Integrated report 2021

25.3 Fair value hierarchy

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
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