The PGE Group identifies the following types of market risk to which it is exposed:
- interest rate risk,
- currency risk,
- commodity price risk.
Currently, the PGE Group is exposed mainly to currency risk related to foreign exchange rates between EUR/PLN, USD/PLN and CHF/PLN and to interest rate risk related to referential interest rates of PLN, EUR, USD and CHF. The PGE Group uses a script analysis method for the purpose of analyzing sensitivity to changes of market risk factors i.e.the Group uses experts’ scripts reflecting the subjective opinion in relation to future fluctuations of individual market risk factors.
The scenario analysis presented in this point is intended to analyze the influence of changes in market risk factors on the financial results of the Group. Only those items that can be defined as financial instruments are subject to the analysis of interest and currency risk.
In sensitivity analysis related to interest rate risk, the PGE Group applies parallel shift of interest rate curve related to a potential possible change of referential interest rates during the following year.
In case of sensitivity analysis of interest rates’ fluctuations, the effect of risk factors’ changes could be recorded in the consolidated statement of comprehensive income as interest income or expenses or as revaluation of financial instruments measured at fair value.
The tables below present sensitivity analysis related to all types of financial market risks to which the Group is exposed as at the reporting date, indicating potential influence of changes of individual risk factors on profit before tax by class of assets and liabilities.
The currency risk exposure for derivative forward instruments is their nominal value together with accrued interest to the reporting date, translated into Polish zloty at the closing rate as at December 31, 2016 and December 31, 2015, without taking the discount into account. In turn, the carrying amount of these derivative instruments is their fair value.
Sensitivity analysis for currency risk
The table below presents sensitivity of financial instruments to reasonably possible changes in foreign currency exchange rates, under the assumption of stability of other risk factors.
FINANCIAL INSTRUMENTS BY CLASS | Carrying amount in PLN | SENSITIVITY ANALYSIS FOR CURRENCY RISK AS AT DECEMBER 31, 2016 | |||||
---|---|---|---|---|---|---|---|
Amount exposed to risk | EUR/PLN | USD/PLN | |||||
Impact on financial result/Equity | Impact on financial result/Equity | ||||||
+10% | -10% | +10% | -10% | ||||
Trade receivables and other financial receivables | 6,562 | 172 | 17 | (17) | - | - | |
Cash and cash equivalents | 2,669 | 59 | 6 | (6) | - | - | |
Derivatives – assets | 9 | 66 | 7 | (7) | - | - | |
CCIRS hedging instruments | 231 | 3,222 | 291 | (291) | - | - | |
Interest bearing loans and borrowings | (6,171) | (670) | (57) | 57 | (10) | 10 | |
Bonds issued | (3,842) | (2,842) | (284) | 284 | - | - | |
Trade and other financial liabilities | (3,589) | (65) | (7) | 7 | - | - | |
Derivatives – liabilities | (30) | (7) | - | - | (1) | 1 | |
IMPACT ON PROFIT OR LOSS | (27) | 27 | (11) | 11 | |||
CCIRS hedging instruments | 231 | 3,222 | 31 | (31) | - | - | |
IMPACT ON HEDGING RESERVE | 31 | (31) | - | - |
FINANCIAL INSTRUMENTS BY CLASS | Carrying amount in PLN | SENSITIVITY ANALYSIS FOR CURRENCY RISK AS AT DECEMBER 31, 2015 | ||||||
---|---|---|---|---|---|---|---|---|
Amount exposed to risk | EUR/PLN | USD/PLN | CHF/PLN | |||||
Impact on financial result/Equity | Impact on financial result/Equity | Impact on financial result/Equity | ||||||
+10% | -10% | +10% | -10% | +10% | -10% | |||
Trade receivables | 2,548 | 151 | 15 | (15) | - | - | - | - |
Cash and cash equivalents | 3,104 | 280 | 28 | (28) | - | - | - | - |
Derivatives – assets | 50 | 2,958 | 265 | (265) | - | - | - | - |
Interest bearing loans and borrowings | (1,673) | (760) | (60) | 60 | (14) | 14 | (3) | 3 |
Bonds issued | (3,734) | (2,734) | (273) | 273 | - | - | - | - |
Trade and other financial liabilities | (3,979) | (213) | (21) | 21 | - | - | - | - |
Derivatives – liabilities | (89) | (49) | (4) | 4 | (1) | 1 | - | - |
IMPACT ON PROFIT OR LOSS | (50) | 50 | (15) | 15 | (3) | 3 | ||
CCIRS hedging instruments | 43 | 3,107 | 30 | (30) | - | - | - | - |
IMPACT ON HEDGING RESERVE | 30 | (30) | - | - | - | - |
Sensitivity analysis for interest rate risk
The Group identifies exposure to interest rate risk related to WIBOR, EURIBOR and LIBOR. The table below presents the sensitivity of financial instruments to reasonably possible changes in interest rates, under assumption of stability of other risk factors.
|
SENSITIVITY ANALYSIS FOR INTEREST RATE RISK AS AT DECEMBER 31, 2016 |
|||||||
---|---|---|---|---|---|---|---|---|
FINANCIAL ASSETS AND LIABILITIES |
Carrying amount in PLN |
Amount exposed to risk |
WIBOR |
EURIBOR |
LIBOR USD |
|||
Impact on financial result/Equity |
Impact on financial result/Equity |
Impact on financial result/Equity |
||||||
+50bp |
-50bp |
+25bp |
-25bp |
+25bp |
-25 bp |
|||
Trade and other receivables |
6,562 |
88 |
- |
- |
<1 |
<(1) |
- |
- |
Derivatives measured at fair value through profit or loss – assets |
365 |
9 |
- |
- |
- |
- |
- |
- |
Interest bearing loans and borrowings |
(6,171) |
(6,050) |
(10) |
10 |
(1) |
1 |
- |
- |
Bonds issued |
(3,842) |
(1,000) |
(5) |
5 |
- |
- |
- |
- |
Leasing |
(1) |
(1) |
- |
- |
- |
- |
- |
- |
Derivatives measured at fair value through profit or loss – liabilities |
(30) |
(30) |
5 |
(5) |
- |
- |
<1 |
<(1) |
IMPACT ON FINANCIAL RESULT |
|
|
(10) |
10 |
(1) |
1 |
- |
- |
CCIRS hedging instruments |
231 |
231 |
60 |
(62) |
(37) |
37 |
- |
- |
IRS hedging instruments |
125 |
125 |
128 |
(133) |
|
|
|
|
IMPACT ON HEDGING RESERVE |
|
|
188 |
(195) |
(37) |
37 |
- |
- |
Value of derivatives exposed to interest rate risk is fair value of those instruments (carrying amount). Sensitivity analysis for CCIRS and IRS derivatives was carried out using the valuation change due to the shift of interest rate curves for particular currency.
|
|
SENSITIVITY ANALYSIS FOR INTEREST RATE RISK AS AT DECEMBER 31, 2015 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
FINANCIAL ASSETS AND LIABILITIES |
Carrying amount in PLN |
Amount exposed to risk |
WIBOR |
EURIBOR |
LIBOR USD |
|||||
Impact on financial result/Equity |
Impact on financial result/Equity |
Impact on financial result/Equity |
||||||||
+50bp |
-50bp |
+25bp |
-25bp |
+25bp |
-25bp |
|||||
Derivatives measured at fair value through profit or loss – assets |
50 |
7 |
<1 |
<(1) |
- |
- |
- |
- |
||
Interest bearing loans and borrowings |
(1,673) |
(1,519) |
(4) |
4 |
(1) |
1 |
- |
- |
||
Bonds issued |
(3,734) |
(1,000) |
(5) |
5 |
- |
- |
- |
- |
||
Derivatives measured at fair value through profit or loss – liabilities |
(89) |
(89) |
12 |
(13) |
- |
- |
(1) |
1 |
||
IMPACT ON FINANCIAL RESULT |
|
|
3 |
(4) |
(1) |
1 |
(1) |
1 |
||
CCIRS hedging instruments |
43 |
43 |
73 |
(76) |
(43) |
44 |
- |
- |
||
IMPACT ON HEDGING RESERVE |
|
|
73 |
(76) |
(43) |
44 |
- |
- |
Value of derivatives exposed to interest rate risk is fair value of those instruments (carrying amount). Sensitivity analysis for CCIRS and IRS derivatives was carried out using the valuation change due to the shift of interest rate curves for particular currency.
Sensitivity analysis for commodity price risk
The Group identifies exposure to commodity price risk.
The table below presents the sensitivity analysis to changes of the purchase cost of selected commodities by 10%:
|
AS AT DECEMBER 31, 2016 |
AS AT DECEMBER 31, 2015 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
COMMODITY |
Purchase cost |
Impact on profit or loss |
Purchase cost |
Impact on profit or loss |
||||||
+10% |
-10% |
+10% |
-10% |
|||||||
Hard coal |
1,141 |
114 |
(114) |
1,315 |
132 |
(132) |
||||
CO2 emission rights for own use |
937 |
94 |
(94) |
1,301 |
130 |
(130) |
||||
Gas [thousand m3] |
454 |
45 |
(45) |
484 |
48 |
(48) |
||||
190 |
19 |
(19) |
333 |
33 |
(33) |
|||||
Fuel oil |
41 |
4 |
(4) |
38 |
4 |
(4) |
||||
TOTAL |
2,763 |
276 |
(276) |
3,471 |
347 |
(347) |