Tauron – 27. Loans to joint ventures

SELECTED ACCOUNTING PRINCIPLES Loans granted to a joint venture do not satisfy the criteria to be recognised as a net investment in a joint venture. PROFESSIONAL JUDGEMENT AND ESTIMATES In accordance with the requirements of IFRS 9 Financial Instruments, the Group appropriately classifies and measures its loans and estimates the allowance for expected credit losses for loans classified as assets measured at amortised cost. As at the balance sheet date, the loan granted under the debt consolidation agreement, due to the fact that the cash flows do not correspond solely to the payment of principal and interest, was classified as a financial asset measures at a fair value through profit or loss. The Group has estimated the fair value accordingly. The methodology for calculating fair value is presented in Note 51 to these consolidated financial statements. Other loans are measured at amortised cost and at each balance sheet date the Group estimates expected credit losses. The methodology and expected credit loss amounts are presented below and in Note 52.1.4 to these consolidated financial statements.

SELECTED ACCOUNTING PRINCIPLES

Loans granted to a joint venture do not satisfy the criteria to be recognised as a net investment in a joint venture.

PROFESSIONAL JUDGEMENT AND ESTIMATES

In accordance with the requirements of IFRS 9 Financial Instruments, the Group appropriately classifies and measures its loans and estimates the allowance for expected credit losses for loans classified as assets measured at amortised cost.

As at the balance sheet date, the loan granted under the debt consolidation agreement, due to the fact that the cash flows do not correspond solely to the payment of principal and interest, was classified as a financial asset measures at a fair value through profit or loss. The Group has estimated the fair value accordingly. The methodology for calculating fair value is presented in Note 51 to these consolidated financial statements.

Other loans are measured at amortised cost and at each balance sheet date the Group estimates expected credit losses. The methodology and expected credit loss amounts are presented below and in Note 52.1.4 to these consolidated financial statements.

Table 1

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	Loan amount	As at 31 December 2020			As at 31 December 2019			Maturity date	Interest rate
	Loan amount	Gross value	Impairment loss	Carrying amount	Gross value	Impairment loss	Carrying amount	Maturity date	Interest rate
Loans measured at fair value
Debt consolidation agreement	609,951	72,523	n.d.	72,523	216,018	n.a.	216,018	30.06.2033	fixed
Loans measured at amortized cost
VAT loan	15,000	2,453	(33)	2,420	5,109	(110)	4,999	31.03.2021	WIBOR 1M+margin
Other loans	7,290	1,986	(353)	1,633	7,955	(218)	7,737	30.06.2033	fixed
	9,500	2,295	(304)	1,991	9,197	(252)	8,945
	5,175	1,372	(165)	1,207	5,485	(150)	5,335
	59,175	14,404	(598)	13,806	–	–	–
	35,000	5,160	(27)	5,133	–	–	–
Total		100,193	(1,480)	98,713	243,764	(730)	243,034
Non-current		97,740	(1,447)	96,293	238,655	(620)	238,035
Current		2,453	(33)	2,420	5,109	(110)	4,999

Pursuant to the borrower’s debt consolidation agreement of 28 February 2018 for the total amount of PLN 609,951 thousand, all existing liabilities of Elektrociepłownia Stalowa Wola S.A. towards the Company arising from loans granted and unpaid until 28 February 2018 were renewed. As at the balance sheet date, the nominal amount of the loan is PLN 310 851 thousand (the principal in the amount of PLN 299,100 thousand was repaid on 30 April 2018). The debt under review constitutes subordinated debt, measured at a fair value of PLN 72,523 thousand as at the balance sheet date.

The following loan agreements were concluded between the Company and Elektrociepłownia Stalowa Wola S.A. in 2020.

Agreement of 20 February 2020 up to the amount of PLN 59,175 thousand to finance liabilities related mainly to the completion of the construction of the CCGT unit and the Reserve Heat Source in Stalowa Wola. As at the balance sheet date, the amount of the loan granted was equal to the maximum loan limit arising from the said agreement;
Agreement of 16 October 2020 up to the amount of PLN 35,000 thousand to secure the operation and activity in the scope of trading in electricity. As at the balance sheet date, under the agreement, the Company provided the borrower with tranches in the total amount of PLN 22,000 thousand.

The repayment of the two loans described above, accrued interest and costs and other amounts due to the Company under the agreements are secured by the borrower’s blank promissory notes including the promissory note declarations.

Analyses of credit risk of loans granted to Elektrociepłownia Stalowa Wola S.A. performed as at the balance sheet date, taking into account, among others, the estimated future cash flows of Elektrociepłownia Stalowa Wola S.A., indicated impairment losses due to credit risk (level 3 of the measurement) resulting in a decrease in the carrying amount of the loans granted in the total amount of PLN 235,714 thousand, whereas the fair value of the debt consolidation agreement was reduced by PLN 156,881 thousand, and in relation to other loans measured at amortized cost, the gross value of loans granted was adjusted by PLN 72,943 thousand and interest accrued by PLN,4 442 thousand, as well as additional impairment losses were recognized in the amount of PLN 1,448 thousand. The amount of credit loss as at the date of recognition has been estimated taking into account the entire lifetime of the financial instrument. As at 31 December 2019 the provision for expected credit losses was measured at the amount of the 12-month expected credit losses.