Mission, vision, strategic goals
In June 2014 TAURON’s Management Board adopted the TAURON Group’s Corporate Strategy for 2014–2017 with an outlook until 2023, subsequently approved by the Supervisory Board to update the corporate strategy adopted and approved in 2011.
When updating the Corporate Strategy the changing market and regulatory environment were taken into account with the most important factors affecting the sector being the EU and national regulations related to the conditions in which Poland’s energy sector functions.
In the updated Corporate Strategy the TAURON Group’s mission, vision and overall goal to date are reaffirmed. The Group’s mission is to “Ensure energy supply for customers based on best practices guaranteeing shareholder value growth”. Its vision is “To be one of the leading energy companies in the region”. The overall strategic objective is continuous value growth to procure a return on capital invested for shareholders. The accomplishment of this goal is measured using EBITDA growth and ROIC.
The key direction of the Corporate Strategy is to focus on expanding operations in those lines of business that potentially offer the highest rate of return on investment and to diversify the generation portfolio. This strategy reaffirms the efficiency enhancement goal by constantly focusing on operational excellence to develop an effective organization in the TAURON Group’s operations. Another objective is to manage the pertinent market and regulatory risk inherent in the Group’s operations.
The TAURON Group’s total CAPEX will be approx. PLN 37bn in 2014-2023, with approx. PLN 29bn to be spent in 2014-2020.
|Portfel inwestycyjny w podziale na obszary biznesowe (mld zł)|
The goal of the investment projects, planned and underway, is to commission 2,200 MW of generation capacity, including in particular:
- approximately 1,000 MW in hard coal based technology (910 MW at the Jaworzno III Power Plant, 50 MW at the Tychy Production Plant),
- approximately 675 MW in gas based technology (225 MW at the Stalowa Wola Combined Heat and Power Plant and approximately 450 MW at the Łagisza Power Plant),
- approximately 500 MW in wind based capacity.
Main strategic goals
Growth will be focused in the lines of business potentially offering the highest rate of return on investment. In the Generation, Heat and Renewable Energy Sources (RES) segments the Group plans to replace and grow installed generation capacity up to approx. 6.15 GW in 2023. The distribution and supply segments are also important growth areas.
As a result of the investment projects underway, 2,200 MW of generation capacity will be commissioned.
Currently 92 percent of the Group’s installed capacity employs hard coal technologies. The Group’s strategy assumes that by 2023 their percentage of capacity will subside to approx. 74 percent, with 25 percent in the form of modern and highly efficient hard coal-fired units. Low emission technologies, i.e. gas, wind, hydro and biomass will account for approx. 26 percent.
Facing the need to develop a diversified generation portfolio stemming from CO2 emissions requirements becoming more stringent, the TAURON Group is taking steps aimed at participating in the project to construct Poland’s first nuclear power plant. This will be accomplished by acquiring a 10 percent stake in the share capital of the PGE EJ1 special purpose vehicle from PGE.
The expansion of smart grid infrastructure in the distribution segment will also foster growth. Investment projects will mainly involve connecting new customers and generation sources and the related grid construction while upgrading and replacing existing assets.
This strategy places significant weight on the TAURON Group’s research and development efforts. The Group endeavors to procure effective R&D management in the Group’s subsidiaries to spark innovative activities and maximize benefits resulting from access to knowledge and experience gained in project implementation.
As part of implementing the Strategy envisioning further improvement in operational and investment management returns, restructuring activities were continued in 2014 to improve management processes and integrate support functions. These actions also call for reducing non-core business operations, outsourcing services not directly related to the Group’s core business and conducting a joint procurement policy on consolidated and strategic purchases.
A priority for each line of business is to maintain budget discipline in capital expenditures and operating expenses. The activities taken to improve operational and investment management returns allowed the TAURON Group to prepare to function in a volatile market environment, and in particular to deal with the price volatility affecting fuels, electricity, emission allowances (carbon credits), etc.
The 2013-2015 operating expense reduction program was continued in 2014 to grow the TAURON Group’s value. As part of this program, consolidation and restructuring projects were devised to cut costs by approx. PLN 864m in 2013-2015. The Group is seeking to reduce OPEX in most lines of business with the largest savings to be achieved in the distribution and generation segments. The operating expense reduction program is one of the pillars enabling the Group to maintain its strong competitive position. Savings realized in 2013-2014 were in the region of approx. PLN 720m.
|Value (PLN m)|
|Program poprawy efektywności na lata 2013-2015|
|Segment||Savings realized in 2013 -2014
|Savings planned in 2013-2015
|Progress %||Main initiatives|
|Distribution||292||416||70||Implementation of the ultimate business model, elimination of the redundant functions
Change of the way expenses are classified as CAPEX or OPEX
Optimization of the balancing difference
IT processes optimization
Integration of business functions in the support (maintenance) area
Optimization of external services
|Generation (including RES)||322||387||83||Employment restructuring and process optimization
Reduction of upgrades (maintenance) for the least efficient units
Overhead cost optimization
Outsourcing of some functions, mainly in the maintenance area
Improvement of the devices’ efficiency, optimization of the production volume and operating expenses at hydroelectric power plants
Reduction of the costs of support and maintenance of the wind farm’s operation
Compressed air losses reduction
External services’ costs optimization
Procurement policy optimization
|Mining||27||28||97||Nitrogen production system construction
Coal sludge (slurry) dewatering station expansion
Potable water treatment
Electronic auctions in public procurement
Use of the mechanical lining when drilling headings
|Other Segments||36||Employment restructuring, reduction of external services’ costs|
Market and regulatory risk management in the TAURON Group’s operations giving consideration to its strong exposure to changes in national and European Union law is one of the key elements of Strategy implementation and involves, among others, continuous monitoring of legislative initiatives related to the energy market in the EU and Poland. Market risk management applies to all lines of business and is coordinated by TAURON Polska Energia.
Market risk management is focused mainly on electricity trading. In order to optimize market and regulatory risks and maximize the rates of return the TAURON Group is diversifying its generation portfolio, selecting specific technologies accordingly (to reduce the long-term risk related to investment decisions) and developing an effective hedging policy, including electricity supply hedging (to reduce the medium and long-term risk in trading). This policy enables us to reduce the volatility of the Group’s financial results through asset portfolio management and control of risk limits.
The effective hedging strategy covers all activities in the Group’s value chain, starting with securing the budgeted volume of fuel supplies from the company’s own sources and ending with covering a specific volume of electricity supplied to end users from the company’s own generation units. This policy guarantees secure operation of the generation segment’s assets by securing fuel supplies and maintaining prices at an acceptable level.
In 2014 the company continued activities to promote and develop strategic power generation technologies and prepare the nuclear energy development program. The company was involved in research and development efforts subsidized by domestic (e.g. National Research and Development Center) and international funds (e.g. KIC InnoEnergy Knowledge and Innovations Community).
In order to accomplish this goal the TAURON Group is focusing its activities on improving the organization’s efficiency and the quality of the services offered, centralizing support functions and providing tools to manage human capital. Developing a streamlined organization involves ensuring the appropriate workforce structure, increasing the level of competences by implementing the appropriate personnel development processes, including management by objectives to help develop an external and internal customer oriented organization.
Activities conducted in 2014 included continued implementation of the target organizational structure and completing the integration of corporate functions, starting with accounting and IT support services. In the Supply and Customer Service segments numerous activities were carried out to improve service level quality and enhance customer satisfaction by unifying processes, standardizing documents, providing remote access via the e-BOK channel. Centralization of billing systems for business customers was completed, while centralization of billing systems for mass customers was continued. Centralization of financial and accounting processes and IT support functions was also continued.