ENVIRONMENTAL IMPACT AND CLIMATE ACTIONSEU taxonomy

The EU Taxonomy, i.e. Regulations introduced by the Regulation 2020/852/EU of the European Parliament and of the Council is a classification system that establishes a list of environmentally sustainable economic activities. Under the Taxonomy Regulation, the European Commission has developed a de facto list of environmentally sustainable activities, defining the technical eligibility criteria for each environmental objective through delegated acts.

The EU taxonomy is a system that allows a uniform classification of sustainable development activities. It's a system designed to support investors in making investment decisions.

TURNOVER KPI

Based on the analysis of each business segment, PSE has analyzed the revenues generated in 2022 and allocated a corresponding proportion thereof to Taxonomy-eligible activities. The sales revenue figures are taken from the financial and accounting records and are consistent with the figures in the Financial Statements.

The allocation of revenues and costs according to the Taxonomy was made possible by the new controlling model implemented in 2019, facilitating a multi-faceted analysis of financial performance. The main product was a revised layout of the controlling objects, including cost locations. The new controlling objects reflect the functioning of our organization in a better and more precise way, and therefore enable more precise analyses regarding the activities of each area of the company. The analysis showed that 99.8 percent of the company's consolidated revenues are derived from business activities that are Taxonomy-eligible.

Share of non-Taxonomy eligible business activities in total turnover.

Business Activity	Revenue in 2022 (in PLN thousands)	Revenue in 2022 (“other” business) (in PLN thousand)	Share in turnover –eligible activities (%)	Share in turnover – non-eligible activities (%)

Transmission and distribution of electricity	25,434,925.43	38,285.48	99.84970295	0.150297049

TOTAL	25,434 925.43	38,285.48	99.84970295	0.150297049

Percentage share of Taxonomy-eligible business activities in total turnover				99.8

Share of non-Taxonomy eligible business activities in total turnover				0.2

Accounting principles

Based on the Commission Delegated Regulation (EU) No. 2021/2139 of 4 June 2021, one Taxonomy-eligible activity was identified for which PSE generated revenues in 2022. It is:

4.9 Transmission and distribution of electricity

Then, based on the provisions of Commission Delegated Regulation (EU) No. 2021/2139 of 4 June 2021 PSE analysed individual business segments, which were assigned to two categories:

category I – bringing together the company's areas of operation that are Taxonomy eligible,
category II – bringing together areas of the company's operations that are non-Taxonomy eligible.

Due to the fact that PSE is a transmission system operator (TSO) – defined in the Energy Law – as an energy company engaged in the transmission of electricity, the areas eligible for the Taxonomy include revenues as defined in the Electricity Tariff for 2022 for:

electricity transmission services through the transmission network (fixed and variable network fee),
use of the national power system (quality fee),
conducting settlements for the exchange of electricity between the national power system and the power systems of non-member states (market fee),
making the national power system available (transition fee),
ensuring the availability of electricity from renewable sources in the national power system (RES fee),
ensuring the availability of electricity from high-efficiency cogeneration (cogeneration fee),
remaining on the standby service to supply electrical power to the power system and supply such power to the system during periods of emergency (capacity fee),
connection to the transmission network (connection fee),
revenues from the sale of electricity in the Balancing Market as part of the physical execution of energy purchase/sale agreements concluded by participants and real-time balancing of electricity demand with its production in the national power system (NPS),
obtained from operative deliveries Inter TSO cross-border exchange,
uzyskiwanych z dostaw operatywnych w ramach międzyoperatorskiej wymiany międzysystemowej,
making available the cross-zonal capacity allocation on synchronous interconnections (with Germany, the Czech Republic and Slovakia) and on non-synchronous interconnections (with Sweden and Lithuania) and the connection with Ukraine.

PSE, as a transmission system operator, also conducts other activities, which are a marginal part of its business. It has adopted the materiality principle, according to which events occurring in the enterprise that do not significantly affect the asset and financial position of the entity will not be included in the Taxonomy. A percentage indicator was used to determine the materiality threshold. The determination of the materiality threshold percentage is based on the volume of total sales revenue. The materiality threshold was set at over 1 percent of the company's total revenue. Revenues from other activities amounted to 0.15 percent of total revenues, so they were included in Category II, which clusters the company's areas of operation that are non-Taxonomy eligible.

CAPEX KPI

Share of Taxonomy-eligible economic activities in total capital expenditures.

Type of expenditures	Expenditures in 2021	Which expenditures meet one of the following criteria:
				are associated with taxonomy-eligible activities under the Turnover KPI:
				Yes/No:	the name of the related business to the Turnover KPI:	Amount for YES

Expenditures on construction, extension and modernization of substations and power lines	1,064,435.95	YES	Transmission and distribution of electricity	1,064,435.95
Expenditures on ICT-related tasks	158,024.19	YES	Transmission and distribution of electricity	158,024.19
Expenditures on buildings and structures	34,503.93	YES	Transmission and distribution of electricity	34,503.93
Expenditures on purchases of finished capital goods	12,512.82	YES	Transmission and distribution of electricity	12,512.82
Expenditures on the purchase of network facilities and regulation of legal status of real properties	4.96	YES	Transmission and distribution of electricity	4.96

	1,269,481.86			1,269,481.86

Percentage share of Taxonomy-eligible business activities in total capital expenditures				100

Share of non-Taxonomy-eligible business activities in total capital expenditures				0

Accounting principles

Based on the provisions of Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021, PSE analyzed the capital expenditures in 2022 and allocated them to Taxonomy-eligible activities.
To calculate the above indices, the value of capital expenditures consistent with the values reported in PSE's consolidated financial statements for 2022 was used, respectively, in the denominator. The value of the increase in tangible and intangible assets during the financial year before revaluation (including the calculation of impairment) and deduction of depreciation for the year was defined as the basic value of capital expenditures.
In the next step, the value of the numerator was determined, i.e. the expenses incurred are related to assets or processes that relate to taxonomy-eligible activities or those that meet the criteria set by taxonomy-eligible activities.
Capital expenditures incurred by the company were entirely classified under the activities included in the taxonomy.
These are capital expenditures incurred for investment tasks included in the 2022-2026 Investment Intentions Plan adopted by the company, resulting from the Transmission Grid Development Plan.
As the analyses show, 100 percent of the total capital expenditures are Taxonomy-eligible.

Contextual information

Due to the transitional nature of the disclosures for 2022, including:

no period for comparison,
no reports on the alignment of activities to the taxonomy – no qualitative information are disclosed on material modifications that occurred during the reporting period in relation to the implementation of capital expenditure plans, quantitative breakdown – at the aggregate business activities level – of the amounts included in the numerator and qualitative explanation of the key elements of changes in the capital expenditure KPIs during the reporting period.

OPEX KPI

Percentage share of Taxonomy-eligible business activities in total turnover.

Type of expenditures	Expenditures in 2022 (as defined by Opex) (in PLN thousands)	Which expenses meet one of the following criteria:
				They are related to taxonomy-eligible activities under the Turnover KPI:				They relate to the purchase of products of taxonomy-eligible activities and individual measures that enable the targeted activity to become low-carbon or enable it to reduce greenhouse gas emissions:
				Yes/No:	Name of related activity with the Turnover KPI:	Amount For Yes	Amount for No	Yes/No:

Technical materials	2,047.93	YES	Transmission and distribution of electricity	1,982.49	65.45	NO
Consumables	4,995.21	YES	Transmission and distribution of electricity	4,995.21	0.00	NO
Transmission grid rehabilitation services	14,846.85	YES	Transmission and distribution of electricity	14,846.85	0.00	NO
Transmission grid maintenance services	88,900.19	YES	Transmission and distribution of electricity	88,866.60	33.59	NO
Other operating services	10,472.38	YES	Transmission and distribution of electricity	9,589.87	882.52	NO
Other refurbishment	2,052.01	YES	Transmission and distribution of electricity	1,922.73	129.28	NO
Research and development works	2,523.14	YES	Transmission and distribution of electricity	2,400.14	123.00	NO
Cleaning services	5,543.52	YES	Transmission and distribution of electricity	5,020.37	523.15	NO
Property security	14,265.80	YES	Transmission and distribution of electricity	12,934.51	1,331.29	NO
Training	6,311.05	YES	Transmission and distribution of electricity	6,271.63	39.42	NO

TOTAL	151,958.08			148,830.39	3,127.69

Percentage share of Taxonomy-eligible business activities in total operational expenses						97.9

Share of non-Taxonomy-eligible business activities in total operational expenses						2.1

This index was determined by dividing the total operational expenses related to activities eligible for the Taxonomy systematics by the total expenses allocated the aforementioned cost categories.

According to the calculation carried out in the reporting year, 97.9 percent of total operational expenses are Taxonomy-eligible expenses.

The percentage of operating costs related to activities that are not eligible for the Taxonomy systematics is 2.1 percent.

Accounting principles

Based on the provisions of Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021, the Company analyzed its operational expenses in 2022 and allocated a corresponding portion thereof to Taxonomy-eligible activities.

Operational expenses and operating costs are understood in the same way.

The figures for the operating costs incurred are taken from the financial and accounting records and are consistent with the Financial Statements.

According to the Regulation, only costs directly related to the maintenance of fixed assets and infrastructure are the denominator, and they include costs related to:

research and development,
building renovation activities,
short-term leases, maintenance and repairs, and any other direct expenses related to day-to-day running of the property, plant and equipment by the company or a third party outsourced to perform the activities necessary to ensure continuous and efficient operation of those assets.

The company conducted a cost structure analysis and identified the costs given below.

Due to the impossibility of assigning a single cost item within a cost type, the Company included in the denominator only those cost types which were attributable in whole or in their majority to the denominator.

The following cost categories were adopted in accordance with the guidelines described in the Regulation:

Technical materials	Technical materials consumed for the operation of buildings and structures and equipment installed in buildings and structures.
Consumables	Materials purchased for maintenance works or taken from the warehouse of reserve apparatus equipment worn out in maintenance works.
Transmission grid rehabilitation services	Costs of rehabilitation works carried out on transmission grid facilities (lines and substations).
Transmission grid maintenance services	Costs of work related to the provision of maintenance of substation power equipment by external contractors.
Other operating services	Koszty prac związanych z eksploatacją i przeglądami pozostałego majątku użytkowanego przez Costs of work related to the operation and inspections of other assets used by the Company.
Other refurbishment	Costs of refurbishment of fixed assets not directly used in energy generation and distribution (buildings and structures, machinery and equipment).
Research and development works	Costs of research, development, and innovation works.
Cleaning services	Costs of cleaning services on transmission grid facilities (lines and substations) and at the Company's head offices.
Property security	Costs of property security services, supervision of transmission grid facilities (lines and substations) and the Company's head offices.
Training	Specialized training necessary for employees to do their jobs.

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ENVIRONMENTAL IMPACT AND CLIMATE ACTIONSEU taxonomy

The EU taxonomy is a system that allows a uniform classification of sustainable development activities. It's a system designed to support investors in making investment decisions.

TURNOVER KPI

Accounting principles

CAPEX KPI

Accounting principles

Contextual information

OPEX KPI

Carbon footprint

IMPACT ON SOCIETY AND EMPLOYEES (S)

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