Tools
PGE Group is mainly exposed to the risk of changes in EUR/PLN and USD/PLN exchange rates and to the risk of changes in reference interest rates for PLN, EUR and USD. For the purpose of analysing sensitivity to changes of market risk factors, PGE Group uses a scenario analysis, i.e. experts’ scenarios reflecting the subjective opinion in relation to future development of market risk factors.
The scenario analyses presented in this section is intended to analyse the influence of changes in market risk factors on the consolidated financial performance. Only those items that can be defined as financial instruments are subject to the analysis of interest and currency risk.
In sensitivity analysis related to interest rate risk, PGE Group applies parallel shift of interest rate curve by a potential possible change in reference interest rates in the subsequent year.
In case of analysis of sensitivity to interest rates’ fluctuations, the effect of changes in risk factors’ would be recognised in the consolidated statement of comprehensive income as interest income or expenses or as revaluation of financial instruments measured at fair value.
A sensitivity analysis for each type of market risk to which PGE Group is exposed at the reporting date, indicating the potential effect of changes of individual risk factors by class of financial assets and liabilities on profit or loss before tax is presented in the following tables.
The value of exposure to currency risk for forwards represents their notional amount together with interest accrued until the reporting date, translated into PLN at the closing rate as at December 31, 2018 and as at December 31, 2017 respectively, without discount. In turn, the carrying amount of derivatives represents their fair value.
Analysis of sensitivity to currency risk
The table below presents the sensitivity of financial instruments to reasonably possible changes in exchange rates, under the assumption that other risk factors remain unchanged.
ANALYSIS OF SENSITIVITY TO CURRENCY RISK AS AT DECEMBER 31, 2019
| CLASSES OF FINANCIAL INSTRUMENTS | Amount in the financial statements in PLN | Value at risk | EUR/PLN effect on profit or loss/equity |
USD/PLN effect on profit or loss/equity |
||
| +10% | -10% | +10% | -10% | |||
| Trade and other financial receivables | 4,995 | 629 | 63 | (63) | – | – |
| Cash and cash equivalents | 1,313 | 504 | 50 | (50) | 1 | (1) |
| Derivatives measured at fair value through profit or loss | 300 | 2,324 | (208) | (208) | 24 | (24) |
| Hedging derivatives | 18 | 796 | 61 | (61) | – | – |
| Interest-bearing credit facilities and loans | (9,381) | 376 | (29) | 29 | (8) | 8 |
| Bonds issued | (1,998) | 595 | (60) | 60 | – | – |
| Trade and other payables | (4,111) | 220 | (7) | 7 | (15) | 15 |
| Derivatives measured at fair value through profit or loss | (40) | 1,154 | (73) | 73 | (16) | 16 |
| EFFECT ON PROFIT OR LOSS | (203) | 203 | (14) | 14 | ||
| Hedging instruments | (386) | 11,251 | 1,026 | 1,026 | – | – |
| EFFECT ON REVALUATION RESERVE | 1,026 | (1,026) | – | – | ||
ANALYSIS OF SENSITIVITY TO CURRENCY RISK AS AT DECEMBER 31, 2018
| CLASSES OF FINANCIAL INSTRUMENTS | Amount in the financial statements in PLN | Value at risk | EUR/PLN effect on profit or loss/equity |
USD/PLN effect on profit or loss/equity |
||
| +10% | -10% | +10% | -10% | |||
| Trade and other financial receivables | 4,270 | 151 | 15 | (15) | 14 | (14) |
| Cash and cash equivalents | 1,281 | 92 | 9 | (9) | – | – |
| Derivatives measured at fair value through profit or loss | 42 | 553 | 5 | (5) | 50 | (50) |
| Hedging derivatives | 123 | 3,032 | 283 | (283) | 3 | (3) |
| Interest-bearing credit facilities and loans | (7,936) | (566) | (39) | 39 | (18) | 18 |
| Bonds issued | (2,769) | (2,769) | (277) | 277 | – | – |
| Trade and other payables | (4,137) | (270) | (21) | 21 | (7) | 7 |
| Derivatives | (136) | (777) | (32) | 32 | (46) | 46 |
| EFFECT ON PROFIT OR LOSS | (57) | 57 | (4) | 4 | ||
| Hedging instruments | 69 | (1,376) | (421) | 421 | – | – |
| EFFECT ON REVALUATION RESERVE | (421) | 421 | – | – | ||
Analysis of sensitivity to interest rate risk
The Group has identified exposure to the risk of changes in the WIBOR and EURIBOR interest rates. The table below presents the sensitivity of financial instruments to reasonably possible changes in interest rates, under the assumption that other risk factors remain unchanged.
ANALYSIS OF SENSITIVITY TO INTEREST RATE RISK AS AT DECEMBER 31, 2019
| FINANCIAL ASSETS AND LIABILITIES |
Amount in the |
Value at risk | WIBOR effect on profit or loss/equity |
EURIBOR effect on profit or loss/equity |
||
| +50pb | -50pb | +25pb | -25pb | |||
| Derivatives measured at fair value through profit or loss – assets | 420 | 208 | – | – | – | – |
| Interest-bearing credit facilities and loans | (9,381) | 7,152 | (34) | 34 | (1) | 1 |
| Bonds issued | (1,998) | 1,403 | (7) | 7 | ||
| Derivatives | (479) | 471 | – | – | – | – |
| EFFECT ON PROFIT OR LOSS | (41) | 41 | (1) | 1 | ||
| Hedging instruments | (387) | 387 | 183 | (178) | (17) | 17 |
| EFFECT ON REVALUATION RESERVE | 183 | (178) | (17) | 17 | ||
ANALYSIS OF SENSITIVITY TO INTEREST RATE RISK AS AT DECEMBER 31, 2018
| FINANCIAL ASSETS AND LIABILITIES |
Amount in the |
Value at risk | WIBOR effect on profit or loss/equity |
EURIBOR effect on profit or loss/equity |
||
| +50pb | -50pb | +25pb | -25pb | |||
| Derivatives measured at fair value through profit or loss – assets | 42 | 24 | – | – | <1 | – |
| Interest-bearing credit facilities and loans | (7,936) | 7,646 | (35) | 35 | (1) | 1 |
| Leases | (4) | (4) | – | – | – | – |
| Derivatives | (136) | 88 | – | – | – | – |
| EFFECT ON PROFIT OR LOSS | (35) | 35 | (1) | 1 | ||
| CCIRS hedges | 145 | 145 | 141 | (142) | (20) | 21 |
| EFFECT ON REVALUATION RESERVE | 141 | (142) | (20) | 21 | ||
Analysis of sensitivity to commodity price risk
The Group identifies exposure to commodity price risk, including commodities to produce electricity and heat using the Group’s generating assets.
The table below presents the analysis of sensitivity to changes of the purchase cost of selected commodities by 10%:
| COMMODITY | AS AT DECEMBER 31, 2019 | AS AT DECEMBER 31, 2018 | ||||
|---|---|---|---|---|---|---|
| Cost of commodity | Effect on profit or loss | Cost of commodity | Effect on profit or loss | |||
| +10% | -10% | +10% | -10% | |||
| Hard coal | 3,465 | 347 | (347) | 3,051 | 305 | (305) |
| CO2 emission allowances for captive use | 1,477 | 148 | (148) | 1,714 | 171 | (171) |
| Natural gas [m3 000s] | 918 | 92 | (92) | 826 | 83 | (83) |
| Biomass | 144 | 14 | (14) | 107 | 11 | (11) |
| Fuel oil | 111 | 11 | (11) | 117 | 12 | (12) |
| TOTAL | 6,115 | 612 | (612) | 5,815 | 582 | (582) |
