57. Finance and capital management

The Company carries out a centralised finance management policy, allowing effective management in this respect at a level of the entire TAURON Group. The main tools allowing for effective management include the appropriate internal corporate regulations, as well as the TAURON Group’s cash pool service and intra-group loans. In addition, the finance management system is supported by the TAURON Group’s central financial risk management policy and the TAURON Group’s central insurance policy. In these areas, the Company acts as a manager and decides on the direction of activities, enabling it to set appropriate risk exposure limits.

Detailed information concerning finance management are described in section 7.3. of the Management Board’s reports on the activities of TAURON Polska Energia S.A. and TAURON Capital Group for the financial year 2020.

In 2020, the Company and TAURON Group demonstrated full capacity to settle their liabilities on their maturity date. The main objective of the Group’s capital management is to maintain a good credit rating and safe capital ratios that would support the Group’s operations and increase value for its shareholders.

The Group primarily monitors the debt ratio, defined as the ratio of net financial debt to EBITDA.

The TAURON Group’s net financial debt is defined in the individual financing agreements and generally represents the obligation to pay or repay money on account of loans, borrowings and debt securities and on account of financial leases, excluding: subordinated bond liabilities and lease liabilities recognised under IFRS 16 Leases, which would not meet the conditions for classification as lease liabilities under the provisions of IAS 17 Leases, less cash and short-term investments with a maturity of up to 1 year. EBITDA means the TAURON Group’s operating profit or loss plus depreciation and amortisation and write-downs on non-financial assets. The value of the ratio is monitored by the financing institutions of the Group and rating agencies and influences the possibility and cost of obtaining financing as well as the Company credit rating.

As at the balance sheet date, the debt ratio stood at 2.51, which is acceptable to financial institutions.

Table 1

Export to Excel
Year ended
31 December 2020
Year ended
31 December 2019
Loans and borrowings 4,794,846 4,727,633
Bonds 1 5,322,625 4,254,660
Finance lease 2
Non-current debt liabilities 10,117,471 8,982,293
Loans and borrowings 1,197,287 2,323,018
Bonds 1 201,217 88,935
Finance lease 2
Short-term debt liabilities 1,398,504 2,411,953
Total debt 11,515,975 11,394,246
Cash and cash equivalents 3 921,345 1,237,952
Short-term investments maturing within one year 100 26,722
Net debt 10,594,530 10,129,572
EBITDA 4,222,717 3,599,367
Operating profit (loss) (1,731,977) 295,454
Depreciation/amortization (1,954,142) (1,991,733)
Impairment (4,000,552) (1,312,180)
Net debt / EBITDA 2.51 2.81

1 Debt does not include liabilities arising from subordinated bonds.
2 Liabilities arising from lease in line with IAS 17 Leases.
3 Cash and cash equivalents include cash of TAURON Ciepło Sp. z o.o. classified as at the balance sheet date as the disposal group.

The change in debt liabilities is shown in the table below.

Export to Excel
Debt Year ended
31 December 2020
Year ended
31 December 2019
Opening balance 14,314,276 10,963,377
subordinated bonds (1,913,427) (1,541,659)
lease indebtedness (except for those meeting the conditions of IAS 17 Leases) (1,006,603)
Opening balance – debt in the calculation of debt ratio 11,394,246 9,421,718
Effects of implementing new IFRS 918,115
Proceeds arising from debt taken out 4,359,573 5,645,485
financing received 4,368,546 5,650,000
transaction costs (8,973) (4,515)
Interest accrued 427,015 450,716
charged to profit or loss 257,486 266,504
capitalized to property, plant and equipment and intangible assets 169,529 184,212
Debt related payments (4,954,773) (3,759,175)
debt securities redemption (60,400) (2,420,000)
principal repaid (4,406,813) (867,360)
lease instalments paid (102,085) (75,047)
interest paid (215,946) (212,556)
interest paid, capitalized to investment projects (169,529) (184,212)
Change in the balance of overdraft facility and cash pool (16,417) 21,453
Recognition of new lease agreements and change of lease agreements 186,932 84,474
Business acquisition – recognition of acquired lease liabilities 35,215
Change in debt measurement 339,126 (42,619)
Reclassification of the Group for sale as for sale (64,625)
Other non-monetary changes (4,108) (2,765)
Closing balance 14,586,999 14,314,276
subordinated bonds (1,998,367) (1,913,427)
lease debt (except for debt meeting the conditions of IAS 17 Leases) (1,072,657) (1,006,603)
Closing balance – debt in the calculation of debt ratio 11,515,975 11,394,246