Table 1
Export to Excel| Year ended 31 December 2020 |
Year ended 31 December 2019 (restated figures) |
|
|---|---|---|
| Depreciation and amortization | (1,891,170) | (1,867,549) |
| Impairment of non-financial assets | (3,174,681) | (1,354,143) |
| Materials and energy | (1,216,941) | (1,503,284) |
| Maitenance and repair services | (204,238) | (202,606) |
| Distribution services | (1,610,126) | (1,550,246) |
| Other external services | (796,009) | (766,586) |
| Cost of obligation to remit the CO2 emission allowances | (863,883) | (670,657) |
| Other taxes and charges | (678,414) | (628,149) |
| Employee benefits expense | (2,617,094) | (2,890,673) |
| Allowance for trade receivables expected credit losses | (57,697) | (27,803) |
| Other | (88,772) | (101,583) |
| Total costs by type | (13,199,025) | (11,563,279) |
| Change in inventories, prepayments, accruals and deferred income | 79,683 | 104,845 |
| Cost of goods produced for internal purposes | 905,942 | 830,534 |
| Selling and distribution expenses | 491,583 | 496,140 |
| Administrative expenses | 613,285 | 633,953 |
| Cost of goods for resale and materials sold | (9,589,147) | (9,431,139) |
| Cost of sales | (20,697,679) | (18,928,946) |
In the year ended 31 December 2020 compared to the comparative period, the main changes in the cost of goods, products, materials and services sold involved:
- an increase in impairment losses on property, plant and equipment, rights-of-use assets and intangible assets, as discussed in more detail in Note 14.3 to these consolidated financial statements;
- a decrease in the consumption of materials and energy mainly as a result of a decrease in the cost of fuel consumed, which results from lower achieved electricity production in the year 2020 compared to the comparable period. In addition in the current reporting period, the consumption of materials and energy included the cost of coal used for the start-up of the 910 MW unit in Jaworzno;
- an increase in the cost of distribution services as a result of increases in the tariff for distribution services for Polskie Sieci Elektroenergetyczne S.A., which came into force on 6 April 2019 and 1 January 2020;
- an increase in the cost of the obligation to redeem CO2 emission allowances, as a result of including in the comparable period in the cost of fulfilling the obligation to redeem CO2 emission allowances certified emission reductions (CERs) in the amount of 883,000, whose purchase price was significantly lower than EUAs, and an increase in the price of CO2 emission allowances included in the calculation of the provision. The average price of EUAs included in the calculation of the provision for the year ended 31 December 2020 was higher than the price of EUAs included in the redemption cost for the comparable period. At the same time, emissions decreased in the current period compared to the comparable period;
- an increase in the cost of taxes and fees, mainly due to the cost of real estate taxes on the wind farms acquired in September 2019 and the provision created for real estate taxes due to the Constitutional Court ruling of July 2020, and an increase in the value of network assets as a basis for calculating property tax and higher property tax rates;
- a decrease in the cost of employee benefits, as described in more detail in Note 14.2 to these consolidated financial statements;
- an increase in the value of goods and materials sold, which is the result of:
- a higher cost of electricity compared to the comparable period, with a simultaneously lower volume of electricity purchased from the market;
- the effects of the change in the strategy for securing the depreciation needs for CO2 emission allowances of the Generation area. The transactions concluded as part of the implementation of the strategy change had an impact on charging the value of the Group goods and materials sold in the amount of PLN 123,792 thousand. As part of its management of the portfolio of CO2 emission allowances of its subsidiaries, the Company purchases allowances for redemption purposes of the Group’s generation companies. The main purpose of concluding the above-mentioned transactions by the Company is to secure the expected volume and cost of purchase of CO2 emission allowances, which the Group’s generating companies are obliged to redeem. In the first quarter of 2020, the Group decided to change its strategy in the scope of hedging the redemption needs of the Generation area, consisting of a one-off swap of exchange contracts with a delivery date in December 2020 to OTC contracts with a delivery date in March 2021. The decision to change the strategy was made taking into account current market circumstances which were difficult to predict at the time of concluding the transaction. These circumstances included, in particular, the increasing cost of maintaining a position on the stock exchange, which was related, among other things, to the need for ongoing contributions to stock exchange deposits, the change in legal and market circumstances in the area of CO2 emissions trading related to Brexit and the COVID-19 pandemic. In implementing the above change of the strategy, the Company sold off the forward position with a delivery date in December 2020 held on the exchange (it entered into an opposite transaction on the exchange), while purchasing the same volume in contracts with a delivery date in March 2021 from counterparties on the OTC market. As a result of conclusion of the countertrade, the original contract will not be settled by physical delivery and therefore the Company recognised this contract and the countertrade in accordance with IFRS 9 Financial Instruments at a fair value (these contracts were settled in December 2020). All new transactions concluded on the OTC market will be used for the purpose of meeting the redemption obligation of the TAURON Group generating companies and therefore as excluded from the scope of IFRS 9 Financial Instruments are not measured at a fair value. At the same time, the purchase of volume performed with a delivery date in March 2021 from counterparties in the OTC market, at prices lower than the purchase originally contracted, reduces the cost of the creation of the provision for CO2 liabilities for the current and subsequent reporting periods by the Group. As a result of the foregoing, the Group estimates that the cumulative impact of the change in strategy on the operating profit will not be significant. In the Group’s opinion, the change in the strategy makes it possible, in the current market situation, to secure the redemption needs of the Group’s generating companies in a manner mitigating the risks to which the Group is exposed.