Letter by the President
Dear Sir/Madam,

I am pleased to present the fourth report on the impact of the activities of Polskie Sieci Elektroenergetyczne on the social and economic development of the country and on the natural environment. The publication we are presenting to you summarizes the activities of our organization in 2020, a special period dominated by the COVID-19 pandemic. It is also the time of transformation that the power sector is going through.

PSE was one of the first companies in Poland to establish a crisis team to monitor the threats posed by the spread of the coronavirus from January 2020 and to make the changes necessary to ensure safe operation of the NPS. Among those employed by the company are dispatchers. They have the unique skills and knowledge necessary to manage the system. Therefore, it was necessary to minimize the risk of coronavirus infection in this group as much as possible. A quick response, implemented procedures, as well as responsibility and commitment of our employees allowed us to ensure safe operation of the power system and continuity of electricity supplies.

Other processes and activities of our organization have also not been affected, despite the fact that they have been — to a large extent — performed by people working from home. We have begun implementing a strategy for 2020–2030 that responds to the challenges of the changing environment and is consistent with the vision of the modern electricity market. The world is in the process of energy and environmental transformation. Distributed, prosumer generating units geared toward community energy self-sufficiency are being developed. At the same time, the European Commission and the Agency for the Cooperation of Energy Regulators are promoting the concept of integrated wholesale electricity markets for the entire Europe. The direction to be ultimately followed by the market development is unknown. What is certain, however, is further and deeper digitalization covering almost all areas of the power industry. Therefore, we are focused on ensuring cybersecurity, developing Energy Market Information Operator services, and services that make the power system more resilient to emergencies and failures. We are systematically working on a model of providing services added to the transmission service, which will raise the standard of security and quality of electricity supply. These issues are fundamental to the strategy of our organization and are reflected in key initiatives of PSE.

We actively participate in the preparation of new solutions, including through the development and implementation of standardized market mechanisms and products required by European regulations. We have implemented an interim mechanism for the uniform day-ahead market coupling at synchronous borders of Poland, and on June 17, 2021, the synchronous borders of Poland were included in the Interim Market Coupling (ICP) mechanism. The implementation of the ICP made it possible to connect all EU countries in the single day-ahead market.

On January 1, 2021, we implemented Phase I of the balancing market reform. In Poland, this coincided with the full launch of the capacity market, which required the adaptation of both the processes of coordination planning and operation of the NPS as well as the IT systems supporting their implementation.

The priority for PSE is to ensure that the system operates safely, reliably and economically now and in the future. Since the beginning of 2020, we have carried out a number of processes to enable the conclusion and execution of capacity agreements. We have also improved the project execution model, allowing for efficient implementation of investment tasks and cost rationalization. In 2020, infrastructural investment project expenditures amounted to PLN 1.1 billion, and by the end of 2030 we are planning to allocate a total of PLN 14.2 billion for this purpose.

The direct value added generated by PSE in the power sector, calculated using Wassily Leontief's input-output model, amounted to PLN 2.78 billion. The total added value generated by us in the domestic economy amounts to PLN 6.58 billion. The operations of PSE contributed to preserving 17.9 thousand jobs in Poland. We paid PLN 996.13 million in taxes and contributions to the state and local government budgets.

We have been measuring the carbon footprint of our organization for four years. Last year, when we used the location-basedmethod, we recorded emission reduction by 19% in relation to the year 2017 in which we calculated emissions for the first time. Whereas the reduction calculated using the market-based method was 26 percent compared to the base year. Good results stem to a large extent from the reduction of electricity losses during transmission, achieved owing to investments in new infrastructure and retrofit of old equipment.

We make all investments in transmission network development in a way that minimizes key threats to nature and avoids the risk of biodiversity loss. We take care of this right from the planning stage of the line route and substation location. For years, also in our day-to-day activities, we have been implementing initiatives to improve the quality of life and development of local communities living in the vicinity of infrastructure and transmission facilities owned by PSE. Over the past five years, we have held nearly 3900 meetings with residents, of which 850 were held in 2020. PSE's flagship education project, “WzMOCnij swoje otoczenie” (EmPOWER Your Neighborhood), already has more than 270 beneficiaries. In 2020, we allocated about PLN 4.29 million to social projects, and our grant projects included environmental protection, health promotion, education, improving quality of life, and eliminating inequality. As part of the “poMOCni w walce z COVID-19” (Helping in the fight against COVID-19) campaign, we made in-kind and financial donations worth a total of PLN 1.96 million.

The publication you have in front of you was created in accordance with the best market practices. It meets international reporting standards and has been externally verified. For the sake of the environment and in response to your expectations, it was created in a digital version. We used an interactive form of data presentation for clarity.

PSE and its employees hope that you will enjoy your reading.
Eryk Kłossowski

President of the Management Board
Polskich Sieci Elektroenergetycznych S.A.

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