PGE Polska Grupa Energetyczna S.A. Semi-annual financial report
for the 6-month period
ended June 30, 2020
in accordance with IFRS EU (in PLN million)
TABLE OF CONTENTS
The additional notes constitute an integral part | |
of these consolidated financial statements. | 2 of 61 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 3 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
- PGE GROUP CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE 6-MONTH PERIOD ENDED JUNE 30, 2020, IN ACCORDANCE WITH IFRS EU
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Period ended | Period ended | |
Note | June 30, 2020 | June 30, 2019 |
(unaudited) | (unaudited) | |
STATEMENT OF PROFIT OR LOSS | |
SALES REVENUES | 7.1 |
Cost of goods sold | 7.2 |
GROSS PROFIT ON SALES | |
Distribution and selling expenses | 7.2 |
General and administrative expenses | 7.2 |
Net other operating income/expenses | 7.3 |
OPERATING PROFIT | |
Net finance costs, including: | 7.4 |
Interest income calculated using the effective interest rate method | |
Share of profit/(loss) of equity-accounted entities | 7.5 |
GROSS PROFIT/(LOSS) | |
Income tax | 9 |
NET PROFIT/(LOSS) FOR THE REPORTING PERIOD |
22,77618,236
(20,893)(15,848)
1,8832,388
- (582)
- (508)
- 1,148
2712,446
- (228)
1718
(545)22
- 2,240
- (475)
- 1,765
OTHER COMPREHENSIVE INCOME | |
Items that may be reclassified to profit or loss in the future: | |
Valuation of debt financial instruments | 18.2 |
Valuation of hedging instruments | 18.2 |
Foreign exchange differences from translation of foreign entities | |
Deferred tax | 9 |
Items that may not be reclassified to profit or loss in the future: |
(3)3
- (146)
4 | (1) |
11 | 27 |
Actuarial gains and losses from valuation of provisions for employee benefits | (207) | (142) | |||
Deferred tax | 9 | 39 | 27 | ||
Share of profit of equity-accounted entities | (3) | (1) | |||
OTHER COMPREHENSIVE INCOME FOR THE REPORTING PERIOD, NET | (214) | (233) | |||
TOTAL COMPREHENSIVE INCOME | (851) | 1,532 | |||
NET PROFIT/(LOSS) ATTRIBUTABLE TO: | |||||
- equity holders of the parent company | (688) | 1,702 | |||
- non-controlling interests | 51 | 63 | |||
COMPREHENSIVE INCOME ATTRIBUTABLE TO: | |||||
- equity holders of the parent company | (902) | 1,469 | |||
- non-controlling interests | 51 | 63 | |||
EARNINGS AND DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF | |||||
(0.37) | 0.91 | ||||
THE PARENT COMPANY (IN PLN) | |||||
The additional notes constitute an integral part | |
of these consolidated financial statements. | 4 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at | As at | |
December 31, | ||
Note | June 30, 2020 | |
2019 | ||
(unaudited) | ||
audited
NON-CURRENT ASSETS | |
Property, plant and equipment | |
Investment property | |
Intangible assets | |
Right-of-use assets | |
Financial receivables | 16.1 |
Derivatives and other assets measured at fair value through profit or loss | 17 |
Shares and other equity instruments | |
Shares accounted for using the equity method | 12 |
Other non-current assets | |
CO2 emission allowances for captive use | 15 |
Deferred income tax assets | 13.2 |
60,570 | 59,690 |
43 | 47 |
733 | 735 |
1,315 | 1,303 |
193 | 180 |
89 | 93 |
56 | 58 |
157 | 715 |
695 | 676 |
32240
1,0591,318
64,94265,055
CURRENT ASSETS
Inventories | 14 |
CO2 emission allowances for captive use | 15 |
Income tax receivables | |
Derivatives and other assets measured at fair value through profit or loss | 17 |
Trade and other financial receivables | 16.1 |
Other current assets | |
Cash and cash equivalents | 16.2 |
3,019 | 4,509 |
207 | 965 |
8 | 59 |
111 | 327 |
4,059 | 4,815 |
755605
2,0231,313
10,182 | 12,593 | |||
ASSETS CLASSIFIED AS HELD FOR SALE | 1 | 2 | ||
TOTAL ASSETS | 75,125 | 77,650 | ||
EQUITY | |
Share capital | 18.1 |
Reserve capital | |
Hedging reserve | 18.2 |
Foreign exchange differences from translation
Retained earnings
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Equity attributable to non-controlling interests
19,16519,165
18,41019,669
- (323)
3(1)
4,1723,779
41,38042,289
892848
TOTAL EQUITY | 42,272 | 43,137 | ||
NON-CURRENT LIABILITIES
Non-current provisions | 19 |
Loans, borrowings, bonds and lease | 20.1 |
Derivative instruments | 17 |
Deferred income tax liabilities | 13.2 |
Deferred income and government grants | |
Other financial liabilities | 20.2 |
Other non-financial liabilities | 21.1 |
11,3229,652
10,71210,859
433107
246920
601616
- 475
- 58
23,82822,687
CURRENT LIABILITIES
Current provisions | 19 |
Credit facilities, loans, bonds and leases | 20.1 |
Derivative instruments | 17 |
Trade and other financial liabilities | 20.2 |
Income tax liabilities | |
Deferred income and government grants | |
Other non-financial liabilities | 21.2 |
3,9674,366
7201,449
98372
1,9863,636
30858
8380
1,8631,865
9,025 | 11,826 | |||
TOTAL LIABILITIES | 32,853 | 34,513 | ||
TOTAL EQUITY AND LIABILITIES | 75,125 | 77,650 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 5 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital | Reserve capital | Hedging reserve | Foreign | Retained | Total | Non-controlling | Total | ||||||||||||
exchange | earnings | interests | equity | ||||||||||||||||
differences from | |||||||||||||||||||
translation | |||||||||||||||||||
Note | 18.1 | 18.2 | |||||||||||||||||
JANUARY 1, 2020 | 19,165 | 19,669 | (323) | (1) | 3,779 | 42,289 | 848 | 43,137 | |||||||||||
Net profit/(loss) for the reporting | - | - | - | - | (688) | (688) | 51 | (637) | |||||||||||
period | |||||||||||||||||||
Other comprehensive income | - | - | (47) | 4 | (171) | (214) | - | (214) | |||||||||||
COMPREHENSIVE INCOME | - | - | (47) | 4 | (859) | (902) | 51 | (851) | |||||||||||
Coverage of accumulated losses | - | (1,259) | - | - | 1,259 | - | - | - | |||||||||||
Dividend | - | - | - | - | - | - | (1) | (1) | |||||||||||
Settlement of purchase of | - | - | - | - | (6) | (6) | (5) | (11) | |||||||||||
additional shares in subsidiaries | |||||||||||||||||||
Other changes | - | - | - | - | (1) | (1) | (1) | (2) | |||||||||||
TRANSACTIONS WITH OWNERS | - | (1,259) | - | - | 1,252 | (7) | (7) | (14) | |||||||||||
JUNE 30, 2020 | 19,165 | 18,410 | (370) | 3 | 4,172 | 41,380 | 892 | 42,272 | |||||||||||
Share capital | Reserve capital | Hedging reserve | Foreign | Retained | Total | Non-controlling | Total | |
exchange | earnings | interests | equity | |||||
differences from | ||||||||
translation | ||||||||
Note | 18.1 | 18.2 | ||||||
JANUARY 1, 2019 | 19,165 | 19,872 | (52) | (1) | 7,743 | 46,727 | 1,074 | 47,801 |
Net profit for the reporting period | - | - | - | - | 1,702 | 1,702 | 63 | 1,765 |
Other comprehensive income | - | - | (116) | (1) | (116) | (233) | - | (233) |
COMPREHENSIVE INCOME | - | - | (116) | (1) | 1,586 | 1,469 | 63 | 1,532 |
Coverage of accumulated losses | - | (203) | - | - | 203 | - | - | - |
Dividend | - | - | - | - | - | - | (4) | (4) |
Settlement of purchase of | - | - | - | - | (21) | (21) | (254) | (275) |
additional shares in subsidiaries | ||||||||
Acquisition of a new subsidiary | - | - | - | - | - | - | 8 | 8 |
TRANSACTIONS WITH OWNERS | - | (203) | - | - | 182 | (21) | (250) | (271) |
JUNE 30, 2019 | 19,165 | 19,669 | (168) | (2) | 9,511 | 48,175 | 887 | 49,062 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 6 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
CONSOLIDATED STATEMENT OF CASH FLOWS
Period ended | Period ended | ||
Note | June 30, 2020 | June 30, 2019 | |
(unaudited) | (unaudited) | ||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Gross profit/(loss) | (544) | 2,240 | |
Income tax paid | (174) | (238) | |
Adjustments for: | |||
Share in (profit)/loss of equity-accounted entities | 545 | (22) | |
Depreciation, amortisation, disposal and impairment losses | 2,534 | 1,949 | |
Interest and dividend, net | 150 | 106 | |
(Gain)/loss from investing activities | 240 | (30) | |
Change in receivables | 765 | (818) | |
Change in inventories | 1,490 | (1,472) | |
Change in liabilities, excluding credit facilities and loans | (598) | 956 | |
Change in other non-financial assets, prepayments and CO2 emission allowances | 785 | 123 | |
Change in provisions | 292 | ||
109 | |||
Other | 7 | 107 | |
NET CASH FROM OPERATING ACTIVITIES | 5,309 | 3,193 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Purchase of property, plant and equipment and intangible assets | (3,454) | (3,180) | |
Recognition of deposits with maturity over 3 months | (43) | (94) | |
Termination of deposits with maturity over 3 months | 33 | 83 | |
Purchase of financial assets | (1) | (14) | |
Other | 16 | 19 | |
NET CASH FROM INVESTING ACTIVITIES | (3,449) | (3,186) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Proceeds from credit facilities, loans | 3,634 | 4,436 | |
Proceeds from issue of bonds | - | 1,400 | |
Repayment of loans, credit facilities and leases | (4,602) | (3,258) | |
Redemption of bonds issued | - | (2,139) | |
Interest and commission paid | (186) | (163) | |
Increase of share in Group companies | (11) | (275) | |
Other | 12 | - | |
NET CASH FROM FINANCING ACTIVITIES | (1,153) | 1 | |
NET CHANGE IN CASH AND CASH EQUIVALENTS | |
Net foreign exchange differences | |
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD | 16.2 |
CASH AND CASH EQUIVALENTS AT THE END OF PERIOD | 16.2 |
7078
12(1)
1,3111,279
2,0181,287
The additional notes constitute an integral part | |
of these consolidated financial statements. | 7 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
GENERAL INFORMATION, BASIS FOR PREPARATION OF FINANCIAL STATEMENTS AND OTHER EXPLANATORY INFORMATION
1. General information
1.1 Information on theparent
PGE Polska Grupa Energetyczna S.A. was founded on the basis of a notary deed of August 2, 1990, and registered in the District Court in Warsaw, XVI Commercial Department on September 28, 1990. The Company was registered in the National Court Register of the District Court for the capital city of Warsaw, XII Commercial Department, under no. KRS 0000059307. The Parent Company's registered office is in Warsaw, ul. Mysia 2.
As at January 1, 2020, the Company's Management Board was as follows:
- Henryk Baranowski - President of the Management Board,
- Wojciech Kowalczyk - Vice-President of the Management Board,
- Marek Pastuszko - Vice-President of the Management Board,
- Paweł Śliwa - Vice-President of the Management Board,
- Ryszard Wasiłek - Vice-President of the Management Board,
- Emil Wojtowicz - Vice-President of the Management Board.
On February 19, 2020, the Supervisory Board dismissed all members of the Management Board from the Management Board with effect as of February 19, 2020. At the same time, the Supervisory Board appointed Mr Wojciech Dąbrowski, Mr Paweł Śliwa and Mr Ryszard Wasiłek to the Management Board for the eleventh term of office as of February 20, 2020, as well as Mr Paweł Cioch and Mr Paweł Strączyński as of February 24, 2020.
As at June 30, 2020
- Wojciech Dąbrowski - President of the Management Board,
- Paweł Cioch - Vice-President of the Management Board,
- Paweł Strączyński - Vice-President of the Management Board,
- Paweł Śliwa - Vice-President of the Management Board,
- Ryszard Wasiłek - Vice-President of the Management Board.
On August 18, 2020, the Supervisory Board appointed Ms Wanda Buk to the Management Board with effect as of September 1, 2020.
As at the date of publication of these financial statements, the composition of the Management Board is as follows:
- Wojciech Dąbrowski - President of the Management Board,
- Wanda Buk - Vice-President of the Management Board,
- Paweł Cioch - Vice-President of the Management Board,
- Paweł Strączyński - Vice-President of the Management Board,
- Paweł Śliwa - Vice-President of the Management Board,
- Ryszard Wasiłek - Vice-President of the Management Board.
Ownership structure
The parent's ownership structure was as follows:
State Treasury | Other shareholders | Total | |
As at December 31, 2019 | 57.39% | 42.61% | 100.00% |
As at June 30, 2020 | 57.39% | 42.61% | 100.00% |
The ownership structure as at particular reporting dates was prepared on the basis of data available to the Company.
According to information known to the Company as at the date on which these financial statements were prepared, the State Treasury is the only shareholder with at least 5% of votes at the General Meeting of PGE S.A.
1.2 Information on PGE Group
PGE Group includes the parent, PGE Polska Grupa Energetyczna S.A., 66 consolidated subsidiaries, 4 associates and 1 jointly controlled entity. For additional information about subordinated entities included in the consolidated financial statements please refer to note 1.3.
These consolidated financial statements of PGE Group cover the period from January 1 to June 30, 2020 and contain comparative figures for the period from January 1 to June 30, 2019 and as at December 31, 2019.
These condensed consolidated interim financial statements do not cover all of the information and disclosures required in annual financial statements and they should be read in conjunction with the Group's consolidated financial statements for the year ended December 31, 2019, approved for publication on March 31, 2020.
The financial statements of all subordinated entities were prepared for the same reporting period as the financial statements of the parent company, using consistent accounting principles. An exception to this rule are companies acquired in the course of the financial year that prepared financial data for the period from the moment of obtaining control by PGE Group.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 8 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
PGE Group companies' core activities are as follows:
- production of electricity,
- distribution of electricity,
- wholesale and retail trade in electricity, energy origin rights, CO2 emission allowances and natural gas,
- production and distribution of heat,
- provision of other services related to these activities. Business activities are conducted under appropriate concessions granted to particular Group companies.
Going concern
These financial statements have been prepared on the assumption that significant Group companies will continue as going concerns for a period of at least 12 months from the reporting date. As at June 30, 2020, the subsidiary, PGE Obrót S.A., reports negative equity, primarily due to negative developments on the retail electricity trading market. PGE Obrót S.A., like other PGE Group companies, has access to financing provided by PGE S.A., therefore the going concern for this company is justified.
Apart from the issue concerning PGE Obrót S.A., as at the date of authorisation of these financial statements for publication, no circumstances were identified which would indicate any threat to significant Group companies continuing as going concerns.
Changes in accounting policies
The same accounting rules (policies) and calculation methods were applied in these financial statements as in the most recent annual financial statements. These financial statements should be read in conjunction with PGE Group's consolidated financial statements for the year ended December 31, 2019, approved for publication on March 31, 2020.
1.3 PGE Group's composition
During the reporting period, PGE Group consisted of the following subsidiaries, consolidated directly and indirectly:
Stake held by
Stake held by
PGE Group
PGE Group
EntityEntity holding stakecompanies as at companies as at
December 31,
June 30, 2020
SEGMENT: SUPPLY
2019
1.
2.
3.
4.
5.
6.
7.
PGE Polska Grupa Energetyczna S.A. Warsaw
PGE Dom Maklerski S.A.
Warsaw
PGE Trading GmbH
Berlin
PGE Obrót S.A.
Rzeszów
ENESTA sp. z o.o.
Stalowa Wola
PGE Centrum sp. z o.o.
Warsaw
PGE Paliwa sp. z o.o.
Kraków
Parent | ||
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE Obrót S.A. | 87.33% | 87.33% |
PGE S.A. | 100.00% | 100.00% |
PGE EC S.A. | 100.00% | 100.00% |
SEGMENT: CONVENTIONAL GENERATION
8.
9.
PGE Górnictwo i Energetyka Konwencjonalna S.A. Bełchatów
ELBIS sp. z o.o.
Rogowiec
PGE S.A.
PGE S.A.
100.00% 100.00%
100.00% 100.00%
10.
11.
MegaSerwis sp. z o.o.
Bogatynia
"ELMEN" sp. z o.o.
Rogowiec
"Przedsiębiorstwo Usługowo-Produkcyjne
PGE S.A.
PGE S.A.
100.00% 100.00%
100.00% 100.00%
12. "ELTUR-SERWIS" sp. z o.o.
Bogatynia"
PGE S.A.
100.00% 100.00%
13.
Przedsiębiorstwo Transportowo-Sprzętowe "BETRANS" sp. z o.o. Bełchatów
Przedsiębiorstwo Wulkanizacji Taśm i Produkcji Wyrobów
PGE S.A.
100.00% 100.00%
14. Gumowych BESTGUM POLSKA sp. z o.o. Rogowiec
PGE S.A.
100.00% 100.00%
15.
16.
17.
RAMB sp. z o.o.
Piaski
EPORE sp. z o.o.
Bogatynia
"Energoserwis - Kleszczów" sp. z o.o.
Rogowiec
PGE S.A.
PGE GiEK S.A.
PGE GiEK S.A.
100.00% 100.00%
100.00% 85.38%
51.00% 51.00%
The additional notes constitute an integral part | |
of these consolidated financial statements. | 9 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Stake held by
Stake held by
PGE Group
PGE Group
EntityEntity holding stakecompanies as at companies as at
December 31,
June 30, 2020
SEGMENT: DISTRICT HEATING
2019
18.
19.
20.
21.
22.
23.
24.
25.
PGE Energia Ciepła S.A. *
Warsaw
PGE Toruń S.A.
Toruń
PGE Gaz Toruń sp. z o.o.
Warsaw
Zespół Elektrociepłowni Wrocławskich KOGENERACJA S.A. Wrocław
Elektrociepłownia Zielona Góra S.A.
Zielona Góra
MEGAZEC sp. z o.o.
Bydgoszcz
Przedsiębiorstwo Energetyki Cieplnej sp. z o.o.
Zgierz
PGE Ekoserwis sp. z o.o.
Wrocław
PGE S.A. | 100.00% | 100.00% |
PGE EC S.A. | 95.22% | 95.22% |
PGE EC S.A. | 100.00% | 100.00% |
PGE EC S.A. | 58.07% | 58.07% |
KOGENERACJA S.A. | 98.40% | 98.40% |
PGE S.A. | 100.00% | 100.00% |
PGE EC S.A. | 50.98% | 50.98% |
PGE S.A. | 95.08% | 95.08% |
SEGMENT: RENEWABLES
26.
27.
28.
29.
PGE Energia Odnawialna S.A.
Warsaw
Elektrownia Wiatrowa Baltica-1 sp. z o.o.
Warsaw
Elektrownia Wiatrowa Baltica-2 sp. z o.o.
Warsaw
Elektrownia Wiatrowa Baltica-3 sp. z o.o.
Warsaw
Elektrownia Wiatrowa Baltica-4 sp. z o.o. (formerly: PGE
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
- Inwest 17 sp. z o.o.) Warsaw
Elektrownia Wiatrowa Baltica-5 sp. z o.o. (formerly: PGE - Inwest 18 sp. z o.o.) Warsaw
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
32.
33.
34.
35.
36.
37.
38.
39.
40.
PGE Baltica sp. z o.o. Warsaw
PGE Klaster sp. z o.o. Warsaw
PGE Soleo 1 sp. z o.o. Warsaw
PGE Soleo 2 sp. z o.o. Warsaw
PGE Soleo 3 sp. z o.o. Warsaw
PGE Soleo 4 sp. z o.o. Warsaw
PGE Soleo 5 sp. z o.o. Warsaw
PGE Soleo 6 sp. z o.o. Warsaw
PGE Soleo 7 sp. z o.o. Warsaw
PGE S.A. | 100.00% | 100.00% |
PGE EO S.A. | 100.00% | 100.00% |
PGE EO S.A. | 100.00% | 100.00% |
PGE EO S.A. | 100.00% | 100.00% |
PGE EO S.A. | 100.00% | 100.00% |
PGE EO S.A. | 100.00% | 100.00% |
PGE EO S.A. | 100.00% | 100.00% |
PGE EO S.A. | 100.00% | 100.00% |
PGE EO S.A. | 100.00% | 100.00% |
SEGMENT: DISTRIBUTION | ||||
41. | PGE Dystrybucja S.A. | PGE S.A. | 100.00% | 100.00% |
Lublin | ||||
SEGMENT: OTHER ACTIVITIES
42.
43.
44.
45.
PGE EJ 1 sp. z o.o. Warsaw
PGE Systemy S.A. Warsaw
PGE Sweden AB (publ) Stockholm
PGE Synergia sp. z o.o. Warsaw
PGE S.A. | 70.00% | 70.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 10 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Stake held by
Stake held by
PGE Group
PGE Group
EntityEntity holding stakecompanies as at companies as at
December 31,
June 30, 2020
2019
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
"Elbest" sp. z o.o. Bełchatów
Elbest Security sp. z o.o.
Bełchatów
PGE Inwest 2 sp. z o.o.
Warsaw
PGE Ventures sp. z o.o.
Warsaw
PGE Inwest 8 sp. z o.o.
Warsaw
PGE Inwest 9 sp. z o.o.
Warsaw
PGE Inwest 10 sp. z o.o.
Warsaw
PGE Inwest 11 sp. z o.o.
Warsaw
PGE Inwest 12 sp. z o.o.
Warsaw
PGE Inwest 13 S.A.
Warsaw
PGE Inwest 14 sp. z o.o.
Warsaw
PGE Nowa Energia sp. z o.o.
Warsaw
PGE Inwest 16 sp. z o.o.
Warsaw
PGE Inwest 19 sp. z o.o.
Warsaw
Towarzystwo Funduszy Inwestycyjnych Energia S.A. Warsaw
BIO-ENERGIA sp. z o.o.
Warsaw
Przedsiębiorstwo Transportowo-Usługowe
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE S.A. | 100.00% | 100.00% |
PGE EO S.A. | 100.00% | 100.00% |
62. "ETRA" sp. z o.o. Białystok
PGE Dystrybucja S.A. | 100.00% | 100.00% |
63.
64.
65.
66.
Energetyczne Systemy Pomiarowe sp. z o.o.
Białystok
ZOWER sp. z o.o.
Czerwionka-Leszczyny
Przedsiębiorstwo Usługowo-Handlowe TOREC sp. z o.o. Toruń
4Mobility S.A.
Warsaw
Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych
PGE Dystrybucja S.A. | 100.00% | 100.00% |
PGE EC S.A. | 100.00% | 100.00% |
PGE Toruń S.A. | 50.04% | 50.04% |
PGE Nowa Energia sp. z o.o. | 51.47% | 51.47% |
67. Eko-Inwestycje Warsaw
PGE Group companies | 100.00% | 100.00% |
* Elektrownia Rybnik (Rybnik Power Plant) belonging to PGE EC S.A. until December 31, 2019 is presented in note 6 to these financial statements in the Conventional Generation segment.
The table above includes the following changes in the structure of PGE Group companies subject to full consolidation which took place during the period ended June 30, 2020:
- On January 2, 2020, the demerger of PGE EC S.A. was entered in the National Court Register. The demerger was effected by way of transfer from PGE EC S.A. to PGE GiEK S.A. an organized part of the enterprise covering Elektrownia Rybnik (Rybnik Power Plant). The transaction did not affect these consolidated financial statements.
-
On May 29, 2020, PGE GiEK S.A. acquired 14.62% of shares in EPORE sp z o.o. and became the sole shareholder of this company.
The ownership of shares was transferred to PGE GiEK S.A. on June 18, 2020. Following the transaction, the Group's equity decreased by PLN 11 million, including PLN 5 million attributable to non-controlling interests.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 11 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Additionally, the following events took place after the reporting date:
- On October 14, 2019, the Extraordinary General Meeting of Shareholders of PIMERGE S.A. resolved to increase the company's share capital. Following the capital increase, the share held by PGE Group increased from 42.37% to 89.87% and PIMERGE S.A. was included in consolidation. The capital increase was registered and control of the company was taken over on July 1, 2020. As of the third quarter of 2020, PIMERGE will be a fully consolidated subsidiary.
- On July 30, 2020, PGE EO S.A. purchased 100% of shares in Eco-Power sp. z o.o. The ownership of shares was transferred to PGE EO S.A. on July 31, 2020. As of the third quarter of 2020, Eco-Power will be a fully consolidated subsidiary.
- On August 17, 2020, the Investors' Meeting of the Closed-end private equity fund (FIZAN) Eko-Inwestycje resolved to dissolve the fund. The liquidation will be completed by the end of this year.
2. Basis for preparation of the financial statements
2.1 Statement of compliance
These consolidated financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and in the scope required under the Minister of Finance Regulation of March 29, 2018 on current and periodic information provided by issuers of securities and conditions of recognition as equivalent information required by the law of a non-Member State (Official Journal 2018, items 512 and 685).
International Financial Reporting Standards comprise standards and interpretations approved by the International Accounting Standards Board and IFRS Interpretation Committee.
2.2 Presentation and functionalcurrency
The functional currency of the parent company and the presentation currency of these consolidated financial statements is Polish Zloty. All amounts are in PLN millions, unless indicated otherwise.
For the purpose of translation at the reporting date of items denominated in currency other than PLN the following exchange rates were applied:
June 30, 2020 | December 31, | June 30, 2019 | |
2019 | |||
USD | 3.9806 | 3.7977 | 3.7336 |
EUR | 4.4660 | 4.2585 | 4.2520 |
2.3 New standards and interpretations published, not yet effective
The following standards, changes in already effective standards and interpretations are not endorsed by the European Union or are not effective as at January 1, 2020:
Standard | Description of changes | Effective date |
IFRS 14 Regulatory Deferral Accounts | Accounting and disclosure principles for regulatory deferral accounts. | Standard in the current version |
will not be effective in the EU | ||
Amendments to IFRS 10 and IAS 28 | Deals with the sale or contribution of assets between an investor and its | Postponed indefinitely |
joint venture or associate. | ||
IFRS 17 Insurance contracts | Defines a new approach to recognising revenue and profit/loss in the | January 1, 2023 |
period in which insurance services are provided | ||
Amendments to IAS 1 | The amendments concern the presentation of financial statements | January 1, 2022 |
Annual improvements to IFRS (cycle | Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 focus on resolving | January 1, 2022 |
2018-2020) | inconsistencies and clarifying terminology. | |
Amendments to IFRS 16 | COVID-19-Related Rent Concessions | June 1, 2020 |
Amendments to IFRS 3 | Amendments to references in the Conceptual Framework | January 1, 2022 |
Amendments to IAS 16 | Proceeds before intended use | January 1, 2022 |
Amendments to IAS 37 | Onerous Contracts - cost of fulfilling a contract | January 1, 2022 |
Amendments to IFRS 4 | Extension of the temporary exemption from applying IFRS 9 | January 1, 2021 |
PGE Group intends to adopt the above mentioned new standards, amendments to standards and interpretations published by the International Accounting Standards Board but not yet effective at the reporting date, when they become effective.
These regulations will not have a significant effect on the future financial statements of PGE Group.
2.4 Professional judgment of management and estimates
Judgments and estimates made by the management in the process of applying accounting rules that are described below had the most significant impact on the amounts presented in the consolidated financial statements, including in other explanatory information. The estimates are based on the best knowledge of the Management Board relating to current and future operations and events in particular areas. Detailed information on the assumptions made is presented below or in respective explanatory notes.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 12 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
-
During the reporting period, the Group revised the amount of impairment losses on assets, including in particular on property, plant and equipment. For a description of changes, see Note 3 to these financial statements.
Estimate of recoverable amount of property, plant and equipment is based on a number of significant assumptions to the factors, realisation of which is uncertain and mostly beyond PGE Group's control. The Group believes that it has assumed the most accurate volumes and values. Nevertheless, realisation of the particular assumptions may diverge from the ones established by the Group. - On December 28, 2018, an act amending the act on excise duty and certain other acts was adopted. The Act, as amended, regulated prices for final customers of electricity for 2019 and introduced a system of compensation for energy companies offering reduced prices. In connection with the provisions of the Act, the Group made estimates of revenues from compensation due and estimates of reductions in revenues. The estimates were related to the previous reporting period but it is possible that they will be adjusted in the current reporting period. For details, see note 25.1 to these financial statements.
-
Provisions are liabilities of uncertain amount or timing. During the reporting period, the Group changed estimates regarding the validity or amounts of some provisions.
In particular, the rehabilitation provision and provisions for employee benefits were remeasured in the reporting period due to a decrease in the discount rate. For details, see note 19 to these financial statements. - Uncertainties concerning tax treatment are described in note 23 to the consolidated financial statements.
- As at the reporting date, the Group did not observe any significant extension of the receivables repayment period or liquidity problems resulting from the COVID-19 pandemic. Nevertheless, the Group has updated the models used to estimate the expected credit losses. For the purpose of estimating expected credit losses, counterparties were divided into two groups: strategic counterparties that are internally rated on the basis of a scoring model and other counterparties for whom expected credit losses are estimated on the basis of a provision matrix. For the first group of counterparties, the basis for calculating expected credit losses was changed - as at June 30, 2020, losses were calculated based on quotations of Credit Default Swaps (CDSs), whereas for the second group of counterparties, the percentage rates in the respective time intervals of the provisioning matrix were updated to the level corresponding to the current recoverability of receivables. As a result of these two changes, the level of provisions for expected credit losses as at June 30, 2020 is 20 million more than if the provisions had been recognised in accordance with previous rules. For a more detailed description of the impact of the pandemic on PGE Group's operations, see Note 25.3 of these statements.
3. Test for impairment of property, plant and equipment, intangible assets, right-of-use assets and goodwill
Property, plant and equipment is PGE Group's most significant group of assets. Due to the changing macroeconomic and regulatory environment, PGE Group verifies regularly the premises that may indicate that its assets may be impaired. In assessing the market situation, PGE Group uses both its own analytical tools and the support of independent analytical institutions. In previous reporting periods, PGE Group recognised significant impairment losses on non-current assets in the Conventional Generation segment and the Renewables segment.
In the current reporting period, PGE Group analysed indications and identified drivers that could have substantial impact on changes in the value of assets in the aforesaid segments.
External indications
- Market capitalisation of PGE remaining below the net carrying amount of assets.
- Decrease in prices of futures contracts.
- Low demand for electricity in the National Power System due to the COVID-19 pandemic.
- Low prices on spot markets in Germany and Scandinavia result in high competitiveness of energy imports to Poland, which results in lower utilisation of Generation Units. An additional adverse factor is a decrease in demand in the National Power System and an increase in RESgeneration. In the opinion of the PGE Group, this situation may continue until the end of 2021.
- Approaching depletion of lignite resources.
The lifetime of lignite-fired power plants is limited due to the quantity of available lignite resources. Therefore, over time, the remaining service period, as well as the benefits and value in use, becomes shorter. - Continuing high prices of emission rights (TGEozea index) The price of green energy origin certificate increased between Q1 and Q4 2018 from 63 PLN/MWh to 149 PLN/MWh. In 2019, prices of green property rights remained high, to reach more than 130 PLN/MWh in Q2 2020.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 13 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Macroeconomic assumptions
The key price assumptions, i.e. the prices of electricity, CO2 emission allowances, hard coal, gas, and assumptions related to production at most of the Group's installations were derived from a study prepared by an independent expert, taking into account own estimates, based on the current market situation for the first two years of the projection.
Electricity price projections assume a slight increase in prices in 2020 as compared to 2019, followed by growths in subsequent years.
Price projections for CO2 emission allowances assume dynamic market price growth in successive years of the projection.
Hard coal price projections expect a decline in prices until 2023, as compared to 2019, followed by several-percent growth in subsequent years.
Gas price projections assume a decline in 2020 as compared to 2019, average annual growth in the period to 2025 at approx. 8% and growth of approx. 3% annually in the years thereafter.
Projections for prices of emission rights concerning certificates of origin provide for an average annual decrease of about 7% between 2022 and 2031, which is related to the declining obligation to redeem.
Capacity-market revenue projection for 2021-2024 is based on the results of main auctions for these delivery periods, taking into account the mechanisms of the agreement to re-allocate revenue within PGE Group companies. The projection after 2025 was developed by a team of experts at PGE S.A., based on assumptions concerning estimated future cash flows for generation units, on the basis of, among others, completed auctions and projections prepared by a third-party expert. As of July 1, 2025, removed from the Capacity Market are units that fail to meet the emission criterion of 550 g CO2 per kWh, except for units covered by multiannual contracts executed in main auctions for years 2021-2024.
Revenue from regulatory system services was based on existing bilateral agreements with PSE S.A.
Unit availability was estimated based on repair plans, taking into account statistical failure rates.
3.1 Description of assumptions for theConventional Generation segment
The impairment tests were performed as at June 30, 2020 with respect to cash-generating units by determining their recoverable amount. Determination of fair value for very large groups of assets for which there is no active market and a small number of comparable transactions is very difficult in practice. In the case of power plants and mines for which a value on the local market should be determined, there are no observable fair values. Therefore, the recoverable amount of the analysed assets was determined based on value in use estimated using the discounted net cash flow method, based on financial projections prepared for the period from July 2020 to the end of their operation. According to the Group, financial projections longer than five years are justified due to significant and long-term effects of projected changes in the regulatory environment. With longer projections, the recoverable amount can be determined in a more reliable manner.
Detailed assumptions regarding the segment
Presented below are the key assumptions having impact on estimates of the value in use of the tested CGUs:
- recognition of the following entities as a single CGU:
- Branch Kopalnia Węgla Brunatnego Bełchatów and Branch Elektrownia Bełchatów ("Bełchatów Complex"),
- Branch Kopalnia Węgla Brunatnego Turów and Branch Elektrownia Turów ("Turów Complex"),
-
recognition of Elektrownia Dolna Odra, Elektrownia Szczecin and Elektrownia Pomorzany, forming part of the Branch Zespół
Elektrowni Dolna Odra, as three separate CGUs, - assumption that in the period after June 2025 there will be support from the capacity market or equivalent only for units that meet the emission criterion of 550 g of CO2 for electricity produced per kWh, whereby multiannual contracts concluded in auctions for 2021-2024 will be performed in accordance with their term,
- taking into account work cost optimisation resulting from current work plans, among other things,
- maintaining production capacities as a result of replacement-type investments,
- taking into account development investments for which construction works are in progress,
- assuming the weighted average cost of capital after tax after tax over the projection period of 6.5%-8.0%, various for individual CGUs according to the risk level assessed on a case by case basis.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 14 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Below are the results of the tests performed for CGUs for which impairment was identified:
As at June 30, 2020 | Discount rate | Value tested* | Impairment loss | Value after | ||
impairment loss | ||||||
Bełchatów Complex | 7.67% | 11,357 | (328) | 11,029 | ||
Turów Complex | 7.00% | 3,775 | (202) | 3,573 | ||
Elektrownia Opole | 7.00% | 12,257 | - | 12,257 | ||
Elektrownia Dolna Odra | 6.50% - 8.00%** | - | - | - | ||
Elektrociepłownia Pomorzany | 8.00% | - | - | - | ||
Elektrociepłownia Szczecin | 8.00% | - | - | - | ||
Elektrownia Rybnik | 8.00% | - | - | - | ||
TOTAL | 27,389 | (530) | 26,859 |
*)Thetested amountpresented aboveisthenetcarryingamountofthetested assetsasat June30,2020adjustedforprovisionsand liabilitiesdisclosed in thestatementoffinancialposition,except fortherehabilitation provision.
**) The discount rate is reduced when new gas units are put into operation.
Sensitivity analysis
In accordance with IAS 36 Impairment of assets, the Group performed a sensitivity analysis for generation units in the Conventional Energy segment.
The estimated effect of the change of key assumptions on the amount in impairment loss on assets as at June 30, 2020 for the Conventional Generation segment is presented below.
Parameter | Change | Effect on impairment loss in PLN billion | |
Increase | Decrease | ||
Change in electricity prices in the entire projection period | 1% | - | 1.1 |
-1% | 1.1 | - | |
A 1% decrease in electricity price would increase the impairment loss by PLN 1.1 billion for the Bełchatów and Turów Complexes.
Parameter | Change | Effect on impairment loss in PLN billion | |
Increase | Decrease | ||
Change in WACC | +0.5 pp | 0.3 | - |
- 0.5 pp | - | 0.3 | |
A 0.5 p.p. increase WACC would increase the impairment loss by PLN 0.3 billion for the Bełchatów and Turów Complexes.
Parameter | Change | Effect on impairment loss in PLN billion | |
Increase | Decrease | ||
Change in prices of CO2 emission allowances | 1% | 0.5 | - |
-1% | - | 0.4 | |
A 1% increase in prices of CO2 emission allowances would increase the impairment loss by PLN 0.5 billion for the Bełchatów and Turów Complexes.
3.2 Analysis of indicationsof impairment of generation assets in theDistrict Heatingsegment
In previous reporting periods, PGE Group recognised significant impairment losses for non-current assets in the District Heating segment. Key assumptions used in asset impairment tests carried out in 2019 are described in the consolidated financial statements of PGE Group for 2019.
In the current reporting period, the Group analysed the impairment indications in order to verify whether these assets have been impaired or whether previously recognised impairment losses have reversed.
The most significant factors analysed included:
- analysis of the financial plan,
- confirmation whether the investment plan remains valid,
- analysis of energy and gas prices,
- analysis of assumptions concerning the so-called Capacity Market, support for cogeneration,
- analysis of estimated margins on production and sale of electricity in future periods, in the light of projections of prices of energy, hard coal and CO2 emission allowances.
The analysis of indications for the District Heating segment showed that the generating units implement the financial plan in accordance with the assumptions. Natural gas, electricity, coal and CO2 emission allowance price projections available to PGE Group result in favourable projections of margins. Assumptions for the Capacity Market remain unchanged compared to 2019. At the same time, PGE Group believes that the assumptions adopted in 2019 regarding the support for cogeneration remain valid as at June 30, 2020. Therefore, PGE Group believes that as at the reporting date there are no indications for recognising impairment losses on non-current assets of the District Heating segment or for reversing impairment losses recognized in prior periods.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 15 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Some important regulatory assumptions made for impairment tests are beyond control of PGE Group and their materialization in the future is uncertain. This concerns in particular issues related to the shape of the Polish capacity market after July 1, 2025 or allocation of free CO2 emission allowances after 2020. In these areas, the Group relies on current assumptions about developments in regulations, which are subject to risk. Future changes to these regulations, compared to PGE's current expectations, may have an impact on the assessment of the recoverable amount of generation assets in the District Heating segment.
3.3 Analysis of indicationsof impairment of generation assets in theRenewables segment
In 2019, PGE Group reversed impairment losses on non-current assets in the Renewables segment recognised in previous reporting periods. Key assumptions used in asset impairment tests carried out in 2019 are described in the consolidated financial statements of PGE Group for 2019.
In the current reporting period, the Group analysed the impairment indications in order to verify whether these assets have been impaired or whether previously recognised impairment losses have reversed.
The most significant factors analysed included:
- analysis of the financial plan,
- confirmation whether the investment plan remains valid,
- analysis of energy, gas and energy origin rights prices,
- analysis of assumptions concerning the so-called Capacity Market,
- analysis of estimated margins on production and sale of electricity in future periods, in the light of projections of prices of energy.
The analysis of indications for the Renewables segment showed that the generating units implement the financial plan above the assumed values. Assumptions for the capacity market for pumped-storage power plants and hydropower plants adopted as at December 31, 2019 are valid as at June 30, 2020. Therefore, PGE Group believes that as at the reporting date there are no indications for recognising impairment losses on non-current assets of the Renewables segment or for reversing impairment losses recognized in prior periods.
Some important regulatory assumptions made for impairment tests are beyond the control of PGE Group and their materialization in the future is uncertain. This applies in particular to projections of prices of energy origin rights the uncertainty of which results from the unstable legal and regulatory situation related to the functioning of the energy origin system.
4. Changes in accounting principles and data presentation
New standards and interpretations which became effective on January 1, 2020
The accounting principles (policies) applied in preparing these financial statements are consistent with those applied in preparing the financial statements for 2019. The following amendments to IFRSs are applied in these financial statements in line with their effective dates. The following amendments did not have material impact on the presented and disclosed financial information or they were not applicable to the Group's transactions:
- Amendments to the Conceptual Framework - These amendments aim to harmonise the Conceptual Framework;
- Amendments to IFRS 3 - These changes clarify the definition of economic activity;
- Amendments to IAS 1 and IAS 8 - The amendments concern the definition of 'material';
- Amendments to IFRS 9, IAS 39 and IFRS 7 - The amendments concern the reform of the benchmark rate.
The Group has not decided to early adopt any of the standards, interpretations or amendments that have been published but are not yet effective in accordance with the European Union regulations.
5. Fair value hierarchy
Derivatives
The Group measures derivatives at fair value using valuation models for financial instruments based on publicly available exchange rates, interest rates, discount curves in particular currencies (applicable also for commodities which prices are denominated in these currencies) derived from active markets. The fair value of derivatives is determined based on discounted future cash flows from transactions, calculated on the difference between the forward rate and transaction price. Forward exchange rates are not made as separate risk factor, but are derived from the spot rate and appropriate forward interest rate for foreign currencies in relation to PLN.
In the category of financial assets and financial liabilities at fair value through profit or loss, the Group presents financial instruments related to greenhouse gases emission rights - currency and commodity forwards, contracts for the purchase and sale of coal, commodity SWAPs (Level 2).
In addition, the Group presents CCIRS derivative that hedges foreign exchange rate and interest rate and IRS hedging transaction swapping variable interest rate in PLN to fixed interest rate in PLN (Level 2).
The additional notes constitute an integral part | |
of these consolidated financial statements. | 16 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
As at June 30, 2020 | As at December 31, 2019 | |||
FAIR VALUE HIERARCHY | Level 1 | Level 2 | Level 1 | Level 2 |
CO2 emission allowances in trading activities | 1 | - | 1,303 | - |
Hard coal in trading activities | 42 | - | 125 | - |
Inventories | 43 | - | 1,428 | - |
Currency forwards | - | 82 | - | 13 |
Commodity forwards | - | 16 | - | 265 |
Commodity SWAP | - | 13 | - | 11 |
Contracts for purchase/sale of coal | - | - | - | 6 |
Valuation of CCIRS | - | 13 | - | 18 |
Valuation of IRS | - | - | - | 34 |
Options | - | 6 | - | 5 |
Fund participation units | - | 70 | - | 68 |
Financial assets | - | 200 | - | 420 |
Currency forwards | - | 80 | - | 348 |
Commodity forwards | - | 4 | - | 8 |
Commodity SWAP | 16 | |||
- | 2 | - | ||
Contracts for purchase/sale of coal | - | 13 | - | 1 |
Valuation of IRS | - | 432 | - | 106 |
Financial liabilities | - | 531 | - | 479 |
Derivatives are presented in note 17 to these financial statements. During the current and comparative reporting periods, there have been no transfers of financial instruments between the first and the second level of fair value hierarchy.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 17 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS EXPLANATORY NOTES TO OPERATING SEGMENTS
6. Information on operating segments
PGE Group companies conduct their business activities based on relevant concessions, including primarily concession on: production, trade and distribution of electricity, generation, transmission and distribution of heat, granted by the President of Energy Regulatory Office and concessions for the extraction of lignite deposits, granted by the Minister of the Environment. Concessions, as a rule, are issued for the period between 10 and 50 years.
Relevant assets are assigned to the held concessions on lignite mining and generation and distribution of electricity and heat, which was presented in detailed information on operating segments. For its concessions concerning electricity and heat the Group incurs annual charges dependent on the level of turnover. Whereas for conducting licensed extraction of lignite the exploitation charges as well as fees for the use of mining are borne. The exploitation charges depend on the current rate and the volume of the extraction.
PGE Group presents information on operating segments in the current and comparative reporting period in accordance with IFRS 8 Operating Segments. PGE Group' segment reporting is based on the following business segments:
- Conventional Generation comprises exploration and mining of lignite and generation of electricity from conventional sources as well as ancillary services.
- District heating comprises the generation of electricity from cogeneration units and the transmission and distribution of heat.
- Renewables comprise generation of electricity in pumped-storage power plants and from renewable sources.
- Supply includes sales and purchases of electricity and natural gas on the wholesale market, trading in CO2 emissions allowances and energy origin rights, sales and purchases of fuel, as well as sales of electricity and rendering services to final customers.
- Distribution comprises management over local distribution networks and transmission of electricity in these networks.
- Other operations comprise services rendered by the subsidiaries for the Group, e.g. fund raising, IT, accounting and HR, and transport services. Additionally, the other operations segment comprises the activities of a subsidiary whose main business is preparation and implementation of a nuclear power plant construction project, investments in startups.
Organisation and management over PGE Group is based on segment reporting separated by nature of the products and services provided. Each segment represents a strategic business unit, offering different products and serving different markets. Assignment of particular entities to operating segments is described in note 1.3 to these consolidated financial statements. Inter-segment transactions are disclosed as if they were concluded with third parties - under market conditions. When analysing the results of particular business segments the management of PGE Group draws attention primarily to EBITDA.
Seasonality of business segments
Main factors affecting the demand for electricity and heat are: weather conditions - air temperature, wind force, rainfall, socio-economic factors - number of energy consumers, energy product prices, growth of GDP and technological factors - advances in technology, product manufacturing technology. Each of these factors has an impact on technical and economic conditions of production, distribution and transmission of energy carriers, thus influence the results obtained by PGE Group.
The level of electricity sales is variable throughout a year and depends especially on weather conditions - air temperature, length of the day. Growth in electricity demand is particularly evident in winter periods, while lower demands are observed during the summer months. Moreover, seasonal changes are evident among selected groups of final customers. Seasonality effects are more significant for households than for the industrial sector.
In the Renewables segment, electricity is generated from natural resources such as water, wind and sun. Weather conditions are an important factor affecting electricity generation in this segment.
Sales of heat depend in particular on air temperature and are higher in winter and lower in summer.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 18 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
6.1 Information on business segments
Information on business segments for the period ended June 30, 2020
Conventional | District | Renewables | Supply | Distribution | Other | Adjustments | Total | ||||||||||||
Generation | Heating | activities | |||||||||||||||||
STATEMENT OF PROFIT OR LOSS | |||||||||||||||||||
Sales to external customers | 9,276 | 1,556 | 382 | 9,987 | 3,091 | 38 | (1,554) | 22,776 | |||||||||||
Inter-segment sales | 3,291 | 1,061 | 139 | 5,699 | 44 | 199 | (10,433) | - | |||||||||||
TOTAL SEGMENT REVENUE | 12,567 | 2,617 | 521 | 15,686 | 3,135 | 237 | (11,987) | 22,776 | |||||||||||
Cost of goods sold | (12,288) | (2,234) | (335) | (14,843) | (2,493) | (232) | 11,532 | (20,893) | |||||||||||
EBIT | (667) | 193 | 152 | 169 | 502 | (39) | (39) | 271 | |||||||||||
Depreciation, amortisation, disposal and | |||||||||||||||||||
impairment losses | 1,441 | 300 | 149 | 18 | 625 | 44 | (43) | 2,534 | |||||||||||
recognised in profit or loss | |||||||||||||||||||
EBITDA | 774 | 493 | 301 | 187 | 1,127 | 5 | (82) | 2,805 | |||||||||||
LOSS BEFORE TAX | (544) | ||||||||||||||||||
Income tax | (93) | ||||||||||||||||||
NET LOSS FOR THE REPORTING PERIOD | (637) | ||||||||||||||||||
ASSETS AND LIABILITIES | |||||||||||||||||||
Segment's assets excluding trade receivables | 34,164 | 7,833 | 4,118 | 3,251 | 19,203 | 854 | (2,054) | 67,369 | |||||||||||
Trade receivables | 603 | 220 | 145 | 3,645 | 812 | 67 | (2,304) | 3,188 | |||||||||||
Shares accounted for using the equity method | 157 | ||||||||||||||||||
Unallocated assets | 4,411 | ||||||||||||||||||
TOTAL ASSETS | 75,125 | ||||||||||||||||||
Segment's liabilities excluding trade liabilities | 14,712 | 2,127 | 1,015 | 2,538 | 2,812 | 138 | (4,024) | 19,318 | |||||||||||
Trade liabilities | 889 | 213 | 30 | 1,891 | 221 | 30 | (2,258) | 1,016 | |||||||||||
Unallocated liabilities | 12,517 | ||||||||||||||||||
TOTAL LIABILITIES | 32,851 | ||||||||||||||||||
OTHER INFORMATION ON BUSINESS SEGMENT | |||||||||||||||||||
Capital expenditures | 811 | 175 | 647 | 5 | 819 | 85 | (51) | 2,491 | |||||||||||
Increases in ROUA | 2 | 3 | 2 | 1 | 6 | 2 | (3) | 13 | |||||||||||
TOTAL CAPITAL EXPENDITURES | 813 | 178 | 649 | 6 | 825 | 87 | (54) | 2,504 | |||||||||||
Impairment losses on financial and non-financial | 622 | 2 | - | 34 | 8 | - | - | 666 | |||||||||||
assets | |||||||||||||||||||
Other non-monetary expenses *) | 3,385 | 497 | 20 | 362 | 180 | 26 | 174 | 4,644 | |||||||||||
*) Non-monetary expenses include mainly changes in provisions such as: rehabilitation provision, provision for CO2 emission allowances, jubilee awards, employee tariff and non-financial liabilities concerning employee benefits that are recognised in profit or loss and other comprehensive income.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 19 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Information on business segments for the period ended June 30, 2019
Conventional | District | Renewables | Supply | Distribution | Other | Adjustments | Total | |
Generation | Heating | activities | ||||||
STATEMENT OF PROFIT OR LOSS | ||||||||
Sales to external customers | 6,038 | 2,168 | 522 | 6,510 | 2,982 | 51 | (35) | 18,236 |
Inter-segment sales | 3,260 | 933 | 36 | 2,632 | 46 | 177 | (7,084) | - |
TOTAL SEGMENT REVENUE | 9,298 | 3,101 | 558 | 9,142 | 3,028 | 228 | (7,119) | 18,236 |
Cost of goods sold | (8,430) | (2,674) | (344) | (8,294) | (2,293) | (202) | 6,389 | (15,848) |
EBIT | 1,216 | 481 | 180 | 457 | 609 | (15) | (482) | 2,446 |
Depreciation, amortisation, disposal and | 890 | 291 | 130 | 16 | 602 | 42 | (22) | 1,949 |
impairment losses recognised in profit or loss | ||||||||
EBITDA | 2,106 | 772 | 310 | 473 | 1,211 | 27 | (504) | 4,395 |
GROSS PROFIT | 2,240 | |||||||
Income tax | (475) | |||||||
NET PROFIT FOR THE REPORTING PERIOD | 1,765 | |||||||
ASSETS AND LIABILITIES | ||||||||
Segment's assets excluding trade receivables | 41,025 | 8,115 | 3,311 | 2,687 | 18,182 | 729 | (2,011) | 72,038 |
Trade receivables | 708 | 350 | 180 | 3,530 | 902 | 60 | (2,388) | 3,342 |
Shares accounted for using the equity method | 800 | |||||||
Unallocated assets | 3,721 | |||||||
TOTAL ASSETS | 79,901 | |||||||
Segment's liabilities excluding trade liabilities | 9,446 | 1,719 | 384 | 3,048 | 2,855 | 112 | (2,068) | 15,496 |
Trade liabilities | 942 | 312 | 38 | 2,121 | 204 | 39 | (2,331) | 1,325 |
Unallocated liabilities | 14,018 | |||||||
TOTAL LIABILITIES | 30,839 | |||||||
OTHER INFORMATION ON BUSINESS SEGMENT | ||||||||
Capital expenditures | 1,580 | 111 | 31 | 6 | 818 | 93 | (96) | 2,543 |
Increases in ROUA | 1 | - | 1 | 3 | 2 | 7 | - | 14 |
TOTAL CAPITAL EXPENDITURES | 1,581 | 111 | 32 | 9 | 820 | 100 | (96) | 2,557 |
Impairment losses on financial and non-financial | 95 | 90 | 1 | 10 | 4 | - | (1) | 199 |
assets | ||||||||
Other non-monetary expenses *) | 2,177 | 255 | 38 | 277 | 157 | 20 | 89 | 3,013 |
*) Non-monetary expenses include mainly changes in provisions such as: rehabilitation provision, provision for CO2 emission allowances, jubilee awards, employee tariff and non-financial liabilities concerning employee benefits that are recognised in profit or loss and other comprehensive income.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 20 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
EXPLANATORY NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
7. Revenue and expenses
7.1 Revenuefromsales
Revenue from sales in the period ended June 30, 2020, by category
A reconciliation of revenue disclosure by category and information on revenue that the entity discloses for each reporting segment is presented in the table below.
Conventional | District Heating | Renewables | Supply | Distribution | Other | Adjustments | Total | |||||||||||||
Generation | activities | |||||||||||||||||||
Revenue from contracts with customers | 12,560 | 2,560 | 415 | 15,683 | 3,109 | 237 | (11,981) | 22,583 | ||||||||||||
Revenue from support for high- | - | 7 | - | - | - | - | - | 7 | ||||||||||||
efficiency cogeneration | ||||||||||||||||||||
Revenue from LTC compensations | - | 41 | - | - | - | - | - | 41 | ||||||||||||
Revenue from leases | 7 | 9 | 106 | 3 | 26 | - | (6) | 145 | ||||||||||||
TOTAL REVENUE FROM SALES | 12,567 | 2,617 | 521 | 15,686 | 3,135 | 237 | (11,987) | 22,776 | ||||||||||||
Revenue from contracts with customers divided into categories that reflect how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors is presented in the table below.
Type of goods or services | Conventional | District Heating | Renewables | Supply | Distribution | Other | Adjustment | Total | ||||||||||||
Generation | activities | s | ||||||||||||||||||
Revenue from sales of goods and | ||||||||||||||||||||
products, without excluding taxes and | 12,539 | 2,511 | 414 | 15,289 | 3,117 | 37 | (11,310) | 22,597 | ||||||||||||
fees | ||||||||||||||||||||
Taxes and fees collected on behalf of | (2) | (2) | - | (61) | (36) | - | - | (101) | ||||||||||||
third parties | ||||||||||||||||||||
Revenue from sales of goods and | 12,537 | 2,509 | 414 | 15,228 | 3,081 | 37 | (11,310) | 22,496 | ||||||||||||
products, including: | ||||||||||||||||||||
Sale of electricity | 10,595 | 1,200 | 268 | 7,573 | 1 | - | (4,012) | 15,625 | ||||||||||||
Sale of distribution services | 7 | 7 | - | 23 | 2,972 | - | (42) | 2,967 | ||||||||||||
Sale of heat | 85 | 1,066 | - | 5 | - | - | - | 1,156 | ||||||||||||
Sale of energy origin rights | 27 | 6 | 120 | - | - | - | 31 | 184 | ||||||||||||
Regulatory system services | 221 | - | 24 | - | - | - | - | 245 | ||||||||||||
Sale of natural gas | - | - | - | 154 | - | - | (77) | 77 | ||||||||||||
Sale of fuel | - | - | - | 384 | - | - | (215) | 169 | ||||||||||||
Sale of CO2 emission allowances | 1,535 | 202 | - | 7,086 | - | - | (6,993) | 1,830 | ||||||||||||
Other sales of goods and materials | 67 | 28 | 2 | 3 | 108 | 37 | (2) | 243 | ||||||||||||
Revenue from sales of services | 23 | 51 | 1 | 455 | 28 | 200 | (671) | 87 | ||||||||||||
TOTAL REVENUE FROM CONTRACTS | 12,560 | 2,560 | 415 | 15,683 | 3,109 | 237 | (11,981) | 22,583 | ||||||||||||
WITH CUSTOMERS | ||||||||||||||||||||
Revenue from sales in the period ended June 30, 2019, by category
A reconciliation of revenue disclosure by category and information on revenue that the entity discloses for each reporting segment is presented in the table below.
Conventional | District Heating | Renewables | Supply | Distribution | Other | Adjustments | Total | |
Generation | activities | |||||||
Revenue from contracts with customers | 9,288 | 3,087 | 455 | 8,233 | 3,005 | 226 | (7,110) | 17,184 |
Revenue from recognised | ||||||||
compensations based on the Act on | 4 | 20 | - | 907 | - | - | - | 931 |
Electricity Prices | ||||||||
Revenue from LTC compensations | - | (15) | - | - | - | - | - | (15) |
Revenue from leases | 6 | 9 | 103 | 2 | 23 | 2 | (9) | 136 |
TOTAL REVENUE FROM SALES | 9,298 | 3,101 | 558 | 9,142 | 3,028 | 228 | (7,119) | 18,236 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 21 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Revenue from contracts with customers divided into categories that reflect how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors is presented in the table below.
Type of goods or services* | Conventional | District Heating | Renewables | Supply | Distribution | Other | Adjustment | Total |
Generation | activities | s | ||||||
Revenue from sales of goods and | ||||||||
products, without excluding taxes and | 9,235 | 3,039 | 454 | 7,864 | 3,011 | 44 | (6,444) | 17,203 |
fees | ||||||||
Taxes and fees collected on behalf of | (2) | (6) | - | (74) | (34) | - | - | (116) |
third parties | ||||||||
Revenue from sales of goods and | 9,233 | 3,033 | 454 | 7,790 | 2,977 | 44 | (6,444) | 17,087 |
products, including: | ||||||||
Sale of electricity | 8,767 | 1,942 | 333 | 5,543 | 2 | - | (4,547) | 12,040 |
Sale of distribution services | 7 | 6 | - | 25 | 2,870 | - | (43) | 2,865 |
Sale of heat | 91 | 1,037 | - | 6 | - | - | - | 1,134 |
Sale of energy origin rights | 15 | 12 | 91 | 8 | - | - | (5) | 121 |
Regulatory system services | 182 | - | 26 | - | - | - | - | 208 |
Sale of natural gas | - | - | - | 285 | - | - | (30) | 255 |
Sale of fuel | - | - | - | 647 | - | - | (441) | 206 |
Sale of CO2 emission allowances | 99 | 12 | - | 1,276 | - | - | (1,375) | 12 |
Other sales of goods and materials | 72 | 24 | 4 | - | 105 | 44 | (3) | 246 |
Revenue from sales of services | 55 | 54 | 1 | 443 | 28 | 182 | (666) | 97 |
TOTAL REVENUE FROM CONTRACTS | 9,288 | 3,087 | 455 | 8,233 | 3,005 | 226 | (7,110) | 17,184 |
WITH CUSTOMERS | ||||||||
*There was a reclassification between items in the table above.
7.2 | Costs bynatureand function | ||
Period ended | Period ended | ||
June 30, 2020 | June 30, 2019 | ||
COSTS BY NATURE | |||
Depreciation, amortisation and impairment losses | 2,545 | 1,994 | |
Materials and energy consumption | 2,582 | 2,660 | |
External services | 1,230 | 1,155 | |
Taxes and fees | 4,103 | 2,783 | |
Employee benefits expenses | 2,835 | 2,679 | |
Other costs by nature | 138 | 139 | |
TOTAL COST BY NATURE | 13,433 | 11,410 | |
Change in products | (5) | (20) | |
Cost of products and services for the entity's own needs | (512) | (569) | |
Distribution and selling expenses | (738) | (582) | |
General and administrative expenses | (535) | (508) | |
Cost of goods and materials sold | 9,250 | 6,117 | |
COST OF GOODS SOLD | 20,893 | 15,848 |
As disclosed in note 3.1 these financial statements, following impairment tests performed, the Group recognised impairment losses on non-current assets in the amount of PLN 530 million under Amortisation, depreciation and impairment losses.
The increase in the cost of goods and materials sold results from the increase in the purchase of electricity on the wholesale market and on the balancing market, which is related to the fulfilment of the exchange sale requirement of 100% by the Producers, larger reductions than in previous years, and thus lower production of electricity and securing the sale to final customers with purchase on the exchange market.
7.2.1 Depreciation, amortisation, disposal and impairment losses
The following presents depreciation, amortisation, disposals and impairment losses of property, plant and equipment, intangible assets, right-of-use assets and investment property in the statement of comprehensive income.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 22 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Period ended | Depreciation, amortisation, disposal | Impairment losses | ||||||||||||||||||||||||
June 30, 2020 | PPE | IA | ROUA | IP | TOTAL | PPE | IA | TOTAL | ||||||||||||||||||
Cost of goods sold | 1,804 | 37 | 27 | 1 | 1,869 | 623 | - | 623 | ||||||||||||||||||
Distribution and selling expenses | 7 | 2 | 1 | - | 10 | - | - | - | ||||||||||||||||||
General and administrative | 17 | 9 | 5 | - | 31 | 1 | - | 1 | ||||||||||||||||||
expenses | ||||||||||||||||||||||||||
RECOGNISED IN PROFIT OR LOSS | 1,828 | 48 | 33 | 1 | 1,910 | 624 | - | 624 | ||||||||||||||||||
Change in products | (4) | - | - | - | (4) | - | - | - | ||||||||||||||||||
Cost of products and services for the | 14 | - | 1 | - | 15 | - | - | - | ||||||||||||||||||
entity's own needs | ||||||||||||||||||||||||||
TOTAL | 1,838 | 48 | 34 | 1 | 1,921 | 624 | - | 624 | ||||||||||||||||||
Period ended | Depreciation, amortisation, disposal | Impairment losses | ||||||||||||||||||||||||
June 30, 2019 | ||||||||||||||||||||||||||
PPE | IA | ROUA | TOTAL | PPE | IA | TOTAL | ||||||||||||||||||||
Cost of goods sold | 1,756 | 42 | 19 | 1,817 | 95 | - | 95 | |||||||||||||||||||
Distribution and selling expenses | ||||||||||||||||||||||||||
6 | 1 | - | 7 | - | - | - | ||||||||||||||||||||
General and administrative | 15 | 9 | 5 | 29 | 1 | - | 1 | |||||||||||||||||||
expenses | ||||||||||||||||||||||||||
RECOGNISED IN PROFIT OR LOSS | 1,777 | 52 | 24 | 1,853 | 96 | - | 96 | |||||||||||||||||||
Cost of products and services for the | 45 | - | - | 45 | - | - | - | |||||||||||||||||||
entity's own needs | ||||||||||||||||||||||||||
TOTAL | 1,822 | 52 | 24 | 1,898 | 96 | - | 96 | |||||||||||||||||||
Other operating income | - | - | - | - | (1) | - | (1) |
In the current period, the Group performed impairment tests on non-current assets, as a result of which it recognised impairment losses in the total amount of PLN 530 million. For a detailed description, see note 3.1 to these financial statements.
Other impairment losses recognised in the reporting period concern capital expenditure incurred in the units for which impairment losses were recognised in previous periods.
Under "Depreciation, amortisation, disposal", the Group recognised the net disposals of PPE and IA of PLN 17 million in the current period and PLN 27 million in the corresponding period.
7.3 | Other operatingincomeand expenses | |||
Period ended | Period ended | |||
June 30, 2020 | June 30, 2019 | |||
NET OTHER OPERATING INCOME/(EXPENSES) | ||||
Effect of revaluation of rehabilitation provisions | (434) | (246) | ||
Valuation and exercise of derivatives, including: | 70 | (44) | ||
- CO2 | 66 | 33 | ||
- Coal | 4 | (77) | ||
Penalties, fines and compensations | 40 | 129 | ||
(Recognition)/Reversal of impairment losses on receivables | (40) | (97) | ||
Grants | 17 | 14 | ||
Reversal/(Recognition) of other provisions | (7) | 9 | ||
Gain on disposal of PPE/IA | 4 | 6 | ||
Income from additional CO2 emission allowances | - | 1,391 | ||
Other | 11 | (14) | ||
TOTAL NET OTHER OPERATING INCOME/(EXPENSES) | (339) | 1,148 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 23 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
7.4 | Financeincomeand costs | |||
Period ended | Period ended | |||
June 30, 2020 | June 30, 2019 | |||
NET FINANCE INCOME/(COSTS) FROM FINANCIAL INSTRUMENTS | ||||
Dividends | 2 | 1 | ||
Interest, including: | (133) | (101) | ||
Interest income calculated using the effective interest rate method | 17 | 18 | ||
Revaluation | 3 | (5) | ||
Reversal/(recognition) of impairment losses | (2) | (1) | ||
Foreign exchange differences | (17) | (14) | ||
Loss on disposal of investments | - | (7) | ||
TOTAL NET FINANCE INCOME/(COSTS) FROM FINANCIAL INSTRUMENTS | (147) | (127) | ||
OTHER NET FINANCE INCOME/(COSTS) | ||||
Interest expense on non-financial items | (117) | (97) | ||
Interest on statutory receivables | (1) | - | ||
Recognition of provisions | (1) | |||
Other | (5) | (3) | ||
TOTAL NET OTHER FINANCE INCOME/(COSTS) | (123) | (101) | ||
TOTAL NET FINANCE INCOME/(COSTS) | (270) | (228) | ||
Interest expenses mainly relate to bonds issued and credit and loans incurred as well as leases. In the current period, interest expenses on lease liabilities amounted to PLN 21 million.
Interest expenses on non-financial items relate mainly to rehabilitation provisions and employee benefit provisions.
7.5 Shareof profit ofequity-accounted entities
Period ended June 30, 2020 | Polska Grupa | Polimex | ElectroMobility | PEC Bogatynia | Energopomiar | ||||||||
Górnicza | Mostostal | Poland | |||||||||||
SHARE IN VOTES | 15.32% | 16.48% | 25.00% | 34.93% | 49.79% | ||||||||
Revenue | 3,524 | 644 | - | 5 | 33 | ||||||||
Profit (loss) on continuing operations | (547) | 64 | (2) | 1 | 4 | ||||||||
Share of profit of equity-accounted entities before | (84) | 11 | (1) | - | 2 | ||||||||
consolidation adjustments | |||||||||||||
Elimination of unrealised gains and losses | 9 | - | - | - | - | ||||||||
Impairment loss | (482) | - | - | - | |||||||||
SHARE OF PROFIT (LOSS) OF EQUITY-ACCOUNTED | (557) | 11 | (1) | - | 2 | ||||||||
ENTITIES | |||||||||||||
Other comprehensive income | (21) | - | - | - | - | ||||||||
SHARE OF PROFIT (LOSS) OF EQUITY-ACCOUNTED | (3) | - | - | - | - | ||||||||
ENTITIES IN OTHER COMPREHENSIVE INCOME | |||||||||||||
Period ended June 30, 2019 | Polska Grupa | Polimex | ElectroMobility | PEC Bogatynia | Energopomiar | ||||||||
Górnicza | Mostostal | Poland | |||||||||||
SHARE IN VOTES | 15.32% | 16.48% | 25.00% | 34.93% | 49.79% | ||||||||
Revenue | 4,486 | 632 | - | 8 | 34 | ||||||||
Profit (loss) on continuing operations | 128 | (7) | (3) | - | 3 | ||||||||
Share of profit of equity-accounted entities before | 20 | (1) | (1) | - | 1 | ||||||||
consolidation adjustments | |||||||||||||
Elimination of unrealised gains and losses | 2 | - | - | - | - | ||||||||
SHARE OF PROFIT (LOSS) OF EQUITY-ACCOUNTED | 22 | (1) | (1) | 2 | |||||||||
ENTITIES | |||||||||||||
Other comprehensive income | (9) | - | - | - | - | ||||||||
SHARE OF PROFIT (LOSS) OF EQUITY-ACCOUNTED | (1) | - | - | - | - | ||||||||
ENTITIES IN OTHER COMPREHENSIVE INCOME | |||||||||||||
The Group makes a consolidation adjustment related to margin on sale of coal between Polska Grupa Górnicza and PGE Group.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 24 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
8. Impairment losses on assets
Period ended | Period ended | ||
June 30, 2020 | June 30, 2019 | ||
IMPAIRMENT LOSSES ON PROPERTY, PLANT AND EQUIPMENT | |||
Recognition of impairment losses | 883 | 241 | |
Reversal of impairment losses | 259 | 146 | |
IMPAIRMENT LOSSES ON SHARES ACCOUNTED FOR USING THE EQUITY METHOD | |||
Recognition of impairment losses | 482 | - | |
Reversal of impairment losses | - | - | |
IMPAIRMENT LOSSES ON INVENTORY | |||
Recognition of impairment losses | 9 | 37 | |
Reversal of impairment losses | 16 | 4 |
9. Income tax
9.1 | Tax in thestatement of comprehensiveincome | ||||
Main components of income tax expense for the period ended June 30, 2020, and June 30, 2019 were as follows: | |||||
Period ended | Period ended | ||||
June 30, 2020 | June 30, 2019 | ||||
INCOME TAX RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS | |||||
Current income tax | 458 | 329 | |||
Adjustments to current income tax for previous years | 1 | 11 | |||
Deferred income tax | (369) | 145 | |||
Adjustments to deferred income tax | 3 | (10) | |||
INCOME TAX EXPENSE RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS | 93 | 475 | |||
INCOME TAX EXPENSE RECOGNISED IN OTHER COMPREHENSIVE INCOME | |||||
On actuarial gains (losses) on valuation of employee benefit provisions | (39) | (27) | |||
On valuation of hedging instruments | (11) | (27) | |||
(Tax benefit)/tax expense recognised in other comprehensive income (equity) | (50) | (54) | |||
9.2 Effectivetax rate
The table below presents a reconciliation of income tax on pre-tax profit/loss computed at the statutory rate with income tax computed at the effective tax rate of the Group:
Period ended | Period ended | |||
June 30, 2020 | June 30, 2019 | |||
PROFIT / (LOSS) BEFORE TAX | (544) | 2,240 | ||
Income tax at the 19% statutory rate applicable in Poland | (103) | 426 | ||
ITEMS ADJUSTING INCOME TAX | ||||
Recognition of impairment losses with respect to which no deferred tax was recognised | 111 | 7 | ||
Recognition of rehabilitation provisions with respect to which no deferred tax was recognised | 74 | 48 | ||
Other non-deductible costs | 26 | 31 | ||
Non-taxable income | - | (15) | ||
Other adjustments | (15) | (22) | ||
INCOME TAX AT THE EFFECTIVE TAX RATE | ||||
93 | 475 | |||
Income tax (expense) in the consolidated financial statements | ||||
EFFECTIVE TAX RATE | 17% | 21% |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 25 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
EXPLANATORY NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
10. Significant acquisitions and disposals of property, plant and equipment, intangible assets and right-of-use assets
In the current reporting period, PGE Group purchased property, plant and equipment and intangible assets worth PLN 2,491 million and obtained right-of-use assets worth PLN 13 million. The largest expenditure was incurred by the Conventional Generation segment (PLN 813 million) and the Distribution segment (PLN 825 million). The key expenditure items included: construction of a new unit at the Turów power plant (PLN 120 million) and connection of new customers (PLN 350 million).
In the current period, there were no significant disposals of property, plant and equipment.
11. Future investment commitments
As at June 30, 2020, PGE Group committed to incur capital expenditures on property, plant and equipment of approximately PLN 8,895 million. These amounts relate mainly to construction of new power units, modernisation of Group's assets and purchase of machinery and equipment.
As at | As at | |
June 30, 2020 | December 31, 2019 | |
Conventional Generation | 6,584 | 2,363 |
Distribution | 1,680 | 1,405 |
District Heating | 267 | 227 |
Renewables | 183 | 363 |
Supply | 4 | 1 |
Other activities | 177 | 213 |
TOTAL FUTURE INVESTMENT COMMITMENTS | 8,895 | 4,572 |
The most significant future investment commitments concern:
- Conventional Generation:
- Branch Bełchatów Power Plant - upgrade of FGD unit - approximately PLN 286 million,
- Branch Opole Power Plant - modernisation of power units no. 1-4 - approximately PLN 163 million,
- Branch Turów Power Plant - construction of new power unit no. 7 - approximately PLN 786 million,
- Branch Zespół Elektrowni Dolna Odra - construction of two CCGT units and agreement on maintenance services for two gas turbines - approximately PLN 4,366 million,
- Distribution - investment commitments related to network distribution assets with the total value of approximately PLN 1,680 million,
- Other activity, PGE EJ1 sp. z o.o. - agreement for owners engineer in the investment process related to construction of the first Polish nuclear power plant - approximately PLN 128 million (basic scope). An optional scope includes the amount of approx. PLN 1,112 million.
PGE EJ 1 sp. z o.o. is a subsidiary of PGE Group, established in 2010. The current scope of the Programme conducted by PGE EJ 1 Sp. z o.o. provides for carrying environmental and site surveys at two potential locations (Lubiatowo-Kopalino and Żarnowiec) and in preparing a Project environmental impact report and a Site report.
PGE Group intends to continue providing financial support for PGE EJ1 sp. z o.o., as is necessary to continue works under the existing scope of works and approved financial plan.
Decisions with regard to the continuation of the Programme will be made based on decisions by the public administration authorities concerning a role of nuclear energy in Polish fuel mix, mode for the procurement of nuclear power plant technology, investment financing model and an updated Programme for Poland's Nuclear Power.
On August 6, 2020, the Ministry of Climate has submitted a draft resolution of the Council of Ministers on the amendment of the multi- annual Polish Nuclear Power Programme for public consultation. The program provides for the acquisition by the State Treasury of 100% of shares in the special purpose vehicle PGE EJ1 sp. z o. o. The programme is expected to be adopted in the fourth quarter of 2020.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 26 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
12. Shares accounted for using the equity method
As at | As at | ||||||||||||||||
June 30, 2020 | December 31, 2019 | ||||||||||||||||
Polska Grupa Górnicza S.A., Katowice | - | 570 | |||||||||||||||
Polimex-Mostostal S.A., Warsaw | 123 | 112 | |||||||||||||||
ElectroMobility Poland S.A., Warsaw | 14 | 14 | |||||||||||||||
PEC Bogatynia Sp. z o.o., Bogatynia | 8 | 8 | |||||||||||||||
Energopomiar Sp. z o.o. , Gliwice | 12 | 11 | |||||||||||||||
SHARES ACCOUNTED FOR USING THE EQUITY METHOD | 157 | 715 | |||||||||||||||
Polska Grupa | Polimex | ElectroMobility | PEC Bogatynia | Energopomiar | |||||||||||||
Górnicza | Mostostal | Poland | |||||||||||||||
SHARE IN VOTES | 15.32% | 16.48% | 25.00% | 34.93% | 49.79% | ||||||||||||
AS AT JUNE 30, 2020 | |||||||||||||||||
Current assets | 1,709 | 1,085 | 35 | 4 | 29 | ||||||||||||
Non-current assets | 10,405 | 659 | 22 | 21 | 18 | ||||||||||||
Current liabilities | 4,292 | 810 | 1 | 1 | 12 | ||||||||||||
Non-current liabilities | 4,668 | 287 | - | - | 8 | ||||||||||||
NET ASSETS | 3,154 | 647 | 56 | 24 | 27 | ||||||||||||
Share in net assets | 481 | 107 | 14 | 8 | 12 | ||||||||||||
Goodwill | 1 | 16 | - | - | - | ||||||||||||
Impairment loss on investments | (482) | - | - | - | - | ||||||||||||
SHARES ACCOUNTED FOR USING THE EQUITY | - | 123 | 14 | 8 | 12 | ||||||||||||
METHOD | |||||||||||||||||
Polska Grupa | Polimex | ElectroMobility | PEC Bogatynia | Energopomiar | |||||||||||||
Górnicza | Mostostal | Poland | |||||||||||||||
SHARE IN VOTES | 15.32% | 16.48% | 25.00% | 34.93% | 49.79% | ||||||||||||
AS AT DECEMBER 31, 2019 | |||||||||||||||||
Current assets | 2,226 | 964 | 40 | 5 | 28 | ||||||||||||
Non-current assets | 10,220 | 718 | 18 | 21 | 18 | ||||||||||||
Current liabilities | 4,040 | 779 | 1 | 2 | 15 | ||||||||||||
Non-current liabilities | 4,695 | 320 | - | - | 8 | ||||||||||||
NET ASSETS | 3,711 | 583 | 57 | 24 | 23 | ||||||||||||
Share in net assets | 569 | 96 | 14 | 8 | 11 | ||||||||||||
Goodwill | 1 | 16 | - | - | - | ||||||||||||
SHARES ACCOUNTED FOR USING THE EQUITY | 570 | 112 | 14 | 8 | 11 | ||||||||||||
METHOD | |||||||||||||||||
Due to the extremely restrictive policy of the European Union towards hard coal, the prospects for the hard coal mining sector seem to be extremely challenging. PGE analyses the investment in PGG S.A. on an ongoing basis in the context of external, including market- related, and internal conditions. In particular, PGE notes the difficult personnel and payroll policy in the sector, where the social partners expect salary increases or additional benefits regardless of the financial performance of mining companies. Additionally, the need to extract coal from lower and lower deposits, resulting from the specific nature of PGG's mines, has an adverse impact on the profitability of production.
It should also be noted that the profitability of PGG, which was one of the most important prerequisites for the investment decision of PGE Group, significantly deviates (to the disadvantage) from the assumptions adopted in the business plan prepared in 2014 when the company was established.
The above, combined with the decreasing demand for coal in subsequent periods, which is reflected in projections available to PGE, constituted a premise for remeasurement of the value in use of PGG S.A. shares.
Following the test, an impairment loss of PLN 482 million was recognised on the investment in PGG. After the recognition of the impairment loss, the carrying amount of PGG in the consolidated financial statements of PGE Group is 0.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 27 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
13. Deferred tax in the statement of financial position
13.1 | Deferred incometax assets | |||
As at | As at | |||
June 30, 2020 | December 31, 2019 | |||
Difference between tax value and carrying amount of property, plant and equipment | 2,889 | 3,403 | ||
Rehabilitation provision | 1,190 | 984 | ||
Provisions for employee benefits | 752 | 677 | ||
Provision for purchase of CO2 emission allowances | 596 | 671 | ||
Difference between tax value and carrying amount of financial liabilities | 281 | 429 | ||
Difference between carrying amount and tax value of right-of-use assets | 171 | 171 | ||
Tax losses | 158 | 160 | ||
Other provisions | 134 | 151 | ||
Difference between tax value and carrying amount of financial assets | 208 | 146 | ||
LTC compensations | 81 | 89 | ||
Difference between tax value and carrying amount of inventories | 15 | 21 | ||
Energy infrastructure acquired free of charge and connection fees received | 31 | |||
30 | ||||
Other | 5 | 14 | ||
TOTAL DEFERRED INCOME TAX ASSETS | 6,510 | 6,947 |
13.2 | Deferred tax liabilities | |||
As at | As at | |||
June 30, 2020 | December 31, 2019 | |||
Difference between tax value and carrying amount of property, plant and equipment | 4,927 | 5,281 | ||
CO2 emission allowances | 44 | 476 | ||
Difference between tax value and carrying amount of financial assets | 436 | 447 | ||
Difference between carrying amount and tax value of lease liabilities | 186 | 169 | ||
Receivables from recognised compensations - Act on Electricity Prices | 3 | 58 | ||
Difference between tax value and carrying amount of energy origin units | 29 | 25 | ||
Difference between tax value and carrying amount of financial liabilities | 12 | 12 | ||
Other | 60 | 81 | ||
TOTAL DEFERRED TAX LIABILITIES | 5,697 | 6,549 | ||
Group's deferred tax after offset of assets and liabilities at each company and the tax group | ||||
Deferred tax assets | 1,059 | 1,318 | ||
Deferred income tax liabilities | (246) | (920) |
14. Inventories
As at | As at | |
June 30, 2020 | December 31, 2019 | |
Hard coal | 908 | 1,077 |
Materials for repairs and operations | 675 | 628 |
Mazut | 39 | 43 |
Other materials | 85 | 56 |
TOTAL MATERIALS | 1,707 | 1,804 |
Green property rights | 1,165 | 1,096 |
Other property rights | 4 | 76 |
TOTAL ENERGY ORIGIN RIGHTS | 1,169 | 1,172 |
CO2 emission allowances held for sale | 1,303 | |
1 | ||
Hard coal held for sale | 42 | 125 |
Other goods | 21 | 26 |
TOTAL GOODS | 64 | 1,454 |
OTHER INVENTORIES | 79 | |
79 | ||
TOTAL INVENTORIES | 3,019 | 4,509 |
In the corresponding period, the CO2 emission allowances included EUA resulting from the additional allocation of the CO2 emission allowances for 2013-2017. These allowances were held for trading purposes and were sold in the first quarter of 2020.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 28 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
15. CO2 emission allowances for captive use
CO2 emission allowances are received by power generating units belonging to PGE Group, which are covered by the Act dated June 12, 2015 on a scheme for greenhouse gas emission allowance trading. Starting from 2013, only part of emission rights for production of heat will be granted unconditionally, while for production of electricity there is, as a rule, lack of free of charge EUA. Pursuant to Article 10c of Directive 2009/29/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community, the derogation is possible providing the realization of investment tasks included in National Investment Plan, which allow to reduce CO2 emission. The condition under which free of charge CO2 emission rights can be obtained is presentation of factual-financial statements from realization of tasks included in National Investment Plan.
In September 2019, PGE Group submitted further reports on investments included in the National Investment Plan in order to obtain CO2 EUA allocations for power generating installations, justified by expenses incurred for investment tasks included in the National Investment Plan in the reporting period from July 1, 2018 to June 30, 2019. This period is the last period of allocation of free emission allowances in the current settlement period. The requested allowances (12 million of EUA allowanced) were released to the operator's accounts in the EU register in April 2020.
In the case of EUAs for CO2 emissions related to heating, the allocation schedule is different - in February 2020 EUAs were allocated for the coverage of CO2 emissions for 2020 (1 million EUAs).
As at June 30, 2020 | As at December 31, 2019 | |||||||
EUA | Non-current | Current | Non-current | Current | ||||
Quantity (Mg million) | 1 | 4 | 3 | 18 | ||||
Value (PLN million) | 32 | 207 | 240 | 965 | ||||
EUA | Quantity (Mg million) | Value (PLN million) | ||||||
AS AT JANUARY 1, 2019 | 37 | 1,611 | ||||||
Purchase | 40 | 1,477 | ||||||
Granted free of charge | 15 | - | ||||||
Redemption | (70) | (1,803) | ||||||
Reclassification to inventories | (1) | (80) | ||||||
AS AT DECEMBER 31, 2019 | 21 | 1,205 | ||||||
Purchase | 50 | 3,955 | ||||||
Granted free of charge | 13 | - | ||||||
Redemption | (61) | (3,414) | ||||||
Sale | (18) | (1,507) | ||||||
AS AT JUNE 30, 2020 | 5 | 239 |
16. Selected financial assets
The value of financial receivables measured at amortised cost is a reasonable approximation of their fair value.
16.1 Tradeand other financial receivables
As at June 30, 2020 | As at December 31, 2019 | ||||||
Non-current | Current | Non-current | Current | ||||
Trade receivables | - | 3,188 | - | 3,483 | |||
Deposits and loans | 185 | 18 | 174 | 8 | |||
Receivables from recognised compensations based on | - | 17 | - | 304 | |||
the Act on Electricity Prices | |||||||
Deposits, securities and collateral | - | 647 | 1 | 801 | |||
Damages and penalties | - | 103 | - | 112 | |||
Other financial receivables | 8 | 86 | 5 | 107 | |||
FINANCIAL RECEIVABLES | 193 | 4,059 | 180 | 4,815 | |||
* In the comparative period, there was a reclassification between items in the table above.
Deposits, securities and collateral mainly concern transaction and hedging deposits and the guarantee fund related to transactions on the electricity and CO2 markets.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 29 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
16.2 Cash and cash equivalents
Short-term deposits are placed for different periods, from one day up to one month, depending on the Group's needs for cash.
The balance of cash and cash equivalents comprises the following items:
As at | As at | |
June 30, 2020 | December 31, 2019 | |
Cash in hand and at banks | 1,841 | 1,093 |
Overnight deposits | 12 | 19 |
Short-term deposits | 33 | 103 |
Cash in VAT accounts | 137 | 98 |
TOTAL | 2,023 | 1,313 |
Exchange differences on cash in foreign currencies | (5) | (2) |
Cash and cash equivalents presented in the statement of cash flows | 2,018 | 1,311 |
Undrawn borrowing facilities as at the reporting date | 6,487 | 5,309 |
including overdraft facilities | 1,827 | 1,035 |
A detailed description of credit agreements is presented in note 20.1 to these financial statements.
The balance of cash includes restricted cash:
- PLN 102 million (PLN 230 million in the comparative period) in PGE Dom Maklerski S.A. clients' accounts as collateral for settlements with IRGiT,
- cash in VAT accounts in the amount of PLN 137 million (PLN 98 million in the comparative period) as well as
- securities and collateral of PLN 98 million (PLN 100 million in the comparative period).
17. Derivatives and other assets measured at fair value through profit or loss
As at June 30, 2020 | |||
Assets | Liabilities | ||
DERIVATIVES MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS | |||
Currency forwards | 4 | 2 | |
Commodity forwards | 16 | 4 | |
Commodity SWAP | 13 | 2 | |
Contracts for purchase/sale of coal | - | 13 | |
Options | 6 | - | |
HEDGING DERIVATIVES | |||
CCIRS hedges | 13 | - | |
IRS hedges | - | 432 | |
Currency forward - USD | 1 | 1 | |
Currency forward - EUR | 77 | 77 | |
OTHER ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS | |||
Investment fund participation units | 70 | - | |
TOTAL | 200 | 531 | |
current | 111 | 98 | |
non-current | 89 | 433 | |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 30 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
As at December 31, 2019 | |||
Assets | Liabilities | ||
DERIVATIVES MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS | |||
Currency forwards | 13 | 16 | |
Commodity forwards | 265 | 8 | |
Commodity SWAP | 11 | 16 | |
Contracts for purchase/sale of coal | 6 | 1 | |
Options | 5 | - | |
HEDGING DERIVATIVES | |||
CCIRS hedges | 18 | - | |
IRS hedges | - | 106 | |
Currency forward - USD | - | - | |
Currency forward - EUR | 34 | 332 | |
OTHER ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS | |||
Investment fund participation units | 68 | - | |
TOTAL | 420 | 479 | |
current | 327 | 372 | |
non-current | 93 | 107 |
Commodity and currency forwards
Commodity and currency forward transactions mainly relate to trade in CO2 emission allowances and to sales of coal. To recognise currency futures related to the purchase of CO2 allowances, the Group uses hedge accounting.
Options
On January 20, 2017 PGE S.A. purchased a call option to purchase shares of Polimex-Mostostal S.A. from Towarzystwo Finansowe Silesia Sp. z o.o. The option was measured using the Black-Scholes method.
Coal swaps
In the current period, PGE Paliwa sp. z o.o., in order to hedge the commodity risk related to the price of imported coal, executed a number of transactions to hedge this risk using commodity swaps for coal. The number and value of these transactions is correlated to the quantity and value of imported coal. Changes in fair value are recognised in profit or loss.
Purchase and sale contracts with physical delivery of coal
PGE Paliwa Sp. z o.o. measures all of its sales and purchase contracts with physical delivery of coal at fair value using the trader-broker model. As at the reporting date, the Company held contracts that would be performed in 2021.
IRS transactions
PGE S.A. entered into IRS transactions to hedge interest rates on credit facilities and bonds issued with a total nominal value of PLN 7,030 million. To recognise these IRS transactions, the Group uses hedge accounting. The impact of hedge accounting on the revaluation reserve is presented in note 18.2 to these consolidated financial statements.
CCIRS hedges
In connection with loans received from PGE Sweden AB (publ), PGE S.A. concluded CCIRS transactions, hedging both the exchange rate and interest rate. In these transactions, banks-counterparties pay PGE S.A. interest based on a fixed rate in EUR and PGE S.A. pays interest based on a fixed rate in PLN. In the consolidated financial statements, a relevant part of the CCIRS transactions is treated as a security for bonds issued by PGE Sweden AB (publ).
Investment fund participation units
In previous years, PGE S.A. purchased investment certificates from the PGE Ventures Closed-end Private Equity Investment Fund (FIZAN); their value as at the reporting date is PLN 14 million. It also purchased participation units from TFI Energia S.A. in three sub-funds; their value as at the reporting date is PLN 53 million.
18. Equity
The basic objective of the Group's policy regarding equity management is to maintain an optimal equity structure over the long-term perspective, assure a good financial standing and secure equity structure ratios that would support the operating activity of PGE Group. It is also crucial to maintain a sound equity base that would be the basis to win confidence of potential investors, creditors and the market and assure further development of the Group.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 31 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
18.1 | Sharecapital | |||
As at | As at | |||
June 30, 2020 | December 31, 2019 | |||
1,470,576,500 Series A ordinary Shares with a nominal value of PLN 10.25 each | 15,073 | 15,073 | ||
259,513,500 Series B ordinary Shares with a nominal value of PLN 10.25 each | 2,660 | 2,660 | ||
73,228,888 Series C ordinary Shares with a nominal value of PLN 10.25 each | 751 | 751 | ||
66,441,941 Series D ordinary Shares with a nominal value of PLN 10.25 each | 681 | 681 | ||
TOTAL SHARE CAPITAL | 19,165 | 19,165 |
All of the Company's shares are paid up.
After the reporting date and until the date on which these financial statements were prepared, there were no changes in the value of the Company's share capital.
Shareholder rights - State Treasury rights concerning the Company's activities
The Company is a member of PGE Group, in respect of which the State Treasury holds special rights as long as it remains a shareholder.
Special rights of the State Treasury that are applicable to PGE Group entities derive from the Act of March 18, 2010 on special rights of the Minister of Energy and their performance in certain companies and groups operating in the electricity, oil and gaseous fuels sectors ( Official Journal from 2016, item 2012). The aforesaid Act specifies the particular rights entitled to the Minister of Energy related to companies and groups operating in the electricity, oil and gaseous fuels sectors whose property was disclosed within the register of buildings, installations, equipment and services included in critical infrastructure.
Based on this act the Minister of Energy has the right to object to any resolution or legal action of the Management Board that relates to the ability to dispose of a part of Company's property, which may result in threat to functioning, continuity of operations and integrity of critical infrastructure. The objection can also be expressed against any resolution adopted that relates to:
- dissolution of company,
- changes of the use or discontinuance of exploitation of an asset that is a component of critical infrastructure,
- change in the Company's principal business activity,
- sale or lease of, or creation of limited property rights in, the Company's business or its organised part,
- adoption of a budget, plan of investment activities, or a long-term strategic plan,
- relocation of the Company's registered office abroad,
if the implementation of any such resolution could constitute a material threat to the security, continuity or integrity of critical infrastructure operations. The objection is expressed in the form of an administrative decision.
18.2 | Hedgingreserve | ||||
Period ended | Year ended | ||||
June 30, 2020 | December 31, 2019 | ||||
AS AT JANUARY 1 | (323) | (52) | |||
Change in hedging reserve: | (58) | (336) | |||
Measurement of hedging instruments, including: | (55) | (336) |
Recognition of the effective portion of change in fair value of hedging financial instruments in the part considered as effective hedge
Accrued interest on derivatives transferred from hedging reserve and recognised in interest expense
Currency revaluation of CCIRS transaction transferred from hedging reserve and recognised in net
foreign exchange gains (losses)
(33)(438)
83
(30)91
Ineffective portion of change in fair value of hedging derivatives recognised in profit or loss | - | 8 | ||
Measurement of other financial assets | (3) | - | ||
Deferred tax | 11 | 65 | ||
HEDGING RESERVE | (370) | (323) | ||
AFTER DEFERRED TAX | ||||
Hedging reserve includes mainly valuation of hedging instruments to which cash flow hedge accounting is applied.
18.3 Dividends paid and proposed
In the reporting and comparative period, the Company did not distribute dividends.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 32 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
19. Provisions
The carrying amount of provisions is as follows:
As at June 30, 2020 | As at December 31, 2019 | ||||||
Non-current | Current | Non-current | Current | ||||
Employee benefits | 3,045 | 271 | 2,796 | 270 | |||
Rehabilitation provision | 8,186 | 1 | 6,648 | 1 | |||
Provision for shortage of CO2 emission allowances | - | 3,109 | 121 | 3,411 | |||
Provisions for property rights held | - | 481 | - | 572 | |||
for surrender | |||||||
Provision for non-contractual use of property | 65 | 9 | 62 | 10 | |||
Other provisions | 26 | 96 | 25 | 102 | |||
TOTAL PROVISIONS | 11,322 | 3,967 | 9,652 | 4,366 | |||
Due to the change of market interest rates, PGE Group updated the discounting rate applied for the measurement of rehabilitation end employee benefit provisions. As at June 30, 2020, the discounting rate for the costs of rehabilitation of mining excavations is 2.15% (2.8% as at December 31, 2019). As at June 30, 2020, the discounting rate for the employee benefits provision and other provisions for rehabilitation costs is 1.4% (2.0% as at December 31, 2019). Changes in the discounting rate resulted in:
- An increase in the rehabilitation provision, with a corresponding increase of PLN 434 million in other operating expenses;
- An increase in the rehabilitation provision, with a corresponding increase of PLN 943 million in property, plant and equipment;
- An increase in the provision for post-employment benefits, with a corresponding decrease of PLN 176 million in other comprehensive income;
- An increase in the provision for jubilee awards, with a corresponding increase of PLN 40 million in operating expenses.
Changes in provisions
Provision for | Provisions for | Provision for | ||||||||||||||||||
Rehabilitation | shortage of CO2 | |||||||||||||||||||
Employee | property rights | non- | ||||||||||||||||||
provision | emission | Other | Total | |||||||||||||||||
benefits | held | contractual use | ||||||||||||||||||
allowances | ||||||||||||||||||||
for surrender | of property | |||||||||||||||||||
JANUARY 1, 2020 | 3,066 | 6,649 | 3,532 | 572 | 72 | 127 | 14,018 | |||||||||||||
Actuarial gains and losses | 31 | - | - | - | - | - | 31 | |||||||||||||
Current service costs | 55 | - | - | - | - | - | 55 | |||||||||||||
Interest expense | 30 | 87 | - | - | - | - | 117 | |||||||||||||
Adjustment to discount rate and | 216 | 1,377 | - | - | - | - | 1,593 | |||||||||||||
other assumptions | ||||||||||||||||||||
Benefits paid / Provisions used | (82) | (1) | (3,411) | (553) | - | (15) | (4,062) | |||||||||||||
Provisions reversed | - | - | (121) | (7) | (6) | (15) | (149) | |||||||||||||
Provisions recognised - costs | - | 24 | 3,109 | 469 | 8 | 26 | 3,636 | |||||||||||||
Provisions recognised - | - | 49 | - | - | - | - | 49 | |||||||||||||
expenditure | ||||||||||||||||||||
Other changes | - | 2 | - | - | - | (1) | 1 | |||||||||||||
JUNE 30, 2020 | 3,316 | 8,187 | 3,109 | 481 | 74 | 122 | 15,289 | |||||||||||||
Provision for | Provisions for | Provision for | ||||||||||||||||||
Rehabilitation | shortage of CO2 | |||||||||||||||||||
Employee | property rights | non- | ||||||||||||||||||
provision | emission | Other | Total | |||||||||||||||||
benefits | held | contractual use | ||||||||||||||||||
allowances | ||||||||||||||||||||
for surrender | of property | |||||||||||||||||||
January 1, 2019 | 2,705 | 3,766 | 1,921 | 423 | 73 | 148 | 9,036 | |||||||||||||
Actuarial gains and losses | 65 | - | - | - | - | - | 65 | |||||||||||||
Current service costs | 110 | - | - | - | - | - | 110 | |||||||||||||
Past service costs | 5 | - | - | - | - | - | 5 | |||||||||||||
Interest expense | 81 | 123 | - | - | - | - | 204 | |||||||||||||
Adjustment to discount rate | 300 | 2,637 | - | - | - | - | 2,937 | |||||||||||||
and other assumptions | ||||||||||||||||||||
Benefits paid / Provisions used | (200) | (1) | (1,803) | (640) | - | (26) | (2,670) | |||||||||||||
Provisions reversed | - | - | (6) | (6) | (9) | (43) | (64) | |||||||||||||
Provisions recognised - costs | - | 43 | 3,419 | 784 | 8 | 49 | 4,303 | |||||||||||||
Provisions recognised - | - | 75 | - | - | - | - | 75 | |||||||||||||
expenditure | ||||||||||||||||||||
Other changes | - | 6 | 1 | 11 | - | (1) | 17 | |||||||||||||
DECEMBER 31, 2019 | 3,066 | 6,649 | 3,532 | 572 | 72 | 127 | 14,018 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 33 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
19.1 Provision for employeebenefits
Provisions for employee benefits mainly include:
- post-employmentbenefits - PLN 2,358 million (PLN 2,149 million as at December 31, 2019),
- jubilee awards - PLN 958 million (PLN 917 million as at December 31, 2019).
19.2 Rehabilitation provision
Provision for rehabilitation of post-exploitation mining properties
PGE Group recognises provisions for rehabilitation of post-exploitation mining properties. The amount of the provision recognised in the financial statements includes also the value of Mine Liquidation Fund created in accordance with the Geological and Mining Law Act. As at June 30, 2020, the provision amounted to PLN 7,564 million (as at December 31, 2019: PLN 6,127 million).
Provision for rehabilitation of ash storage sites
PGE Group power generating units recognise provisions for rehabilitation of ash storage sites. As at June 30, 2020, the provision amounted to PLN 296 million (PLN 249 million as at the end of the comparative period).
Provision for rehabilitation of wind-farm sites
Companies that own wind farms recognise provision for rehabilitation of wind-farm sites. As at June 30, 2020, the provision amounted to PLN 66 million (PLN 60 million as at the end of the comparative period).
Liquidation of property, plant and equipment
As at the reporting date, the provision amounts to PLN 261 million (PLN 213 million as at the end of the comparative period) and refers to some assets of the Conventional Generation and Renewables segments.
19.3 Provision for shortageof CO2 emission allowances
As described in note 15 to these financial statements, PGE Group is entitled to receive CO2 emissions allowances granted free of charge in connection to expenditures on investment projects included in National Investment Plan. The calculation of the provision also includes these allowances.
19.4 Provision for energyorigin units held for redemption
PGE Group companies recognise provision for energy origin rights relating to sales carried out during the reporting period or in the prior reporting periods, in a part unredeemed until the reporting date. As at June 30, 2020, the provision amounts to PLN 481 million (PLN 572 million in the comparative period) and is recognised mainly by PGE Obrót S.A.
19.5 Provision for non-contractual useof property
PGE Group companies recognise a provision for claims concerning non-contractual use of property. This mainly relates to the distribution company that owns distribution networks. As at the reporting date, the provision amounted to approximately PLN 74 million (including PLN 32 million for litigations). In the comparative period, the provision amounted to PLN 72 million (including PLN 32 million for litigations).
20. Financial liabilities
The value of financial liabilities measured at amortised cost is a reasonable approximation of their fair value, except for bonds issued by PGE Sweden AB (publ).
Bonds issued by PGE Sweden AB (publ) are based on a fixed interest rate. As at June 30, 2020, their value at amortised cost, as disclosed in these consolidated financial statements, amounted to PLN 633 million and their fair value was PLN 744 million.
20.1 Credit facilities, loans, bondsand leases
As at June 30, 2020 | As at December 31, 2019 | ||||
Non-current | Current | Non-current | Current | ||
Credit facilities and loans | 7,806 | 657 | 7,999 | 1,382 | |
Bonds issued | 2,014 | 20 | 1,986 | 12 | |
Leases | 892 | 43 | 874 | 55 | |
TOTAL CREDIT FACILITIES, LOANS, BONDS AND LEASES | 10,712 | 720 | 10,859 | 1,449 | |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 34 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Credit facilities and loans
Among loans and borrowings presented above as at June 30, 2020 and December 31, 2019, PGE Group presents mainly the following facilities:
Lender | Limit in | Liability as at | Liability as at | ||||||
Hedging instrumen | Maturity date | Currency | Interest rate | December 31, | |||||
currency | June 30, 2020 | ||||||||
2019 | |||||||||
Bank consortium | IRS | 2023-09-30 | 3,630 | PLN | Variable | 3,644 | 3,649 | ||
European Investment Bank | - | 2034-08-25 | 1,500 | PLN | Fixed | 1,505 | 1,505 | ||
Bank Gospodarstwa Krajowego | IRS | 2027-12-31 | 1,000 | PLN | Variable | 938 | 1,001 | ||
European Bank for Reconstruction | |||||||||
IRS | 2028-06-07 | 500 | PLN | Variable | 501 | 502 | |||
and Development | |||||||||
Bank Gospodarstwa Krajowego | IRS | 2028-12-31 | 500 | PLN | Variable | 500 | 500 | ||
European Investment Bank | - | 2034-08-25 | 490 | PLN | Fixed | 493 | 493 | ||
Nordic Investment Bank | - | 2024-06-20 | 150 | EUR | Variable | 260 | 293 | ||
Bank Gospodarstwa Krajowego | - | 2021-05-31 | 1,000 | PLN | Variable | 139 | 455 | ||
Bank Pekao S.A. | - | 2020-09-21 | 40 | USD | Variable | 93 | 83 | ||
Millennium | - | 2021-06-16 | 7 | PLN | Fixed | 1 | 1 | ||
Revolving credit facility | - | 2022-12-16 | 4,100 | PLN | Variable | - | 300 | ||
Bank Pekao S.A. | - | 2024-12-22 | 500 | PLN | Variable | - | 160 | ||
PKO BP S.A. | - | 2022-04-29 | 300 | PLN | Variable | - | 21 | ||
Bank Ochrony Środowiska SA | - | 2020-10-01 | 136 | PLN | Variable | - | 5 | ||
European Investment Bank | - | 2038-10-16 | 273 | PLN | Fixed | - | - | ||
NFOŚiGW (State Fund for | March 2023 - | ||||||||
Environmental Protection and Water | - | 215 | PLN | Fixed | 181 | 204 | |||
December 2028 | |||||||||
Management) | |||||||||
NFOŚiGW (State Fund for | September 2021 | ||||||||
Environmental Protection and Water | - | 279 | PLN | Variable | 87 | 101 | |||
March 2031 | |||||||||
Management) | |||||||||
WFOŚiGW (Provincial Fund for | September 2020 | ||||||||
Environmental Protection and Water | - | 21 | PLN | Fixed | 1 | 2 | |||
September 2026 | |||||||||
Management) | |||||||||
WFOŚiGW (Provincial Fund for | September 2021 | ||||||||
Environmental Protection and Water | - | 256 | PLN | Variable | 83 | 82 | |||
September 2028 | |||||||||
Management) | |||||||||
Loan from shareholders | - | November 2020 - | 35 | PLN | Fixed | 37 | 24 | ||
June 2023 | |||||||||
TOTAL CREDIT FACILITIES AND LOANS | 8,463 | 9,381 | |||||||
As at June 30, 2020, the value of the available overdrafts at significant PGE Group companies was PLN 1,827 million. The repayment date of used overdraft facilities of PGE Group's key companies is 2020-2021. In the first half of 2020 and after the reporting period, there were no cases of default on repayment or breach of other terms of credit agreements.
Bonds issued
Hedging | Maturity | Limit in the | Tranche issue | Tranche maturity | Liability as at | Liability as at | |||||
Issuer | date of | programme | Currency | Interest rate | December 31, | ||||||
instrument | date | date | June 30, 2020 | ||||||||
the programme | currency | 2019 | |||||||||
PGE SA | IRS | indefinite | 5,000 | PLN | Variable | 2019-05-21 | 2029-05-21 | 1,001 | 1,002 | ||
2019-05-21 | 2026-05-21 | 400 | 401 | ||||||||
PGE Sweden | |||||||||||
CCIRS | indefinite | 2,000 | EUR | Fixed | 2014-08-01 | 2029-08-01 | 633 | 595 | |||
AB (publ) | |||||||||||
TOTAL BONDS ISSUED | 2,034 | 1,998 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 35 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
20.2 | Tradeand other financial liabilities | |||||||
As at June 30, 2020 | As at December 31, 2019 | |||||||
Non-current | Current | Non-current | Current | |||||
Trade liabilities | - | 1,016 | - | 1,506 | ||||
Purchase of PPE and IA | 2 | 507 | 3 | 1,633 | ||||
Security deposits received | 30 | 85 | 21 | 99 | ||||
Liabilities on account of LTC | 404 | 24 | 432 | 36 | ||||
Insurance | - | 15 | - | 8 | ||||
Settlements related with stock market transactions | - | 229 | - | 269 | ||||
Other | 19 | 110 | 19 | 85 | ||||
TRADE AND OTHER FINANCIAL LIABILITIES | 455 | 1,986 | 475 | 3,636 | ||||
"Other" liabilities include, among others, PGE Dom Maklerski S.A.'s liabilities towards clients on account of funds deposited.
21. Other non-financial liabilities
The main components of other non-financial liabilities as at respective reporting dates are as follows:
21.1 | Other non-financial liabilities - non-current | ||||
As at | As at | ||||
June 30, 2020 | December 31, 2019 | ||||
OTHER NON-CURRENT LIABILITIES | |||||
Contract liabilities | 57 | 56 | |||
Estimated liabilities under the Voluntary Redundancy Programme | 2 | 2 | |||
TOTAL OTHER NON-CURRENT LIABILITIES | 59 | 58 | |||
21.2 | Other current non-financial liabilities | |||
As at | As at | |||
June 30, 2020 | December 31, 2019 | |||
OTHER CURRENT LIABILITIES | ||||
VAT liabilities | 333 | 176 | ||
Excise tax liabilities | 27 | 35 | ||
Environmental fees | 137 | 213 | ||
Payroll liabilities | 199 | 292 | ||
Bonuses for employees | 225 | 238 | ||
Unused holiday leave | 202 | 143 | ||
Estimated liabilities on account of St. Barbara's Day and Energy Day | 56 | - | ||
Liabilities under the Voluntary Redundancy Programmes | 3 | 6 | ||
Awards for Management Boards | 23 | 27 | ||
Estimated liabilities on account of other employee benefits | 39 | 6 | ||
Personal income tax | 63 | 89 | ||
Social security liabilities | 219 | 276 | ||
Contract liabilities | 263 | 290 | ||
Dividends payable | 8 | 7 | ||
Other | 66 | 67 | ||
TOTAL OTHER CURRENT LIABILITIES | 1,863 | 1,865 |
Environmental fees relate mainly to charges for the use of water and gas emission in conventional power plants as well as exploitation charges paid by lignite mines.
"Other" comprises mainly payments to the Employment Pension Programme, the State Fund for Rehabilitation of Persons with Disabilities and withholdings from employee salaries.
Contract liabilities
Contract liabilities mainly include advances for deliveries and prepayments made by customers for connection to the distribution grid and forecasts for electricity consumption concerning future periods.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 36 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
OTHER EXPLANATORY NOTES
22. Contingent liabilities and receivables. Legal claims
22.1 | Contingent liabilities | ||||
As at | As at | ||||
June 30, 2020 | December 31, 2019 | ||||
Contingent return of grants from environmental funds | 455 | 505 | |||
Legal claims | 178 | 248 | |||
Bank guarantee liabilities | 180 | 1,846 | |||
Perpetual usufruct of land | 95 | - | |||
Claim for contractual penalties | 10 | - | |||
Share purchase option | 4 | - | |||
Other contingent liabilities | 39 | 37 | |||
TOTAL CONTINGENT LIABILITIES | 961 | 2,636 |
Contingent return of grants from environmental funds
The liabilities represent the value of possible future reimbursements of funds received by PGE Group companies from environmental funds for certain investment projects. The funds will be reimbursed if investment projects for which they were granted, do not bring the expected environmental effect.
Legal claims
Dispute with Worley Parsons
The contingent liability is mainly related to the dispute with WorleyParsons. WorleyParsons made a claim for payment of PLN 59 million due to the claimant and for the return of the amount that in the claimant's opinion was unduly collected by PGE EJ 1 sp. z o.o. from a bank guarantee, and later the claim extended to PLN 104 million (i.e. by PLN 45 million). On March 31, 2018, the company filed a response to WorleyParsons' expanded claim. The Group has not recognised the claims and believes that the court is unlikely to award them to the claimant.
Bank guarantee liabilities
These liabilities comprise bank guarantees provided as collateral for exchange transactions resulting from membership in the Warsaw Commodity Clearing House. As at June 30, 2020, the total amount of bank guarantees was PLN 180 million. In the comparative period, it amounted to PLN 1,846 million. The decrease in guarantees results from the offsetting agreement concluded in January 2020 between PGE Group companies. Under this agreement, in accordance with the Regulations of the Exchange Clearing House, security deposits within the energy group may be offset, owing to which offsetting positions within the PGE Group were offset and thus required only a minor security.
Perpetual usufruct of land
Contingent liabilities on account of perpetual usufruct of land are related to the received update of annual fees for perpetual usufruct. Branches of PGE GiEK S.A. have appealed against the decisions received to the Local Government Appeal Courts. The value of the contingent liability was measured as the difference between the discounted sum of updated perpetual usufruct fees for the entire period for which the perpetual usufruct was established and the liability on account of perpetual usufruct of land which was recognised in the accounting records on the basis of previously applicable fees.
Other contingent liabilities
Other contingent liabilities mainly comprise a potential claim by WorleyParsons amounting to PLN 33 million (as described above), and PLN 1 million from the imbalance between purchases and sales of energy in the domestic market. In the previous year, as at December 31, 2019, this occurance related to contingent receivables and amounted to PLN 33 million.
22.2 Other significant issues related to contingent liabilities
Non-contractual use of property
As described in note 19.5 to these financial statements, PGE Group recognises provision for disputes under court proceedings concerning non-contractual use of properties intended for distribution activities. In addition, PGE Group is involved in disputes at an earlier stage of proceedings and it cannot be excluded that the number and value of similar disputes will increase in the future.
Contractual liabilities related to purchase of fuels
According to the concluded agreements for the purchase of fuels (mainly coal and natural gas), PGE Group companies are obliged to collect the minimum volume of fuels and not to exceed the maximum level of collection of gas fuel in particular periods. Failure to collect the minimum volumes of fuels specified in the contracts, may result in extra fees being imposed (in case of certain agreement for the purchase of gas fuel, the volume not collected by power plants but paid up may be collected within the next periods).
In PGE Group's opinion, the terms and conditions of fuel deliveries to its power generating units as described above do not differ from the terms and conditions of fuel deliveries to other power generating units in the Polish market.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 37 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
22.3 Contingent receivables
As at the reporting date, PGE Group held PLN 72 million in contingent receivables from potential return of overpaid excise duty. The Group is waiting for the Supreme Administrative Court's decision on what excise duty rate should be applied to settle the excise duty relief for the surrender of energy origin certificates arising from renewable energy sources before January 1, 2019.
In PGE Group's opinion, the rate in force at the time of sale of electricity generated from renewable energy sources to the final user, i.e. 20 PLN/MWh, should be used to settle the said relief. This position was sustained by the judgment of the Regional Administrative Court in Rzeszów of October 8, 2019.
On November 20, 2019, the tax authority filed a cassation appeal against the above mentioned ruling of the Provincial Administrative Court.
22.4 Other legal claims and disputes
Compensation for conversion of shares
Former shareholders of PGE GiEK S.A. filed motions to courts to summon PGE S.A. to a conciliation hearing concerning payment of compensation for incorrect (in their opinion) determination of the exchange ratio of shares of PGE Górnictwo i Energetyka S.A. into shares of PGE S.A. during a consolidation process that took place in 2010. The total value of claims resulting from summons to a conciliation hearing made by the former shareholders of PGE Górnictwo i Energetyka S.A. amounts to over PLN 10 million.
Irrespective of the foregoing, on November 12, 2014 Socrates Investment S.A. (an entity which purchased claims from former PGE Górnictwo i Energetyka S.A. shareholders) filed a lawsuit to impose a compensation in the total amount of over PLN 493 million (plus interest) for damage incurred in respect of incorrect (in their opinion) determination of the exchange ratio of shares in the merger of PGE Górnictwo i Energetyka S.A. and PGE S.A. The Company filed a response to the lawsuit. At present, the first instance court proceedings are pending. A hearing concerning appointment of an expert was held on November 20, 2018. Currently, experts are in the process of preparing their opinions. The next hearing will be scheduled ex officio.
Moreover, a similar claim was raised by Pozwy sp. z o.o., a buyer of claims from the former shareholders of PGE Elektrownia Opole S.A. Through a lawsuit filed at the District Court in Warsaw against PGE GiEK S.A., PGE S.A. and PwC Polska sp. z o.o. ("Defendants"), Pozwy sp. z o.o. demanded from the Defendants, in solidum, or jointly damages for Pozwy sp. z o.o. totalling over PLN 260 million with interest for allegedly incorrect (in its opinion) determination of exchange ratio for PGE Elektrownia Opole S.A. shares for PGE Górnictwo i Energetyka Konwencjonalna S.A. shares in a merger of these companies. This lawsuit was served on PGE S.A. on March 9, 2017, and the deadline for responding to it was set by the court as July 9, 2017. The following companies: PGE S.A. and PGE GiEK S.A. submitted a response to the claim on July 8, 2017. On September 28, 2018, the District Court in Warsaw ruled in the first instance and the lawsuit by Pozwy sp. z o.o. against PGE S.A., PGE GiEK S.A. and PWC Polska sp. z o.o. was dismissed. On April 8, 2019, PGE S.A. received a copy of the appeal filed by the claimant on December 7, 2018. A response to the appeal was prepared on April 23, 2019. The Court of Appeal scheduled the hearing for August 28, 2020. Due to the complexity of the case, the hearing was postponed until October 26, 2020.
PGE Group companies have not recognised the claims made by Socrates Investment S.A., Pozwy sp. z o.o. and the rest of shareholders requesting conciliatory settlements. According to PGE S.A., these claims are groundless and the entire consolidation process was conducted in a fair and correct manner. The value of shares subject to the process of consolidation was established by an independent company, PwC Polska sp. z o.o. Additionally, merger plans of the companies mentioned above, including the exchange ratios, were examined for accuracy and reliability by an expert appointed by the registration court; no irregularities were found. Next, the court registered the mergers of the aforementioned companies.
PGE Group has not recognised any provisions for these claims.
Termination by Enea S.A. of agreements for sale of certificates
In 2016, PGE GiEK S.A., PGE EO S.A. and PGE Energia Natury PEW sp. z o.o. (acquired by PGE EO S.A.) received from Enea S.A. termination of long-term contracts for purchase of renewable energy origin certificates, so called "green certificates". In the explanatory statement of the termination, Enea S.A. claimed that the companies significantly breached the provisions of these contracts, i.e. failed to re-negotiate contractual provisions in accordance with the adaptive clause, as requested by Enea S.A. in July 2015 in connection with an alleged change in legal regulations having impact on performance of these contracts.
In the opinion of PGE Group, notices of termination of contracts presented by Enea S.A. were filled in with a violation terms of the agreements. The companies took appropriate steps to enforce their rights. With Enea S.A. refusing to perform long-term contracts to purchase energy origin certificates resulting from certificates of origin received by PGE Group companies in connection with the production of renewable energy, PGE GiEK S.A. and PGE Energia Natury PEW sp. z o.o. have demanded from Enea S.A. payment of contractual penalties, while PGE EO S.A. has demanded payment of compensation for damages. Proceedings in all of the cases are pending.
Due to the fact that according to PGE Group termination notices presented by Enea S.A. were submitted in breach of contractual terms, as at June 30, 2020, the Group recognised contractual penalty and compensation receivables of PLN 159 million (of which PLN 6 million was recognised as present-period incomes). According to PGE Group companies, based on available legal opinions, a favourable resolution in the above disputes is more probable than an unfavourable one.
The estimated volume of green certificates covered by the contracts with Enea S.A. amounts to approximately 2,691 thousand MWh. The above amount was calculated for the period from the date of termination of the contracts to the end of the expected initial term of the contracts.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 38 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
In addition, PGE GiEK S.A., PGE Energia Natury PEW sp. z o.o. (acquired by PGE EO S.A.) and PGE EO S.A. filed lawsuits against Enea S.A. for the payment of receivables totalling PLN 47 million concerning invoices issued to Enea S.A. for the sale of energy origin certificates based on these contracts. Enea S.A. refused to pay these receivables, claiming that they were offset by receivables from the Group's companies related to compensation for alleged damages arising as a result of the companies' failure to re-negotiate the contracts. According to Group companies, such offsets are groundless because Enea S.A.'s receivables concerning the payment of compensation never arose and there are no grounds for acknowledging Enea S.A.'s claim that the companies breached contractual provisions. Proceedings in all of the cases are pending.
23. Tax settlements
Tax obligations and rights are specified in the Constitution of the Republic of Poland, tax regulations and ratified international agreements. According to the tax ordinance, tax is defined as public, unpaid, obligatory and non-returnable cash liability toward the State Treasury, provincial or other regional authorities resulting from the tax act. Taking into account the subject criterion, current taxes in Poland can be divided into five groups: taxation of incomes, taxation of turnover, taxation of assets, taxation of activities and other, not classified elsewhere.
From the point of view of business entities, the most important is the taxation of income (corporate income tax), taxation of turnover (value added tax, excise tax) followed by taxation of assets (real estate tax and vehicle tax). Other payments classified as quasi-taxes must also be mentioned. Among these there are social security charges.
Basic tax rates in 2020 were as follows: corporate income tax rate - 19%, for smaller enterprises a 9% rate is likely; basic value added tax
rate - 23%, reduced: 8%, 5%, 0%, furthermore some goods and products are subject to a VAT tax exemption.
The tax system in Poland is characterised by a significant changeability of tax regulations, their high complexity and high potential fees for commitment of a tax crime or violation. Tax settlements and other activity areas are conditioned by regulations (customs or currency inspections) and can be subject to inspections by respective authorities that are entitled to issue fines and penalties with penalty interest. Inspections may cover tax settlements for the period of 5 years after the end of calendar year in which the tax was due.
Tax group
An agreement for a tax group named PGK PGE 2015, whose representative is PGE S.A., was signed on September 18, 2014 for a period of 25 years.
Companies included in the tax group must meet a number of requirements including: appropriate level of equity, parent's stake in PGK companies of at least 75%, lack of capital ties between subsidiaries, no tax arrears, share in total revenue of at least 2% (counted at tax group level), and execution of transactions with related parties from outside the tax group only on market terms. Any violation of these requirements will result in the tax group being dissolved and losing its taxpayer status. When the tax group is dissolved, each of its member companies will become an independent payer of corporate income tax. Following the introduction of provisions on counteracting the effects of COVID-19, the requirement to achieve a share in revenues of at least 2% for 2020 has been suspended.
VAT split payment mechanism, obligation to make payments to accounts registered with tax offices
The Group uses funds received from counterparties in VAT accounts to pay its liabilities that contain VAT. The level of funds in these VAT accounts at a given date depends mainly on the number of the Group's counterparties that decide to use this mechanism and on the relation between the payment dates of receivables and liabilities. As at June 30, 2020, the cash balance in these VAT accounts totalled PLN 137 million.
On January 1, 2020, regulations under which entrepreneurs are required to make payments to their counterparties - active VAT payers - for goods or services purchased with a value exceeding PLN 15 thousand only to their accounts that have been registered with the tax office (the so-called white list) came into force. As a rule, payment to an account not registered with the tax office excludes the right to consider such expenditure as a tax-deductible expense. Only by notifying the tax authority in a specific form and time of the payment made to an account not included in the "white list" can the right to settle the expense as a tax-deductible expense be retained. On July 1, 2020, regulations were introduced under which a payment made under the split payment mechanism excludes sanctions related to the payment to an account not included in the "white list". Given that the Group's principle is to make payments using the split payment method, the aforementioned risk is mitigated.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 39 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Reporting of tax schemes (MDR)
In 2019, new legal regulations that introduced mandatory reporting of the so-called tax schemes (Mandatory Disclosure Rules, MDR) came into force. As a general rule, a tax scheme means an activity whose main or one of the main benefits is the achievement of a tax advantage. In addition, events with so called special or other special hallmarks, defined in the regulations, were indicated as a tax scheme. The reporting obligation applies to three types of entities: promoters, facilitators and beneficiaries. MDR regulations are complex and imprecise in many areas, which raises doubts as to their practical application.
Excise tax
As a result of the incorrect implementation of EU regulations in the Polish legal system, in 2009 PGE GiEK S.A. initiated proceedings regarding reimbursement of the improperly paid excise tax for the period from January 2006 to February 2009. The irregularity consisted in taxing electricity at the first stage of sales, i.e. at the sale by producers, when it was the sale to final customers that should have been taxed.
Having examined PGE GiEK S.A.'s complaints with regard to the restitution claims against decisions issued by tax authorities refusing to confirm the overpayment of excise tax, administrative courts ruled that PGE GiEK S.A. did not bear the economic burden of the improperly calculated excise tax (which in the context of the resolution by the Supreme Administrative Court of June 22, 2011, file no. I GPS 1/11, precludes the return of overpaid amounts). According to the Supreme Administrative Court, the claims that PGE GiEK S.A. sought, especially using economic analyses, are of an offsetting nature and therefore could be sought only in civil courts. Given the above, PGE GiEK S.A. decided to withdraw from the proceedings as regards restitution claims. Currently, the actions concerning the overpaid excise tax are pending in the civil courts. On January 10, 2020, the District Court issued a ruling in a case brought by PGE GiEK against the State Treasury - the Minister of Finance. The court dismissed the claim. On February 3, 2020, the Company appealed against the decision of the first instance to the Warsaw Court of Appeals.
Given the significant uncertainty over the final ruling in this issue, the Group does not recognise in its financial statements any effects related to potential compensation in civil courts in connection with the improperly paid excise tax.
Property tax
Tax on property constitutes a significant burden on certain PGE Group companies. Regulations concerning property tax are unclear in certain areas and give rise to a variety of interpretation doubts. Tax authorities, i.e. municipality leader, mayor or city president, have often issued inconsistent tax interpretations in similar cases. Due to the above, PGE Group companies have been and may be parties to court proceedings concerning property tax. If the Group considers that an adjustment of settlements is likely due to such a proceeding, it recognises an appropriate provision.
Uncertainty related to tax settlements
Regulations on value added tax, corporate income tax, and social security contributions are subject to frequent amendments, with the effect being lack of appropriate points of reference, conflicting interpretations, and scarcity of established precedents which could be followed. Furthermore, the applicable tax laws lack clarity, which leads to differences in opinions and diverse interpretations of tax regulations, both between various public authorities and between public authorities and businesses.
Tax settlements and other regulated areas of activity (e.g. customs or foreign exchange control) are subject to inspection by administrative bodies, which are authorised to impose high penalties and fines, and any additional tax liabilities arising from such inspections must be paid with high interest. Consequently, tax risk in Poland is higher than in countries with more stable tax systems.
The amounts presented and disclosed in the financial statements may therefore change in the future as a result of a final decision by a tax inspection authority.
The Polish Tax Legislation Act contains the provisions of the General Anti-Avoidance Rules (GAAR). GAAR is intended to prevent the creation and use of abusive arrangements to avoid paying taxes in Poland. Under GAAR, tax avoidance is an arrangement the main purpose of which is to obtain a tax advantage which is contrary to the objectives and purpose of the tax legislation. According to GAAR, such measures do not lead to the achievement of a tax benefit if the scheme used was artificial. Any arrangements involving separation of transactions or operations without a sufficient rationale, engaging intermediaries where no business or economic rationale exists, any offsetting elements, and any arrangements that operate in a similar way, may be viewed as an indication of the existence of an abusive arrangement subject to GAAR. The new regulations will require much more judgement to be exercised when assessing the tax consequences of particular transactions.
The GAAR clause should be applied with respect to arrangements made after its effective date as well as arrangements that were made before its effective date but benefits of the tax advantage obtained through the arrangement continued or still continue after that date. Implementation of the above regulations will provide Polish tax inspection authorities with grounds to challenge certain legal arrangements made by taxpayers, including restructuring or reorganisation of the group.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 40 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
The Group discloses and measures current and deferred assets or liabilities in compliance with the requirements of IAS 12 Income Taxes, based on the taxable income (tax loss), tax base, unused tax losses, unused tax credits and tax rates, taking into consideration uncertainties related to tax settlements. Whenever it is uncertain whether and to what extent a tax authority would accept accounting for individual transactions, the Group accounts for such transactions taking into consideration an uncertainty assessment.
24. Information on related parties
PGE Group's transactions with related parties are concluded based on market prices for provided goods, products and services or are based on the cost of manufacturing.
24.1 Associates and jointlycontrolled entities
The total value of transactions with associates and jointly controlled entities is presented in the table below.
Period ended | Period ended | ||
June 30, 2020 | June 30, 2019 | ||
Sales to associates and jointly controlled entities | 6 | 8 | |
Purchases from associates and jointly controlled entities | 984 | 1,074 | |
As at | As at | ||
June 30, 2020 | December 31, 2019 | ||
Trade receivables from associates and jointly controlled entities | 1 | 3 | |
Trade liabilities to associates and jointly controlled entities | 193 | 164 |
The value of purchases and balance of liabilities result mainly from transactions with Polska Grupa Górnicza Sp. z o.o.
24.2 StateTreasury-controlled companies
The State Treasury is the dominant shareholder in PGE Polska Grupa Energetyczna S.A. and as a result in accordance with IAS 24 Related Party Disclosures, State Treasury companies are treated as related parties. PGE Group entities identify in detail transactions with approximately 40 of the biggest State Treasury subsidiaries.
The total value of transactions with such entities is presented in the table below.
Period ended | Period ended | |
June 30, 2020 | June 30, 2019 | |
Sales to related parties | 1,192 | 1,018 |
Purchases from related parties | 2,509 | 2,730 |
As at | As at | |
June 30, 2020 | December 31, 2019 | |
Trade receivables from related parties | 206 | 266 |
Trade liabilities to related parties | 455 | 612 |
The largest transactions with companies in which the State Treasury holds a stake concern transactions with Polskie Sieci Elektroenergetyczne S.A., Polskie Górnictwo Naftowe i Gazownictwo S.A., ENERGA-OPERATOR S.A., ENEA Operator Sp. z o.o., Zakłady Azotowe PUŁAWY S.A., Jastrzębska Spółka Węglowa S.A., PKN Orlen S.A., PKP Cargo S.A., Grupa LOTOS S.A., TAURON Dystrybucja S.A.
Moreover, PGE Group enters into significant transactions in the energy market via Towarowa Giełda Energii S.A. (Polish Power Exchange). Due to the fact that this entity deals only with the organisation of trading, any purchases and sales made through this entity are not recognised as transactions with related parties.
24.3 Management remuneration
The key management comprises the Management and Supervisory Boards of the parent company and significant subsidiaries.
Period ended | Period ended | |
PLN '000 | June 30, 2020 | June 30, 2019 |
Short-term employee benefits (salaries and salary related costs) | 18,349 | 17,119 |
Post-employment benefits | 1,863 | 1,427 |
TOTAL REMUNERATION OF KEY MANAGEMENT PERSONNEL | 20,212 | 18,546 |
Remuneration of key management personnel of entities of non-core operations | 12,024 | 11,747 |
TOTAL REMUNERATION OF KEY MANAGEMENT PERSONNEL | 32,236 | 30,293 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 41 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Period ended | Period ended | |
PLN '000 | June 30, 2020 | June 30, 2019 |
Management Board of the parent company | 3,357 | 3,947 |
including post-employment benefits | (143) | - |
Supervisory Board of the parent company | 407 | 379 |
Management Boards - subsidiaries | 14,669 | 12,447 |
Supervisory Boards - subsidiaries | 1,779 | 1,773 |
TOTAL | 20,212 | 18,546 |
Remuneration of key management personnel of entities of non-core operations | 12,024 | 11,747 |
TOTAL REMUNERATION OF KEY MANAGEMENT PERSONNEL | 32,236 | 30,293 |
PGE Group companies (direct and indirect subsidiaries) apply a rule according to which management board members are employed on the basis of management services contracts. The above remuneration is included in other costs by nature disclosed in note 7.2 Costs by nature and function.
25. Significant events during and after the reporting period
25.1 Act amendingtheact on excisedutyand certain other acts
On December 28, 2018, an act amending the act on excise duty and certain other acts was adopted. The Act aimed to stabilise electricity prices for final customers in 2019. The Act, among other things, froze the level of electricity prices for final off-takers and introduced a compensation scheme for retail companies.
In 2019, the Group recognised income from expected and received compensations in the amount of PLN 1,148 million, of which PLN 845 million was received by December 31, 2019, and further PLN 286 million by the date of these financial statements.
The final amount of compensations will depend on the actual consumption of energy by end users in 2019, determined on the basis of readings of meters for the period from January 1 to June 30 and from July 1 to December 31, 2019, respectively, and after the completion of the ERO procedure related to the recognition of individual own costs of the Company. This value may differ from the Group's estimates.
25.2 Onerous contracts resultingfrom, amongother, theapproval of atariff forG tariffgroup customers
On January 3, 2020, the President of the ERO approved the tariff for PGE Obrót S.A. for G tariff group customers who do not use free market offers for the sale of electricity in the period from 18 January 2020 to 31 March 2020. The approved price level does not fully cover the purchase prices of electricity, energy origin certificates and own costs, resulting in the loss of profitability of sales made by PGE Obrót S.A. to G tariff group customers who do not use free market offers for the sale of electricity and customers from this tariff group who use free market offers, where the sales price is correlated with the price approved by the President of ERO. The Management Board of PGE Obrót S.A. commenced the procedure of applying to the President of the Energy Regulatory Office for another tariff for the sale of electricity for the period from April 1 to December 31, 2020. The measures taken are aimed at obtaining such electricity sales prices that will allow to cover the actual electricity contracting costs, property rights and operating expenses of this company. By decision of July 8, 2020, the President of ERO rejected the application concerning this matter. On July 29, 2020, PGE Obrót S.A. filed an appeal against this decision.
Effects on reporting
As far as onerous contracts are concerned within the meaning of IAS 37, the Group is of the opinion that there were no such contracts as at June 30, 2020 due to the positive margin generated between the cost of producing energy and its sale to the final customer. Accordingly, consolidated figures of PGE Group do not include the recognition, use and reversal of respective provisions.
In turn, in the first half of 2020, the Supply segment reversed PLN 180 million from the provision for onerous contracts recognised in 2019. This had no effect on the results of PGE Group.
25.3 Impact of theCOVID-19 pandemic on PGE Group's operations
PGE Group identifies, on an ongoing basis, the risk factors that affect the Group's performance in connection with the COVID-19 pandemic as well as they were taken into account in the test for impairment of non-financial and financial non-current assets . As at June 30, 2020, the impact on financial performance remained limited. Nevertheless, further effects of the pandemic may become apparent in subsequent periods. The nature and scale of possible further effects are difficult to estimate. What will be important is the duration of the epidemic, its potential increased severity and extent, as well as its impact on economic growth in Poland. At the same time, the accuracy of estimates remains difficult in view of a number of other factors affecting the power market, including the level of demand for electricity.
The outbreak of the pandemic has led to expectations of economic slowdown in 2020 in the global economy and in Poland. These are reflected, among others, in the revision of market projections for GDP, industrial output and investments.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 42 of 61 |
PGE Group Condensed consolidated interim financial statements
for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Due to the reduced level of economic activity, PGE Group identifies the risk that the lower level of domestic electricity consumption will continue. This affects the decrease in revenues and margins from energy generation, distribution and sales in the Distribution, Supply, Conventional Generation and District Heating segments.
A decline in demand for electricity affects the utilisation of generation units. A part of the PGE Group's generation units is held in the so- called spinning reserve and secures potential shortages of supplies from renewable sources, imports or those that result from failures of other commercial power plants in Poland. The majority of production was contracted in previous periods, therefore in the short term the negative impact of lower production volumes on the Conventional Generation segment should be significantly limited. The negative effect should be related to potential reductions on the part of the Transmission System Operator, resulting in lower production from lignite, which is characterized by a relatively stable cost structure. The PGE Group expects, however, an impact on contracting volumes and prices for subsequent periods, but at this stage this impact cannot be estimated.
For the Supply segment, the decrease in demand volume affected the past period and the negative impact was associated with a lower level of sales to final off-takers and higher cost of balancing electricity. Also in the Distribution segment, a lower volume of deliveries made to final off-takes directly translates into lower revenues earned on this account. Taking into account the entire value chain, the impact of the above factors at the Group level was not material.
As at June 30, 2020, the impact of the expected increase in payment congestion, especially regarding receivables from small and medium- sized enterprises, was not significant. As described in note 2.4 to these financial statements, the Group recognised additional impairment losses on receivables in the amount of PLN 20 million. On the other hand, depending on the further epidemiological and economic situation, the risk of deteriorated liquidity of PGE Group and increased impairment losses on overdue receivables still exists and is monitored on an ongoing basis. Currently, the Group does not expect this phenomenon to be more material than for the first half year of 2020. Regardless, however, due to the high availability of credit lines and the financial liquidity released in the second quarter of this year, the Group does not identify any liquidity risk.
PGE Group's plants are of strategic importance for maintaining undisturbed production and supply of electricity and heat in Poland. The COVID-19 pandemic has affected the change of work organisation, especially with respect to PGE Group's generation units. In many cases, this involves additional costs resulting from, for example, the purchase of protective materials for employees. Since the beginning of the pandemic, the Group has introduced work rules that aim to reduce, as much as possible, the health risk for employees. As one of the largest employers in Poland, with 42 thousand employees, PGE Group takes a number of measures to protect the health and life of its employees, including the implementation of teleworking, raising awareness of, in particular, the basic principles of protection against coronavirus, prevention, quarantine, as well as those related to the organisation of the company and work to ensure business continuity. PGE has established a Crisis Team to collect information from all Group companies, monitor the situation in individual companies on an ongoing basis and take appropriate steps.
The production branches also have plans for operation with non-standard absenteeism that are developed and verified on an ongoing basis, and as plants of strategic importance from the point of view of maintaining undisturbed production and supply of electricity and heat, they are in constant contact with local authorities responsible for monitoring the situation in the country and in all locations of PGE Group entities.
Along with the outbreak of the pandemic, Customer Service Offices were closed, and all communication with PGE customers was routed through remote channels. The Group has also stopped sending collectors to customers' houses. As of May 18, along with further stages of unfreezing the Polish economy, PGE Group has been gradually returning to serving its customers in office, while observing special safety rules. From an operational point of view, owing to the introduction of appropriate countermeasures at the early stage of the pandemic, PGE has been continuously producing electricity and heat and ensuring their uninterrupted supply.
PGE Group has been monitoring the further impact of the COVID-19 pandemic on the financial condition of the PGE Group and is preparing for various scenarios. The pandemic has accelerated the introduction of measures to prepare the entire organisation to changes in order to tackle the decarbonisation challenges faced by energy companies. This will require considerable financial expenditure. All potential savings scenarios for both capital expenditures and operating costs were analysed in order to focus on the most important development projects related to the core business of PGE Group.
25.4 Publication of EnergyPolicy of Poland until 2040
On September 8, 2020, the Ministry of Climate published a summary of the updated draft document "Energy Policy of Poland until 2040" (EPP2040). Due to the fact that EPP2040 is to set the direction for the development of the power sector in Poland in the next twenty years, the PGE Group has verified the presented assumptions regarding the future generation mix and the use of conventional units based on hard and lignite coal in it. The share of conventional units assumed by PGE in the impairment tests is within the range indicated by the EPP2040 scenarios, therefore, in the Company's opinion, the publication of the document is not an event causing an adjustment of the test results. PGE will conduct further analyzes after the full assumptions of EPP2040 are available, having regard to the fact that these assumptions may have an impact on the recoverable amount of assets
The additional notes constitute an integral part | |
of these consolidated financial statements. | 43 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
-
CONDENSED SEPARATE INTERIM FINANCIAL STATEMENTS OF PGE POLSKA GRUPA ENERGETYCZNA S.A.
FOR THE 6-MONTH PERIOD ENDED JUNE 30, 2020, IN ACCORDANCE WITH IFRS EU
SEPARATE STATEMENT OF COMPREHENSIVE INCOME
Period ended | Period ended | |
Note | June 30, 2020 | June 30, 2019 |
(unaudited) | (unaudited) |
STATEMENT OF PROFIT OR LOSS | |
SALES REVENUES | 6 |
Cost of goods sold | 7 |
GROSS PROFIT ON SALES | |
Distribution and selling expenses | 7 |
General and administrative expenses | 7 |
Other operating income/(expenses) | |
OPERATING PROFIT | |
Finance income/(costs), including: | 8 |
Interest income calculated using the effective interest rate method | |
GROSS PROFIT |
Income tax
NET PROFIT FOR THE REPORTING PERIOD
15,1008,048
(14,571)(7,488)
529560
(10)(8)
- (102)
(8)-
404450
1,2001,021
8286
1,6041,471
(57)(67)
1,5471,404
OTHER COMPREHENSIVE INCOME | ||||
Items that may be reclassified to profit or loss in the future: | ||||
Valuation of hedging instruments | (356) | (39) | ||
Deferred tax | 68 | 7 | ||
OTHER COMPREHENSIVE INCOME FOR THE REPORTING PERIOD, NET | (288) | (32) | ||
TOTAL COMPREHENSIVE INCOME | 1,259 | 1,372 | ||
NET PROFIT AND DILUTED NET PROFIT PER SHARE | 0.83 | 0.75 | ||
(IN PLN) | ||||
The additional notes constitute an integral part | |
of these consolidated financial statements. | 44 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
SEPARATE STATEMENT OF FINANCIAL POSITION
As at | As at | |
Note | June 30, 2020 | December 31, 2019 |
(unaudited) | (audited) |
NON-CURRENT ASSETS | |
Property, plant and equipment | |
Intangible assets | |
Right-of-use assets | |
Financial receivables | 10.1 |
Derivatives and other assets measured at fair value through profit or loss | 11 |
Shares in subsidiaries | 9 |
Shares in associates and jointly controlled entities | |
Deferred tax assets |
157162
1-
2021
10,01510,955
90105
29,67529,995
101101
10216
40,16141,355
CURRENT ASSETS
Inventories | |
Income tax receivables | |
Trade and other receivables | 10.1 |
Derivative instruments | 11 |
Other current assets | 12 |
Cash and cash equivalents | 10.2 |
13
-37
8,0667,889
311446
2,132487
1,125221
11,635 | 9,083 | |||
TOTAL ASSETS | 51,796 | 50,438 | ||
EQUITY | ||||
Share capital | 19,165 | 19,165 | ||
Reserve capital | 18,410 | 19,669 | ||
Hedging reserve | (358) | (72) | ||
Retained earnings/(accumulated losses) | 1,547 | (1,258) | ||
38,764 | 37,504 | |||
NON-CURRENT LIABILITIES |
Non-current provisions | |
Credit facilities, loans, bonds, leases | 13 |
Derivative instruments | 11 |
Other liabilities |
2118
9,4269,521
432106
1720
9,8969,665
CURRENT LIABILITIES
Current provisions | |
Credit facilities, loans, bonds, cash pooling, leases | 13 |
Derivative instruments | 11 |
Trade and other liabilities | |
Income tax liabilities | |
Other non-financial liabilities |
11
1,8122,015
297338
682760
290-
54155
3,136 | 3,269 | |||
TOTAL LIABILITIES | 13,032 | 12,934 | ||
TOTAL EQUITY AND LIABILITIES | 51,796 | 50,438 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 45 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
SEPARATE STATEMENT OF CHANGES IN EQUITY
Share | Reserve | Hedging | Retained earnings/ | Total | |||||||||
capital | capital | reserve | (accumulated losses) | equity | |||||||||
AS AT JANUARY 1, 2020 | 19,165 | 19,669 | (72) | (1,258) | 37,504 | ||||||||
Net profit for the reporting period | - | - | - | 1,547 | 1,547 | ||||||||
Other comprehensive income | - | - | (286) | (2) | (288) | ||||||||
COMPREHENSIVE INCOME FOR THE | - | - | (286) | 1,545 | 1,259 | ||||||||
PERIOD | |||||||||||||
Loss coverage | - | (1,259) | - | 1,259 | - | ||||||||
Other changes | - | - | - | 1 | 1 | ||||||||
AS AT JUNE 30, 2020 | 19,165 | 18,410 | (358) | 1,547 | 38,764 | ||||||||
Share | Reserve | Hedging | Retained earnings/ | Total | |||||||||
capital | capital | reserve | (accumulated losses) | equity | |||||||||
AS AT JANUARY 1, 2019 | 19,165 | 19,872 | (2) | (201) | 38,834 | ||||||||
Net profit for the reporting period | - | - | - | 1,404 | 1,404 | ||||||||
Other comprehensive income | - | - | (30) | (2) | (32) | ||||||||
COMPREHENSIVE INCOME FOR THE | - | - | (30) | 1,402 | 1,372 | ||||||||
PERIOD | |||||||||||||
Loss coverage | - | (203) | - | 203 | - | ||||||||
Other changes | - | - | - | - | - | ||||||||
AS AT JUNE 30, 2019 | 19,165 | 19,669 | (32) | 1,404 | 40,206 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 46 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
SEPARATE STATEMENT OF CASH FLOWS
Period ended | Period ended | |
June 30, 2020 | June 30, 2019 | |
(unaudited) | (unaudited) | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Gross profit | 1,604 | 1,471 |
Income tax paid | 191 | (66) |
Adjustments for: | ||
Depreciation, amortisation and impairment losses | 6 | 6 |
Interest and dividend, net | (1,542) | (1,034) |
(Gain)/loss on investing activities | 440 | (118) |
Change in receivables | 54 | (168) |
Change in inventories | 2 | 2 |
Change in liabilities, excluding credit facilities and loans | (138) | (68) |
Change in other non-financial assets | (160) | (203) |
Foreign exchange differences | (3) | 11 |
NET CASH FROM OPERATING ACTIVITIES | 454 | (167) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property, plant and equipment and intangible assets | (3) | (2) |
(Purchase)/buy-back of bonds issued by PGE Group companies | 910 | (252) |
Sale of other financial assets | - | - |
Acquisition of shares in subsidiaries | (18) | (15) |
Loans granted/(repaid) under the cash pooling agreement | 683 | 527 |
Loans advanced | (2,088) | (1,267) |
Interest received | 279 | 279 |
Repayment of loans advanced | 1,724 | 380 |
NET CASH FROM INVESTING ACTIVITIES | 1,487 | (350) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from credit facilities, loans | 3,603 | 4,420 |
Proceeds from issue of bonds | - | 1,400 |
Repayment of credit facilities, loans and leases | (4,463) | (5,271) |
Interest paid | (180) | (160) |
NET CASH FROM FINANCING ACTIVITIES | (1,040) | 389 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 901 | (128) |
Net foreign exchange differences | - | - |
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD | 219 | 233 |
CASH AND CASH EQUIVALENTS AT THE END OF PERIOD | 1,120 | 105 |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 47 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
1. General information
PGE Polska Grupa Energetyczna S.A. was founded on the basis of a notary deed of August 2, 1990, and registered in the District Court in Warsaw, XVI Commercial Department on September 28, 1990. The Company was registered in the National Court Register of the District Court for the capital city of Warsaw, XII Commercial Department, under no. KRS 0000059307. The Company's registered office is in Warsaw, ul. Mysia 2.
PGE S.A. is the parent company of the PGE Polska Grupa Energetyczna S.A. Group and prepares separate and consolidated financial statements in accordance with International Financial Reporting Standards as endorsed by the European Union.
The State Treasury is the Company's principal shareholder.
The Company's core activities are as follows:
- trade in electricity and other energy market products;
- oversight of head offices and holding companies;
- provision of financial services to PGE Group companies;
- provision of other services related to these activities.
PGE S.A.'s business activities are conducted under appropriate concessions, including concession for electricity trading granted by the Energy Regulatory Office. The concession is valid until 2025. No significant assets or liabilities are assigned to the concession. For its concession, the Group incurs annual charges dependent on the level of turnover,
Revenue from the sale of electricity and other energy market products is the only significant items in operating revenue. This revenue is generated on the domestic market. Therefore, the Company does not report business or geographical segments.
PGE S.A.'s accounting books are maintained by a subsidiary, PGE Synergia sp. z o.o.
Statement of compliance
These financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and in the scope required under the Minister of Finance Regulation of March 29, 2018 on current and periodic information provided by issuers of securities and conditions of recognition as equivalent information required by the law of a non-Member State (Official Journal 2018, items 512 and 685).
IFRS comprise standards and interpretations, approved by the International Accounting Standards Board and the International Financial Reporting Interpretation Committee.
Going concern
These condensed interim financial statements have been prepared on the assumption that the Company will continue as a going concern for a period of at least 12 months from the reporting date. As at the date of authorisation of these separate financial statements, no circumstances were identified which would indicate any threat to the Company continuing as a going concern.
These financial statements cover the period from January 1 to June 30, 2020 ("separate financial statements") and contain comparative figures for the period from January 1 to June 30, 2019 and as at December 31, 2019.
The same accounting rules (policies) and calculation methods were applied in these financial statements as in the most recent annual financial statements. These financial statements should be read in conjunction with the audited separate financial statements of PGE S.A. prepared in accordance with IFRS EU for the year ended December 31, 2019.
Seasonality of operations
Main factors affecting the demand for electricity and heat are: weather conditions - air temperature, wind force, rainfall, socio-economic factors - number of energy consumers, energy product prices, growth of GDP and technological factors - advances in technology, product manufacturing technology. Each of these factors has an impact on technical and economic conditions of production, distribution and transmission of energy carriers, thus influence the results obtained by the Company.
The level of electricity sales is variable throughout a year and depends especially on weather conditions - air temperature, length of the day. Growth in electricity demand is particularly evident in winter periods, while lower demands are observed during the summer months. Moreover, seasonal changes are evident among selected groups of final customers. Seasonality effects are more significant for households than for the industrial sector.
The seasonality of sales of PGE S.A. results from the fact that 78% of the volume of the Company's sales was made to PGE Obrót S.A. and PGE Dystrybucja S.A., whose demand for electricity is subject to seasonality.
2. Professional judgment of management and estimates
In the reporting period, the Company recognised impairment losses on its shares in subsidiaries, as described in notes 8 and 9 to these financial statements. Apart from these impairment losses, there were no other significant changes to the estimates affecting the figures presented in the financial statements.
3. Effect of new regulations onfuturefinancial statements of theCompany
New standards and interpretations published, not yet effective, are described in note 2.3 to the consolidated financial statements.
4. Changes in accountingprinciples and datapresentation
In the current period, the Company has not made any changes in accounting policies or data presentation
The additional notes constitute an integral part | |
of these consolidated financial statements. | 48 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
New standards and interpretations that became effective on January 1, 2020 and had no impact on the Company's separate financial statements are described in note 4 to the consolidated financial statements.
5. Fair valuehierarchy
The principles for measurement of inventories, shares and instruments not quoted on active markets, for which fair value may not be determined reliably, are the same as presented in the financial statements for the year ended December 31, 2019.
The Company measures derivatives at fair value using valuation models for financial instruments based on publicly available exchange rates, interest rates, discount curves in particular currencies (applicable also for commodities which prices are denominated in these currencies) derived from active markets. The fair value of derivatives is determined based on discounted future cash flows from transactions, calculated on the difference between the forward rate and transaction price. Forward exchange rates are not modelled as separate risk factor, but are derived from the spot rate and appropriate forward interest rate for foreign currencies in relation to PLN.
During the current and comparative reporting periods, there have been no transfers of financial instruments between the first and the second level of the hierarchy.
6. Revenuefromsales
Revenue from contracts with customers divided into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors is presented in the table below.
Type of goods or services | Period ended | Period ended | ||
June 30, 2020 | June 30, 2019 | |||
REVENUE FROM CONTRACTS WITH CUSTOMERS | 15,097 | 8,045 |
Revenue from sale of goods, including: | 14,568 | 7,578 |
Sale of electricity | 7,333 | 6,026 |
Sale of gas | 149 | 276 |
Sale of CO2 emission allowances | 7,086 | 1,276 |
Revenue from sales of services | 529 | 467 |
LEASE INCOME | 3 | 3 |
TOTAL SALES REVENUES | 15,100 | 8,048 |
The Company operates mainly in Poland.
The year-on-year increase in revenue from electricity sales in the first half of 2020 results from higher turnover volume and higher sales prices. The increase in the turnover volume results mainly from the revision of the electricity sales strategy in the first half of 2020, implemented in order to secure the demand of retail customers for electricity supplies. The change consists in the fact that surpluses of electricity not sold by PGE S.A. are resold again to producers.
The decline in revenue from sales of natural gas in the first half of 2020 resulted from a decrease in the volume of gas traded and a decrease in the selling price. The decrease in gas volume concerns mainly sales on the exchange and transactions with PGE Obrót S.A.
The increase in revenue from the sale of CO2 emission allowances in the current period results from the increase in sales prices and volume of sales to PGE Group companies, revenue from sales to third parties of surplus CO2 emission allowances bought back from PGE Group companies and revenue from sales to third parties of free CO2 emission allowances received in 2019 and 2020. The increase in the volume of CO2 emission allowances sold to PGE Group companies is attributable to a lower volume of free allowances granted in 2020 and the contracting of a higher volume of electricity sold, which results in higher demand for CO2 emission allowances.
Revenue from sales of services mainly concern services provided to PGE Group subsidiaries and cover electricity trade and supply, fuel deliveries, licences and support services. Increased revenues are mainly due to higher revenues from electricity trading services provided on behalf of PGE Group companies, as a result of both higher volume and higher electricity price.
Information concerning key clients
The Company's main counterparties are PGE Group subsidiaries. In the first half of 2020, sales to PGE Obrót S.A. accounted for 38% of revenue from sales, while sales to PGE GiEK S.A. accounted for 30%. In the first half of 2019, sales to these companies accounted for 68% and 18% respectively.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 49 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
7. Costs bynatureand function
Period ended | Period ended | |
June 30, 2020 | June 30, 2019 | |
COSTS BY NATURE | ||
Amortisation and depreciation | 6 | 6 |
External services | 36 | 33 |
Employee benefits expenses | 83 | 70 |
Other costs by nature | 25 | 33 |
TOTAL COSTS BY NATURE | 150 | 142 |
Distribution and selling expenses | (10) | (8) |
General and administrative expenses | (107) | (102) |
Cost of goods and materials sold | 14,538 | 7,456 |
COST OF GOODS SOLD | 14,571 | 7,488 |
*There was a reclassification between items in the table above.
The increase in the cost of goods and materials sold in the first half of 2020, as compared to the first half of 2019, is largely the effect of higher revenue from sales, as described above, and higher prices on the wholesale market.
8. Financeincomeand costs
Period ended | Period ended | ||
June 30, 2020 | June 30, 2019 | ||
NET FINANCE INCOME/(COSTS) FROM FINANCIAL INSTRUMENTS | |||
Dividends | 1,464 | 950 | |
Interest accrued at effective interest rate | 80 | 95 | |
Revaluation of financial instruments | (10) | 2 | |
Reversal/(recognition) of impairment losses | (337) | - | |
Foreign exchange differences | 3 | (17) | |
Gain on disposal of investments | - | (9) | |
TOTAL NET FINANCE INCOME/(COSTS) FROM FINANCIAL INSTRUMENTS | 1,200 | 1,021 | |
OTHER NET FINANCE INCOME/(COSTS) | - | - | |
TOTAL NET FINANCE INCOME/(COSTS) | 1,200 | 1,021 |
In the period ended June 30, 2020, the Company reported dividend income mainly from GE Dystrybucja S.A. (PLN 792 million), PGE Energia Odnawialna S.A. (PLN 467 million) and PGE Energia Ciepła S.A. (PLN 186 million), and in the comparative period mainly from PGE Dystrybucja (PLN 935 million).
Under the heading "Reversal / (recognition) of impairment losses", in the current reporting period, the Company presents the recognition of impairment losses on shares in PGE Obrót SA. (PLN 278 million), Elbest sp. z o.o (PLN 31 million), PGE Nowa Energia sp. z o.o. (PLN 16 million) and PGE Trading GmbH (PLN 12 million).
The Company reports interest income mainly from financing granted to its subsidiaries.
Interest expenses mainly relate to bonds issued and credit and loans contracted, as described in note 13 to these financial statements.
In the item "Revaluation of financial instruments", the Company presents mainly measurements of hedging transactions in their ineffective part for instruments designated as cash flow hedges and in full as regards other instruments.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 50 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
9. Shares in subsidiaries
9.1 Analysis of valueof shares in PGE Górnictwoi EnergetykaKonwencjonalnaS.A., PGE EnergiaCiepłaS.A. and PGE EnergiaOdnawialnaS.A.
In the first half of 2020, the Company analysed indications and identified drivers that could have substantial impact on changes in the value of its generating assets and, as a result, have an impact on the value of PGE S.A.'s shares in PGE Górnictwo i Energetyka Konwencjonalna S.A., PGE Energia Ciepła S.A. and PGE Energia Odnawialna S.A.
Key changes in the environment are as follows:
- Market capitalisation of PGE S.A. remaining below the net carrying amount of assets.
- Decrease in prices of futures contracts.
- Low demand for electricity in the National Power System due to the COVID-19 pandemic.
- Low prices on spot markets in Germany and Scandinavia result in high competitiveness of energy imports to Poland, which results in lower utilisation of Generation Units. An additional adverse factor is a decrease in demand in the National Power System and an increase in RES generation. In the opinion of the PGE S.A., this situation may continue until the end of 2021.
-
Approaching depletion of lignite resources.
The lifetime of lignite-fired power plants is limited due to the quantity of available lignite resources. Therefore, over time, the remaining service period, as well as the benefits and value in use, becomes shorter. - Continuing high prices of property rights (TGEozea index) The price of green property rights increased between Q1 and Q4 2018 from 63 PLN/MWh to 149 PLN/MWh. In 2019, prices of green property rights remained high, to reach more than 130 PLN/MWh in Q2 2020.
Following the analysis of the premises listed above, PGE S.A. performed impairment tests on its shares in PGE GiEK S.A. The basis for the estimates was the enterprise value calculated using the income method obtained based on the results of tests of non-current assets, adjusted to the level of equity. The tests were carried out with respect to CGUs by establishing their recoverable amounts. The recoverable amount of the analysed assets was determined based on value in use estimated using the discounted net cash flow method, based on financial projections prepared for the assumed useful life of the particular CGU. According to the Company, financial projections longer than five years are justified because the property, plant and equipment items used by the tested entities have significant longer useful lives and also due to significant and long-term effects of projected changes in the regulatory environment.
With respect to PGE EC S.A. and PGE EO S.A., there were no prerequisites for testing.
Key assumptions adopted for tests of the value in use of PGE GiEK S.A. are listed below.
Macroeconomic and market assumptions
The key price assumptions, i.e. the prices of electricity, CO2 emission allowances, hard coal, gas, and assumptions related to production at most of the Group's installations were derived from a study prepared by an independent expert, taking into account own estimates, based on the current market situation for the first two years of the projection.
Electricity price projections assume a slight increase in prices in 2020 as compared to 2019, followed by growths in subsequent years.
Price projections for CO2 emission allowances assume dynamic market price growth in successive years of the projection.
Hard coal price projections expect a decline in prices until 2023, as compared to 2019, followed by several-percent growth in subsequent years.
Gas price projections assume a decline in 2020 as compared to 2019, average annual growth in the period to 2025 at approx. 8% and growth of approx. 3% annually in the years thereafter.
Projections for prices of property rights concerning certificates of origin provide for an average annual decrease of about 7% between 2022 and 2031, which is related to the declining obligation to redeem.
Capacity-market revenue projection for 2021-2024 is based on the results of main auctions for these delivery periods, taking into account the mechanisms of the agreement to re-allocate revenue within PGE Group companies. The projection after 2025 was developed by a team of experts at PGE S.A., based on assumptions concerning estimated future cash flows for generation units, on the basis of, among others, completed auctions and projections prepared by a third-party expert. As of July 1, 2025, removed from the Capacity Market are units that fail to meet the emission criterion of 550 g CO2 per kWh, except for units covered by multiannual contracts executed in main auctions for years 2021-2024.
Revenue from regulatory system services was based on existing bilateral agreements with PSE S.A.
Unit availability was estimated based on repair plans, taking into account statistical failure rates.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 51 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Other detailed assumptions
- taking into account the allocation of free CO2 emission allowances in 2021-2030 only for system district heating, based on the 2020 level and assuming annual reduction,
- assumption for conventional plants that in the period after June 2025 there will be support from the capacity market or equivalent only for units that meet the emission criterion of 550 g of CO2 for electricity produced per kWh, whereby multiannual contracts concluded in auctions for 2021-2024 will be performed in accordance with their term,
- assumption for CHP plants that during the residual period there will be support from the capacity market or equivalent, only for units that meet the emission criterion of 550 g of CO2 of electricity produced,
- Taking into account work cost optimisation resulting from current work plans, among other things,
- Maintaining production capacities as a result of replacement-type investments,
- Taking into account highly advanced development investments,
- Assuming WACC after tax over the projection period of 6.5%-8.0%, differentiated for individual CGUs according to the risk level assessed on a case by case basis.
Impairment test and analysis of sensitivity of shares in PGE GiEK S.A.
As regards shares in PGE GiEK S.A., the tests carried out did not demonstrate the necessity to recognise an impairment loss. The carrying amount of shares in PGE GiEK S.A. recognised in the Company's accounting books is PLN 11,979 million. Following the impairment test, the value of PGE GiEK S.A.'s equity was estimated at PLN 13,251 million, and consequently PGE S.A. was not required to recognise an impairment loss.
The basis for the estimates was the enterprise value calculated using the income method adjusted to the level of equity by interest liabilities, financial assets and discounted expenses for reclamation. The analysis revealed that the value of the measured shares is most sensitive to changes in assumptions concerning the price of electricity, the price of CO2 emission allowances and the weighted average cost of capital. The estimated effect of the change of key assumptions on the change in PGE GiEK S.A.'s equity as at June 30, 2020 is presented below.
Parameter | Change | Effect on equity | |
Increase | Decrease | ||
Change in electricity prices in the entire | 1% | 2,074 | - |
projection period | -1% | - | 2,090 |
A 1% decrease in electricity price would decrease the equity by PLN 2,090 million.
Parameter | Change | Effect on equity | |
Increase | Decrease | ||
Change in WACC | +0.5 pp | - | 1,025 |
-0.5 pp | 1,133 | - | |
A 0.5 p.p. increase WACC would decrease the equity by PLN 1,025 million.
Parameter | Change | Effect on equity | |
Increase | Decrease | ||
Change in prices of CO2 emission | 1% | - | 744 |
allowances | -1% | 736 | - |
A 1% increase in prices of CO2 emission allowances would decrease the equity by PLN 744 million.
9.2 Analysis of thevalueof shares in PGE Obrót S.A.
In the first half of 2020, the retail electricity trading market was under pressure due to lower demand caused by the COVID-19 pandemic. The lower volume results in a lower margin generated due to the resale of the excess volume in SPOT transactions with a negative outcome. Therefore, PGE S.A. has identified indications of impairment of financial non-current assets in the form of shares in PGE Obrót S.A. Such indications include:
-
Significant decrease in demand for electricity in connection with the COVID-19 pandemic, which caused a significant decrease in the volume sold to final off-takers, which negatively affects the financial performance of trading companies, including PGE Obrót
S.A. - Non-recognitionby the President of the ERO of the qualified costs incurred by PGE Obrót related to the sale of electricity for the G tariff customer portfolio for 2020, which significantly affected the Company's performance in terms of sales margins.
- The effects of the Act of February 20, 2015 on Renewable Energy Sources, which introduced rules for the settlement of prosumers and energy cooperatives consisting in compensating the amount of electricity introduced into and received from the power grid. The introduced settlement system generates losses for the obliged seller (i.e. PGE Obrót S.A.). These losses are higher the higher the percentage of electricity introduced into the grid that can be compensated by the prosumer or energy cooperative. In connection with the dynamic development of photovoltaic microinstallations in recent years supported by the activities of state administration in the form of aid programmes, such as "Mój Prąd" and as a result of the aforementioned settlement system, the financial performance of electricity sellers will be under pressure from the expected further growth of the prosumer market segment.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 52 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
In view of the above, the Company performed an impairment test on shares in PGE Obrót S.A. The test was conducted in line with IAS 36 using the discounted cash flows method. A five-year cash flow model for PGE Obrót S.A. was used in developing the projections. The key assumptions used in the measurement were as follows:
- decrease in total sales volume in 2020 related to the COVID-19 pandemic,
- increase in overall sales volume in 2024 by approx. 2.1% compared to 2020,
- price assumptions for electricity, which were the basis for estimating the level of margins, were derived from a study prepared by an independent expert, taking into account own estimates, based on the current market situation for the first two years of the projection,
- taking into account the economic effects related to the level of prices approved by the ERO President for households throughout 2020 in the projection,
- change in margin after 2021 calculated on the basis of the assumptions of stabilisation on the electricity market and improvement of price risk management efficiency,
- correlation between electricity prices in 2022-2024 for sales to retail customers with wholesale prices and impact on their level resulting from a change in the obligation to redeem property rights as well as changes in the prices of property rights,
- taking into account the economic effects related to the dynamic development of prosumer microinstallations in the projection horizon on the basis of observed market trends in 2019
- assumption of WACC after tax over the projection period of 7.0%.
The higher sales volume and margins for 2022-2024 assumed for these tests were estimated on the assumption that PGE Obrót S.A. will strengthen its position on the electricity sales market. In recent years, as a result of considerable volatility of prices on the wholesale market, many companies engaged in trade of electricity ceased their activities and terminated their sales contracts with customers.
Impairment test and analysis of sensitivity of shares in PGE Obrót S.A.
The carrying amount of shares in PGE Obrót S.A. recognised in the Company's accounting books is PLN 852 million. Following the test, the value of shares in PGE Obrót S.A. was estimated at PLN 574 million, and therefore PGE S.A. recognized an impairment loss of PLN 278 million. The need to recognise an impairment loss is primarily caused by rising electricity prices on the wholesale market, which translates into lower projected margins in 2020-2021 and a drop in sales related to the COVID-19 pandemic.
The analysis revealed that the value of the measured shares is most sensitive to changes in assumptions concerning the weighted average cost of capital and stand-alone margins. The estimated effect of the change of key assumptions on the change in impairment loss on shares in PGE Obrót S.A. is presented below.
Parameter | Change | Effect on impairment loss in PLN million | |
Increase in impairment loss | Decrease in impairment loss | ||
Change in stand-alone margin | 1% | - | 119 |
-1% | 119 | - | |
A 1% decrease in stand-alone margin would increase the impairment loss by PLN 119 million.
Parameter | Change | Effect on impairment loss in PLN million | |
Increase in impairment loss | Decrease in impairment loss | ||
Change in WACC | +0.5 pp | 259 | - |
-0.5 pp | - | 324 | |
A 0.5 p.p. increase WACC would increase the impairment loss by PLN 259 million.
9.3 Analysis of valueof other shares
In the first half of 2020, the Company recognised an impairment loss on shares in PGE Nowa Energia sp. z o.o. in the amount of PLN 16 million and on shares in PGE Trading GmbH in the amount of PLN 13 million. The rationale for recognition of impairment losses is a significant difference between the carrying amount of shares in PGE Nowa Energia sp. z o.o. and shares in PGE Trading GmbH in the accounting books of PGE S.A. and the value of these companies estimated with the adjusted net assets method. In addition, the Company recognised impairment losses on shares in Elbest sp. z o.o. in the amount of PLN 31 million. The rationale for recognition of impairment losses is a significant difference between the carrying amount of shares in Elbest sp. z o.o. in the accounting books of PGE S.A. and the value of these companies estimated with the discounted cash flows method.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 53 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
10. Selected financial assets
The carrying amount of financial assets measured at amortised cost is a reasonable estimate of their fair value.
10.1 Tradeand other financial receivables
As at June 30, 2020 | As at December 31, 2019 | |||
Non-current | Current | Non-current | Current | |
Trade receivables | - | 1,060 | - | 1,190 |
Bonds acquired | 9,930 | 1,799 | 10,840 | 1,799 |
Cash pooling receivables | - | 874 | - | 1,016 |
Loans advanced | 85 | 4,104 | 115 | 3,730 |
Other financial receivables | - | 229 | - | 154 |
TOTAL FINANCIAL RECEIVABLES | 10,015 | 8,066 | 10,955 | 7,889 |
Trade receivables
Trade receivables of PLN 1,060 million relate mainly to the sale of electricity and services to subsidiaries in PGE Group. As at June 30, 2020, the balance of the three most important customers, i.e. PGE Obrót S.A., PGE Górnictwo i Energetyka Konwencjonalna S.A. and PGE Dystrybucja S.A., accounted for 94% of total trade receivables.
Bonds acquired
As at June 30, 2020 | As at December 31, 2019 | |||
Non-current | Current | Non-current | Current | |
BONDS ACQUIRED - ISSUER | ||||
PGE Górnictwo i Energetyka Konwencjonalna S.A. | 9,930 | 713 | 10,840 | 713 |
PGE Energia Odnawialna S.A | - | 1,086 | - | 1,086 |
TOTAL BONDS ACQUIRED | 9,930 | 1,799 | 10,840 | 1,799 |
PGE S.A. acquires bonds issued by PGE Group companies. Proceeds from the issue of bonds are used for financing investment projects, refinancing financial liabilities as well as for financing current operations.
Bonds with maturities not exceeding 12 months from the reporting date are classified as current assets, and bonds with maturities exceeding 12 months from the reporting date are classified as non-current assets; however, this classification depends not only on maturity dates, but also on the Company's intentions with regard to roll-overs.Inter-group bonds that mature within one year and are expected to be rolled over are classified as non-current instruments. This classification reflects the nature of cash management in a mid- and long-term.
Cash pooling receivables
In order to centralize the management of financial liquidity in PGE Group, agreements for real cash pooling services were executed between 16 companies of PGE Group and each bank separately, i.e. with PKO BP S.A. and PeKaO S.A. PGE S.A. coordinates the cash pooling service in PGE Group. This means, among others, that individual companies settle their accounts with the Company, and the Company settles with the banks. Therefore, balances of settlements with related parties participating in cash pooling are reported in financial receivables and financial liabilities of PGE S.A.
Loans advanced
As at June 30, 2020 | As at December 31, 2019 | ||||||
Non-current | Current | Non-current | Current | ||||
LOANS ADVANCED - BORROWER | |||||||
PGE Energia Ciepła S.A. | - | 1,560 | - | 1,938 | |||
PGE Obrót | - | 1,464 | - | 1,015 | |||
PGE Dystrybucja S.A. | - | 751 | - | 627 | |||
PGE Systemy S.A. | - | 197 | - | 116 | |||
PGE EJ 1 sp. z o.o. | 76 | 80 | 110 | 22 | |||
PGE Dom Maklerski sp. z o.o. | 32 | ||||||
PGE Trading GmbH | - | 13 | - | 12 | |||
Betrans sp. z o.o. | 9 | 2 | 4 | - | |||
Elbest Sp. o.o. | - | 5 | |||||
Bestgum sp. z o.o. | - | - | 1 | - | |||
TOTAL LOANS ADVANCED | 85 | 4,104 | 115 | 3,730 |
Loan repayment dates range from 2020 to 2024.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 54 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
10.2 Cash and cash equivalents
Short-term deposits are placed for various maturities, ranging from one day to one month, depending on the Company's current cash requirement, and bear interest at agreed interest rates.
Cash at banks earns interest at variable rates linked to O/N deposit rates.
The balance of cash and cash equivalents comprises the following items:
As at | As at | |
June 30, 2020 | December 31, 2019 | |
Cash at bank | 1,051 | 182 |
Cash in VAT accounts | 74 | 39 |
TOTAL | 1,125 | 221 |
Exchange differences on cash in foreign currencies | (5) | (2) |
Cash and cash equivalents presented in the statement of cash flows | 1,120 | 219 |
Undrawn borrowing facilities | 4,373 | 4,973 |
including overdraft facilities | 1,661 | 864 |
The balance of cash includes restricted cash in the amount of PLN 74 million, representing cash in VAT accounts in the amount as well as securities and collateral.
A detailed description of credit agreements is presented in note 13 to these financial statements.
11. Derivatives and other receivables measured at fair value through profit or loss
All derivatives are recognised in the Company's financial statements at fair value.
As at June 30, 2020 | As at December 31, 2019 | ||||||
Assets | Liabilities | Assets | Liabilities | ||||
DERIVATIVES MEASURED AT FAIR VALUE THROUGH | |||||||
PROFIT OR LOSS | |||||||
Commodity forwards | - | 220 | 324 | - | |||
Futures | 233 | - | 79 | - | |||
Currency forwards | 78 | 77 | 43 | 338 | |||
Options | 6 | - | 5 | - | |||
HEDGING DERIVATIVES | |||||||
CCIRS hedges | 13 | - | 18 | - | |||
IRS hedges | - | 432 | - | 106 | |||
OTHER ASSETS MEASURED AT FAIR VALUE THROUGH | |||||||
PROFIT OR LOSS | |||||||
Investment fund participation units | 71 | - | 82 | - | |||
TOTAL | 401 | 729 | 551 | 444 | |||
non-current | 311 | 432 | 105 | 106 | |||
current | 90 | 297 | 446 | 338 | |||
Commodity and currency forwards
Commodity and currency forward transactions mainly relate to trade in CO2 emission allowances.
IRS transactions
The Company entered into IRS transactions to hedge interest rates on credit facilities and bonds issued with a total nominal value of PLN 7,030 million (PLN 5,630 million for credit facilities and PLN 1,400 million for bonds). To recognise these IRS transactions, the Company uses hedge accounting.
CCIRS hedges
In connection with loans received from the subsidiary, PGE Sweden AB (publ), referred to in note 13 to these financial statements, in June and August 2014 PGE S.A. concluded CCIRS transactions, hedging both the exchange rate and interest rate. In these transactions, banks- counterparties pay PGE interest based on a fixed rate in EUR and PGE S.A. pays interest based on a fixed rate in PLN. The notional amount, payment of interest and repayment of notional amount in CCIRS transactions are correlated with the relevant conditions arising from loan agreements.
In 2019, the company repaid a loan with the nominal amount of EUR 514 million, and the CCIRS transaction concluded to hedge it was settled.
To recognise these CCIRS transactions, the Company uses hedge accounting.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 55 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Options
PGE S.A. purchased a call option to purchase shares of Polimex-Mostostal S.A. from Towarzystwo Finansowe Silesia Sp. z o.o. The option was measured using the Black-Scholes method.
Investment fund participation units
In previous years, the Company purchased investment certificates from the PGE Ventures Closed-end Private Equity Investment Fund (FIZAN) - their value as at the reporting date is PLN 14 million, and investment certificates from the PGE Ventures Closed-end Private Equity Investment Fund (FIZAN) - their value as at the reporting date is PLN 4 million. It also purchased participation units from TFI Energia S.A. in three sub-funds; their value as at the reporting date is PLN 53 million.
12. Other current assets
As at | As at | |
June 30, 2020 | December 31, 2019 | |
Dividends receivable | 1,464 | - |
Receivables from tax group | 27 | 9 |
Advance payments | 616 | 475 |
VAT receivable | 21 | - |
Other | 4 | 3 |
TOTAL | 2,132 | 487 |
Dividends receivable mainly concern receivables from PGE Dystrybucja S.A., PGE Energia Odnawialna S.A. and PGE Energia Ciepła S.A.
Advance payments comprise mainly funds transferred to the subsidiary, PGE Dom Maklerski S.A., for the purchase of electricity and gas of PLN 612 million in the current reporting period as compared to PLN 475 million in the comparative period.
13. Credit facilities, loans, bonds, cash pooling, leases
As at June 30, 2020 | As at December 31, 2019 | ||||||
Non-current | Current | Non-current | Current | ||||
Liability on account of credit facilities | 7,367 | 353 | 7,492 | 1,094 | |||
Loans received | 641 | 8 | 611 | 8 | |||
Bonds issued | 1,398 | 3 | 1,398 | 5 | |||
Cash pooling liabilities | - | 1,447 | - | 907 | |||
Lease liabilities | 20 | 1 | 20 | 1 | |||
TOTAL CREDIT FACILITIES, LOANS, | 9,426 | 1,812 | 9,521 | 2,015 | |||
BONDS AND CASH POOLING | |||||||
Credit facilities
Hedging | Limit in | Liability as at | Liability as at | ||||||
Lender | Execution date | Maturity date | Currency | Interest rate | December 31, | ||||
instrument | currency | June 30, 2020 | |||||||
2019 | |||||||||
Bank consortium | IRS | 2015-09-07 | 2023-09-30 | 3,630 | PLN | Variable | 3,644 | 3,649 | |
European | |||||||||
Investment Bank | - | 2015-10-27 | 2034-08-25 | 1,500 | PLN | Fixed | 1,505 | 1,505 | |
Bank Gospodarstwa | |||||||||
Krajowego | IRS | 2014-12-17 | 2027-12-31 | 1,000 | PLN | Variable | 938 | 1,001 | |
European Bank for | |||||||||
Reconstruction and | |||||||||
Development | IRS | 2017-06-07 | 2028-06-07 | 500 | PLN | Variable | 501 | 502 | |
Bank Gospodarstwa | |||||||||
Krajowego | IRS | 2015-12-04 | 2028-12-31 | 500 | PLN | Variable | 500 | 500 | |
European | |||||||||
Investment Bank | - | 2015-10-27 | 2034-08-25 | 490 | PLN | Fixed | 493 | 493 | |
Bank Gospodarstwa | |||||||||
Krajowego | - | 2018-06-01 | 2021-05-31 | 1,000 | PLN | Variable | 139 | 455 | |
Revolving credit | |||||||||
facility | - | 2018-09-17 | 2022-12-16 | 4,100 | PLN | Variable | - | 300 | |
Bank Pekao S.A. | - | 2018-07-05 | 2024-12-22 | 500 | PLN | Variable | - | 160 | |
PKO BP S.A. | - | 2018-04-30 | 2022-04-29 | 300 | PLN | Variable | - | 21 | |
European | |||||||||
Investment Bank | - | 2019-12-16 | 2038-10-16 | 273 | PLN | Fixed | - | - | |
TOTAL CREDIT FACILITIES | 7,720 | 8,586 |
In the first half of 2020 and after the reporting period, there were no cases of default on repayment or breach of other terms of credit agreements.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 56 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Loans received
Hedging | Limit in | Liability as at | Liability as at | ||||||
Lender | Execution date | Maturity date | Currency | Interest rate | December 31, | ||||
instrument | currency | June 30, 2020 | 2019 | ||||||
PGE Sweden AB | CCIRS | 2014-08-27 | 2029-07-31 | 100 | EUR | Fixed | 452 | 431 | |
PGE Sweden AB | CCIRS | 2014-08-27 | 2029-07-31 | 43 | EUR | Fixed | 197 | 188 | |
TOTAL LOANS RECEIVED | 649 | 619 |
In 2014, PGE S.A. and PGE Sweden AB (publ) established the Medium term Eurobonds Issue Programme under which PGE Sweden AB (publ) may issue eurobonds up to the amount of EUR 2 billion with a minimum maturity of 1 year. In 2014, PGE Sweden AB (publ) issued Eurobonds in the total amount of EUR 638 million. The subsidiary allocated the funds raised under this program to grant loans to its parent company.
Domestic market bond issues
Conclusion | Maturity | Hedging | Interest | Tranche | Tranche | Liability as at | Liability as at | ||||
date | date | Limit in currency | instrument | Currency | rate | issue date | maturity date | June 30, 2020 | December 31, | ||
2019 | |||||||||||
2013-06-27 indefinite | 1,002 | IRS | PLN | Variable | 2019-05-21 | 2029-05-21 | 1,001 | 1,002 | |||
401 | 2019-05-21 | 2026-05-21 | 400 | 401 | |||||||
TOTAL BONDS ISSUED | 1,401 | 1,403 |
Cash pooling liabilities
The establishment of the real cash pooling arrangement is described in note 10 to these financial statements.
14. Contingent liabilities
As at | As at | |
June 30, 2020 | December 31, 2019 | |
Bank guarantee liabilities | 12,050 | 11,549 |
Collateral for exchange transactions | 180 | 1,800 |
Other contingent liabilities | - | - |
TOTAL CONTINGENT LIABILITIES | 12,230 | 13,349 |
Guarantee for PGE Sweden AB (publ) liabilities
Due to establishment of the Eurobonds programme in 2014, an agreement was concluded for the issue of guarantee by PGE S.A. for the liabilities of PGE Sweden AB (publ). The guarantee was granted to the amount of EUR 2,500 million (PLN 10,750 million) and will be valid until December 31, 2041. As at June 30, 2020, PGE Sweden AB (publ)'s liabilities on account of bonds issued amounted to EUR 140 million (PLN 633 million), as at December 31, 2019 liabilities amounted to EUR 140 million (PLN 596 million).
Collateral for exchange transactions
These liabilities comprise bank guarantees provided as collateral for exchange transactions resulting from membership in the Warsaw Commodity Clearing House. As at June 30, 2020, the total amount of bank guarantees was PLN 180 million. In the comparative period, it amounted to PLN 1,800 million. The decrease in guarantees results from the offsetting agreement concluded in January 2020 between PGE Group companies. Under this agreement, in accordance with the Regulations of the Exchange Clearing House, security deposits within the energy group may be offset, owing to which offsetting positions within the PGE Group were offset and thus required only a minor security.
Standby commitments to ensure financing of new investments for PGE Group companies
Due to planned strategic investments in PGE Group, the Company committed to its subsidiaries, in the form of standby commitments, to ensure financing of the planned investments. The standby commitments relate to specific investments and may be used only for such purposes. As at the reporting date, the approximate value of future investment commitments related to these projects amounts to about PLN 800 million.
Other legal claims and disputes
Compensation for share conversions and lawsuits seeking annulment of the General Meeting resolutions have been described in note 22.4 to the consolidated financial statements.
15. Information on related parties
Transactions with related parties are concluded based on market prices for provided goods, products and services or are based on the cost of manufacturing. Exceptions to this rule were tax losses settlements within the tax group.
Any benefits from the current settlement of tax losses are attributable to PGE S.A.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 57 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
16. PGE Group subsidiaries
Period ended | Period ended | ||
June 30, 2020 | June 30, 2019 | ||
Sales to related parties | 11,210 | 7,610 | |
Purchases from related parties | 6,100 | 3,548 | |
Net finance income/(expenses) | 1,421 | 1,168 | |
The Company recognises revenues from sales to subsidiaries in PGE Group mainly from sales of electricity. |
As at | As at | |
June 30, 2020 | December 31, 2019 | |
RECEIVABLES FROM RELATED PARTIES | ||
Bonds issued by subsidiaries | 11,729 | 12,639 |
Dividends receivable | 1,464 | - |
Trade receivables from subsidiaries | 1,030 | 1,145 |
Loans granted to subsidiaries | 4,189 | 3,845 |
Cash pooling receivables | 874 | 1,017 |
Receivables from the tax group settlements | 27 | 9 |
TOTAL RECEIVABLES FROM RELATED PARTIES | 19,313 | 18,655 |
As at | As at | |
June 30, 2020 | December 31, 2019 | |
LIABILITIES TO RELATED PARTIES | ||
Loans received from subsidiaries | 649 | 619 |
Trade liabilities to related parties | 414 | 561 |
Cash pooling liabilities | 1,447 | 907 |
Liabilities from the tax group settlements | 5 | 47 |
TOTAL LIABILITIES TO RELATED PARTIES | 2,515 | 2,134 |
Standby commitments and sureties granted to PGE S.A.'s subsidiaries are described in note 14 to these separate financial statements.
17. State Treasury-controlled companies
The State Treasury is the dominant shareholder of PGE Group and as a result the State Treasury companies are treated as related entities. The Company closely monitors transactions with key State Treasury subsidiaries. The total value of transactions with such entities is presented in the table below.
Period ended | Period ended | ||
June 30, 2020 | June 30, 2019 | ||
Sales to related parties | 68 | 61 | |
Purchases from related parties | 101 | 106 | |
As at | As at | ||
June 30, 2020 | December 31, 2019 | ||
Trade receivables from related parties | 6 | 18 | |
Trade liabilities to related parties | 19 | 8 |
Moreover, the Company enters into significant transactions in the energy market via Towarowa Giełda Energii S.A. (Polish Power Exchange). Due to the fact that this entity deals only with the organisation of trading, any purchases and sales made through this entity are not recognised as transactions with related parties.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 58 of 61 |
Condensed separate interim financial statements of PGE Polska Grupa Energetyczna S.A. for the 6-month period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
18. Management remuneration
The management personnel comprises the Management Board and the Supervisory Board of the Company.
Period ended | Period ended | ||
PLN '000 | June 30, 2020 | June 30, 2019 | |
Short-term employee benefits (salaries and salary related costs) | 3,907 | 4,326 | |
Post-employment and termination benefits | (143) | - | |
TOTAL REMUNERATION OF KEY MANAGEMENT PERSONNEL | 3,764 | 4,326 | |
Period ended | Period ended | ||
PLN '000 | June 30, 2020 | June 30, 2019 | |
Management Board of the Company | 3,357 | 3,947 | |
Supervisory Board of the Company | 407 | 379 | |
TOTAL REMUNERATION OF KEY MANAGEMENT PERSONNEL | 3,764 | 4,326 |
Members of the Company's Management Board are employed on the basis of civil law contracts for management (so called management contracts). The above remuneration is included in other costs by nature disclosed in note 7 Costs by nature and function.
The amount of post-employment and termination benefits in the current period was negative due to the reversal of unused provisions from previous years.
19. Significant events during and after the reporting period
Significant events in the period have been described in note 25 to the consolidated financial statements. No other significant events took place between the end of the reporting period and the date on which these separate financial statements were approved.
The additional notes constitute an integral part | |
of these consolidated financial statements. | 59 of 61 |
Semi-annual financial report for the 6-month period
period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
III. APPROVAL OF THE SEMI-ANNUAL FINANCIAL REPORT
This semi-annual financial report was approved for publication by the Management Board of the parent company on September 15, 2020.
Warsaw, September 15, 2020
Signatures of members of the Management Board of PGE Polska Grupa Energetyczna S.A.
President of the | Wojciech Dąbrowski |
Management Board |
Vice-President of the Wanda Buk
Management Board
Vice-President of the Paweł Cioch
Management Board
Vice-President of the Paweł Strączyński
Management Board
Vice-President of the Paweł Śliwa
Management Board
Vice-President of the Ryszard Wasiłek
Management Board
Signature of person | Michał Skiba |
responsible for drafting | |
Director, Reporting and | |
these financial | |
Tax Department | |
statements | |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 60 of 61 |
Semi-annual financial report for the 6-month period
period ended June 30, 2020, in accordance with IFRS EU (in PLN million)
Glossary of terms and acronyms
Below is a list of the terms and abbreviations most frequently used in these consolidated financial statements
Acronym | Full name | |
CCIRS | Cross Currency Interest Rate Swaps | |
CGU | Cash Generating Unit | |
EBIT | Earnings Before Interest and Taxes | |
EBITDA | Earnings Before Interest, Taxes, Depreciation and Amortization | |
EUA | CO2 emission allowances (European Union Allowances) | |
ECH | Exchange Clearing House | |
PGE Capital Group, PGE Group, Group, PGE | PGE Polska Grupa Energetyczna S.A. Capital Group | |
CG | ||
IRGiT | Warsaw Commodity Clearing House | |
IRS | Interest Rate Swap | |
LTC | Long-term capacity and electricity sales contracts | |
KOGENERACJA S.A. | Zespół Elektrociepłowni Wrocławskich KOGENERACJA S.A. | |
KPI | National Investment Plan | |
IFRS | International Financial Reporting Standards | |
EU IFRSs | International Financial Reporting Standards as endorsed by the European Union | |
IP | Investment property | |
ROUA | Right-of-use assets | |
PGE S.A., Company, Parent Company | PGE Polska Grupa Energetyczna S.A | |
PGE EC S.A. | PGE Energia Ciepła S.A. | |
PGE EO S.A. | PGE Energia Odnawialna S.A. | |
PGE GiEK S.A. | PGE Górnictwo i Energetyka Konwencjonalna S.A. | |
PGE PGK | PGE Tax group | |
RPUL | Right to perpetual usufruct of land | |
PPE | Property, plant and equipment | |
Financial statements, consolidated financial | Consolidated financial statements of PGE Group | |
statements | ||
ERO | Energy Regulatory Office | |
Act on Electricity Prices | Act amending the act on excise duty and certain other acts | |
WACC | Weighted Average Cost of Capital | |
WFOŚiGW | Provincial Fund for Environmental Protection and Water Management | |
IA | Intangible assets | |
The additional notes constitute an integral part | |
of these consolidated financial statements. | 61 of 61 |
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Disclaimer
PGE - Polska Grupa Energetyczna SA published this content on 15 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 September 2020 07:49:00 UTC