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The Mining Segment includes the extraction, enrichment and sale of hard coal to the commercial energy sector and to private customers.

 

 Financial results*
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Item
[PLN thousand]
2016 2015 2014 Growth rate
(2016/2015)
Change
(2016 – 2015)
Mining
Sales revenues 1 311 143 1 205 944 1 194 024 108.7% 105 199
coal – thick and medium grades 346 251 346 778 359 857 99.8% (527)
steam coal 918 647 836 772 803 647 109.8% 81 875
other revenues 46 245 22 394 30 520 206.5% 23 851
Operating profity (205 163) (104 328) (6 829) (100 835)
Depreciation/amortization and impairment losses 123 033 113 465 105 249 108.4% 9 568
EBITDA (82 130) 9 137 98 420 (91 267)

A three-year perspective of financial performance is presented to ensure the transparency of information.

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EBITDA

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In 2016, the Mining Segment’s EBIT and EBITDA were lower than in 2015, due to the following factors:

  1. operational launch of ZG Brzeszcze in the Segment in 2016;
  2. volume of pulverized coal sold down 2.6%;
  3. price of pulverized coal sold down 13.4%;
  4. lower revenues on other grades as a result of selling a lower volume of medium grades down 7.2% and thick grades down 1.6%, while commanding lower prices, 5.1% and 0.3% respectively, as a result of the oversupply of coal on the domestic market and the related fierce price competition among various players;
  5. lower cost of coal sold, resulting from:
    • labor costs down 8.0% as a result of the average headcount being lower by 522 full-time equivalents,
    • sale of some of the coal inventory in 2015, whereby that inventory value was recognized as a cost of goods sold in the period. In 2016, the volume of coal produced by TAURON Wydobycie was greater than the quantum of coal sold, resulting in mining costs being allocated to the company’s balance sheet;
  6. recognition of costs in the 2015 result:
    • adjusting the inventories of saleable coal and semi-finished products after taking a physical inventory,
    • checking the real value of prepayments on account of the work connected with driving roadway workings for mining and reinforcement of longwalls,
    • settling the costs of abandoning the longwall at ZG Sobieski,
    • reversing actuarial provisions for the Company Employee Benefit Fund and free coal allowances partly for the present retirees;
  7. debiting them to other operating activity:
    • reversing the provision for the ZG Brzeszcze mine closure fund due to changing the discount rate,
    • creating a provision for property tax in connection with verdicts pronounced by administrative courts in 2016 regarding the taxation of mine shields.

 

Major investments

In 2016, the Mining Segment incurred capital expenditures totaling PLN 283 million, also for the following strategic investment projects:

  • PLN 24 million to build the “Grzegorz” shaft and its infrastructure and accompanying underground workings;
  • PLN 61 million to build level 800 m in ZG Janina;
  • PLN 100 million for the investment program in ZG Brzeszcze (including the purchase of a longwall shearer for PLN 73 million).

The Mining Segment’s other expenditures are incurred to prepare and conduct mining (mainly to purchase plant and machinery, tunneling underground workings, preparing longwalls).

 

Growth prospects

The continuing restructuring of the hard coal mining industry, this fuel’s unfavorable prospects in Poland’s energy policy and fierce competitive pressure posed by imported coal substantiate the contention that the market conditions for hard coal producers will be challenging and trying in the upcoming years.

On the other hand, considering the need to ensure energy security, coal will continue to be the main fuel used in the energy industry in Poland, also in the TAURON Group.

The Group’s strategy assumes that the planned Strategic Projects and investment projects will allow the Mining Segment to continue being one the most efficient operations in Poland (comparative analyses performed for mines in Poland in 2015 show that the mines in TAURON Wydobycie are the most efficient, following the mines in Lubelski Węgiel „Bogdanka” S.A., both in terms of unit mining costs and in terms of employee productivity).

 

Top priorities

In accordance with the TAURON Group’s Strategy, the top priority actions in the Mining Segment are as follows:

  1. continuing investment projects in ZG Janin and ZG Sobieski;
  2. executing the investment program in ZG Brzeszcze;
  3. optimizing operating expenses and capital expenditures to sustain the position of TAURON Wydobycie as the second most cost-efficient coal producer in Poland;
  4. building a portfolio of products adjusted to internal needs, also to supply 70-80% of the coal demand in the Group’s power generation units;
  5. developing a product offering for end-users outside the TAURON Group.

Projects performed in the Mining Segment focus on enhancing productivity and growing the percentage of coal from proprietary mines in the Group’s coal purchase mix. These factors create an opportunity to improve the segment’s profitability.

The Generation Segment entails the generation of electricity from conventional and renewable sources as well as the generation, distribution and sale of heat.

 

Financial results*
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Item
[PLN thousand]
2016 2015 2014 Growth rate
(2016/2015)
Change
(2016 – 2015)
Generation
Sales revenues 4 356 101 5 376 280 4 963 651 81.0% (1 020 179)
electricity 3 101 505 4 021 274 3 264 510 77.1% (919 769)
heat 861 029 814 045 824 791 105.8% 46 984
property rights from certificates of origin of electricity 335 673 480 698 574 291 69.8% (145 025)
blast furnace blow-in 0 0 159 422 0
compressed air 61 56 71 122 108.9% 5
other revenues 57 833 60 207 69 515 96.1% (2 374)
Operating profit (752 813) (3 477 076) 72 093 2 724 263
Depreciation/amortization and impairment losses 1 298 124 4 231 827 720 710 30.7% (2 933 703)
EBITDA 545 311 754 751 792 803 72.3% (209 440)

A three-year perspective of financial performance is presented to ensure the transparency of information.

 

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EBITDA

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The following factors contributed to the level of these results:

  • higher costs of the CO2 reserve – the result of a shortage of free CO2 emission allowances compared to CO2 emissions y/y and higher prices of CO2 forward contracting y/y;
  • higher revenues from the Operating Capacity Reserve (OCR) – the effect of the higher volume of available capacities (lower sales of contracted electricity y/y) and the unit higher rate for OCR y/y;
  • revenues from the Emergency Cold Reserve (ECR) (since 1 January 2016);
  • lower variable unit costs of electricity generaton due to the reduction in the unit costs of coal and biomass consumption and optimization in the utilization of generation units;
  • lower electricity prices on the forward wholesale market y/y, translating into a lower electricity sales volume y/y (also under the resale of purchased electricity);
  • lower price and volume of property rights on RES (effect of the oversupply of RES property rights on the market, absence of support for hydropower stations with an installed electrical capacity above 5 MWe and limitation of support for co-firing from 1 January 2016 and lower production from RES y/y – optimization of operation of biomass-fired units and worse wind conditions compared to the previous year);
  • higher margin on heat – mainly due to lower prices for the fuels used for producing heat and higher heat transmission volume (lower average ambient temperature in the heating season: 4.6°C in 2015, 4.0°C in 2016);
  • recognition of impairment losses for property, plant and equipment, intangible assets and goodwill following the asset impairment test;
  • other factors – mainly lower fixed expenses (the greatest reductions for renovation and external services).

 

Major investments

In 2016, the Generation Segment incurred capital expenditures totaling PLN 1,661 million, also for the following strategic investment projects:

  • PLN 1,237 million – construction of a 910 MW coal-fired unit at the Jaworzno III Power Plant;
  • PLN 107 million – construction of new cogeneration capacities in ZW Tychy (50 MW);
  • PLN 11 million – construction of a flue gas denitrogenation unit and modernization of 200 MW units at the Jaworzno Power Plant.

In addition, approx. PLN 57 million was earmarked for projects to develop the heat distribution network, PLN 18 million to modernize hydropower plants and approx. PLN 80 million for replacement expenditures and refurbishment in TAURON Wytwarzanie. A project is being performed in Stalowa Wola with the participation of a strategic partner – PGNiG, including the construction of a 449 MWe combined cycle gas turbine unit with a 240 MWt heat generation unit. The project is planned to be completed in 2019. In January 2016, the contract with the main contractor was rescinded. A new gas supply contract was negotiated with PGNiG. Since the banks suspended financing, talks are being held on financing the project further.

 

Prospects for development

Available forecasts and analyses show that the conditions in which domestic electricity generators will operate will continue to be challenging, first of all because of price pressure and the diminishing production volumes from conventional generation units (resulting, among other things, from their age and low efficiency, and the increasing percentage RES have in generation). The ad hoc mechanisms introduced by the Transmission System Operator, such as the Operating Capacity Reserve and the Emergency Cold Reserve exert a favorable impact on the results of electricity generators.

In the near future, the key problem will be still to ensure security of operation of the National Power System, which is mostly understood as the possibility of balancing the demand by production capacities. To do this, a capacity market is planned to be introduced in Poland. This should make it possible for generation units to obtain an additional source of revenues.

 

The most important priorities

The major strategic direction planned for the Generation Segment is to achieve economic effectiveness or decommission various conventional assets. The segment’s measures will focus, among other things, on completing the construction of the coal-fired power generation unit in Jaworzno. This also entails finding a strategic partner to buy an equity stake to execute this project while retaining control. Asset management is to be integrated in the Generation Segment (this refers to TAURON Wytwarzanie and TAURON Ciepło) in coordination with the Mining Segment.

With regard to RES, options are being prepared to develop RES installations, provided that the support system is favorable and their operating model is profitable.

In heat generation, distribution and supply, important activities include participation in the Low Emission Source Liquidation Program, seeking solutions in multi-fuel cogeneration and increasing the utilization of existing infrastructure.

The Distribution Segment includes the distribution of electricity using distribution grids located in the southern part of Poland.

Financial results*
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Item
[PLN thousand]
2016 2015 2014 Growth rate
(2016/2015)
Change
(2016 – 2015)
Distribution
Sales revenues 6 310 216 6 450 274 6 074 646 97.8% (140 058)
distribution services 5 892 510 6 022 144 5 656 807 97.8% (129 634)
connection fees 103 636 125 698 121 044 82.4% (22 062)
maintenance of street lighting 116 462 116 042 111 634 100.4% 420
other revenues 197 608 186 389 185 161 106.0% 11 219
Operating profit 1 363 236 1 371 577 1 209 344 99.4% (8 341)
Depreciation/amortization and impairment losses 1 031 576 1 000 552 962 944 103.1% 31 024
EBITDA 2 394 812 2 372 129 2 172 288 101.0% 22 683

A three-year perspective of financial performance is presented to ensure the transparency of information

 

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In 2016, the Distribution Segment, as compared to 2015, recorded a decline in revenues of 2.2% and movement in EBIT and EBITDA of -0.6% and 1.0%, respectively. The following factors contributed to the growth rate in these results:

  • a decrease in the average rate of sale of the distribution service to customers, in each tariff group except for group A, resulting mainly from the reduction of WACC in the 2016 tariff;
  • rising amount of supply to industrial customers, as a result of higher GDP and production, in particular among customers in group B; diminishing amount of supply to customers in group A because of problems in the mining and metallurgical sectors and restructuring processes companies in these industries were undergoing;
  • falling volume of electricity distributed to households as a result of the one-off recognition in 2015 of the favorable revaluation due to the migration of customers to the Central Billing System;
  • rising costs of purchasing transmission services resulting from the higher quality fee charged for greater electricity consumption and the RES fee introduced as of July 2016;
  • substantially lower price of balancing energy losses in the contract with TAURON Sprzedaż; a favorable effect was also achieved due to reducing the volume of the hedge purchase;
  • in accounting terms (with revaluation), the grid loss ratio was higher y/y, mostly as a result of the one-off recognition in 2015 of the favorable revaluation due to the migration of customers to the Central Billing System;
  • falling revenues from connection fees from entities connected to HV and MV grids (including wind farms); lower level of fee revenues also after the completion of the HV line connection in PKP Energetyka S.A. in 2015;
  • falling fee revenues for excessive consumption of reactive energy resulting from the drop in the energy price on the competitive market included in the fee calculation;
  • rising revenues from removing obstructions, mainly as a result of completing tasks in Q4;
  • lower costs of the actuarial provision – a non-recurring event in December 2016 following unification of the Collective Bargaining Agreement in Distribution Segment companies; another reason for the partial dissolution of the provision was the lowering of the retirement age;
  • lower fixed expenses, including in particular: lower costs of the provision for the Voluntary Leave Program, lower costs of customer service at TAURON Obsługa Klienta, lower costs of cutting trees, the favorable balance of impairment losses for receivables;
  • rising costs of taxes and fees as a result of investments in progress and rising grid asset value and in connection with creating a provision for the risk of higher periodic fees for transmission easement for energy infrastructure located in forest inspectorates;
  • a higher result on other core business.

 

Major investments

In 2016, the Distribution Segment incurred capital expenditures totaling PLN 1,806 million. The major investment targets are as follows:

  • PLN 591 million for projects to connect new customers;
  • PLN 953 million for projects to modernize and replace the grid.

In addition, in 2016, expenditures were incurred for performing Strategic Investment Projects: Grid Asset Management System – approx. PLN 35 million, Construction of the Grid Management Center in Kraków – approx. PLN 6 million. Capital expenditures totaling approx. PLN 200 million were also incurred to build the Grid Management Center in Wrocław, communications and IT technology, buildings and structures, means of transport, modernization of street lighting and other tasks linked to core business.

 

Growth prospects

The new challenges defining the directions of growth in the Distribution Segment span prosumers, energy clusters and the developing electromobility sector. Smart grid and smart metering technologies will also be of great significance for the energy sector. These solutions will introduce additional functionalities for distributors and customers alike, thereby making a clear contribution on the growth of the industry. The Distribution Segment will focus on ensuring reliable electricity supply of suitable quality. To do this, considerable capital expenditures will be needed to replace assets, make the necessary changes in construction technology, automation, smart meters and introduction of energy storage units as elements stabilizing grid parameters. Furthermore, customers must be in the center of attention in the Distribution Area; that is why it will be especially important to streamline customer service procedures and develop new communication channels.

 

The most important priorities

It should be borne in mind that the challenges facing Distribution will be faced on a regulated market. On the market, the Company’s activities are dependent on new elements of the policy introduced by the President of the Energy Regulatory Office (URE) to regulate DSOs and the related risks, i.e. an updated approach to the weighted average cost of capital, adjustment factors for improving the effectiveness of companies with regard to operating expenses and the level of carrying amount difference, continuation of quality regulation.

The Sales Segment covers the sales of electricity and gas to end-users and wholesale trading of electricity as well as the trading and management of CO2 emission rights, property rights arising from certificates of origin of electricity and fuels.

 

Financial results*
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Item
[PLN thousand]
2016 2015 2014 Growth rate
(2016/2015)
Change
(2016 – 2015)
Sales
Sales revenues 14 016 190 15 873 355 15 277 451 88.3% (1 857 165)
electricity, including 8 814 692 10 357 041 9 708 534 85.1% (1 542 349)
revenues on retail sales of electricity 7 145 644 8 111 002 7 950 864 88.1% (965 357)
rights to greenhouse gas emissions 363 500 94 086 183 451 386.3% 269 414
fuels 1 583 672 1 972 403 1 935 135 80.3% (388 730)
distribution service (transferred) 3 183 232 3 377 473 3 332 151 94.2% (194 241)
other revenues, including commercial services 71 094 72 353 118 180 98.3% (1 259)
Operating profit 479 374 369 529 582 307 129.7% 109 845
Depreciation/amortization and revaluation charges 10 631 10 876 25 906 97.7% (245)
EBITDA 490 005 380 405 608 213 128.8% 109 600

A three-year perspective of financial performance is presented to ensure the transparency of information

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EBITDA

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In 2016, EBIT and EBITDA were higher than in the previous year, due to the following factors:

  • lower volume of retail electricity sales (down 3.9 TWh) – the major causes are related to the loss of large business clients in the TAURON Group’s operating area and the deceleration in the pace of expansion elsewhere due to the competition’s more extensive sales efforts;
  • lower unit margin on the retail supply of electricity – the adverse impact on the result is caused by efforts to loyalize business segment clients – at prices determined by the market levels of wholesale prices for electricity and property rights and loyalize mass customers – by switching from the tariff price list to a product price list with a commercial fee and a 0.88% lower tariff price for households offered by TAURON Sprzedaż as of 2016;
  • an increase in the level of revenues from fixed trading fees – the higher fees are caused by campaigns actively promoting loyalty in the mass segment to acquire new customers and minimize the number of lost ones as a result of the competitive activity. Selling with a commercial fee (reducing the variable component of the price and transferring that revenue to the fixed component) guarantees a return on sales and that the products offered retain their market competitiveness;
  • higher costs of performing the obligation of redeeming property rights for PR-RES from 14% to 14.35%, for PR-MET from 1.3% to 1.5%, for PR-GM from 4.9% to 6.00% and implementing such an obligation for PR-RES-BIO (0.65%) in H2 2016;
  • lower costs of purchasing PR-RES – taking advantage of the favorable market context (mainly caused by the lower prices for “green” certificates on the Polish Power Exchange (TGE));
  • lower level of fixed expenses, mainly because of having lower costs for running sales and marketing campaigns;
  • provision for EC Stalowa Wola – on 29 January 2016, EC Stalowa Wola rescinded the contract with the general contractor in connection with the failure to meet the schedule and comply with important technical conditions of the combined cycle gas turbine unit in Stalowa Wola, affecting the unit’s security and failure-free operation as well as its future efficiency and operational expenses. As a result, in 2015, TAURON recognized provisions for agreements leading to liabilities with the joint venture – EC Stalowa Wola, totaling PLN 182.9 million. In 2016, the provision rose by approx. PLN 4.4 million;
  • higher result on trading CO2 emission rights and gas fuel (taking advantage of the conducive situation in the process of effectively hedging the portfolio as prices trend downward on the gas market and the sales volume rises at the same time).

 

Major investments

In 2016, the Sales Segment incurred capital expenditures totaling PLN 1.5 million, mostly to handle ongoing tasks.

 

Growth prospects

Growing competition in the Sales Segment and challenges on the wholesale electricity market lead to depressed sales volumes and margin erosion. Considering these conditions, the Group’s strategy posits that the foundation for long-term growth in this segment will be to maintain long-term relations with customers (service quality) and develop its offering by launching new products and business models.

 

Top priorities

In pursuing the TAURON Group’s strategic vision (“We are the company that responds the best to customer needs in the Polish power sector”), the Sales Segment focuses on the following activities:

  • recognizing customer needs and developing a customized product offering;
  • cultivating innovation to create new products and services (also developing energy and non-energy-related services, such as smart home services, developing electromobility);
  • maintaining our leadership position in customer service quality;
  • developing modern and integrated sales and customer service channels (omni-channel, e-commerce).

This section mainly includes customer service operations performed for the TAURON Group and support services for Group companies, including accounting and ICT services.

 

Financial results*
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Item
[PLN thousand]
2016 2015 2014 Growth rate
(2016/2015)
Change
(2016 – 2015)
Other operations    
Sales revenues 827 928 927 953 870 035 89.2% (100 025)
customer services,  accounting and IT services, 560 166 581 050 604 118 96.4% (20 884)
electricity and property rights from certificates of origin of electricity 12 827 73 927 168 592 17.4% (61 100)
biomass 111 087 171 326 0 64.8% (60 239)
aggregate 90 491 89 102 91 214 101.6% 1 389
other revenues 53 357 12 548 6 111 425.2% 40 809
Operating profit 42 642 32 596 56 593 130.8% 10 046
Depreciation/amortization and revaluation charges 71 928 67 724 49 622 106.2% 4 204
EBITDA 114 570 100 320 106 215 114.2% 14 250

A three-year perspective of financial performance is presented to ensure the transparency of information

 

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Higher results y/y are caused by the following events:

  • posting the 2016 result of KOMFORT-ZET in connection with consolidating that company;
  • posting the 2015 result of Biomasa Grupa TAURON in connection with consolidating that company;
  • earning a higher margin on the sale of hard coal grades;
  • diminishing trading volumes in the sale of electricity and property rights, reducing the realized negative margin.

 

Major investments

The total capital expenditures incurred in 2016 r. by the companies assigned to other operations were PLN 65 million. These were primarily expenditures on IT systems.

White certificates white certificates "White" certificates "white" certificates Certificates confirming the saving of a specific quantum of energy as a result of completing investments to enhance energy efficiency.
Biomass biomass Denotes a biodegradable fraction of products, waste and residue from agricultural and forestry production and related branches of industry, including fishing and aquaculture, and biogas and a biodegradable fraction of industrial and communal waste.
Sub peak power generation units sub peak power generation units Power generation units used during a period when the power system has a higher demand for capacity. Power generation units in this class are used from 2000 to 4000 hours a year.
Peak power generation units peak power generation units Power generation units used only during a period when the power system has the highest demand for capacity. Power generation units in this class are used fewer than 2000 hours a year.
Blue certificates blue certificates "Blue" certificates "blue" certificates Certificates confirming the generation of energy from agricultural biomass.
CAPEX Capital expenditures.
Red certificates red certificates "Red" certificates "red" certificates Certificates confirming the generation of energy in highly-efficient coal co-generation.
Net debt net debt Liabilities for loans and borrowings less cash and cash equivalents.
Dividend dividend Portion of a company’s net earnings per share designated for payment to shareholders.
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization.
Electromobility electromobility Using electric vehicles, both individual vehicles such as an electric car, electric scooter, electric motorcycle and electric bicycle and public transport means: trams, trolleybuses and trains. The assumptions for the Electromobility Development Plan and the domestic framework for the policy of alternative fuel infrastructure development call for there being one million electric vehicles on Polish roads by 2025. TAURON is conducting research and analyses on developing, promoting and disseminating electromobility among Polish nationals, developing the electromobility industry in Poland and in particular collaborating in launching and implementing the findings of scientific and technical work in this area. Moreover, jointly with PGE, Energa and Enea, TAURON has submitted an application to the Office of Competition and Consumer Protection to receive a permit to establish a company called ElectroMobilityPoland to create grounds for developing electromobility.
EMAS EMAS Eco Management and Audit Scheme, an EU instrument to encourage all types of organizations to improve their environmental protection constantly. Functions on the basis of Regulation (EU) no. 1221/2009 of the European Parliament and of the Council of 25 November 2009 on the voluntary participation by organizations in a Community eco-management and audit scheme (EMAS). The EMAS requirements constitute guidelines for organizations to structure their environmental protection duties, optimize costs and effectively manage energy and resources. EMAS is also a system for reporting an organization’s environmental impact making it easier to conduct dialogue in this area with stakeholders. Registration in the EMAS system means that an organization has satisfied the most rigorous environmental requirements.
Prosumer energy prosumer energy Generation of electricity, chiefly for one’s own needs and on a small-scale in installations harnessing renewable energy sources. Households and businesses that do this are called prosumers, meaning that they simultaneously play the role of energy producer and consumer.
Energy from distributed sources energy from distributed sources energii ze źródeł rozproszonych energetyka rozproszona rozproszone wytwarzanie generacja rozproszona energetyki rozproszonej generacji rozproszonej distributed energy Generation of energy by small generation units or facilities connected directly to distribution grids or located in the user’s electrical energy grid that usually generate electricity from renewable energy sources or non-conventional sources, frequently in cogeneration with the generation of thermal energy (distributed cogeneration). The following parties, for instance, may be part of a distributed generation grid: prosumers, energy cooperatives and municipal power plants.
Purple certificates purple certificates "Purple" certificates "purple" certificates Certificates confirming the generation of energy from methane captured in mines.
grid parity Grid parity Signifies the equivalence of the production costs of renewable energy with the energy generated in conventional power plants.
TGE’s FCM Indices Towarowa Giełda Energii (TGE) is the power exchange running the following markets: electricity (Forward Commodity Market - FCM), Day-Ahead Market - DAM, Intraday Market - IDM) and gas (FCMg, DAMg) and the Property Right Market.
smart metering Smart metering Comprehensive and integrated information system encompassing electrical energy smart meters for users of energy, telecommunication infrastructure, central database and management system. Smart metering systems support two-way communication in real time between information systems and electronic electricity meters installed in customers’ locations. Moreover, they may automate the entire billing process for energy users - from obtaining metering data to processing and aggregating them to issuing invoices.
Stakeholder stakeholder stakeholders Natural or legal entity (individual, community, institution, organization, office etc.) which may affect the company or remain under the influence of its actions.
IoT Internet of Things – concept according to which clearly identified objects may directly or indirectly collect, process or exchange data via computer network.
Emergency Cold Reserve IRZ Mechanism introduced by the transmission system operator in 2016. It involves the TSO paying the owners of generation sources which are planned to be withdrawn for keeping them ready to run in response to the operator’s instruction during the anticipated periods of capacity shortage.
ISO 14001 PN-EN ISO 14001:2005 standard PN-EN 14001 standard One of the ISO standards used in managing environmental protection. This standard designated for all organizations regardless of their type and size defines the requirements whose satisfaction supports the achievement of environmental (for instance preventing the emission of pollutants) and economic objectives.
Covenant covenant Contractual clause, order or ban imposed on a borrower to minimize the risk of its invsolvency. Covenents most frequently constitute protection for sources of debt payment to creditors, e.g. by banning further borrowing or disposing of assets.
Aggregate aggregate Bulk organic or mineral material used mainly to produce construction mortar and concrete and build roads.
HV and MV Lines linii WN i SN sieci WN i SN HV - high voltage grid in which the voltage ranges from 110 kV. This grid is used to transmit electrical energy over large distances. MV - medium voltage grid, i.e. an electrical energy grid in which the electrical voltage ranges from 1 kV to 110 kV. Medium voltage is broadly used in electrical energy grids to transmit electrical energy over medium distances and switch energy. It is used as an intermediate voltage between high voltage and low voltage connected to end-users.
Customer loyalization customer loyalization Strategy to acquire and retain customers in this time of growing competition.
Micro-grid micro-grid Electrical energy micro-grid – set of generation equipment, electrical energy storage and receiver units connected in a joint network to ensure the reliable supply of electrical energy and minimize its cost.
Micro-cogeneration micro-cogeneration Technological process involving the cogeneration of thermal and electrical energy based on the utilization of small-scale equipment and medium capacities. Micro-cogeneration may be employed in all facilities in which there is a concurrent need for electrical and thermal energy. The greatest benefits from employing micro-generation are obtained in facilities in which the demand for these two types of energy does not oscillate much or is constant. That is why individual users, hospitals and educational centers, sports centers, hotels and public utilities are usually the most frequent users of cogeneration systems.
MSCI Emerging Markets Europe 10/40 Index Index comprising key companies listed on emerging markets in Europe.
MSCI Poland Index Index comprising more than 20 key companies listed on the Warsaw Stock Exchange.
Best Available Technology BAT The most efficient and sophisticated level of technology development and methods for conducting a given business. BAT are defined for various branches of industry. In the energy sector BAT forms the basis for determining borderline emission quantities, among others, to eliminate, or if that is not practicable, limit emissions and their overall environmental impact.
Sensitive user sensitive user According to the Act entitled Energy Law, a sensitive user is a person to whom a housing allowance has been awarded and who is a party to a comprehensive agreement or electricity sale agreement and who lives in the place where electrical energy is supplied.
Impairment losses impairment losses Losses because of the impairment of non-current assets taken in accordance with the regulations of international accounting IFRS (MSSF) standard.
Corporate Social Responsibility CSR Corporate Social Responsibility – business philosophy and management strategy calling for an organization to take responsibility for the impact exerted by its decisions and actions on society and the environment. Its foundations are rooted in ethical and transparent conduct, taking into consideration the expectations of stakeholders and cultivating good long-term relations with the overall environment. Corporate social responsibility is one of the key methods of achieving sustainable socio-economic development.
PV cells Photovoltaic cell (PV) – semi-conductor material in which the energy of solar radiation is converted into electrical energy.
omni-channel Omni-channel According to the omni-channel idea, the future of commerce is to conduct online sales while simultaneously encouraging customers to make traditional purchases. Online and offline sales during the digital revolution should fluidly penetrate one another.
Operating Capacity Reserve ORM Mechanism of providing operational reserves by the Centrally Discharged Units (JWCD), where they were able to deliver electricity to the system, but for market reasons were not used. It was implemented in Poland in 2014.
RES Renewable energy sources.
PM-RES Property rights to certificates of energy for electrical energy generated in RES.
Polygeneration polygeneration Parallel generation of energy and chemicals.
RESPECT Index Index consisting of companies listed on the Warsaw Stock Exchange to identify companies managed in a responsible and sustainable manner. It takes into account the quality of reporting, the level of investor relations, corporate governance and liquidity, among others, whereby it simultaneously constitutes a real point of reference to measure the attractiveness of companies as investments.
Balancing market balancing market The balancing market is what is referred to as a technical market. That means it is not a place to sell energy. Its purpose is the physical delivery of the energy purchase/sale agreements executed by participants and balancing the demand for electricity with its generation in real time in the national electrical energy system (KSE). The existence of the balancing market is indispensable for the energy market to function. Entities that buy energy have an obligation to participate in this market.
CATALYST Market Catalyst market Bond market. It is run on the transaction platforms of the Warsaw Stock Exchange and BondSpot.
SAIDI System average interruption duration index in the supply of electricity calculated in minutes per user. It is a reliability index whose value is the sum of the products of interruption duration in energy supply and the number of users affected by the consequences of such an interruption during a year divided by the total number of users connected to a grid.
SAIFI System average interruption frequency index of long interruptions in energy supply. It is a reliability index whose value is the number of users affected by the consequences of all such interruptions during a year divided by the total number of users.
Gangue gangue The rock that is extracted from a deposit of a given mineral that is considered to be unusable waste.
Smart City smart city Smart city is a project involving the implementation of specific solutions exerting a real impact on citizens. One example is supplying tools to urban residents to monitor energy consumption, among others. This is possible thanks to the special platform called eLicznik (eMeter). TAURON supplies smart meters, for instance, under the Smart City Wrocław project.
Smart Home smart home System to control a smart home. SMART HOME technologies control burglar alarms, temperature control and electricity supply systems. This is a real-time power consumption monitoring solution that TAURON offers via a platform to check readings from the smart power meter.
Smart grid smart grid Smart electrical energy grids to facilitate communication between participants on the energy market to supply energy services while cutting costs and enhancing efficiency and integrating distributed sources of energy, including renewable energy.
smart metering Smart metering Smart metering system – electronic system used to measure energy consumption obtaining more information than from a conventional meter, and to send and receive data through electronic communication.
small carbonate sorbent Small carbonate sorbent Fine carbonate sorbent (limestone powder) – is a product derived from the process of dehydrating and profound milling of limestone whose active ingredient is calcium carbonate, CaCO3. Fine carbonate sorbent is used in processes to desulfurize flue gas – to remove SOx.
Enterprise Risk Management System ERM Set of rules, standards and tools to accomplish the fundamental objective of risk management i.e. ensuring the security of the TAURON Group’s operations. This system is regulated by the document entitled Enterprise Risk Management System in the TAURON Group, defining the TAURON Group’s enterprise risk management framework and rules.
Tauronet tauronet TAURON Group’s corporate intranet portal, one of the most important tools of communicating with employees. One of the largest platforms of its type in Poland at the time of publishing this report.
CCS Carbon dioxide capture, transport and geological storage technology.
CCU Capture and use (management) of carbon dioxide, eg. in the the chemical industry.
Smart Technology smart technology Control system in a smart home, among others - it is responsible for the safety and living comfort of residents.
Towarowa Giełda Energii S.A. Polish Power Exchange TGE Towarowa Giełda Energii (TGE) (Polish Power Exchange) is the only licensed power exchange in Poland. Presently, TGE runs the following markets: Day-Ahead Market (DAM), Commodity Forward Market with physical delivery (CFM), Property Rights Market for RES and Cogeneration. TGE also keeps a register of the Certificates of Origin for electrical energy produced in RES and in highly efficient cogeneration sources and the CO2 Emission Allowance Market.
Energy Regulatory Office ERO Government authority regulating the Polish energy market (electricity and gas, among others).
Coal winnings coal winnings The rock material taken from the mine face. It includes the mineral and gangue.
WACC Financial ratio - weighted average cost of capital.
WIBOR Warsaw Inter Bank Offered Rate Warsaw Inter Bank Offered Rate - interest rate used on the Polish interbank market for interbank loans.
WIG Index comprising all the companies listed on the Main Market of the Warsaw Stock Exchange that fulfill the basic criteria for inclusion in its indices.
WIG20 Index comprising the 20 largest and most liquid companies listed on the Main Market of the Warsaw Stock Exchange.
WIG30 Index comprising the 30 largest and most liquid companies listed on the Main Market of the Warsaw Stock Exchange.
WIG-Energy Sectoral index comprising companies participating in the WIG index and simultaneously classified in the energy generation sector.
WIG-Poland National index comprising only the domestic companies listed on the Main Market of the Warsaw Stock Exchange that fulfill the basic criteria for inclusion in its indices.
Underground mining pit underground mining pit Space created as a result of mining works.
Highly-efficient cogeneration high-efficiency cogeneration Generating electrical or mechanical energy and usable thermal energy in cogeneration to save the original energy used in the cogeneration unit in an amount no lower than 10% compared to the generation of electrical energy and thermal energy in separate systems or in a cogeneration unit with an installed electricity capacity under 1 MW compared to the generation of electrical energy and thermal energy in separate systems.
Green certificates green certificates "Green" certificates "green" certificates Certificates of origin, i.e. a document that confirms the generation of electricity with renewable energy sources. The green certificate system has been in force in Poland since 1 October 2005 (and has changed in the new RES Act).
Yellow certificates yellow certificates "Yellow" certificates "yellow" certificates Certificate certifying the origin of energy. Operators of cogeneration units fired with gaseous fuels or with a total installed power source of less than 1 MW may be compensated with yellow certificates.
TPA Third Party Access - TPA is one of the most important principles (besides unbundling) on which the deregulated energy market is founded. TPA gives an energy user the right to buy it from any energy seller of its choosing.
EUA CO2 emission unit.
IFRS International Financial Reporting Standards – standards and their interpretations approved by the International Accounting Standards Board (IASB).
RFX Request for proposal.
Global Reporting Index GRI Independent international organization whose mission is to create a joint global framework for communicating responsibility and sustainable development. The GRI guidelines are an international reporting standard for organizations regardless of size, business sector and venue. Their application gives a guarantee of consistency in terminology and indicators.
International Integrated Reporting Council IIRC The International Integrated Reporting Council is an organization whose purpose is to create globally accepted integrated reporting guidelines based on combining financial, environmental, social and corporate governance reporting in a clear, succinct, coherent and comparable format. It consists of global leaders such as the International Federation of Accountants (IFAC), the International Accounting Standards Board, the United Nations Environmental Program (UNEP), the International Organization of Securities Commissions, the World Business Council for Sustainable Development and the Global Reporting Initiative (GRI).
integrated reporting non-financial reporting standard International integrated reporting standard encompassing financial and non-financial data devised by IIRC.

GRI indicators