General Mills' Q1 2026: Contradictions Emerge on Renewable Energy Costs, Distribution Investments, and Nuclear Ambitions

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: PLN 17.3B for H1 2025, down slightly YOY; included PLN 0.63B in compensation vs PLN 2.1B prior year

Guidance:

• 2025 Group EBITDA expected to be higher YOY; Generation up on better CDS, lower coal, higher balancing revenue; Heat now seen flat YOY.
• Net debt/EBITDA expected to be roughly flat YOY.
• Supply volumes guided lower, but segment profitability intact.
• Ready to enter December capacity auction with up to 1.4 GW OCGT peakers; final go/no‑go by November deposit.
• Actively preparing for 2027–2028 capacity auctions; exploring substitution mechanism for coal-to-gas transition.
• Distribution CAPEX accelerating; RAB growth and WACC mechanics to support investments.
• Pumped storage (Rożnów 2) decision depends on adequate long-duration storage support; indicative commissioning ~2033.

Business Commentary:

• Financial Performance and Strategic Deliverables:
• TAURON Group reported EBITDA of PLN 4.2 billion for the first six months of 2025, which is historically high, surpassing the full year EBITDA of PLN 4 billion in 2020.

• The strong performance was driven by the successful delivery on strategic promises and effective management of costs, particularly in the distribution segment.

• Renewable Energy and Capacity Market Impact:

• The company experienced an increase in the share of renewable energy in the Polish energy mix, reaching 28%.

• This was due to the successful integration of renewable energy sources and strategic investments in wind and PV projects.

• Capacity Market Revenue and Cost Management:

• TAURON secured PLN 346,000 per megawatt hour in revenue from the capacity market, covering fixed costs of operations.

• Effective cost management and strategic investments in renewable energy projects aided in balancing costs amidst negative prices.

• Supply Segment Challenges and Opportunities:

• The supply segment faced a 9% decline in electricity supplies, mainly due to a decline in industries like steel and automotive.
• However, the company mitigated this by offering dynamic pricing products, leading to a 2% lower average price for customers compared to the spot price.

Sentiment Analysis:

• Management reported record H1 2025 results: 'EBITDA for the first half of 2025 topped PLN 4.2 billion' and 'net profit... more than PLN 2 billion.' They highlighted strong delivery on strategy and financing: 'we acquired... almost PLN 17 billion' in subsidies/preferential funds and completed first project finance. Outlook raised: Generation EBITDA to be better YOY; Group EBITDA higher; net debt/EBITDA roughly flat.

Q&A:

• Question from Bartomiszewiczki (Response Point): Why assume Jaworzno (to 2040) and Wągizsa will operate beyond capacity-market support; which coal units were submitted/won in capacity auctions; and what are your renewable balancing costs?
  Response: High‑efficiency units can run profitably without capacity payments; 10 units were submitted and none not submitted will be closed; indicative balancing costs are ~PLN 50/MWh (PV) and ~PLN 15/MWh (wind).

• Question from Curt Juskiewicz (Citibank): How will National Recovery Plan (KPO) loans be accounted for in net debt and leverage headroom?
  Response: Most KPO loan value is recognized in prepayments/accruals due to preferential rates, with only the nominal portion in net debt; strategic leverage headroom considers the nominal KPO amount, so ratios won’t spike as draws increase.

• Question from Curt Juskiewicz (Citibank): What scale and economics are needed for the Rożnów 2 pumped-storage project to justify ~PLN 6B CAPEX?
  Response: Target storage is ~3–3.5 GWh (final size after geotechnical work); FID depends on adequate long‑duration storage support to make returns competitive versus batteries, with indicative commissioning around 2033.

• Question from Andrzej Rembelski (Brokerage House): Why was initial KPO drawdown small and what is the disbursement schedule/risk?
  Response: KPO is reimbursement-based; early tranches were small due to prior EU/EIB funding overlap; drawdowns will accelerate—~PLN 11B in ~4 years (now annexed to ~PLN 16B over ~6 years)—with no loss risk given a 2036 final deadline.