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On January 3, 2020, the President of the ERO approved the for PGE Obrót S.A. for G 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, property rights and own costs, resulting in the loss of profitability of sales made by PGE Obrót S.A. to G customers who do not use free market offers for the sale of electricity and customers from this who use free market offers, where the sales price is correlated with the price approved by the President of ERO.
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 December 31, 2019 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 of respective provisions.
In turn, as at December 31, 2019, the Supply segment estimated the provision for onerous contracts at the amount of PLN 336 million.
The estimated amount of the provision for onerous contracts in connection with the approval of the for households was determined on the assumption that these rates will apply in the period from January 18, 2020 to December 31, 2020 (in the period from January 1, 2020 to January 17, 2020 in accordance with the rates applicable in 2019). Costs, as a rule, include only those costs that are directly related to the contract that the entity would have avoided if it did not perform the contract.
Furthermore, the analysis of revenue resulting from other contacts concluded by the companies in the Supply segment and unavoidable costs of their fulfilment as at December 31, 2019 indicated the existence of contracts qualifying as onerous contracts within the meaning of IAS 37.
The provision recognised at the Supply segment level does not affect the results of PGE Group.
