21. Property, plant and equipment

SELECTED ACCOUNTING PRINCIPLESThe Group’s key fixed assets by segment include:

  • 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.

Average remaining useful lives of individual groups of fixed assets

Export to Excel
Asset group Average remaining depreciation
period (number of years)
Buildings, premises, civil and water engineering structures 20 years
Plant and machinery 15 years
Mining excavations 2 years
Other tangible fixed assets 4 years

The depreciation method, the depreciation rate and the residual value of fixed assets are reviewed at least at each financial year-end and any adjustments to depreciation charges are applied with effect from the beginning of the reporting period in which the review is completed. The review of the economic useful lives of fixed and intangible assets carried out in 2020 had the most significant impact on depreciation and amortisation expense in the Distribution segment – a decrease in depreciation and amortisation expense of PLN 21,900 thousand. The impact on depreciation expense in other segments was not material.

Year ended December 31st, 2020

Export to Excel
Land Buildings, premises
and civil
engineering
structures
Plant and
machinery
Mine
workings
Other Assets under construction Property, plant and equipment, total
COST

Opening balance

140,554 25,480,506 20,297,298 265,001 957,959 7,777,093 54,918,411
Direct purchase 1,174 3,214,919 3,216,093
Borrowing costs 226,734 226,734
Transfer of assets under construction 1,506 4,271,288 5,259,603 41,678 (9,574,075)
Sale (401) (14,134) (107,667) (7,991) (335) (130,528)
Liquidation (8) (70,320) (281,474) (146,708) (11,440) (509,950)
Received free of charge 1,043 11,476 12,519
Transfers to/from assets held for sale (2,145) (1,788,629) (1,863,727) (55,179) (100,926) (3,810,606)
Overhaul expenses 194,987 194,987
Items generated internally 138,625 180,305 318,930
Cost of disassembly of wind farms and
decommissioning of mines
71,663 8,286 79,949
Revenue from start-up (161,834) (161,834)
Other movements 733 (2,367) 12,872 (2,626) 19,726 28,338
Foreign exchange differences from translation of foreign entity 20 18 38
Closing balance 141,282 27,959,483 23,325,211 258,092 922,419 1,776,594 54,383,081
ACCUMULATED DEPRECIATION

Opening balance

(341) (10,756,599) (12,008,192) (116,238) (655,060) (282,910) (23,819,340)
Depreciation for the period (831,008) (771,850) (92,210) (65,278) (65) (1,760,411)
Increase of impairment (15) (1,273,941) (1,806,495) (76,149) (5,475) (149,509) (3,311,584)
Decrease of impairment 2,851 3,580 210 140,061 146,702
Sale 168 168 104,859 7,825 126,226
Liquidation 62,191 273,578 146,708 11,432 493,909
Transfers to/from assets held for sale 742,912 872,164 38,410 13,874 1,667,360
Other movements 35 (1,248) 1,941 (32) 696
Foreign exchange differences from translation of foreign entity (11) (13) (24)
Closing balance (188) (12 ,040,185) (13,333,615) (137,889) (666,008) (278,581) (26,456,466)
NET CARRYING AMOUNT AT THE BEGINNING OF THE PERIOD 140,213 14,723,907 8,289,106 148,763 302,899 7,494,183 31,099,071
NET CARRYING AMOUNT AT THE END OF THE PERIOD 141,094 15,919,298 9,991,596 120,203 256,411 1,498,013 27,926,615
 of which operating segments:
Mining 3,144 310,588 188,256 115,469 3,534 187,483 808,474
Generation 40,383 2,077,270 3,645,017 6,900 104,368 5,873,938
Renewable Energy Sources 796 885,214 1,258,737 1,184 29,670 2,175,601
Distribution 79,913 12,127,222 4,773,285 221,908 1,028,481 18,230,809
Other segments and other operations 16,858 519,004 519,004 4,734 22,885 148,011 837,793

Year ended December 31st, 2019 (restated figures)

Export to Excel
Land Buildings,
premises and
civil
engineering
structures
Plant and
machinery
Mine
workings
Other Assets under
construction
Property, plant
and
equipment,
total
COST

Opening balance

125,869 23,775,062 19,133,480 221,074 943,340 6,376,491 50,575,316
Direct purchase 1,714 3,251,159 3,252,873
Borrowing costs 183,439 183,439
Transfer of assets under construction 14,006 1,395,272 924,748 53,706 (2,387,732)
Sale (39) (3,264) (94,428) (26,460) (47) (124,238)
Liquidation (10) (62,965) (101,672) (124,816) (11,285) (300,748)
Received free of charge 17,107 232 17,339
Transfers to/from assets held for sale (64) (13,636) (46) (175) (13,921)
Overhaul expenses 193,955 193,955
Items generated internally 184,542 99,509 284,051
Business acquisition 592 270,463 441,138 712,193
Cost of disassembly of wind farms and
decommissioning of mines
101,182 2,102 103,284
Other movements 200 1,285 (8,256) (17,513) (1,168) 60,319 34,867
Foreign exchange differences from translation of foreign entity 1 1
Closing balance 140,554 25,480,506 20,297,298 265,001 957,959 7,777,093 54,918,411
ACCUMULATED DEPRECIATION

Opening balance

(404) (9,599,896) (10,765,131) (52,458) (611,258) (139,502) (21,168,649)
Depreciation for the period (829,750) (797,235) (95,837) (74,362) (915) (1,798,099)
Increase of impairment (426,283) (698,406) (92,759) (6,592) (148,752) (1,372,792)
Decrease of impairment 65 35,438 53,208 102 522 89,335
Sale 2,143 91,800 24,963 118,906
Liquidation 55,449 95,937 124,816 11,249 287,451
Transfers to/from assets held for sale 9,666 38 163 9,867
Other movements (2) (3,366) 11,597 676 5,737 14,642
Foreign exchange differences from translation of foreign entity (1) (1)
Closing balance (341) (10,756,599) (12,008,192) (116,238) (655,060) (282,910) (23,819,340)
NET CARRYING AMOUNT AT THE BEGINNING OF THE PERIOD  125,465 14,175,166 8,368,349 168,616 332,082 6,236,989 29,406,667
NET CARRYING AMOUNT AT THE END OF THE PERIOD  140,213 14,723,907 8,289,106 148,763 302,899 7,494,183 31,099,071
of which operating segments:
Mining 3,146 377,857 281,925 144,613 6,980 288,647 1,103,168
Generation* 42,477 1,373,573 1,968,604 23,488 6,167,240 9,575,382
Renewable Energy Sources 807 917,144 1,329,333 1,511 1,511 2,250,306
Distribution 76,924 11,558,666 4,590,377 252,469 1,002,867 17,481,303
Other segments and other operations 16,859 496,667 118,867 4,150 18,451 33,918 688,912

* Segment data for the comparable period include assets of the subsidiary, TAURON Ciepło Sp. z o.o. reclassified as at 31 December 2020 to assets classified as held for sale.

 

In the year ended 31 December 2020, the Group purchased property, plant and equipment (including capitalised borrowing costs) in the amount of PLN 3,442,827 thousand.

The major purchases were made in connection with investments in the following operating segments:

Export to Excel
Operating segment Year ended
31 December 2020
Year ended
31 December 2019
(restated figures)
Distribution 1,844,732 1,744,031
Generation 1,154,254 1,292,561
Mining 190,544 285,257

The average capitalisation rate of borrowing costs was 4.14% for the year ended 31 December 2020 and 3.28% for the year ended 31 December 2019.
The main investment tasks implemented by the Group in the financial year 2020 are described in section 1.5.1. of the Management Board reports on the activities of TAURON Polska Energia S.A. and TAURON Capital Group for the financial year 2020.

Impairment losses on property, plant and equipment affected the results of the following operating segments:

Year ended 31 December 2020

Export to Excel
Generation Mining Distribution Other Total
Increase of impairment (2,622,138) (685,382) (4,056) (8) (3,311,584)
Decrease of impairrment 4,096 140,061 2,542 3 146,702
Total impact on the profit (loss) for the period (2,618,042) (545,321) (1,514) (5) (3,164,882)

Year ended 31 December 2019 (restated figures)

Export to Excel
Generation Mining Distribution Other Total
Increase of impairment (694,044) (676,610) (2,138) (1,372,792)
Decrease of impairment 59,506 3,867 25,962 89,335
Total impact on the profit (loss) for the period (634,538) (676,610) 1,729 25,962 (1,283,457)