25.1.3 Credit facilities, loans, bonds and leases

Currency position and interest rates

Changes in interest-bearing debt in the years ended December 31, 2019 and 2018

Credit facilities and loans

Credit facilities and loans disclosed by PGE Group as at December 31, 2019 and December 31, 2018 include:

As at December 31, 2019, the value of the available overdrafts at significant PGE Group companies was PLN 1,035 million. The repayment date of used overdraft facilities of PGE Group’s key companies is 2020-2021.

In 2019 and after the reporting period, there were no cases of default on repayment or breach of other terms of credit agreements.

Bonds issued

In the current period, PGE Sweden AB redeemed bonds with a total value of EUR 500 million.

Lease liability

ACCOUNTING POLICIES

Lease liabilities

Lease liability is recognised by the lessee at the commencement date.

At the commencement date, the lessee measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee uses the lessee’s incremental borrowing rate.

At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After the commencement date, the lessee measures the lease liability by:

• increasing the carrying amount to reflect interest on the lease liability which, in each period during the lease term, are the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability.
• reducing the carrying amount to reflect the lease payments made; and
• remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect revised in-substance fixed lease payments.

PGE Group is a party to a number of lease, tenancy, easement or rental contracts. The underlying assets include land, areas of technical infrastructure, office and utility space, equipment, plants, technical premises, as well as IT infrastructure. Contracts are concluded for a definite or indefinite period of time with a fixed notice period. The Group also has the right to use the land under perpetual usufruct. The Group estimates the term of each lease taking into account relevant facts and circumstances that may affect the extension or shortening of the lease term.

Some contracts include variable fees based on the inflation rate announced by the Central Statistical Office for the previous year. The index-based element determines their variable nature – these charges are taken into account in the measurement of lease liabilities. In some cases, the annual rent is increased by other variable charges, other than variable charges linked to a rate or index. These include, for example, payments of property tax or structure tax. These charges are not included in the measurement of lease liabilities. Leases of land for the construction and operation of windfarms, in addition to the rent, include fees for compensation for the exclusion of land from cultivation for the construction period. These charges are not included in the measurement of the lease liability as no rights to use the assets are transferred to the lessee and no services are provided to the lessee. The same applies to charges relating to compensation for losses for entering the site to carry out operation, maintenance and other work related to the operation of the wind farm park.

Decisions on the right of perpetual usufruct of land are usually granted for a fixed period of 99 years. The fee for perpetual usufruct of land is established as a percentage of the land value. The amount of the annual fee for perpetual usufruct of a land property is revised no more frequently than once every 3 years, if the value of this property changes, thus it will be a variable fee depending on the index or rate, which is included in the measurement of the lease liability.

The Group leases small office equipment (printing equipment, photocopiers, computers, etc.), treated as leases of low-value assets. The Group decided to apply the exemption and not to recognise the right-of-use assets and lease liabilities in respect of these contracts in the statement of financial position.

The Group also applied a practical exemption for short-term leases. This mainly concerns decisions on use of a road or rail lane strip if the decision is issued for less than 12 months.

The Group also takes advantage of a simplification for short-term leases in the case of indefinite property leases with a notice period of less than 12 months, where the leased space was not subject to special adjustments, there are no significant exit barriers (e.g. penalties for early termination) and both parties have a practical possibility to lease such space on the market.