21. Property, plant and equipment

• in the Generation Segment:
  • boilers with accessories, turbines with generators, transformers and thermal stations as well as equipment used for purposes of fuel
    unloading, storage and transportation, pumping stations and desulphurisation installations, steam generators, switchgears, landfills,
    warehouses and other buildings, switchgears for the highest voltages;
  • heating stations, fuel unloading and transportation facilities, as well as pumping stations and water treatment plants.
• in the Distribution Segment:
  • power lines located in an area of 57 thousand square kilometres, with the total length of approximately 242 thousand km;
  • electrical substations (approximately 61 thousand units);
  • transformers (approximately 59 thousand units).
• in the Mining Segment:
  • mechanised enclosures, pit shafts and dip-headings and fixed assets located in the mine walls and the coal processing plant;
  • costs of work related to the cutting of production drifts and accumulated costs of work related to the reinforcement of longwalls;
• in the Segment of Renewable Energy Sources:
  • wind turbines, hydroelectric power stations, hydroelectric power station buildings and weirs, dams and hydroelectric equipment.

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. The cost includes:

• acquisition price or manufacturing cost,
• costs directly attributable to the purchase and bringing the asset to a usable condition,
• the expected cost of disassembly and removal of items of property, plant and equipment and restoration of their current location to its original condition (the accounting policy in the scope of creating provisions for these costs are presented in Note 41 to these consolidated financial statements),
• external financing costs.

All material elements included in an asset but having various useful lives (components) are identified and separated as at the date of acquisition of an item of property, plant and equipment. Components also include costs of overhauls, periodic inspections and costs of replacing the main components. The Company recognises specialised spare parts and servicing equipment as separate items of property, plant and equipment, if their useful life period exceeds one year.

Depreciation is calculated by reference to the acquisition price or manufacturing cost of the fixed asset less its residual value. Depreciation of property, plant and equipment takes place based on the depreciation plan determining the estimated useful life of each fixed asset. Items of property, plant and equipment (including components) are depreciated on a straight-line basis over the period of their expected useful lives, except for land and fixed assets under construction, which are not subject to depreciation. Specialised spare parts and service equipment are depreciated over the useful life of the fixed asset to which they relate.

External financing costs

Borrowing costs are capitalised as part of the manufacturing cost or acquisition price of the qualifying non-current assets. Borrowing costs consist primarily of interest on specific and general financing calculated using the effective interest rate method and foreign exchange differences arising on foreign currency financing to the extent that they are recognised as an adjustment to interest costs. The effective portion of the hedge for contracts that satisfy the hedge accounting criteria and are concluded in connection with financing the development of non-current assets is also capitalised. The amount of general borrowing costs subject to activation is defined through the application of the capitalisation rate to the expenditure incurred for the adjustment of the component of assets. The rate of capitalisation is the average weighted rate of all borrowing costs related to external financing constituting liabilities in a given period, other than specific financing.

Fixed assets received free of charge and connection charges and subsidies to assets

Fixed assets received free of charge and connection fees are initially recognised at acquisition cost corresponding to the estimated fair value or value of cash received as a subsidy to assets. Revenues from fixed assets received free of charge, funded with subsidies, are disclosed in the statement of financial position as deferred income and recognised as other operating revenues in the manner proportionate to the corresponding depreciation costs of received or purchased components of property, plant and equipment.

PROFESSIONAL JUDGEMENT AND ESTIMATES

Impairment

As at every balance sheet date the Group assesses whether objective indication of impairment occurs in relation to property, plant and equipment.

Impairment tests for property, plant and equipment are carried out in line with the accounting policy presented in Note 11 hereto.