Operations in 2020

PGNiG TERMIKA S.A. is the Group’s competence centre for heat and electricity generation as well as execution of heat and power projects. PGNiG TERMIKA’s core business is the generation of heat and electricity from cogeneration sources.

The main sources of the company’s revenue are sales of heat, electricity and grid services. The installed capacity of PGNiG TERMIKA’s generating assets is 4.3 GW of thermal power and 1 GW of electric power, which satisfies most of the heat demand on the Warsaw market and almost the entire demand of the district heating network. PGNiG TERMIKA is also a producer and supplier of heat and the owner of heat sources and heat networks in the towns of Pruszków and Piastów and in the Michałowice municipality.

The company is one of the largest Polish producers of electricity and heat from high-efficiency cogeneration sources.

The core business of PGNiG TERMIKA Energetyka Przemysłowa S.A. is generation and distribution of electricity, compressed air and cold, as well as heat generation, distribution and trading. PGNIG TERMIKA EP is the PGNiG TERMIKA Group’s competence centre for industrial power generation and use of methane captured from coal seam demethanation. The company operates generation assets with a total capacity of ca. 773 MWt and 185 MWe, and approximately 311 km of heat networks. It is present in the municipalities of Jastrzębie-Zdrój, Czerwionka-Leszczyny, Knurów, Racibórz, Kuźnia Raciborska, Pawłowice, Rybnik, Wodzisław-Śląski, Żory and Częstochowa, and sells its products mainly to housing cooperatives and mines.

The PGNiG TERMIKA Group takes steps to modernise its old and environmentally inefficient generation assets to meet environmental regulations, stricter industrial emissions standards and BAT (best available technology) criteria. The key investment projects underway in 2020 included the performance of the contract to construct a CCGT unit and a peak-load boiler house at the Żerań CHP plant and an investment programme to upgrade the Pruszków CHP plant. In August 2019, an environmental permit was issued for the construction a multi-fuel unit at the 75 MW Siekierki CHP plant.

In 2020, PGNiG TERMIKA supplied heat to two municipal networks: the Warsaw heating network, owned by Veolia Energia Warszawa S.A., and its own heating network, covering Pruszków, Piastów, and Michałowice. The heat output in Warsaw in 2020 corresponded to the requirements set out in the annual agreement with Veolia Energia Warszawa S.A. under the multi-year contract for the sale of heat from PGNiG TERMIKA S.A. generating facilities, effective until August 31st 2028. The company also used Veolia’s network to supply heat to its own end customers, based on a transmission contract (those customers are billed on different terms as they are classified in PGNiG TERMIKA’s separate tariff group – ‘OKW’).

In 2020, negotiations were conducted on a long-term lease of the Zasanie Heat Plant in Przemyśl. Combined with a currently constructed CHP plant, the acquisition would secure control of all generation units supplying the district heating network in Przemyśl. The average annual output of the Zasanie heating plant is over 550 TJ. The acquisition is expected to be completed in the first half of 2021. The company intends to approach local authorities and municipal companies with a proposal of cooperation based on the Przemyśl model, i.e. long-term lease of heating assets.

PGNiG TERMIKA holds licences for electricity generation, heat generation, heat transmission, and electricity trading. In 2020, PGNiG TERMIKA S.A. applied the following tariffs for heat generated at the Żerań CHP plant, Siekierki CHP plant, Pruszków CHP plant, Wola heating plant and Kawęczyn heating plant, and for transmission and distribution of heat via the heating networks in the Pruszków area (supplied from Pruszków CHP plant’s own heat generating source), as well as in the Annopol, Chełmżyńska, Jana Kazimierza, Marsa Park and Marynarska areas. The following tariffs were in force in 2020:

• tariff effective from September 1st 2019 to August 31st 2020, resulting in a 7.29% increase in average prices;
• tariff adjustment effective from July 1st 2020 to August 31st 2020, resulting in a 12.97% increase in prices of energy from cogeneration sources;
• tariff effective from September 1st 2020 to August 31st 2021, resulting in a 3.21% increase in average prices.

PGNiG TERMIKA EP holds licences for: generation of electricity, generation of heat, transmission and distribution of heat, trading in heat, trading in electricity and distribution of electricity. The following tariffs applied in 2020:

• tariff effective from January 1st 2020 to June 30th 2020 for from PGNiG TERMIKA EP’s heat generating sources;
• tariff effective from July 1st 2020 to December 31st 2020 for heat from PGNiG TERMIKA EP’s generating sources, resulting in a 11.64% increase in average prices, and for distribution services, resulting in a 3,64% increase in average prices. The tariff remains effective until June 30th 2021;
• tariff effective from January 1st 2020 to June 30th 2020 for electricity distribution services;
• tariff effective from July 1st 2020 to December 31st 2020 for electricity distribution services. The tariff remains effective until June 30th 2021.

In 2020, another main auction of the capacity market was held for deliveries in 2025 and an additional auction for quarterly deliveries in 2021. As a result of the three main auctions organised by Polskie Sieci Elektroenergetyczne S.A. in 2018, the auctions in 2019 and 2020 and the additional auctions in 2020, PGNiG TERMIKA and PGNiG TERMIKA EP concluded the following contracts:

• CCGT unit at the Żerań 2 CHP plant: a 17-year supply contract for 2021–2037 (net capacity of 433.3 MW);
• Units No. 7 and No. 8 at the Siekierki CHP plant: annual supply contracts for 2021–2024 (total net capacity of 140 MW);
• Units No. 9 and No. 10 at the Siekierki CHP plant: annual supply contract, limited due to emission requirements, for delivery from January 1st 2025 to June 30th 2025 (total net capacity 140 MW);
• Units No. 7 and No. 8 at the Siekierki CHP plant: supply contracts for deliveries in the first and fourth quarter of 2021 (total net capacity of 43 MW).

PGNiG TERMIKA units made available to PGNiG S.A.:

• Żerań 1 CHP plant: supply contracts for deliveries in the first and fourth quarters of 2021 (net capacity of 140MW);
• Units No. 9 and No. 10 at the Siekierki CHP plant: supply contracts for deliveries in the first quarter of 2021 (total net capacity of 171 MW);
• Moszczenica CHP plant unit: annual supply contracts for 2021–2022 (net capacity of 7 MW), and for 2023 (6.4 MW);
• Wodzisław – Częstochowa CHP plant unit: annual supply contracts for 2021–2023 (net capacity of 1.2 MW);
• Moszczenica – Wodzisław CHP plant unit: annual supply contract for 2024 (net capacity of 8 MW);
• CFB unit at the Zofiówka CHP plant: an annual supply contract for 2024 (net capacity of 65.1 MW).

Furthermore, in 2018 the Stalowa Wola CHP plant (CCGT unit construction project implemented by PGNiG TERMIKA and TAURON Polska Energia S.A.) signed a seven-year supply contract for 2021–2027 (net capacity of 386 MW).

In 2020, PGG faced a number of challenges, the most serious of which were the collapse in coal sales and the COVID-19 coronavirus pandemic. All key components of PGG’s financial result deteriorated significantly. On September 25th 2020, an agreement was signed between the government and the miners unions on the transformation of the Polish hard coal mining industry, which sets out, among other things, the general schedule of decommissioning of individual mines. The parties set 2049 as the cut-off date for the closure of mines. It was further agreed that a social agreement would be drawn up to guide the functioning of the hard coal mining sector. It will be submitted to the European Commission and is necessary in order to obtain the approval for granting state aid. PGG is also actively working to raise funds under the Polish Development Fund’s Financial Shield for Large Companies programme. In 2020, as a result of impairment testing of PGG shares, PGNIG TERMIKA recognised impairment losses totalling PLN 800m. The current carrying amount of PGG shares held by PGNiG TERMIKA is PLN 0.