Tools
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 modelled 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).
| As at December 31, 2019 | As at December 31, 2018 | |||
|---|---|---|---|---|
| FAIR VALUE HIERARCHY | Level 1 | Level 2 | Level 1 | Level 2 |
| CO2 emission allowances in trading activities | 1,303 | – | 140 | – |
| Hard coal in trading activities | 125 | – | 4 | – |
| Inventories | 1,428 | – | 144 | – |
| Currency forwards | – | 13 | – | 24 |
| Commodity forwards | – | 265 | – | 4 |
| Commodity SWAP | – | 11 | – | 6 |
| Contracts for purchase/sale of coal | – | 6 | – | 2 |
| Valuation of CCIRS | – | 18 | – | 113 |
| Valuation of IRS | – | 34 | – | 4 |
| Options | – | 5 | – | 12 |
| Fund participation units | – | 68 | – | 66 |
| Financial assets | – | 420 | – | 231 |
| Currency forwards | – | 348 | – | 59 |
| Commodity forwards | – | 8 | – | – |
| Commodity SWAP | – | 16 | – | 46 |
| Contracts for purchase/sale of coal | – | 1 | – | 7 |
| Valuation of IRS | – | 106 | – | 24 |
| Financial liabilities | – | 479 | – | 136 |
Derivatives are presented in note 25.1.2 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.
Terms of individual derivatives and other receivables measured at fair value through profit or loss.
| As at December 31, 2019 | As at December 31, 2018 | ||||
|---|---|---|---|---|---|
| Amount in the financial statements in PLN |
Notional amount of the instrument in the original currency |
Amount in the financial statements in PLN |
Notional amount of the instrument in the original currency |
Maturity as at December 31, 2019 | |
| CCIRS – EUR to PLN | 18 | – | 113 | 514 | by June 2019 |
| 144 | 144 | by July 2029 | |||
| IRS – interest rate to PLN | – | – | 4 | – | |
| – | 1,000 | – | |||
| Options | 5 | 6 | 12 | 6 | by July 2022 |
| Investment fund participation units | 68 | 66 | 66 | 65 | n/a |
| Currency forward – EUR | 43 | 582 | 4 | 203 | October 2022 |
| Commodity forward – PLN | 93 | 1,572 | 6 | 63 | by December 2022 |
| 1,479 | 57 | ||||
| Commodity forward – PLN | 28 | 298 | – | – | by March 2020 |
| 66 | |||||
| Commodity forward – EUR | 144 | 339 | – | – | by March 2020 |
| Currency forward – USD | 4 | 46 | 18 | 133 | by January 2021 |
| Currency forward – USD | – | – | 2 | 7 | by February 2019 |
| Commodity SWAP – USD | 11 | – | 4 | 27 | by December 2020 |
| 16 | 3 | ||||
| Currency forward – EUR | – | – | – | 10 | by January 2021 |
| Contracts for purchase – USD | 6 | 6 | 2 | 3 | by June 2020 |
| Contracts for sale – USD | 9 | 18 | |||
| Financial assets | 420 | – | 231 | – | |
| Currency forward – EUR | 338 | 3,089 | 48 | 1,222 | December 2023 |
| IRS – interest rate to PLN | 106 | 500 | 24 | June 2028 | |
| 1,000 | 500 | December 2027 | |||
| 500 | December 2028 | ||||
| 3,630 | September 2023 | ||||
| 1,000 | 3,630 | May 2029 | |||
| 400 | May 2026 | ||||
| Currency forward – EUR | 6 | 31 | 7 | 71 | by January 2021 |
| Commodity forward – PLN | 8 | 319 | – | – | by December 2021 |
| 311 | |||||
| Commodity SWAP – USD | 16 | 16 | 46 | 136 | by December 2020 |
| 1 | 6 | ||||
| Currency forward – USD | 3 | 36 | 4 | 108 | by January 2021 |
| – | 3 | ||||
| Currency forward – USD | 1 | 12 | – | – | by January 2021 |
| Contracts for purchase – USD | 1 | – | 7 | – | by December 2020 |
| Contracts for sale – USD | 3 | 1 | |||
| Financial liabilities | 479 | 136 | |||
