26.6 Market (financial) risk – sensitivity analysis

Clients

Natural environment

Public affairs

Investors

Local communities

Employees

Social contribution



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 CLASSCarrying amount in PLNSENSITIVITY ANALYSIS FOR CURRENCY RISK AS AT DECEMBER 31, 2016
  Amount exposed to riskEUR/PLNUSD/PLN
   Impact on financial result/EquityImpact 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) - -
note_26.6_table_1_pge.xlsx
 
FINANCIAL INSTRUMENTS BY CLASS Carrying amount in PLNSENSITIVITY ANALYSIS FOR CURRENCY RISK AS AT DECEMBER 31, 2015
  Amount exposed to riskEUR/PLNUSD/PLNCHF/PLN
   Impact on financial result/EquityImpact on financial result/EquityImpact 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) - - - -
note_26.6_table_2_pge.xlsx
                           

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.

note_26.6_table_3_pge.xlsx

 

 

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.

note_26.6_table_4_pge.xlsx

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)

Biomass

190

19

(19)

333

33

(33)

Fuel oil

41

4

(4)

38

4

(4)

TOTAL

2,763

276

(276)

3,471

347

(347)
note_26.6_table_5_pge.xlsx