26.3 Credit risk

Credit risk is connected with a potential credit event that can occur, such as insolvency of a customer, only a partial payment of receivables, significant delay in payment of receivables or other breaches of contract conditions (in particular the lack of delivery and acceptance of the goods as agreed in the contract and the possible non-payment for damages and contractual penalties).

PGE Group companies are exposed to credit risk arising in the following areas:

• principal activities of the companies – credit risk results from, among others, purchases and sales of electricity, heat, property rights arising from certificates of origin for electricity, CO₂ emission allowances, fuels etc. This relates primarily to the possibility of a default by the other party of the transaction, if fair value of the transaction is positive from the point of view of the Group;
• investing activities of companies – credit risk results from transactions resulting from investment projects whose success depends on the financial standing of the Group’s suppliers;
• investing free cash of companies – credit risk results from investing free cash of PGE Group companies in securities bearing credit risk, i.e. financial instruments other than those issued by the State Treasury.

PGE Group has a concentration of credit risk related to its trade receivables. The three most significant customers accounted for approx. 26% of the trade receivables balance.

The maximum credit risk exposure of PGE Group’s financial assets reflects their carrying amounts.