Provision for rehabilitation of post-mining properties
The Group’s open-pit mines will be rehabilitated after coal extraction is completed. According to current plans, costs will be incurred between 2032 and 2066 for the Bełchatów Lignite Mine Branch and between 2045 and 2085 for the Turów Lignite Mine Branch.
The Group recognises provisions for the costs of rehabilitating pits. The amount of the provision presented in the financial statements also includes the value of the Mine Liquidation Fund created in accordance with the Geological and Mining Act. The provision amounted to PLN 5,571 million as of December 31, 2021 (PLN 7,463 million at December 31, 2020).
In 2021, the Group updated some of the assumptions used in the valuation of the mine workings rehabilitation provisions. Changes to the valuation assumptions were made at both mines in connection with the revaluation of the cost of decommissioning the workings at the end of mining.
In addition, the Group has adjusted the level of discount rates used to estimate the present value of future pit rehabilitation expenditures at the two open-pit lignite mines; they are as follows:
- for expenses expected to be incurred within 15 years from the balance sheet date – 3.6% (compared to 1.3% as at December 31, 2020);
- for expenses expected to be incurred 16-25 years from the balance sheet date – 4.08%, PGE’s extrapolation in accordance with the adopted method (compared to 1.6% as at December 31, 2020);
- for expenses expected to be incurred more than 25 years from the balance sheet date – 4.17%, PGE’s extrapolation in accordance with the adopted method (compared to 1.9% as at December 31, 2020).
The update of the discount rate resulted in a decrease in the provision by PLN 4,460 million, while the change of other assumptions resulted in an increase in the provision by PLN 2,298 million. Ongoing production and the reversal of the discount resulted in an increase in the provision of PLN 270 million. As a result, the provision for rehabilitation of mine workings decreased by PLN 1,892 million in the current reporting period. This change was recognised as follows:
- PLN 749 million – in correspondence with assets (as a decrease in the value of property, plant and equipment),
- PLN 1,143 – in correspondence with current financial result.
Estimated influence of changes in discount rate on the value of rehabilitation provision:
|Carrying amount||Discount rate|
|-1 p.p.||+1 p.p.|
|Provision for rehabilitation of post-mining properties||5,571||1,706||(1,270)|
Provision for rehabilitation of ash landfills
PGE Group’s generating assets create provisions for the rehabilitation of ash landfills. As at December 31, 2021, this provision amounted to PLN 248 million (PLN 318 million at the end of the comparative period).
Provisions for wind farm decommissioning and restoration
Wind farm owners create provisions for decommissioning and restoration. The provision amounted to PLN 26 million as of December 31, 2021 (PLN 71 million at December 31, 2020).
Liquidation of property, plant and equipment
As at the reporting date, the provision amounted to PLN 230 million (PLN 259 million as at the end of the comparative period) and refers to certain assets in the Conventional Generation and Renewables segments.