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Key events that may affect future results

Demand for energy

According to the Ministry of Economy the demand for electricity in the next years will grow in all the sectors of economy. Net production of electricity will increase until 2030 to 193.3 TWh - as results from forecasts by the Ministry of Economy included in "Update of the projection of demand for fuels and energy until 2030". At the same time, pursuant to the document titled “Conclusions from forecast analyses for the needs of the Energy Policy of Poland until 2050” until 2050 the production of electricity will increase by ca. 40% - from 158 TWh until 2010 to 223 TWh in 2050.1)

Quality tariff

The new model of the quality regulation came into force on 1 January 2016, yet it will have impact on the finances of Enea Operator (and other ODSs) as late as in 2018. The President of the Energy Regulatory Office made some part of the regulated income dependant on the quality of services rendered by these entities. Service quality assessment will be performed by measuring numerous ratios, in particular of uninterrupted power supply and time of connecting to the power grid.

The detailed description of the quality tariff is published on page 26 of this Report.

Exemption form the obligation to tariff households

Pursuant to Article 49 of the Energy law, the President of ERO may exempt an energy company from the obligation of submitting tariffs for approval, if he states that it operates competitively. A potential exemption from tariffing may positively affect the margin on sales of energy.

Growth in the number of energy sellers

The number of electricity sellers grows regularly. Appearing of a seller conducting an aggressive price policy may result in the pressure on the margin on sales of energy to retail Consumers.

Additionally, it must be noted that more and more Customers decide to change their energy seller. The number of TPA recipients (Third Party Access) among enterprises (tariff group sets A, B, C) as at the end of December 2015 amounted to 158,596, thus grew from the end of December 2014 by 35,818 (29.2%). And among households (tariff group set G) the TPA principle was used, as at the end of December 2015, by 391,351 entities, which means a growth by 103,624 (36.0%) in relation to the end of December 2014. 2)

Long-term development of energy market

On 16 February 2016 the Government of Poland adopted “Plan for Responsible Development of Poland” 3) The document specifies the key directions of the state functioning and new impulses which ensure its stable development in the future. The plan foresees that the development of the Polish economy will be based on five pillars:

  • reindustrialisation
  • innovation
  • capital
  • foreign expansion
  • social and regional development

Pursuant to the provisions of the document relating to the energy market, in order to increase energy efficiency and unlock the investment after 2020 (including avoidance of blackout and becoming independent from energy imports) the state intends to e.g. support the development of energy infrastructure (energy bridges, power storing technologies), liberalise market segments and introduce capacity market mechanism which would be an impulse for investments in the segment of conventional power engineering.

New projections for energy price paths

Long-term financial projections of Enea Group based on the forecast electricity price paths, expectations as regards the changes of market prices of certificates of origin for energy, allowances for emissions of CO2 and coal prices demonstrate a more and more requiring situation of the segment of Generation. Due to the maintaining of energy prices on exceptionally low levels, resulting in the imbalance between generated revenue and costs of energy generation, the Group foresees the necessity of a quick entry into force of the announced support mechanisms for system power engineering. Difficulties in generating good financial results by generating sources will exclude a possibility of incurring expenditures for development investments which during the coming years seem inevitable.

Structure of generating portfolio

Within the realisation of the superlative goal of Enea CG, i.e. higher value for shareholders, the Group pursues the improvement in the core financial ratios. Building a competitive generating portfolio is one of the basic elements of realisation of the above strategic goal. The Group pursues the development of the generating capacities to the level of additional 1,075 MWe in the segment of system power plants in 2017. In 2020 it is planned to additionally achieve ca. 500 MWe power from RES and ca. 200 MWe and 1,000 MWt in cogeneration sources and heating networks.

The detailed description of the structure of the generating portfolio of Enea CG is published on page 36 of this Report.

Continuation of the construction of the power unit

In 2012 Enea Wytwarzanie and Hitachi Power Europe GmbH (presently Mitsubishi Hitachi Power Systems Europe GmbH) and Polimex-Mostostal SA consortium signed an agreement totalling to PLN 5.1 billion on the construction of 1,075 MWe gross supercritical bituminous coal fired power unit of the efficiency of 45.6% net.

The investment in the construction of the new power unit is one of the key undertakings in order to increase generating capacities of Enea Group for a long-term satisfaction of the demand for electricity of all Enea Group's Customers. The new power unit in Kozienice will be the most modern unit fired with bituminous coal in Poland and Europe. The completion of the investment will allow for increasing generating capacities of the power plant in Kozienice by ca. 30%.

The detailed description of the construction of a new unit No. 11 is published on pages 44-45 of this Report.

Limits of allowances for emissions of CO2

A material element within costs, conditioning the profitability of electricity generation is the allocation of free allowances for emissions of CO2 and other gases and substances in a given settlement period. Obtaining a free allocation of CO2 emission is conditional on the implementation of dedicated investments in Enea CG notified in the National Investment Plan (NIP). The value of actual outlays is the base for obtaining allowances.

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