42. Provisions for liabilities due to energy certificates of origin and CO2 emission allowances

Provision for CO2 emission liabilities

The Group creates a provision for the cost of redemption of CO2 emission allowances. The provision for liabilities arising from emission of gases covered by the emission allowance scheme is created only when the actual emission level for a given year indicates the expected deficit of emission allowances awarded to the Group free of charge, including allocation of free-of-charge emission allowances to facilities belonging to individual Generation companies. The Group companies covered under the EU ETS are required to redeem an allowance for each tonne of carbon dioxide emitted in a given year by 30 April of the following year.

The provision is charged to operating expenses (taxes and fees) in the following amount:

• in the portion covered by allowances held at the end of the balance sheet date:
  • at a zero value, in the case of allowances received free of charge,
  • at the purchase price in the case of purchased allowances;
• in the portion not covered by allowances held as at the balance sheet date:
  • in the first instance, in values resulting from forward and futures transactions concluded for the purchase of allowances intended to meet the obligation for the current year,
  • subsequently, in the market value of the allowances failing to meet the obligation as at the balance sheet date, or in the value of potential penalty – in accordance with the intention regarding the manner of meeting the obligation.

At the date of redemption of the allowances, the emission allowances classified as current intangible assets are derecognised in correspondence with the provision for gas emission liabilities.

Provision for the obligation to present energy certificates of origin

Energy companies trading in and selling electricity to end customers are obliged to acquire property rights resulting from energy certificates of origin and to redeem them or to pay a substitution fee. If in a given financial year the quantitative share of electricity specified in the energy certificates of origin in the total annual sales of electricity to end customers is compliant with the limits provided for in regulations of the Minister of Economy – the obligation shall be deemed satisfied.

In order to meet the obligation to present the rights for redemption or to pay a substitution fee, the Group creates a provision at the end of the reporting periods for the costs of meeting this obligation.

The provision due to the obligation to present certificates of electricity origin for redemption is recognised:

• in the portion corresponding to energy certificates of origin held as at the balance sheet day – in the value of certificates held;
• in the portion not covered by energy certificates of origin held as at the balance sheet day – first, at the amount resulting from futures and forwards for the purchase of certificates with the intention to fulfil the obligation for the current year; subsequently, at the market value of certificates necessary to fulfil the obligation at the end of the reporting period or at the amount of the substitution fee – in accordance with the Group’s intention concerning the method of fulfilling the obligation.

The provision is charged to operating costs.

The settlement of the amount of the provision and the redemption of the property rights shall take place on the day of redemption of these rights by the President of the Energy Regulatory Office or on the day of incurring the substitution fee.