Tools
ACCOUNTING POLICIES
Operating segments
An operating segment is a component of the Group:
Due to the types of production processes as well as the current system of regulation within PGE Group, the following segments are distinguished:
Segment revenue is revenue reported in the Group’s statement of profit or loss that is directly attributable to a segment and the relevant portion of the Group’s revenue that can be allocated on a reasonable basis to a segment, whether from sales to external customers or from transactions with other segments of the Group. Segment expense is expense resulting from the operating activities of a segment that is directly attributable to the segment and the relevant portion of an expense that can be allocated on a reasonable basis to the segment, including expenses relating to sales to external customers and expenses relating to transactions with other segments of the Group. Segment result is segment revenue less segment expense.
Segment assets are those operating assets that are employed by a segment in its operating activities and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. Segment liabilities are those operating liabilities that result from the operating activities of a segment and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. Segment assets and liabilities do not include income tax assets and liabilities.
PGE Group companies conduct their business activities based on relevant concessions, including primarily concession on: production, trade and distribution of electricity, generation, transmission and distribution of heat, granted by the President of Energy Regulatory Office and concessions for the extraction of lignite deposits, granted by the Minister of the Environment. Concessions, as a rule, are issued for the period between 10 and 50 years. PGE Group’s key concessions expire in the years 2020-2038.
Relevant assets are assigned to the held concessions on lignite mining and generation and distribution of electricity and heat, which was presented in detailed information on operating segments. For its concessions concerning electricity and heat the Group incurs annual charges dependent on the level of turnover, whereas for conducting licensed extraction of lignite the exploitation charges as well as fees for the use of mining are borne. The exploitation charges depend on the current rate and the volume of the extraction. In 2019, PGE Group’s concessions costs amounted to approx. PLN 17 million (PLN 10 million in 2018), exploitation charges and mining usufruct charges amounted to PLN 118 million in 2019 and PLN 136 million in 2018.
PGE Group presents information on operating segments in the current and comparative reporting period in accordance with IFRS 8 Operating Segments. PGE Group’ segment reporting is based on the following business segments:
Organisation and management over PGE Group is based on segment reporting separated by nature of the products and services provided. Each segment represents a strategic business unit, offering different products and serving different markets. Assignment of particular entities to operating segments is described in note 1.3 to these consolidated financial statements. As a rule, inter-segment transactions are disclosed as if they were concluded with third parties – under market conditions. When analysing the results of particular business segments the management of PGE Group draws attention primarily to EBITDA.
Starting from 2019, PGE Group has distinguished a new segment, District Heating. In previous periods, assets and performance figures of this segment were recognised and analysed within the Conventional Generation segment. Comparative figures presented in the segment note have been restated accordingly.
The new presentation format is designed to improve transparency and strengthen supervision over the implementation of the District Heating Strategy, which is one of the key areas of the Group’s development.
Seasonality of business segments
Main factors affecting the demand for electricity and heat are: weather conditions – air temperature, wind force, rainfall, socio-economic factors – number of energy consumers, energy product prices, growth of GDP and technological factors – advances in technology, product manufacturing technology. Each of these factors has an impact on technical and economic conditions of production, distribution and transmission of energy carriers, thus influence the results obtained by PGE Group.
The level of electricity sales is variable throughout a year and depends especially on weather conditions – air temperature, length of the day. Growth in electricity demand is particularly evident in winter periods, while lower demands are observed during the summer months. Moreover, seasonal changes are evident among selected groups of final customers. Seasonality effects are more significant for households than for the industrial sector.
In the Renewables segment, electricity is generated from natural resources such as water, wind and sun. Weather conditions are an important factor affecting electricity generation in this segment.
Sales of heat depend in particular on air temperature and are higher in winter and lower in summer.
