Annual Financial Report

CONSOLIDATED ANNUAL REPORT

of TAURON Polska Energia S.A. Capital Group for the year 2024

LETTER OF THE PRESIDENT

OF THE MANAGEMENT BOARD

Dear Shareholders,

Ladies and Gentlemen,

On behalf of the Management Board of TAURON Polska Energia S.A., I would like to present to you the Annual Report for 2024 in which we are disclosing TAURON Group's financial results and outlining the events that are material for TAURON Group.

2024 was a year of an economic recovery, both globally, as well as in Poland. After the slowdown observed in 2023, Poland's economy returned to growth, with GDP growing by almost 3 percent throughout the year and inflation rate falling to around 5 percent. Fuel and electricity prices on the wholesale markets stabilized, indicating a return to normalcy after the energy crisis of the previous years. It was also another year of energy transition, which involves the entire national power system, with

TAURON Group being an important component of this infrastructure. We saw a record high share of RES in the national energy mix, with a dominant share of wind farms, and at the same time, a record low share of the coal fired sources. As a result, new, previously unknown challenges have emerged for the energy companies. Last year, among other things, we experienced, for the first time on such a large scale, the occurrence of negative market electricity prices during the time of high generation by the photovoltaic sources.

Organization

For TAURON Group, last year was a time of rapid changes, both internal ones aimed at streamlining management, as well as strategic ones focused on revising and setting new directions for expansion. We started from scratch, tidying up TAURON Group's organizational structure, adapting it to the needs of modern management focused on the long term and sustainable development. As part of these efforts, we implemented a new business model, an operating model and the Group's management model, and we also built a team ready for the new challenges.

New Strategy

As announced, we have developed and presented to the market TAURON New Energy strategy for 2025 - 2035, which coincided with the acquisition of the largest financing in the Group's history for the implementation of its strategic objectives

• we have signed a loan agreement with Bank Gospodarstwa Krajowego worth PLN 11 billion coming from the funds available under the National Resilience Improvement Plan that we will use for the development of the Distribution segment.

The strategy sets a clear direction for the business transition based on the ESG values and sustainability. The Group's most important target is to achieve climate neutrality by 2040. In parallel, TAURON is planning to double EBITDA over the next decade, reaching more than PLN 13 billion in 2035, and also to return to the regular dividend payments as early as for 2028.

Capital expenditures, which will come in at PLN 100 billion in total, will be key in achieving these goals. Of this amount, PLN 60 billion will be allocated to the modernization and expansion of the distribution grid, while PLN 30 billion will be spent on the development of the renewable energy sources and energy storage facilities. The Group's ambition is to have renewable energy sources and energy storage facilities with the capacity in excess of 6 GW in its portfolio.

Customer is at the center of the strategy - 6 million customers who are the core of our business. That is why TAURON is intensively developing its sales offering and launching new products, building a competitive advantage for the customers, aiming to become the most customer-oriented energy company in Poland. All of TAURON's efforts are focused on the long term goal of providing clean, green energy at a reasonable price - in line with the mission "We are powering change with New Energy."

The RES² values of Responsibility, Commitment, Efficiency and Energy are the basis for the implementation of the strategy.

Stable financial position

TAURON Group's financial situation continues to be stable, as confirmed by the Fitch Ratings agency, maintaining its long term domestic and foreign currency rating at the level of "BBB-" with a stable outlook. The Group's key covenant, i.e. the net debt to EBITDA ratio, remains at a relatively low level guaranteeing financial security. Referring in turn to the financial results achieved, it should be pointed out that last year TAURON Group posted the highest annual EBITDA result in its history coming in at almost PLN 6.5 billion (an increase of more than 18 percent year on year). The largest contributors to this result were the following segments: Distribution, Generation and RES, which accounted for 61 percent, 12 percent and 11 percent of the Group's total EBITDA, respectively. The Group's operating profit clocked in at a similar level as in 2023, reaching PLN 2.65 billion, and the consolidated net profit came in at PLN 590 million. On the other hand, the Group's parent company, TAURON Polska Energia S.A., last year generated PLN 811 million in operating profit (up 353 percent year on year) and PLN 510 million in net profit (vs. PLN 638 million in net loss in 2023).

Distribution

Energy transition requires high capital expenditures, and this in turn entails the need to raise adequate financing. In 2024, we had earmarked more than PLN 5 billion for the capital expenditures, of which more than PLN 3 billion went to the Distribution segment, first and foremost for modernizing the grid and connecting the new customers. In the perspective of the coming years, these investment outlays will be steadily boosted. What is extremely important, we have been successful in raising the financing necessary to carry out the ambitious transition process. Last December we were the first energy company in Poland to obtain the financing available under the National Recovery Plan in the record amount in the Group's history of as much as PLN 11 billion. These funds, in the form of the low interest bearing loans, will be used to expand and adapt the power grid to the needs of the energy transition and climate change. In addition, last year we had signed loan agreements with the financial institutions for a total amount of approximately PLN 4 billion.

RES

Last year, we took a material step towards achieving climate neutrality and "greening" the Group - we commissioned three wind farms and one photovoltaic farm with a total capacity of nearly 180 MW, bringing TAURON Group's installed capacity in RES to almost 900 MW as of the end of 2024. In addition, we finalized the acquisition of a company that owned a wind farm project with an ultimate capacity of 191 MW. This is so far the largest investment of this type in TAURON Group's portfolio. It is worth pointing out that after the completion of all of the projects currently under construction, the total installed capacity of the renewable energy sources will clock in at more than 1 000 MW.

Heat

We have developed a concept of the decarbonization of the Heat Line of Business, based on which a concept has been developed for the supply of heat to the residents of the Silesian-Zagłębie metropolitan area. We are assuming a transition of the district heating industry that will ensure a reliable supply of the low carbon heat at acceptable prices, and our priority is a gradual and profitable decarbonization that will allow for moving away from the hard coal combustion by 2030. We have developed investment plans for each of our generating units operating in this line of business.

Customer

As the 6 million customers who are using our services represent the core asset of our business operations, we are making every effort, to provide them with the top quality services at a socially acceptable price. That is why last year we unveiled an offering to supply electricity coming solely from the renewable sources at a fixed price for 9 years - TAURON New Energy, which by April had already been used by 160 000 of our customers. We are also encouraging the customers to use modern solutions - 2 million of them are the users of the Mój TAURON application, and nearly 3 million use e-invoicing. Earlier this year we unveiled a simplified invoice that we are planning to launch in the first half of this year.

Conventional energy

A just transition is when a new business has taken good care of those who have built its foundations. We declare our readiness to spin off the hard coal fired generating assets to the State Treasury by 2030, and in the absence of a spin-off, a financial autonomy (the so-called ringfencing). With respect to the individual power generation units, we are planning to gradually phase out the conventional units, while at the same time striving to extend as much as possible their profitable operation based on the capacity market.

Our priority is to ensure security and stability of employment, as well as retraining and relocation of the employees affected by the transition within TAURON Wytwarzanie and TAURON Group. We are also conducting an active dialogue with the local communities.

We are analyzing various strategic options for the locations (sites) where the conventional generating units are currently operated. The options under consideration include the peaking units (hydrogen ready), a conversion of the generating units to biomass, generating units that use alternative fuels, small nuclear reactors, photovoltaic farms, energy storage facilities, synchronous compensator, green hydrogen production plants or as the locations (sites) for the data centers and other investment projects.

The pursuit to achieve climate neutrality by 2040 involves the gradual phasing out of the hard coal fired generation assets. We stand by our intention to spin off these assets outside of TAURON Group, but we are also ready for any other possible scenarios. We are preparing strategic options for each location (site) where the hard coal fired units are currently operated, and we are making efforts to develop optimal solutions for the coal assets with respect to their use as part of the capacity market. The preparations for the transition process related to the conventional power generation line of business are taking place with the participation of the employees, we are continuing a dialogue with the social partners (work force) and are making every effort to ensure that the process is carried out with the full acceptance of all of the parties involved.

ESG

ESG does not function as a separate add-on to the strategy at TAURON Group - it is a structural component of the strategy, embedded in every key decision and direction of expansion. Environmental, social and corporate responsibility is for us not only a response to the stakeholder expectations but, first and foremost, a conscious choice of a growth model - sustainable, resilient and efficient in the long term.

It is a practical dimension of the management process - combining technological transition, investments in the green energy, a new value for the customers and transparency in the relations with the stakeholders. Our values - Responsibility,

Commitment, Efficiency and Energy - represent the viable guideposts for the entire organization: starting from the management board, through the project teams, and up to the day to day operational decisions.

As we are building a new energy model, we are aware of the fact that only a consistency between the business ambitions and the responsibility toward the people and the environment will constitute a sustainable foundation of a competitive advantage in a rapidly changing world. That is why ESG is not so much a commitment for us, but a way of working that sets the rhythm of the entire transition process.

Flood relief campaign

The Genoa low pressure system Boris that had lingered over the southwestern part of Poland in mid-September 2024 had brought with it the torrential rains and had been the cause of the catastrophic flooding in the Lower Silesian, Opole and Silesian provinces. At its peak, 108 000 of the company's customers in 150 affected municipalities had been left without power.

During the most difficult moments, more than 1 000 power engineers in 400 teams, additionally supported by the specialized external companies, had been working on the grid. The work of the installers had been supported by the dispatching, supervision, communications, logistics and material supply services. As a result of the involvement of our maintenance services, within two weeks power supply was restored to all of the customers affected by the flood.

We offered the households in the flood affected areas an opportunity to take advantage of the cheaper electricity supply. A wide stream of support also flowed from TAURON Foundation at that time. The value of the support stood at PLN 2 million.

As a result of the flood, some elements of the energy infrastructure belonging to TAURON Dystrybucja, such as the low-, medium- and high voltage lines, substations, field unit buildings and the auxiliary buildings. More than 500 damaged substations and 223 medium-, low- and high voltage lines were affected by the power of the natural element.

Shareholders and communication with the market

What makes me, as the CEO of TAURON, particularly happy is the fact that since the appointment of the Management Board, whose work I have the pleasure of directing, until April 15 this year, TAURON's market value has gone up by almost 60 percent and has clocked in at approximately PLN 8.5 billion. During this period, we have taken measures aimed at rebuilding investor confidence in the company, as part of which we have held meetings with approximately 100 representatives of the domestic and foreign institutional investors, and have reinstated the organizing of the full year and half year earnings conferences in the form of the face to face meetings. It is worth emphasizing, that all of the current, as of the date of drawing up of the report, recommendations of the analysts at the brokerage firms for TAURON shares, are positive - "buy" or "hold." The growing interest in TAURON Group is also undoubtedly confirmed by the growing interest of the foreign investors - over the past year, the London based Helikon Investment Fund has raised its stake in TAURON's shareholding to more than 12 percent, and the global investment bank Goldman Sachs has topped the 5 percent stake threshold.

Summary

Ladies and Gentlemen, the intensive and challenging year of 2024 is now behind us, and it was a year in which we set the directions of the activities and objectives for TAURON Group for the coming years. In 2025, we will focus on building TAURON Group's value in the long term by implementing business only projects that will bring a return on investment. We will be striving to generate and maximize profits while taking into account and balancing the environmental issues, employees, customers, shareholders and local communities in accordance with the ESG principles. At this point, I would like to sincerely thank you for your trust and continued support in accomplishing our strategic objectives. It is thanks to the commitment of our employees, customers, shareholders, business partners and the Members of the Supervisory Board that TAURON has been able to achieve success and rise to the challenges of a rapidly changing environment. The year 2025 places in front of us many more challenges and opportunities, but I am deeply convinced that, thanks to our common efforts, innovative ideas, courage and the determination in the pursuit of our goals, we will be able to effectively face such challenges and take advantage of such opportunities as the drivers for a further expansion and development, and the value of TAURON Group will continue to steadily rise.

Yours respectfully

Grzegorz Lot

President of the Management Board of TAURON Polska

Energia S.A.

The above financial data was converted according to the following principles:

• individual items of the statement of financial position - at the average exchange rate of NBP announced as of December 31, 2024
  - PLN/EUR 4.273 (as of December 29, 2023 - PLN/EUR 4.3480),
• individual items of the statement of comprehensive income and the statement of cash flows - at the exchange rate that is an arithmetic mean of the average exchange rates of NBP announced as of the last day of each month of the financial year running from January 1, 2024 to December 31, 2024 - PLN/EUR 4.3039 (for the period from January 1, 2023 to December 31, 2023 - PLN/EUR - 4.5284).

The Polish original should be referred to in matters of interpretation.

Translation of auditor's report originally issued in Polish.

INDEPENDENT AUDITOR'S REPORT ON THE AUDIT

To the General Meeting and Supervisory Board of TAURON Polska Energia S.A. Audit report on the annual consolidated financial statements

Opinion

We have audited the annual consolidated financial statements of TAURON Polska Energia S.A. Group (the 'Group'), for which the parent company is TAURON Polska Energia S.A. (the 'Parent Company') located in in Katowice at Ks. Piotra Ściegiennego 3, which comprise the consolidated statement of comprehensive income for the period from 1 January 2024 to 31 December 2024, the consolidated statement of financial position as at 31 December 2024, the consolidated statement of changes in equity, the consolidated statement of cash flows for the period from 1 January 2024 to 31 December 2024 and additional information to the consolidated financial statements, including a summary of material accounting policies (the 'consolidated financial statements').

In our opinion, the consolidated financial statements:

• give a true and fair view of the consolidated financial position of the Group as at 31 December 2024 and its consolidated financial performance and its consolidated cash flows for the period from 1 January 2024 to 31 December 2024 in accordance with required applicable rules of International Financial Reporting Standards approved by the European Union and the adopted accounting policies,
• comply in respect of the form and content with laws applicable to the Group and the Parent
  Company's Statute.

The opinion is consistent with the additional report to the Audit Committee issued on 15 April 2025.

Basis for opinion

We conducted our audit in accordance with the National Standards on Auditing in the version of International Auditing Standards ("NAS") and pursuant to the Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Oversight (the 'Act on Statutory Auditors') and the Regulation (EU) No. 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC (the 'Regulation 537/2014'). Our responsibilities under those standards are further described in the 'Auditor's responsibilities for the audit of the financial statements' section of our report.

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), adopted by the National Council of Statutory Auditors and other ethical responsibilities in accordance with required applicable rules of the audit of financial statements in Poland. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. While conducting the audit, the key certified auditor and the audit firm remained independent of the Group in accordance with the independence requirements set out in the Act on Statutory Auditors and the EU Regulation 537/2014.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

ERNST & YOUNG W POLSCE JEST CZŁONKIEM GLOBALNEJ PRAKTYKI ERNST & YOUNG Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k.

Sąd Rejonowy dla m.st. Warszawy w Warszawie, XII Wydział Gospodarczy Krajowego Rejestru Sądowego, KRS: 0000481039, NIP: 526-020-79-76