Derivatives
The Group measures derivatives at fair value using valuation models for financial instruments based on publicly available exchange rates, interest rates, discount curves in particular currencies (applicable also for commodities which prices are denominated in these currencies) derived from active markets. The fair value of derivatives is determined based on discounted future cash flows from transactions, calculated based on the difference between the forward rate and transaction price. Forward exchange rates are not modelled as a separate risk factor, but are derived from the spot rate and appropriate forward interest rate for foreign currencies in relation to PLN.
In the category of financial assets and liabilities measured at fair value through profit or loss, the Group recognises financial instruments related to trading in CO2 emission allowances – currency and commodity forwards, in addition to contracts for the purchase and sale of coal, commodity SWAPs (Level 2).
In addition, the Group presents a derivative hedging instrument for exchange rate and interest rate hedging CCIRS and IRS hedging transactions swapping a floating rate in PLN for a fixed rate in PLN (Level 2).
| Assets at December 31, 2021 | Liabilities at December 31, 2021 | |||
| FAIR VALUE HIERARCHY | Level 1 | Level 2 | Level 1 | Level 2 |
| CO2 emission allowances in trading activities | 1 | – | – | – |
| Hard coal in trading activities | 17 | – | – | – |
| INVENTORIES | 18 | – | – | – |
| Currency forwards | – | 4 | – | 6 |
| Commodity forwards | – | 47 | – | 1 |
| Commodity SWAP | – | 22 | – | 31 |
| Contracts for purchase/sale of coal | – | 19 | – | 11 |
| Options | – | 16 | – | – |
| DERIVATIVES MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS |
– |
108 |
– |
49 |
| CCIRS hedges | – | 110 | – | – |
| IRS hedges | – | 203 | – | – |
| Currency forward – USD | – | 3 | – | – |
| Currency forward – EUR | – | 485 | – | 34 |
| HEDGING DERIVATIVES | – | 801 | – | 34 |
| Investment fund participation units | – | 30 | – | – |
| OTHER ASSETS / LIABILITIES MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS |
– |
30 |
– |
– |
| Assets at December 31, 2020 | Liabilities at December 31, 2020 | |||
| FAIR VALUE HIERARCHY | Level 1 | Level 2 | Level 1 | Level 2 |
| CO2 emission allowances in trading activities | 1 | – | – | – |
| Hard coal in trading activities | 144 | – | – | – |
| INVENTORIES | 145 | – | – | – |
| Currency forwards | 3 | – | 4 | |
| Commodity forwards | 11 | – | 4 | |
| Commodity SWAP | 11 | – | 13 | |
| Contracts for purchase/sale of coal | 17 | – | 18 | |
| Options | 16 | – | – | |
| DERIVATIVES AT FAIR VALUE THROUGH PROFIT OR LOSS | – | 58 | 39 | |
| CCIRS hedges | – | 64 | – | – |
| IRS hedges | – | – | – | 385 |
| Currency forward – USD | – | – | – | 1 |
| Currency forward – EUR | – | 381 | – | 23 |
| HEDGING DERIVATIVES | – | 445 | – | 409 |
| Investment fund participation units | – | 52 | – | – |
| OTHER ASSETS / LIABILITIES MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS | – | 52 | – | – |
Derivative instruments are presented in note 25.1.2 to these financial statements. During the current and comparative reporting periods, there were no transfers of financial instruments between the first and second level of the fair value hierarchy.
Presented below are the terms of the derivative instruments and other receivables carried at fair value through profit or loss.
| At December 31, 2021 | At December 31, 2020 | Maturity at December 31, 2021 | |||
| Value in financial statements in PLN | Instrument’s nominal value in original currency | Value in financial statements in PLN | Instrument’s nominal value in original currency | ||
| CCIRS – EUR to PLN | 110 | 144 | 64 | 144 | July 2029 |
| Options | 16 | 5 | 16 | 6 | November 2026 |
| Investment fund participation units | 30 | 27 | 52 | 48 | n/a |
| Currency forward purchase EUR | 485 | 3,980 | 382 | 2,766 | December 2024 |
| Currency forward sale EUR | 14 | 31 | |||
| Commodity forward sale PLN | 47 | 132 | 11 | 871 | December 2023 |
| Commodity forward purchase PLN | 180 | 882 | December 2023 | ||
| IRS – interest rate PLN | 203 | 438 | – | – | June 2028 |
| 750 | – | December 2027 | |||
| 438 | – | December 2028 | |||
| 2,904 | – | September 2023 | |||
| 1,000 | – | May 2029 | |||
| 400 | – | May 2026 | |||
| Currency forward purchase USD | 3 | 8 | – | – | December 2022 |
| Currency forward purchase USD | 1 | 10 | 2 | 12 | April 2022 |
| Currency forward purchase USD | 3 | 8 | – | – | December 2022 |
| Commodity SWAP purchase USD | 22 | 5 | 11 | 4 | January 2022 |
| Commodity SWAP sale USD | 17 | June 2022 | |||
| Contracts for purchase – USD | 19 | 6 | 17 | 56 | September 2022 |
| Contracts for sale – USD | 13 | 9 | June 2022 | ||
| Financial assets | 939 | – | 555 | – | |
| Currency forward purchase EUR | 34 | 831 | 24 | 88 | December 2024 |
| Currency forward sale EUR | 65 | 208 | December 2024 | ||
| IRS – interest rate – PLN | – | – | 385 | 500 | June 2028 |
| 875 | December 2027 | ||||
| 500 | December 2028 | ||||
| 3,630 | September 2023 | ||||
| 1,000 | May 2029 | ||||
| 400 | May 2026 | ||||
| Commodity forward PLN | 1 | 19 | 4 | 258 | December 2023 |
| 18 | 254 | ||||
| Commodity SWAP purchase USD | 31 | 25 | 13 | 3 | June 2022 |
| Commodity SWAP sale USD | 11 | 1 | June 2022 | ||
| Currency forward – USD | 3 | 53 | 2 | 32 | September 2022 |
| – | |||||
| Currency forward – USD | – | – | 1 | 4 | April 2021 |
| Currency forward – USD | 3 | 8 | 1 | 23 | December 2022 |
| Contracts for purchase – USD |
11 |
21 |
18 |
– | April 2022 |
| Contracts for sale – USD | 6 | 8 | June 2022 | ||
| Financial liabilities | 83 | 448 | |||