is defined ex officio in the regulation. I'm sure we'll be observing the law and the provisions and the regulations to be implemented. Like I mentioned, they're all being analyzed. Not all of them have come into force, but we will be definitely bidding at such prices to abide by the regulations first, and secondly, to cover our costs.
Have you prepared the proposals for new customers for 2023?
The negotiations are underway. The supply company is in contact with the customers. I'm sure these are different proposals for different periods and different customers. Contrary to common belief, the energy market is complex. Like people present different drawings and we are attacked for this.
There are some graphs showing the high prices without providing the volume. As you know, the market is very complex, such news that appear is basically disinformation against us, which is shown by the results presented today. There are no extraordinary profits, no extraordinary margins. In a situation of an energy crisis, we believe, and most of the society believe that it's that the crisis arose as a result of the war in Ukraine. These activities are aimed at causing uncertainty, stirring emotions in Poland, which is in the interest of those from outside Poland. We are pursuing a rational policy and pursuing our strategy on a consistent basis, we're determined to provide energy to Poland until the end of the world.
It's not our goal to maximize our profits and to kill our customers, because at the end of the day, it would probably hamper the financial standing of our customers, so it's not in our interest, quite conversely.
The next question is about the obligations. You mentioned the launch of the trading platform. Where, when could it possibly be launched? Have you talked to Orlen, Tauron, other operators? What wou ld it look like?
We have actually, we're supposed to receive it in a couple of days. We're building this platform internally. Our IT company is dealing with it, and we'll be trading through a brokerage house. This platform will be part of a brokerage house, so it will be a pure, transparent market presenting the proposals, the bids, and matching customers. That's the way it's gonna look.
It's our ambitious goal to launch it as of January 1st. As of today, it seems realistic. I cannot say that anything is wrong about the project. We assume it will be launched as of January 1st.
Have you talked to other major players and generators to be part of it?
Frankly speaking, well, we offer such services to other customers, but whether we are in dialogue with any major generator, I could not tell it to you. I don't think so, but we'll be open to this. Generally, we will be dealing with matching customers. If someone wants to join our service, I think it would be feasible for us to also sell the energy generated by someone else. This is aimed at matching transactions. We will not be servicing those transactions. It will only be about the matching.
Perhaps we should give an opportunity to someone else. I believe that if the price increases grow so much, then PGE will be earning a lot of profit. Why did you sell it for PLN 1 if you could just increase it? You just relate to this. You are addressing a situation from several months ago. The realities then were quite different. Let's remember that we're in the same boat as coal mining. There wouldn't be power gen without coal mining and vice versa. We're happy to see our colleagues experiencing a better time, and I wish for them to keep it going forward when we need more Polish coal, so we don't have to import it.
Thank you very much for those in-depth questions.
We'll be happy to listen to someone else. We have Ireneusz Chojnacki, Virtual Industry.
I'd like to ask you how the coal import is funded. If it's based on a loan, which institutions are providing that loan? Is the plan still in force, in place? That by April, it should reach 10 million tons. Secondly, have the group companies submitted tariff applications to the ERO President when it comes to prices?
Well, maybe not. It's of less importance when it comes to households, prices for households, but when it comes to distribution, it's about the evaluation of the regulatory agreement and whether it will be reflected anyhow in the tariffs for 2023 when it comes to the return on capital. When it comes to the coal prices, we're analyzing the process.
So far, we have sold, we have delivered to customers 4.7 million tons, half of what we've declared. The volume of 10 million is still to be pursued. We are in the process of doing so, it seems that the entire volume has been ordered. When it comes to the tariff applications, they have been submitted. We are in the process of dialogue with ERO. I wouldn't like to share any details as long as the dialogue is in progress. We're not publishing anything. When it comes to funding, we're being funded by BGK. We're being supported, we have external support for that process. Additionally, we have state treasury guarantees and the agreement or regulatory agreement for distribution, energy distribution.
If you could just make it more precise, because we're not quite sure what you mean.
It's about the agreement that the distributors have signed with ERO.
Sorry, we don't hear the question. It's off the mic. May I ask you for some patience? As the President said, the applications have been submitted and they're being negotiated. If we signed, if we signed it, we will have to pursue it. It's about the replacement of remote meters, a different calculation of return on capital employed. I think it will be more advantageous than today, and companies that invest in the grid will be promoted. When it comes to investments in the grid, I'm sure we'll be pursuing it as assumed. That investment will definitely be favored next year, and we'll be pursuing what we have signed.
It would be difficult for us to sign something that we are not going to pursue. This is a good assumption. The discussion is also good. It has been observed that it's important. A lot is being spoken about generation, about gas, but people forget about the supply. The energy has to reach the customer. This will be pursued by us.
We have a broad program of meter replacement to have the remote meters. These represent billions of PLN and CapEx. We are mainly interested in stable regulatory framework to be established that will allow us to make long-term decisions.
Magdalena Graniszewska, Puls Biznesu.
With reference to the topic, of, the platform, and PGE, I would like to ask what will be PGE's policy?
Regarding those trading platforms, because companies within the industry are worried whether the market price would be representative or not.
Well, I think these concerns are not justified. The purpose of the platform will be to set market prices. The process will be fully transparent. It will consist in matching offers of sellers and buyers. The underlying assumption is that this should be benchmarked to the market and realistic. We want to have real prices. This way, we want to ensure that this trading is fully transparent. If we indeed decide to reduce our trading in the commodities exchange, you know, we want to proceed in a manner that is transparent. We will not negotiate prices with potential buyers.
We actually decide immediately when there were first reports of the possibility of this exchange being closed. What portion of your energy will be sold through this platform? I do not know. These are the decisions to be made as part of our sales strategy. Now, we are working on our sales strategy for 2023. Please remember that the market changes for us because we have this NABE prices, so we will also be the buyer. PGE will not be just the major generator, but we also buy energy in the market. Now we are working on our strategy for next year and also for the following years. Mainly that will be linked to NABE functioning and our operation in this market.
A huge company like yours could give us some comment on the role of prices at this PGE platform, which is the underlying factor of transactions in this type of market. What will that be like in the future when NABE limits trade?
If it does limit trading in PGE, it will not limit us on the platform. For us, the primary objective is to trade in a transparent manner. That is a necessary condition for our operations in the market. If there are any constraints, or if we are not allowed to trade in the exchange, we will trade on the platform. We will see how it works once it is launched, then will be the right time to comment on it.
We hope that this will allow us to conclude transactions at a balanced price reflecting the actual situation.
Will you publish indices on the platform?
That should be so. There will be some benchmarks. There must be some benchmark. Please bear in mind that this is to be done by a brokerage house. As the CEO said, all that will be fully transparent because there will be full access to it. If you mention that exchange, but if we do that through a brokerage house, we have full transparency, full availability. There is no possibility for any constraints or any preferences as compared to what is happening in the exchange.
For the time being, we plan to launch this platform for ourselves, but we do not exclude the possibility of admitting also other generators to the platform. We think it can be possible, but we have not talked about it yet. It is possible, though.
Last question. You said PGE was ready to hand over its assets to NABE. What can you tell us today about the future economic model, business model of the functioning of this entity? You will buy from this entity? I think several months ago, you were planning to organize a conference about that.
Yes. We assume that we will buy from this entity, but also maybe from other generators. That's not excluded. The model, I think, is well known of its operation.
Will NABE, as a third party, sell on this platform?
Yes, potentially, as any other third party, it should be able to use this service. We have not discussed it internally yet. We focus first of all on ensuring this possibility of transparent trading for ourselves. Providing this kind of service of matching offers will also be available to other customers, including NABE.
Tomasz Brzezinski, Cleaner Energy.
If you allow me, I would like to come back to the nuclear project. Well, the fact that PGE joins the consortium means that nuclear energy will replace low emissions sources such as gas. Will your joining the consortium and the building of the power plant mean acceleration or just maintenance of the climate neutrality targets that you have in your strategy?
Climate neutrality is the overriding goal in our strategy, and we will consistently implement our strategy in order to achieve climate neutrality, going through individual stages, reaching milestones that we set our strategy. Today, we are facing an extraordinary situation, namely the war, which forced us to revise our thinking about the future to some extent. Let me reiterate with emphasis that most definitely, as Polska Grupa Energetyczna, we have always communicated that only nuclear energy can provide energy security for Poland, and consequently, can allow us to replace fossil fuels with clean energy. We, as PGE, want to approach this project in the context of what is happening in the gas market. Its price is unpredictable today.
We do not know to be at a gunpoint and be forced to make decisions. We don't want to build a gas-based generation, so as to have a future problem.
Dolna Odra is not at risk.
No, Dolna Odra is moving on schedule. Rybnik, I cannot tell you whether Rybnik is at risk or not. We have just opened the bids. Once we have analyzed them, we will see the details. Polimex in consortium with Siemens is offering a lower price. That is no secret. The next bid is significantly higher. We have not made the final decision yet. There is this power market and placing Rybnik somewhere in this power market.
In general, we would like to complete this project, but not at any cost. Not at any cost. The profitability of the project will determine whether we go for it or not. Responsible planning of profitability is also very hard these days. The situation in the market is changing dynamically, so the situation may change significantly a year from now. On this assumption, we might say that the safest course of action would be to do nothing at all. Obviously, we cannot do nothing at all. We need to pursue energy transformation, which means making decisions that are tough, but they have to be responsible and thought through. One thing is certain, we need to achieve energy transformation, climate neutrality. To achieve climate neutrality, energy transformation is instrumental.
I hope and I dream that the next generation of Poles can get PGE as the principal supplier of energy, and that principal supplier remains in Polish hands rather than in the foreign capital, because that would mean an uncertain situation. It is extremely important right now to maintain the level of investments that we are making at PGE, and for that, we need to maintain profitability of our operations. Today, unfortunately, there are some concerns in the market. We do not have any talks about any major cuts in our CapEx or any radical moves aimed at slowing down or discontinuing our investment activities. The situation is dynamic. We're analyzing any events that occur.
This year, we plan to spend PLN 6.5 billion in CapEx. I think it is a very significant amount. In this hard situation in which we are, I believe it is a success for PGE to spend PLN 6.5 in CapEx. We have already spent over PLN 4. Everything seems to indicate that by the end of the year, we will meet this target. The situation is difficult. We will pursue our investments. We want to reach climate neutrality. We are not backsliding on this.
Let me just make sure. You said the teams were working on this nuclear project. The Koreans want to have everything done on budget and on schedule. You also intend on achieving this within those parameters.
Your target by the end of the year is to get a preliminary tentative agreement on the schedule and model of funding. Will that be reflected in the strategy of the company? Does it mean that you will communicate to the market adding a new component to your strategy, the nuclear component to your path of arriving at climate neutrality? When can we expect such an announcement?
If we decide to take the next steps in this investment, for sure, we will also revise our strategy, and for sure, we will present this revised strategy to you. In fact, such a major investment
Would be hardly possible without a strategy revision. If there is an inspection within the company and audit, they start with looking at the strategy and they check whether the management board is implementing the strategy. That might be the first step for further inspection by tax authorities, by audit, Supreme Audit Office and so on. We have to be careful about that. If we decide to go for this project, to continue with this project, for sure in the first quarter, we'll definitely have a strategy revision. We'll try to go about it as fast as we can. Of course, the whole team is working on it, and the whole team will then approve the strategy. It is not just the management board.
I assume that the strategy revision will not divert significantly from what is included in the strategy today. We will probably make a short-term focus on certain areas for sure, distribution for sure, offshore, that is going to be something that will remain unchanged. We will also have large-scale nuclear energy as well as gas. That will require some decisions, whether we continue with gas at the current share in the strategy or will the share of gas diminish to the benefit of nuclear power.
Okay, given our time limits, if you have any further questions, we can take one or two more.
One more.
Mr. Kubicki, Rzeczpospolita.
Thank you. There's been an option presented. You give me that opportunity, let me take it. I'd like to drill on the topic of CapEx for next year. I understand that you don't know yet how much you'll devote to CapEx because it will depend on your estimation of the impact of new energy prices on your capacities. Which CapEx projects are must-haves for you?
The distribution and offshore, what we have started.
Rybnik is not such an option yet?
No, it's not, because we don't even know whether the proposals submitted by our by our partners meet our expectations. That's a difference about of about PLN 3 billion-PLN 4 billion. I'm not even talking about the budget. I assume that the very high proposal, well, if something turned out to be wrong, I'm sure we won't be pursuing it at the higher price, I can tell you right off. We will open the bids and we will see.
What about the PV projects likewise? It's a constant, right?
Yes, definitely. The PV project will definitely be pursued. Even in a couple of days, we'll be inviting you to a major project event pursued by us.
By the way, is the onshore wind farm projects also a must-have?
Well, we're not strong enough to act instead of the legislator. We as PGE don't have that in place as yet.
Okay, thank you very much.
For the end, last question, please.
We don't hear it, unfortunately. It's off the mic.
You were talking about the large interpretation doubts when it comes to, the Extraordinary Measure Act, and you mentioned that you were analyzing it. It's maybe it should be amended. It's supposed to come into force on December 1st. It's not the first act to be amended before it came into force.
Well, no comment. I'm sorry. Okay, thank you very much for coming. I think we have reviewed all the aspects of our group's operations through the Q&A session. If we have not addressed any of the questions, we'll try to do so through our press office. You're all invited to the conference devoted to the results for the complete year of 2022. Thank you very much.