| DISTRIBUTION |
Risk of catastrophic damage to elements of infrastructure as a result of extreme weather phenomena that cause an increase in costs of operations
Risk category: physical
Perspective: long term.
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Increased frequency of extreme weather phenomena |
Physical damage to elements of grid infrastructure as a result of extreme weather phenomena |
1. Visual inspections, check-ups and operational procedures in compliance with the due dates specified in the annual Maintenance Procedure Plans.
2. Ongoing removal of the effects of failures and damage to power lines and devices.
3. Capital expenditure endeavors related to the restoration of grid assets in compliance with the Capital Expenditure Plan.
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| GENERATION |
Risk of the consolidation of a strong upward trend on the EUA market, with simultaneous disproportionate increases in electricity prices
Risk category: transition
Perspective: short, medium and long term
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High prices of CO₂ emission allowances may result in a low or negative value of the clean dark spread (CDS) |
Decline in or loss of profitability in electricity generation
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1. Substitution of coal with low-carbon fuels, including a greater share of biomass co-firing.
2. Project of incorporation of combined cycle power units in the Hydro Power Plant to replace the currently operating 8×200 MW units by ENEA ELKOGAZ.
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| Risks related to extreme weather phenomena
Risk category: physical
Perspective: short, medium and long term
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An increased frequency of extreme weather phenomena (droughts, floods affecting the water level on the Vistula River, heavy snowfalls, frosts, icing, hurricanes) may disrupt energy generation |
Interruption of business continuity, loss of revenue and significant additional costs |
1. Vistula River water level monitoring system.
2. Annual assessment of the technical condition of power plant facilities.
3. Continuous supervision of staff over the operation of the power plant.
4. Flood protection system in the event of an increase in the water level on the Vistula River (stoplogs).
5. Ongoing supervision of devices and optimal overhaul management.
6. Monitoring of and supervision over water level in rivers by hydro power plants (close control in order not to exceed the parameters specified in the water permits).
7. Wind farm weather conditions monitoring system adapting the generation parameters to current conditions.
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| Risk of construction disasters in hydro power plants
Risk category: physical
Perspective: medium to long term
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Factors such as torrential rains may increase the adverse impact of water on hydrotechnical facilities |
Partial or complete damage to hydrotechnical equipment |
1. Inspections of the technical condition and safety of buildings in accordance with legal requirements.
2. Execution of the required renovation and capital expenditure tasks to ensure that hydrotechnical equipment is kept in at least good technical condition.
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| Risk of construction disasters on wind farms
Risk category: physical
Perspective: medium to long term
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Extreme weather phenomena, such as strong winds, hurricanes and tornadoes, may pose a threat to selected elements of farm infrastructure |
Partial or complete damage to generation facilities |
1. Inspections of the technical condition and safety of buildings in accordance with legal requirements. |
| Risk of construction disasters in cogeneration plants
Risk category: physical
Perspective: medium to long term
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Changing weather conditions throughout the year necessitate the transport of fuel on belt conveyors in cogeneration plants in ‘covered’ technological facilities (tunnels, galleries, etc.), thereby increasing the risk of an explosion of coal dust or biomass |
Partial or complete damage to generation facilities |
1. Inspections of the technical condition and safety of buildings in accordance with legal requirements – maintaining a positive evaluation of the technical condition.
2. Execution of required maintenance, repairs and capital expenditure tasks to ensure that facilities are kept in at least good technical condition.
3. Ongoing supervision over fuel unloading, storage and feed facilities, in particular in areas with coal or biomass explosion hazard.
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| Risk related to uncertainty of the legislative environment, including risk of limitation of electricity generation from bituminous coal due the radical tightening of the regulations concerning atmospheric emissions of pollution planned by the European Commission
Risk category: transition
Perspective: medium to long term
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Amendments to EU or national regulations, for example resulting from the non-recognition of biomass as a zero-emission energy source. |
Loss of revenue or increased costs related to changing the company’s business context |
1. Monitoring of and participation in legislative work.
2. Lobbying in the European Commission for changing/mitigating the current climate policy, removing or postponing the adopted deadlines of abandonment of fossil fuels through domestic industry organizations.
3. Incorporation of combined cycle power units in the Hydro Power Plant to replace the currently operating 8×200 MW units by ENEA ELKOGAZ.
4. Developing and implementing a CO₂ emissions reduction concept by incorporating CCS (Carbon Capture Storage) and/or CCU (Carbon Capture and Utlilisation) installations.
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| Risk of a decrease in revenues from sales of heat
Risk category: physical
Perspective: short, medium and long term
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The trend of an increase in average temperatures during the heating season may lead to a significant decline in demand for heat |
Lower revenue from sales of heat |
1. Diversification of revenue sources through the development of cogeneration. |
| Risk of an increase in environmental fees, in particular, in the cost of CO₂ emission allowances
Risk category: transition
Perspective: short term
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Due to ongoing climate change, environmental regulations are tightened, resulting in increased fees and penalties |
Increase in environmental fees resulting in higher costs of generation processes |
1. Ongoing monitoring of regulations.
2. Ongoing monitoring of the validity of decisions held, thereby enabling an early preparation of requests for changes.
3. Ongoing supervision over the manner of implementation and compliance with the conditions specified in the decisions held.
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| Risk of suspension of electricity/heat generation as a result of technological misalignment with the requirements of environmental protection regulations
Risk category: transition
Perspective: short term
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Need to adapt generation units to the applicable legal requirements, including the IED |
Suspension of electricity/heat generation as a result of technological misalignment |
1. Regular upgrades of and investments in:
- units for generation of energy from renewable sources,
- heat accumulation systems,
- flue gas heat recovery units,
- flue gas desulfurization units,
- boilers.
2. Upgrade of transmission infrastructure and heating nodes, gradual extension of the extent of application of telemetric systems.
3. Use of proper cooling systems in electricity and heat generation.
4. Taking care of the proper technical condition of equipment using fluorinated gases.
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| Risk of non-continuity of fuel supplies
Risk category: transition
Perspective: short, medium and long term
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1. Natural disasters such as hurricanes, floods, droughts or freezing conditions may result in a limited availability or lack of biomass
2. Natural disasters in the mining sector or in the supply process may cause a limited availability or lack of coal
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Interruption or curtailment of the continuity of fuel supplies and the related loss of revenue. |
1. Optimization of fuel supplies.
2. Diversification of the fuel portfolio.
3. Emergency fuel purchases.
4. Gradual shift of all or part of the fuel shipment process to the supplier.
5. Performance monitoring with deviation analysis and update of plans for the performance of contracts for the supply of generation fuels and logistics services.
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| Risk of an increase in biogas production expenses
Risk category: physical
Perspective: medium term
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Hydrological drought might affect the availability and prices of corn silage, which is the key input substrate in biogas production |
Deterioration of the economic profitability of biogas production from plant-based substrates |
1. Adoption of and early preparation for a comprehensive substrate procurement action.
2. Ongoing monitoring of the substrate market.
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| Risk of an increase in the cost of raising capital and/or property insurance
Risk category: transition
Perspective: short, medium and long term
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Global climate crisis making it increasingly difficult for fossil fuel-based businesses to access finance, insurance undertakings treating the coal-fired energy sector as a high-risk industry |
Increase in operating costs associated with higher cost of raising capital and/or property insurance |
1. Use of the Group’s transformation strategy in consultations with the reinsurance market.
2. Search for new methods of securing assets.
3. Spin-off of coal-fired generation assets from the ENEA Group’s structures
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| Risks associated with the activities of environmental organizations
Risk category: transition
Perspective: short, medium and long term
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Activities of environmental organizations conducting aggressive campaigns against power plants by:
− appealing against and demanding the cancellation of integrated permits or environmental decisions held by them,
– referring to the public interest and joining proceedings aimed at amending integrated permits, thereby delaying or preventing the issue of favorable decisions |
Reducing or ceasing the operation of power plants due to difficulties in obtaining or maintaining valid environmental decisions and permits. |
1. Cooperation with leading law firms.
2. Cooperation with environmental organizations.
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| Risk of losses in capacity caused by hydrologic conditions
Risk category: physical
Perspective: short, medium and long term
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The country’s unfavorable hydrological or meteorological translates into a deterioration in the hydrological conditions for the operation of power plants |
Low surface levels and high water temperatures of the Vistula River may cause power losses due to problems with the provision of the necessary amount of cooling water (resulting from the need to maintain its uninterrupted flow) or abiding by the permissible temperature of the discharged cooling water |
1. A concept of dismantling of the temporary check dam and reconstruction of the Vistula River bottom was prepared in order to ensure an appropriate water level during a low-water period. The project was initially approved by the State Water Holding Polish Waters. Furthermore, hydraulic structures redirecting the majority of the river stream towards the power plant bank were altered. |
| TRADING |
Risk of adopting outdated assumptions for long-term financial projections
Risk category: transition
Perspective: medium to long term
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The progressing climate change affecting the climate policy of various countries and organizations may potentially shape the operating principles of the system and the price of CO₂ emission allowances |
Occurrence of unexpected costs caused by wrong assumptions for long-term financial projections.
Losses or higher financial performance related to underestimation/overestimation of the assumptions of price paths. |
1. Periodic updates of price paths. |
| Risk of additional costs or losses resulting from commodity price volatility on the futures market
Risk category: transition
Perspective: short, medium and long term
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If the actual temperatures in the summer and winter seasons are different from the forecasts, this may cause deviations in electricity and gas prices on the Polish Power Exchange compared to the prices contracted in the previous months |
Additional costs and/or lower revenue as a result of the volatility in commodity prices on the forward market.
Losses or higher financial performance related to underestimation/overestimation of the trade assumptions. |
1. Maintaining and developing risk management competences in the ENEA Group.
2. Internal risk optimization procedures.
3. Monitoring and analysis of factors affecting prices on the Polish Power Exchange.
4. Adjustment of orders placed, both in terms of price and volumes, to the current market situation.
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| Risk of commodity price volatility on the spot market
Risk category: transition
Perspective: short, medium and long term
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Meteorological conditions:
– in the winter season (December-February), monthly average temperatures above the long-term norm,
– in the summer season (June–August), monthly average temperatures above the long-term norm, may generate financial losses on open positions |
Additional costs and/or lower revenue as a result of the volatility in commodity prices on the spot market.
Losses or higher financial performance related to underestimation/overestimation of the trade assumptions. |
1. Maintaining and developing competence within the company to manage this risk.
2. Internal procedures governing optimization on the spot market.
3. Ongoing analysis of factors affecting prices.
4. Monitoring and forecasting of factors affecting prices.
5. Adjustment of orders placed, both in terms of price and volumes, to the current market situation.
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| Risk of disturbances/failures in energy generation
Risk category: physical
Perspective: short, medium and long term
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Climate change may cause:
a) in the winter season
− lower wind generation due to lower wind speeds,
− very low photovoltaic generation due to heavy clouds,
− lower generation in hydro power plants due to low water levels;
b) in the summer season:
− lower wind generation due to lower wind speeds,
− low levels of surface/ground waters resulting in the inability to use them for technological purposes in power plants,
− extreme weather phenomena (violent storms, gusty winds, flash floods), resulting in limited access to energy over a large area
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Additional costs associated with disturbance/failure management.
Generation of financial losses related to the financial expenditure on repairs of infrastructure, upgrade of grid (to achieve more resistance to considerably higher temperatures) |
1. Maintaining and developing competence within the company to manage this risk.
2. Internal procedures governing optimization on the spot market.
3. Ongoing analysis of factors affecting prices.
4. Monitoring and forecasting of factors affecting prices.
5. Adjustment of orders placed, both in terms of price and volumes, to the current market situation.
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| MINING |
Risks related to the need to change the company’s operations are run, which would entail additional capital expenditures
Risk category: transition
Perspective: medium to long term
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Climate change causing an increasingly restrictive EU climate policy, directly and indirectly translating into a number of more stringent environmental standards imposed on mines |
Additional costs associated with increasing environmental standards |
1. Ongoing supervision over compliance with environmental standards.
2. Continuous monitoring of changes in the EU’s climate policy and the resulting amendments to national regulations.
3. Active participation in consultations on new regulations.
4. Continuous search for technical and organizational solutions minimizing the company’s impact on the climate, e.g. by energy efficiency improvements.
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| Risk of a decline in demand for steam coal in Poland and globally
Risk category: transition
Perspective: medium to long term
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Changes in the country’s energy mix, including the ENEA Group’s energy mix, and from a decrease in demand for electricity generated from coal (e.g. as a result of measures favoring energy efficiency, elimination of retail customers from the portfolio, more frequent switching to own sources of energy and heat generation, higher average atmospheric temperatures in winter) is likely to cause a gradual decrease in demand for the products offered to date. |
Restricting the possibility to sell mined coal |
1. Seeking new coal consumers in Poland.
2. Seeking new, foreign coal outlet markets.
3. Implementation of a new business strategy, including through diversification of revenues towards the extraction of coking coal, which is a strategic commodity in the EU.
4. Taking into account the forecasts of climate models in determining the scope of contracts with customers.
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| Risk of an increase in operating costs due to the need to pay greater compensations for losses in grasslands and agricultural land caused by the need to repair of mining damage to the environment
Risk category: physical
Perspective: short, medium and long term
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The conduct of mining activities is associated with the occurrence of mining damage and may lead to the formation of subsidence basins and disruption of local water relations, thus causing occasional local flooding |
Increase in operating costs due to the need to pay greater compensations for losses in grasslands and land caused by the need to repair of mining damage to the environment |
1. Effective mining damage management policy. Ongoing dialog with local communities.
2. Continuous monitoring of rock mass movements using of modern measurement methods.
3. Monitoring of environmental aspects through the Integrated Quality, Environment and Safety Management System.
4. Ongoing reclamation of areas adversely affected by mining activities.
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| Risk of an increase in the cost of raising capital and/or property insurance
Risk category: transition
Perspective: short, medium and long term
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Global climate crisis making it increasingly difficult for fossil fuel-based businesses to access finance, insurance undertakings treating the mining sector as a high-risk industry |
Increase in operating costs associated with higher cost of raising capital and/or property insurance |
1. Use of the Group’s transformation strategy in consultations with the reinsurance market.
2. Search for new methods of securing assets – the attitude of banks to providing financing to the company is monitored on an ongoing basis.
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| Risks associated with the activities of non-governmental environmental organizations
Risk category: transition
Perspective: medium to long term
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The activities of environmental organizations, including potential protests related to investment and development activities, may affect the social acceptance of the company. |
Obstruction in the progress of various administrative procedures conducted with the participation of environmental organizations. |
1. Execution of project activities in partnership with environmental organizations.
2. Ongoing communication of activities aimed at improving environmental safety.
3. Increasing the company’s environmental efficiency, e.g. through investments.
4. Respecting state-imposed forms of nature protection (e.g. no mining and no future mining plans under the Polesie National Park).
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| Reputation risk related to the conduct of business in the fossil fuel industry
Risk category: transition
Perspective: medium to long term
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Due to the climate crisis, the EU’s policy and the activities of environmental organizations, the mining industry may be perceived as the perpetrator of climate change. |
Damage to the image |
1. Participation in business initiatives.
2. Involvement in local socio-economic development initiatives.
3. Intensive communication activities, focusing chiefly on demonstrating the role played by the company in the Lublin region along with its environmental efficiency and openness to change.
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