TAURON Group companies are exposed to transaction and translation currency risk. Group companies are mainly exposed to changes in the EUR/PLN, CZK/PLN, USD/PLN and GBP/PLN exchange rates in connection with their operating and financing activities. The following tables show the Group’s exposure to currency risk by class of financial instrument. Significant exposure relates to EUR/PLN and CZK/PLN exchange rate movements. The Group’s exposure to other currencies is immaterial.
Table 1
Export to Excel| Classes of financial instruments | As at 31 December 2020 | Stan na 31 grudnia 2019 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total carrying amount in PLN |
EUR | CZK | Total carrying amount in PLN |
EUR | CZK | |||||
| in currency | in PLN | in currency | in PLN | in currency | in PLN | in currency | in PLN | |||
| Financial assets | ||||||||||
| Receivables from buyers | 2,473,416 | 2,022 | 9,330 | 61,124 | 10,715 | 2,290,746 | 2,170 | 9,251 | 50,029 | 8,384 |
| Other financial receivables | 176,924 | 11,153 | 51,470 | 20,342 | 3,566 | 499,219 | 49,784 | 212,005 | 20,346 | 3,410 |
| Cash and cash equivalents | 921,345 | 26,767 | 123,524 | 29,458 | 5,164 | 1,237,952 | 4,187 | 17,832 | 48,443 | 8,119 |
| Derivatives (assets) | 158,846 | 17,529 | 80,894 | – | – | 105,529 | 14,214 | 60,531 | – | – |
| Total | 57,471 | 265,218 | 110,924 | 19,445 | 70,355 | 299,619 | 118,818 | 19,913 | ||
| Financial liabilities | ||||||||||
| Bank overdrafts | 2,261 | 487 | 2,249 | – | – | 23,339 | 5,304 | 22,585 | – | – |
| Issued bonds | 7,522,209 | 857,840 | 3,958,759 | – | – | 6,257,022 | 851,101 | 3,324,412 | – | – |
| Liabilities to suppliers | 1,021,364 | 12,363 | 57,053 | 8,340 | 1,462 | 850,628 | 5,770 | 24,572 | 8,884 | 1,489 |
| Capital commitments | 880,373 | 14,985 | 63,813 | – | – | 765,357 | – | – | – | – |
| Other financial liabilities | 245,623 | 15,867 | 73,221 | – | – | 223,920 | 2,530 | 10,774 | – | – |
| Derivatives (liabilities) | 175,584 | 17,026 | 78,573 | – | – | 124,527 | 13,206 | 56,238 | – | – |
| Total | 918,568 | 4,233,668 | 8,340 | 1,462 | 877,911 | 3,738,581 | 8,884 | 1,489 | ||
| Net currency position | (861,097) | (3,968,450) | 102,584 | 17,983 | (807,556) | (3,438,962) | 109,934 | 18,424 | ||
As part of its currency risk management, the TAURON Group uses forward contracts. The purpose of these transactions was to hedge the Group against currency risk arising in the course of its trading activities, mainly due to the purchase of CO2 emission allowances and to hedge currency exposure generated by interest payments on acquired financing in EUR.
The fair value measurement of currency forward contracts and CCIRS contracts is exposed to the risk of changes in the EUR/PLN exchange rate. Transactions entered into to hedge against currency risk are not subject to hedge accounting.
Sensitivity analysis
For the needs of the analysis of sensitivity to changes in market risk factors the Group uses the scenario analysis method. The Group relies on expert scenarios reflecting its judgement concerning the behaviour of individual market risk factors in the future. The scope of the analysis includes only those items which meet the IFRS definition of financial instruments.
The potential changes in foreign exchange rates have been determined within a horizon until the date of the next financial statements and calculated on the basis of annual implied volatility for FX options quoted on the interbank market for a given currency pair as at the end of the reporting period or, in the absence of quoted market prices, on the basis of historical volatility for a period of one year preceding the balance sheet date.
The Group identifies its exposure to foreign currency risk related to EUR/PLN, CZK/PLN, USD/PLN, GBP/PLN. Significant risk exposure regards EUR, mainly due to external financing contracted in EUR. Other currencies do not generate material risk for the Group.
The table below presents sensitivity of the gross profit/loss as well as other comprehensive income (gross) of the Group to reasonably possible changes in foreign exchange rate EUR/PLN within a horizon until the date of the next financial statements, assuming that all other risk factors remain unchanged.
Table 2
Export to Excel| Classes of finacial instruments | 31 December 2020 | Sensitivity analysis for currency risk as at 31 December 2020 |
31 December 2019 | Sensitivity analysis for currency risk as at 31 December 2019 |
||||
|---|---|---|---|---|---|---|---|---|
| Carrying amount |
EUR/PLN | Carrying amount |
EUR | |||||
| Value at risk |
exchange rate EUR/PLN +5.78% |
exchange rate EUR/PLN -5.78% |
Value at risk |
exchange rate EUR/PLN +4.24% |
exchange rate EUR/PLN -4.24% |
|||
| Receivables from buyers | 2,473,416 | 9,330 | 539 | (539) | 2,290,746 | 9,251 | 392 | (392) |
| Other financial receivables | 176,924 | 51,470 | 2,975 | (2,975) | (2,975) | 212,005 | 8,989 | (8,989) |
| Cash and cash equivalents | 921,345 | 123,524 | 7,140 | (7,140) | 1,237,952 | 17,832 | 756 | (756) |
| Derivatives (assets) | 158,846 | 153,651 | 160,819 | (160,819) | 105,529 | 60,531 | 2,567 | (2,567) |
| Overdraft | 2,261 | 2,249 | (130) | 130 | 23,339 | 22,585 | (958) | 958 |
| Bonds issued | 7,522,209 | 3,958,759 | (228,816) | 228,816 | 6,257,022 | 3,624,412 | (153,675) | 153,675 |
| Liabilities to suppliers | 1,021,364 | 57,053 | (3,298) | 3,298 | 850,628 | 24,572 | (1,042) | 1,042 |
| Capital commitments | 880,373 | 63,813 | (3,688) | 3,688 | 76, 357 | – | – | – |
| Other financial liabilities | 245,623 | 73,221 | (4,232) | 4,232 | 223,920 | 10,774 | (457) | 457 |
| Derivatives (liabilities) | 175,584 | 80,328 | (1,370) | 1,370 | 124,527 | 98,946 | 79,408 | (79,408) |
| Total | (70,061) | 70,061 | (64,020) | 64,020 | ||||
The risk exposure as at 31 December 2020 and as at 31 December 2019 is representative of the Group’s risk exposure during the preceding one-year period.