16.5.4. Liquidity and credit risk
Liquidity risk
Maturity analysis for financial liabilities as at 31 December 2021
| NOTE | up to 1 year | above 1 to 3 years | above 3 to 5 years | above 5 years | Total | Carrying amount |
|
| Loans – undiscounted value | 14.7.1 | 531 | 2 810 | 276 | 406 | 4 023 | 3 936 |
| Borrowings – undiscounted value | 14.7.2 | 22 | 44 | 36 | 35 | 137 | 131 |
| Bonds | 14.7.3 | 1 069 | 4 407 | 1 255 | 5 484 | 12 215 | 11 104 |
| floating-rate bonds – undiscounted value | 855 | 70 | 1 035 | – | 1 960 | 1 802 | |
| fixed rate bonds – undiscounted value | 214 | 4 337 | 220 | 5 484 | 10 255 | 9 302 | |
| Trade liabilities | 14.5.2 | 11 040 | – | – | – | 11 040 | 11 040 |
| Investment liabilities | 14.5.3, 14.10.1 | 2 282 | 14 | 14 | 49 | 2 359 | 2 359 |
| Derivatives – undiscounted value | 14.10.1 | 444 | 356 | 438 | – | 1 238 | 1 166 |
| gross exchange amounts, incl.: | 282 | 61 | 76 | – | 419 | 420 | |
| currency forwards | 14.10.1 | 25 | 58 | 76 | – | 159 | 144 |
| commodity forwards (CO2 futures) | 122 | 3 | – | – | 125 | 125 | |
| commodity forwards (electricity) | 99 | – | – | – | 99 | 99 | |
| currency interest rate swaps | 14.10.1 | 36 | – | – | – | 36 | 52 |
| net exchange amounts, incl.: | 162 | 295 | 362 | – | 819 | 746 | |
| currency forwards | 14.10.1 | 26 | 295 | 362 | – | 683 | 610 |
| commodity swaps | 14.10.1 | 136 | – | – | – | 136 | 136 |
| Liabilities on settled derivatives | 14.10.1 | 25 | – | – | – | 25 | 25 |
| Hedged item adjustment | 14.10.1 | 5 | 14 | – | – | 19 | 19 |
| Security deposits | 18 | – | – | – | 18 | 18 | |
| Other | 14.5.3, 14.10.1 | 568 | 21 | 14 | 50 | 653 | 653 |
| 16 004 | 7 666 | 2 033 | 6 024 | 31 727 | 30 451 |
The maturity analysis of financial liabilities related to lease was presented in note 17.2.1.
Maturity analysis for financial liabilities as at 31 December 2020
| NOTE | up to 1 year | above 1 to 3 years | above 3 to 5 years | above 5 years | Total | Carrying amount |
|
| Loans – undiscounted value | 14.7.1 | 2 315 | 797 | 517 | 355 | 3 984 | 3 866 |
| Borrowings – undiscounted value | 14.7.2 | 18 | 44 | 45 | 53 | 160 | 130 |
| Bonds | 14.7.3 | 2 687 | 1 556 | 4 581 | 2 041 | 10 865 | 10 364 |
| floating-rate bonds – undiscounted value | 225 | 831 | 1 023 | – | 2 079 | 2 002 | |
| fixed rate bonds – undiscounted value | 2 462 | 725 | 3 558 | 2 041 | 8 786 | 8 362 | |
| Trade liabilities | 14.5.2 | 6 463 | – | – | – | 6 463 | 6 463 |
| Investment liabilities | 14.5.3, 14.10.1 | 2 027 | 14 | 14 | 56 | 2 111 | 2 111 |
| Derivatives – undiscounted value | 14.10.1 | 272 | 79 | 46 | – | 397 | 408 |
| gross exchange amounts, incl.: | 47 | 48 | 7 | – | 102 | 113 | |
| currency forwards | 14.10.1 | 16 | 4 | 7 | – | 27 | 27 |
| interest rate swaps | 11 | – | – | – | 11 | 11 | |
| currency interest rate swaps | 14.10.1 | 20 | 44 | – | – | 64 | 75 |
| commodity swaps | 14.10.1 | – | – | – | – | – | – |
| net exchange amounts, incl.: | 225 | 31 | 39 | – | 295 | 295 | |
| currency forwards | 14.10.1 | 27 | 30 | 39 | – | 96 | 96 |
| commodity swaps | 14.10.1 | 198 | 1 | – | – | 199 | 199 |
| Liabilities on settled derivatives | 14.10.1 | 156 | – | – | – | 156 | 156 |
| Hedged item adjustment | 7 | – | – | – | 7 | 7 | |
| Other | 14.5.3, 14.10.1 | 699 | 36 | 13 | 42 | 790 | 790 |
| 14 644 | 2 526 | 5 216 | 2 547 | 24 933 | 24 295 |
A financial liquidity risk is the loss of ability to settle current liabilities on time.
The ORLEN Group is exposed to liquidity risk resulting from the relation between current assets and current liabilities. As at 31 December 2021 and 31 December 2020, the current liquidity indicator amounted to 1.3 and 1.1, respectively.
The objective of the liquidity risk management process is to ensure the Group’s financial security and financial stability, and the basic tool limiting the above risk is the ongoing review of matching maturities of assets and maturity of liabilities. Moreover, the ORLEN Group carries out a policy of its financing sources diversification and uses range of tools for effective liquidity management.
The ORLEN Group uses systems of cash concentration („cash-pool systems”) to effectively manage current financial liquidity and to optimize financial costs within the ORLEN Group. At the end of 2021, the following cash-pool systems existed operated by:
- PKN ORLEN:
- cash-pooling systems dedicated to Polish companies of the ORLEN Group. As at 31 December 2021 systems included a total of 33 ORLEN Group entities,
- international cash-pooling system dedicated to foreign companies of the ORLEN Group. As at 31 December 2021 the system comprised 8 ORLEN Group foreign companies;
- ENERGA:
- cash-pooling systems for Polish companies of the ENERGA Group. As at 31 December 2021 systems included a total of 23 companies of the ENERGA Group.
Group may issue bonds within the settled limits as well as purchase bonds issued by the ORLEN Group entities when managing liquidity. Additional information about bonds in note 14.7.3.
There is no concentration of credit risk in ORLEN Group in relation to cooperating banks. The percentage share of the three banks with the highest concentration of cash as at 31 December 2020 is: 25%, 19% and 9% of the total cash balance. In 2021, the ORLEN Group invested surplus cash in bank deposits. Decisions made regarding bank deposits are based on maximising the rate of return with respect of set concentration limits for each bank and the current assessment of the financial condition of the banks which requires an investment grade of short-term deposit rating for the bank. The expected credit loss (ECL) on the short-term deposits opened in the ORLEN Group as at 31 December 2021 was not material.
As at 31 December 2021 and as at 31 December 2020 the maximum possible indebtedness due to loans amounted to PLN 19,063 million and PLN 16,356 million, respectively. As at 31 December 2021 and as at 31 December 2020 PLN 14,960 million and PLN 12,318 million, respectively, remained unused. The increase in the maximum possible indebtedness and the availability of open credit lines results from signing new bank financing agreements concluded by PKN ORLEN and the ORLEN Unipetrol Group.
The value of guarantees regarding liabilities to third parties granted during ongoing operations as at 31 December 2021 and as at 31 December 2020 amounted to PLN 486 million and PLN 418 million, respectively. Guarantees concerned mainly: civil-law guarantees of contract performance and public-law guarantees resulting from generally applicable regulations secured regularity of business licensed in the liquid fuels sector and resulting from this activity tax and customs receivables, etc.
In addition, guarantees and sureties granted in the Group on behalf of related parties as at 31 December 2021 and as at 31 December 2020 amounted to PLN 14,385 million and PLN 16,833 million, respectively. They were mainly related to secure of ORLEN Capital and Energa Finance future liabilities due to these transactions of Eurobonds issuance in total amount of PLN 10,809 million and securing the implementation of the CCGT Ostrołęka gas project in the amount of PLN 1,461 million as well as timely payment of liabilities by related parties.
Based on analysis and forecasts as at the end of the reporting period, the Group recognised the probability of payment of above amounts as low.
PKN ORLEN, according to agreements concluded with ORLEN Group subsidiaries and under conditions specified in these agreements, is obliged to:
- provide funding for financing CCGT Ostrołęka capex, by acquisition the number of shares of CCGT Ostrołęka specified in the agreement or provide financing to ENERGA in the amount not higher than PLN 1.55 billion, necessary to finance the project in relations to building gas power plant in Ostrołęka,
- provide funding for financing up to 100% of CCGT Grudziądz capex – in relation to building the gas-steam power plant in Grudziadz, but not higher than PLN 1.8 billion,
- provide funding for financing up to 100% of ORLEN Lietuva capex – in relation to building the “Bottom of Barrel” unit in the ORLEN Lietuva production plant in Mazeikiu, but not higher than approximately EUR 633 million,
- arrangement of directional method of financing of the investment tasks in ORLEN Południe: “Project and building of UCO FAME production and distillation lines” and “Building of the complex of units for production of II generation bioethanol (B2G)” – “B2G Project”.
As at 31 December 2021 the parties haven’t worked out yet the detailed forms and conditions of financing to be provided under these agreements. These will be defined in future corporate decisions of PKN ORLEN and the subsidiaries and under separate agreements.
On 17 December 2021, PKN ORLEN concluded with the European Investment Bank a long-term loan agreement for the amount of EUR 180 million. The purpose of the loan is partial financing of ORLEN Group investments which supports its sustainable development. On 22 February 2022 the entire contracted amount was disbursed, part of which will be used to finance the investment task in ORLEN Południe “Building of the complex of units for production of II generation bioethanol (B2G)”.
Credit risk
The Group assess that the risk of unsettled receivables by customer in the field of undue receivables and due receivables not covered by allowance is negligible, due to effective management of trade credit and debt recovery. The Group, among others, sets limits for particular customers and establishes hedges, has the possibility to compensate of mutual debts. The Group uses non-recourse factoring, incomplete factoring with recourse as well as reverse factoring solution.
The Group considered that there is no significant concentration of credit risk in relation to trade receivables.
Limits are set based on financial analysis of customers and history of cooperation or the current report from the business information agency.
Separate group are customers for whom an insurance limit is issued e.g.: fleet, micro fleet, export contractors.
Some contractors make a deposit on account. In case of the absence of credit limit, contractors are obliged to make a prepayment.
With regard to trading electricity on the wholesale energy market, procedures specify the limits of possible sales of electricity without the requirement of security. For transactions exceeding the limit, security is required, e.g. bank guarantee.
The measure of credit risk is the maximum credit risk for each class of financial instruments, which is equal to their carrying amount (note 14.5.2. and 14.10.1).
As at 31 December 2021 and as at 31 December 2020 the Group received bank and insurance guarantees of PLN 5,482 million and PLN 3,355 million, respectively. Increased value of received guarantees results mainly from performance guarantee in the amount of PLN 2,155 million accepted by PKN ORLEN and secured the construction of the Olefins III Complex. The Group additionally receives from its customers collateral in the form of sureties, voluntary submission to execution (Article 777 of the Code of Civil Procedure), deposits, registered pledges, mortgages, bills of exchange, guarantees and letters of credit.