28/09/2020

UDS-Biz

Growing Your Income

Edited Transcript of ENGP.WA earnings conference call or presentation 29-May-20 9:00am GMT

Gdansk Jul 21, 2020 (Thomson StreetEvents) — Edited Transcript of Energa SA earnings conference call...

Gdansk Jul 21, 2020 (Thomson StreetEvents) — Edited Transcript of Energa SA earnings conference call or presentation Friday, May 29, 2020 at 9:00:00am GMT

Good morning. I would like to welcome you to a video conference to analysts, investors and journalists interested in the financial results of Energa Group in 2019. Throughout the event, we will also talk about estimated selected data for quarter 1 2020. Throughout the conference, you are free to ask questions filling out the questionnaire on the conference website and also by sending the questions over to Investor Relations at energa.pl. And now of course, we already encourage you to pose your questions.

The host of our today’s meetings are Marek Kasicki, Deputy President of the Board of Energa Financial Affairs; and Mr. Dominik Wadecki, Deputy President of Energa’s Board for Operational Activities.

With us, there also representatives of business lines of the Energa Group. Mr. Piotr Meler, Energa OZE; also present Piotr Dorawa, President of the Board of Energa Obrót; Mr. [Christoph Okonska], Director of Finance and Regulation Department at Energa Operator as well as other experts that will simply be available for you during the Q&A session. I’m Marcin Chanke, and I head Investors Relations at Energa.

Now I give the floor to Marek Kasicki. The floor is yours.

Mr. Chairman, thank you very much, ladies and gentlemen. Welcome. I’d like to welcome you wholeheartedly to our today’s conference of the Energa Group of the group that as we cyclically repeat is the greenest group in the world as far as areas goes, but also we have the most smart grid distribution network in the country.

To begin with, we’ll talk about market conditions that considerably impacted our results in 2019, but also our operations. As you can see — in the slide, you can see the prices of the coal, the prices of green certificates and emission allowances as well as the domestic production of electricity, as well as the domestic consumption of electricity have been presented here on the screen. You can see the changes in relation to 2018. And we have noted an increase in hard coal prices by 10%, green certificates by 33%, emission allowances prices increased by 59%. All these factors impacted our EBITDA, which is higher compared to 2018 at the level of 10%.

And also it was impacted — or it had an impact on certain volumes of production transmission grid. We will talk about particular values resulting from those conditions using further slides.

So far, general information in those market conditions, we managed to reach EBITDA higher compared to 2018.

Next slide, please. Here we will show you the most important tasks implemented within particular business lines, starting from the business line distribution. Distribution business line has become the biggest share-generator in the EBITDA across the group. And here, we would like to pay attention to a significant improvement of SAIDI and SAIFI indicators that are really objective criterion, illustrating the actual effectiveness of the group’s activities.

Another important piece of information is the number of micro generation installations connected. 2019 was the year that saw quite a considerable growth in those micro generation installations. Another element that we would also like to draw your attention to is investment expenditure. The linked EUR 300 million, you can say that it has sustained year-to-year, not too much of a deviation here. And we would like to pay attention also to a twofold volume of cable investments that in the future will transfer into sustaining high indicators, SAIDI/SAIFI indicators, and the volume of electricity delivered was at the level again, similar to 2018, about 2% as in the volume reached in the previous year. Another business line is generation. And as I said, this is something we pride ourselves in the business share of generation from RES.

We produce our own energy. We did this proportion in 2019. RES reduction in the mix reached 38%. It is a result of a well-thought over long-term strategy towards reaching a competitive advantage in this area. So zero, low-emission generation. And here, we’re also presenting to you investments that were made in 2019.

As RES is concerned, you can see the wind farm 30 megawatts (sic) [31 megawatts] to be the delivered in the second quarter of present year. We are also preparing — that was Przykona. We’re also preparing one of the biggest photovoltaic projects. Again, in Przykona and GRYF, we are at the point of getting the construction permit. We’ve also filed applications for investment support entitled photovoltaic panels on the water, again, an innovative topic. A very interesting one, long-term wise.

We have completed the modernization of a hydro power plant. And we also continued the construction of the installation in Ostroleka B power plant to be completed this year.

We can now move on to the sales business line. What is about the most important here is, of course, an increase in the number of clients’ business — sales business line, business out of around 3.07 million (sic) [3.08 million] increase of about 25,000 in 2019. We are also working on the development of our portfolio, around 650 contracts were signed for the implementation of services from the new portfolio financial-related products, and there are also new strategic business partners that were one, we — join us here, and we are thinking about Lotus in particular. Also some companies from the insurance sector and from new tech.

Again, also as far as the sales business line goes, increasing the sales of dedicated offers for additional products and services by around 14% for individual clients and about 7 — 27% year-on-year in the SOHO customer segment.

We are also getting into the area of the sales of photovoltaic panels. We are acting more proactively in this area as well. This is now on general business information concerning our business lines. And this is yet another chart showing to you how much we, as the Energa Group look after the environment for the natural environment. Of course, we have been actively working towards conserving the environment. And now we can see that the results appear clear. There aren’t drops in emissions, particular gases. First of all, starting with 2014, as shown here, you can see quite a significant drop and this is owing to some key projects that have been contributing to this.

This is a reconstructing of the grid and making it adjusted to the increasing number of the new RES connections. And as profession generation sources, just the Ostroleka plant, Ostroleka B plant. All these investments have impacted the limitation of the losses of the electric energy from the grid, which indirectly impacts also the generation from conventional sources, which, again, positive — has a positive impact on financial environment. That’s Poland.

Here, we are presenting major factors of our development impacting nature conservation that are being implemented. With the purpose of, of course, respecting the environment, this is high share in our production of RES. As I said, in this 38%, connecting new renewable energy sources to our grid. And again, quite a big volume of these connections of micro generation installations and further investments in RES generation sources of Przykona new photovoltaic farms.

Investments for production understood as modernizing of the grid have also been made for it to be able to accept the increasing number of RES connections, but also other modernization activities of our conventional sources result in this dedicated amount, of course, CapEx is higher. These expenditures at the level of PLN 416 million. This is supported by external financial institutions, but it has also been appreciated in the form of, given the group a credit in the ESG formula that happened in September 2019. And this kind of a credit is based on environmental conditions that this is the first credit of this kind that was granted in Poland.

The group was subject to a dedicated audit, and it’s going through other audits as well because obviously, we are being audited by rating agencies that specialize in this kind of audits.

In order for our capacities to be verified in terms of respecting natural environment, that, of course, translates into the interest accompanying the credit. So objectively, as well, our activity was confirmed and appreciated by external institutions, financial institutions, including international ones. So getting a credit up to PLN 2 billion in this formula, here’s the proof here.

Let’s move on to another slide that concerns a smart grid project broadly understood. It has been on for many years now by the group by Energa Operator. You can see the results of it in the shape of the attractive society indicators, but it is also an impulse for further improvement of these indicators in the coming years. We can add here that this is the biggest project of this kind in Poland co-finance from the EU resources.

Let us now move on to the financial parameters of the Energa Group in 2019. The revenues in 2019 were at the level of PLN 12.17 billion, increased by 18% year-on-year, resulting mainly from an increase in energy prices on the market. And also certain events like, for example, the analysis of the revenues from the difference of the price for preceding periods. There was a financial conversation — compensation resulting from the Act. We shall discuss it in detail when we discuss the sales business line in greater detail.

As regards as far as EBITDA goes, I’ve mentioned the fact that EBITDA is at the level of PLN 2.039 billion, and that means that it is higher than in 2018. We will explain the details further on. We will discuss what contributed to this result. Further slides will illustrate that.

As for the net profit, at the consolidated level, there was a loss of about PLN 1 billion. And that resulted from impairment losses, concerning our conventional assets, but more than that, also the shares and bonds in subsidiaries. These are noncash events that are subject to an annual verification. That is why we present to you the net profit shown here in a dotted line that we would have achieved had it not been for the impairment losses, it would be about PLN 300 million.

Let us move on to further slides that will show you in greater detail the divisions of the results year-on-year. What we are showing you here is the adjusted EBITDA. So it’s sort of cleared up. No one-offs. And you can see here that it is at the level of PLN 2.122 billion. Again, this high even once adjusted. So we can show it. And again, we would like to post that the EBITDA at the operational level is stable.

Another chart shows the structure of the EBITDA for Energa Group. And here, traditionally, you can say the greatest share is that of the distribution line 81% for 2019 and the fourth quarter itself, was a [delivery] of 116%. This is, of course, connected with the negative result for the fourth quarter, noted by the other lines. But as regards to generation of sales, it is 13% and 9%, respectively, of course, annually here. We’re talking about the share of sales in the EBITDA of the group.

Just worth emphasizing, but I guess we’ll talk about that when we talk about the sales business line, anyway. But still, we can see here the sales and business lines and growing results. And this is connected in 2019 with the use of part of the reserve created in 2018. For the consequences of the Price Act that, of course, impacted the results in plants, and it also impacted the share of the sales EBITDA and the entire EBITDA result.

I can see here that what is displayed is the distribution business line results. All right. And here, annually, what we can see year-on-year is a slight drop of EBITDA compared to 2018, this being a result of mostly the elements that included the adoption in 2019 of a tariff was adjusted on the following quarter 1 as well as higher costs of the group losses in 2019 resulting from higher prices of energy, electric energy.

The net profit result PLN 547 million, which means that it was lower in 2018, again, further details will be discussed, illustrated by another chart. But anyhow, this lower result has to do with a depreciation connected with higher investments, but also and as I said, 16. So it means certain bookkeeping activities. So a signing of certain events costs but also with leasing, and with depreciation of particular factors that altogether resulted in the lowering of the net profit for 2019.

And the distribution of electricity volume, distribution was slightly, only slightly lower. And this is the EBITDA bridge of the business distribution business line that I started talking about the renewed retailers were lower for this line, and that resulted mostly from a lower margin concerning distributions are higher, energy prices, again, connected with losses; the delay in the introduction of a new tariff that entered only in April. So that was the period from which we started to talk about the higher prices for covering the losses from the grid.

The difference in the price of the energy purchased between 2018 and ’19. So what was then reflected in the tariff was PLN 60 per kilowatt hour. So again, that shows the impact on the margin. But then we also have depreciation. We’ve got the property tax and also the OpEx issue. So all the components, the major components of the regulated revenue.

What is also important and has to be taken into account is that in 2018, there was a single event of changing the methods of estimating non-invoiced energy that, again, increased the comparative base for 2018 for comparing it with the activities performed in 2019. And in 2019, of course, there was a increase in the salaries and also actual reserves that was connected with a discount rate drop that again, translated itself onto the EBITDA of the distribution business line.

Let us move on now to a further chart, that will give us more about the reliability indices. Crucial index is connected with the quality regulation, also impacting the quality issues in terms of customer service, energy deliveries and reaching those indices, of course, is subject to a careful scrutiny performed by us, but also by the regulator. And as a result, taking into account in the quality regulated and the regulated revenue, and these indices are quite an objective criterion of assessing the quality of activities, and these indicators go up year-on-year. And this trend is up-kept. It objectively shows that the resources are invested in the grid, that is one.

Now I focus on the results of the sales business line. For 2019, we have noted a considerable improvement in the EBITDA PLN 118 million. The major impact here was the low base. The preceding year connected with creating the reserves. So the lowering of the results for 2018. So that was a major factor that impacted better results for 2019 compared to 2018. That means it’s worth emphasizing that the level of energy sales is, again, at a stable level 20 terawatt hours year-on-year.

Another chart shows you the EBITDA bridge of the sales business line. And the major factors that contributed to this result. I’ve already mentioned the low base for 2018, which was a single-time occurrence, but there are also other important factors worth recalling here. The increase of the price for electric energy on the market back then resulted in the lowering of the margin. You can see here in the bridge that this margin was about — that it was by PLN 533 million lower. We’ve managed to make up for that, resorting to financial compensations. That made it possible for us to reserve — to reverse the reserves in the level of PLN 690 million. PLN 270 million is invested in reserves, but the compensations with Energa Obrót was about PLN 690 million that, again, softened the impact of the worsening of the margin. The reserve of PLN 125 million was created we communicated already before that it was not attractive enough a tariff for the group for the Energa Obrót that the previous amount was not sufficient, that is why such a reserve of PLN 120 million (sic) [PLN 125 million] was created.

As far as other important piece of information go, I guess the major factors have already been discussed. So let’s move one.

So the Generation Business line. Here, EBITDA for 2019 was as you can see, PLN 262 million, which means 20% lower than in 2018. The share of this EBITDA in the group was at the level of 13% compared to 2018 when it was 18%. So a slight drop by 5% in terms of the share of this EBITDA in that of the entire group. What we would like to emphasize is that the energy generation in 2019 was at the level of 3.6 terawatt hours, so 8% less than in 2018. And this lowering trend concerns the hard coal generation of Ostroleka B. What is important perhaps or the most important is that the general increase have been — has been noted in terms of the RES generation, there was an increase by 15% year-on-year. I guess these were the most important factors concerning the EBITDA of the Generation Business Line.

And now let’s move on to the bridge — EBITDA bridge of this line. As you can see, what lowered was the EBITDA year-on-year by PLN 67 million. Major factors being lower revenues from energy sales. So a lower volume concerning Ostroleka B, but also a lower volume concerning water, higher costs of the consumption of key fuels for the generation that mostly concerns the increase of the cost of coal and biomass as well.

We have also noted a higher cost of the fixed costs in the generation line resulting from 2 factors, higher costs of returns connected with the report of Unit 2 in the Ostroleka B plant, which is also connected with increased costs of salaries.

Another factor concerned that impacted the lowering of EBITDA here was the cost of purchasing of CO2 emission allowances, high prices, higher market prices of these allowances. And also a lower pool of free-of-charge emission allowances for 2019.

And as you can see here, what looks positive against this background is the income by PLN 40 million, concerning the sales of green rights and also higher volume of the generation based on RES.

Now let’s move on to EBITDA.

Next slide. We are presenting to the Generation, again, broken into particular energy sources and there is further increase of the RES generation and also as a result, an increasing share of RES generation in the entire portfolio of ours.

What is worth underlining here is also the EBITDA concerning hydro and wind, which, respectively, increased by 18% and 25%. With a drop of EBITDA of the share in EBITDA of the Ostroleka B plant on an annual basis.

Right, let us move on to another slide that has a summary of the capital expenditures of the group in total. For the entire year, CapEx was PLN 1,574 million, out of which in the fourth quarter, it was PLN 466 million. Of course, a higher share of capital expenditures concerned the distribution business line with modernization of the grid and connections.

Another share and CapEx so position #2 is occupied by the Generation Business Line here. We dealt with adjusting our generation sources to the environmental requirements, modernization was carried out mostly in Ostroleka B. And also, there is an advanced stage of construction of a wind farm in Przykona. So altogether, Przykona’s expenditure was of PLN 122 million. Most of the expenditure here was qualified as advanced payment for the construction slide. When we present those capital expenditures, they show as if it was a lower level, but now we are able to show the entire volume that shows the real capital expenditures in total.

Let us now move on. Perhaps let’s stop here for a while. You can see here the value of the installation removing SAIFI.

We would also jumping at the opportunity of holding this event and also publishing the results in May, would also like to tell you about estimated results for the first quarter of this year. And you can see the major parameters that is revenues are higher year-to-year by 11%. But it is mostly as a result of the increase in revenues of the sales business line. So this results from the higher sales prices incurred by the end consumers.

So the — again, the result of the low base in 2018.

And also, there was an increase in the cost of purchasing the electric energy and property rights year-on-year. EBITDA as regards to quarter — the first quarter year-on-year is slightly higher by 3% and reached PLN 568 million. The net profit is PLN 111 million, which means it is lower than in the same quarter of 2019. But again, our results here reflects a certain impact of the COVID-19. While we estimate that the total profit given COVID were PLN 27 million is the impact.

Also the higher result in the first quarter, we have also recognized the share in the loss of the method using property rights. Again, last year, the recognition was above the level of PLN 9 million. There is a difference in the approach, which also resulted in the result given.

We’re presenting to you now selected data of the Energa Group based on estimated EBITDA.

As you can see, the change on the level of the group year-to-year is at the level of about 14% on the positive side, on the plus side. Well, and the received lower results, lower EBITDA for distribution, production and it is connected with certain factors connected with COVID situation. And also with higher costs connected with wages, remuneration, et cetera, and certain external services connected with services or if there is technical servicing of clients. This is just estimated data. Of course, it will be at — made more precise, when produce our results for the 10th of — on the 10th of June, we’ll be able to answer specific questions regarding the first quarter then.

Now let’s move to the next slide, on which we present the outlook for 2020, perspectives for 2020 and that demonstrates the crucial market conditions, regulatory conditions factors which impact the group’s results. As far as distribution, here, of course, we see a decrease of WACC Y-o-Y, up to 5.507% due to the risk-free rates, which impacted, obviously, also the pandemic situation, of course, we also see the risk of volume.

We also see on these levels. And of course, the wage situation connected with relation to the Group. At the same time, the necessity of dealing with the generation situation. As far as the business production line and the renewable energy services, we have potentially worse situation regarding the — the weather we’re expecting a very dry season in the country, which impacts our financial parameters, obviously, which can have a negative effect plus starting an additional wind farm.

As you can also see, the Ostroleka power plant, a decrease in blocks of PSE and lower price of energy sales and connected products. As far as the business line sales — well, the level of the tariff, which was approved by the President of Energy Regulatory Office, does not quite illustrate all the impact — so all the factors impacting the price of energy. This was connected with the reserve that we mentioned at level PLN 250 million and the lack of the volume of sales of energy in view of the epidemic situation. So these are the main criteria, which may impact our results in the perspective of 2020.

And at this phase, at this point, we will finish presenting general results of the Energa Group and individual business lines. You’ve received materials — you’ve received all the materials, the materials — further materials contain detailed data regarding particular results of the group, or line et cetera, and also the main factors impacting the energy business. They can be — you can acquaint yourself all of them. Obviously, we are also open to any questions you might have.

Thank you very much. That’s all from me at this point.

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Questions and Answers

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Marcin Chanke;IR Chief Specialist, [1]

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Thank you, Mr. Chairman. We do have some questions already. The first question is about the impact of the pandemia on the results of the Energa Group in 2020.

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Unidentified Company Representative, [2]

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Well, as I said, we are observing — we keep seeing the impact of pandemia on the volume and our receivables. Of course, we’ve also seen a drop in the sales volume in the first quarter and the distribution of energy at the level of about PLN 27 million. We talked about this estimated data in the first quarter. We are aware that pandemia is going to impact the economy and in terms our results, our parameters. This, of course, stems from lower energy demand and lower production from conventional sources which are working in a forced mode. But frankly, it’s difficult to assess what the impact is going to be exactly. So we’re monitoring it constantly. And I think that on future conferences, we’ll be able to communicate and have more precise information regarding it.

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Marcin Chanke;IR Chief Specialist, [3]

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Another question regarding how many cases are there regarding with CPA? How many of them ended with positive results? And how many with negative one?

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Unidentified Company Representative, [4]

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Well, the company had 8 cases. So in 8 cases, we have entered into the settlement, which basically solved the issue of CPAs. The entire power amount is 59% of the power installed of all the wind power. Two cases — and the verdicts, which were basically — well, basically we want to apply for cassation of these verdicts. 7 more cases are at the second instance level. In 3 cases, we’ve ended up with arbitrage. We actually issued 3 complaints for the verdict that were issued in the arbitrage proceedings.

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Marcin Chanke;IR Chief Specialist, [5]

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Now, we have a question whether the energy warehouse and Bystra power plant will be able to participate in the market — in the power market?

Mr. Chairman, perhaps I could ask production to answer that.

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Unidentified Company Representative, [6]

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Generally speaking, as far as generation is concerned, yes, energy storage that can participate. It’s an R&D project that we are carrying together with Hitachi, the Japanese side. So as far as they are concerned, it’s not yet been reported to the market, but these installations can participate in the market eventually.

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Marcin Chanke;IR Chief Specialist, [7]

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Thank you. Another question, what is the scale of that’s backlog regarding for — in sales and distribution for energy in connection with the legislation dealing with the indication when it comes to the power supply and the — all the collection procedures, which have been supplied — suspended here.

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Unidentified Company Representative, [8]

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Well, the energy group, obviously, has to apply to the — and does apply to the legislation, which was issued in March, our situation is very dynamic. And these are also — such are also the relations — the reactions of our clients, we are observing the payment structure on an ongoing basis. However, the full scale of the impact of these regulations will be able — we’ll be able to see it once the restrictions are actually raised.

At this point, we are communicating with the clients. We have encouraged them to settle their payments at least partially in order not to accumulate these payments for the post epidemic period, so there is no accumulation of backlog of payment, which would make it difficult.

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Marcin Chanke;IR Chief Specialist, [9]

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Another question regarding Ostroleka C, how does Energa look at the possibility of changing the (foreign language) to gas in connection with the opinion of the current ORLEN today’s growth is by the procurement. Why did you say that the fuel will be changed to gas, and the project will be ready in 2024. Is that the final decision?

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Unidentified Company Representative, [10]

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Ladies and gentlemen, as you know, the sponsors of the project is Energa and are currently conducting the analysis dealing with technological — technical aspects. So here, we’re taking into account issues connected with the fuel. And we’re also analyzing issues connected with organization and legal matters of say, economy and financing the project and so on. So in making these analyses, we are also taking into account the declared will of ORLEN to participate in the project in the gas formula. However, the analysis are still being connected. And the effects of these analysis, the results regarding final decision is, of course, you will be informed about them quite soon, in fact.

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Marcin Chanke;IR Chief Specialist, [11]

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Thank you very much. One more question. What are further steps planned by Energa in connection with losing all value of the Ostroleka plant? Will the company be closed? Will the construction of the plant to be taken over directly by the sponsors of the project?

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Unidentified Company Representative, [12]

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If I may — if I could start — well, the actuarial — can’t read it. In the Ostroleka case, because a noncash character and a — deal with issues connected with the situation at the end of December 2019. Currently, we’re conducting analysis connected with further direction of development of the plant. This element determines the degree of arranging the existing structure and the level of possible write-offs. So we are conducting work at this point. We’ll actually communicate after finishing analysis in this area.

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Marcin Chanke;IR Chief Specialist, [13]

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One more question. What steps has Energa taken in order to fight the financial economic consequences of the coronavirus situation?

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Unidentified Company Representative, [14]

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Of course, we are monitoring all the business processes connected with generation and distribution of energy, all the guidelines of the Ministry of Health and the main center inspector to — are being implemented regarding key personnel care employees. It all has been implemented and maintaining critical infrastructure, the basic infrastructure of the company. Obviously, it’s a priority for our group.

And we are trying to mitigate the consequences of the kind of our situation, especially after the economy has started to function again in the later period connected with the unfreeing of the economy. You are aware of the risk connected with the lower use of energy or problems of payments. But here, we are not really at making final decisions. We are monitoring the situation. We’re planning certain measures. Generally, the continuity of operation has been maintained. We are, in fact, attempting these days, while keeping all the rules of caution and being careful.

We’re attempting to go back to normal, so to speak, we’re analyzing all the typical steps. In fact, we are speeding up or accelerating these steps. So one might say that despite a difficult situation, operationally, we’re trying to maintain continuity of operation. And in the case connected toward the — the appearance of COVID cases in Energa in Europe, we haven’t really noted any big risks. There were some individual cases which were diagnosed quite early, and we carried out according to the guidelines in specific steps connected with separating or prevention. So as far as operational continuity, it has not impacted our functioning in a significant way.

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Marcin Chanke;IR Chief Specialist, [15]

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Next question. Here — well, you’ve improved the effectiveness and this SAIDI, SAIFI and their distribution. Do you expect further improvement in 2020 and in the years to come?

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Unidentified Company Representative, [16]

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Well, of course, we can answer — well, yes, and the affirmative to that question. So we could say that the whole investment program is aimed at improving the quality of the network, and we can see the effects, further steps in shape further automatization of the network and installation of further phases of the smart grid concept will allow us to keep improving these indices. We’re also developing high-voltage technology works. For a few years, we’ve been doing that. And the result is that the stops in providing energy are decreasing because we’re able to get rid of any malfunctions without actually stopping the supply of energy. So I can confirm that this situation is going to continue. Our leader position is going to be maintained.

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Marcin Chanke;IR Chief Specialist, [17]

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Is there — is dividend going to be paid out in 2020?

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Unidentified Company Representative, [18]

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Ladies and gentlemen, the Board has recommended in the general meeting of actually covering the net loss because we had a net loss in 2018. So we didn’t recommend paying out a dividend for the year 2019.

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Marcin Chanke;IR Chief Specialist, [19]

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One more question regarding [strategy] in connection with the loss of assets of the Polish Mining Group, and it’s applying for help in connection with pandemia will impact ORLEN decide to participate in this company. How do you evaluate the situation in the company? And how do you evaluate the anti-crisis steps taken by the government?

In addition, there is a question whether you would expect a certain government strategy, like, what would you expect from the strategy in that helping the mining sector?

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Unidentified Company Representative, [20]

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Well, let me start with the financial part. This PGG shares, well the situation was caused by external circumstances which neither the Energa Group or PGG had any impact on. Of course, we keep monitoring as a shareholder would operation of PGG. Also in the context of the current situation, the current economic situation, connecting with the pandemia.

Also in that context, of course, dropping use and the increasing cost has impacted the financial model of PGG. And as a consequence, to such in the latter level of write-offs. So at this point, we are talking about certain concrete scenarios with our strategic main partner. We will actually announce new conditions quite soon. At this point, we don’t really know what the impact is going to have on our share. But at this point, we do not really foresee any future involvement. I could add that in the market environment, regulatory climate, climatic situation, so on. And the change of the main shareholder of the Energa Group determined the need to revise the steps that we are planning. At this point, we are reviewing and analyzing our strategy. Our actions are going to be directed at the area of connected development and distribution area that is building up the network and getting new clients and so on.

Also connected with challenges of servicing RES sources connected in the north of the country located in the north of the country. And as far as the generation? Well, in accordance to the declaration of the direction, which was pointed out by our main shareholders, we are going to direct our steps. The low and zero-emission assets so these are the main directions as far as concrete projects are concerned. And the way of their completion, their structure and so on, of course, we’re going to keep informing you once the decisions are taken. Thank you very much.

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Marcin Chanke;IR Chief Specialist, [21]

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We have 2 more minutes. And there’s a question regarding whether your area is going to change the model of return from distribution. Perhaps — so director, you could answer.

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Unidentified Company Representative, [22]

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Ladies and gentlemen, at this point, we are talking with [Yuri] about changing the model. I think that the changes are going in the right direction, and we are basically in the final stretch. I wouldn’t want to inform you about the changes just yet, but I could just say that they’re in line with the postulates for all the operators, I think, some of our problems, which we had recently are going to be settled, and we will be able to be more stable, frankly speaking, as far as our financial situation unless prone to events that are out of our control.

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Marcin Chanke;IR Chief Specialist, [23]

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Thank you very much. So basically, we’ve run out of time. But there are a few questions left, and we’ll answer them by e-mail or by telephone. So thank you very much. Thank you very much for coming and participation in the remote form. Of course, we encourage you to post additional questions in the bilateral formula (sic) [form]. We’ll answer all your question, other queries. Thank you very much, and we invite you to further future conferences. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]