We have introduced cash-pooling to more effectively manage liquidity within the group.
PGE's current financing model takes into account funds from core activities, debt financing in the form of credit from commercial bands and bond programmes, credit from Bank Gospodarstwa Krajowego, credit from multilateral institutions such as the European Investment Bank or EBRD as well as in the form of preferential financing. We have introduced cash-pooling to more effectively manage liquidity within the group.
Financing model of PGE Group
Until 2014, PGE had maintained a net cash position, with capital expenditures being covered from operating cash flows. However, an ambitious investment programme worth approx. PLN 34 billion, which is to be implemented in 2016-2020, required financing from external sources.
The key external financing sources of PGE Group are as follows:
- domestic bond programme of up to PLN 5 billion.
- EMTN programme of up to EUR 2 billion.
- 2 credit facilities from Bank Gospodarstwa Krajowego under the "Polish investments" programme of a total value of PLN 1.5 billion.
- Syndicated loan of PLN 5.5 billion, including term credit of PLN 3.63 billion and revolving facility of PLN 1.87 billion.
- a PLN 2 billion credit facility from the European Investment Bank - PLN 1.5 billion will be used for projects related to distribution network modernisation and expansion, while PLN 490 million will be used for the financing and re-financing of the construction of cogeneration units.
- overdraft facilities.
In addition, in 2017 PGE Group secured additional external financing - on June 7, PGE S.A. signed an agreement with the EBRD regarding a PLN 500 million credit facility for a long-term distribution grid development and modernisation project.
Cash pooling is a finance management method created for companies operating in a group with an expansive organisational structure. The way it works, in short, is it covers cash deficits of some companies with cash surpluses generated by other companies within the group. This mechanism is based on aggregating such companies' cash in one shared account managed by a pool leader - in our case, this is PGE S.A., and 17 other companies from our Group participate in cash pooling. This service is provided by two banks: PKO BP S.A. and Bank Pekao S.A. Cash pooling makes it possible to optimise cash flows and effectively manage liquidity. Using intra-group cash surpluses reduces demand for external financing and lowers the cost of banking services.