Integrated report 2021

33.1 Impact of COVID-19 on PGE Group’s business

PGE is identifying risk factors related to the COVID-19 pandemic that affect the Group’s results on an on-going basis. The pandemic’s impact on financial results remained limited in 2021. Further potential events and their scale are difficult to estimate. The occurrence and extent of further waves of the disease, the possibility of introducing restrictions and their impact on economic activity in Poland will be of importance. At the same time, preparing precise estimate is difficult due to a variety of other factors having an impact on the electricity market, including demand for electricity.

The pandemic outbreak caused an economic slowdown in 2020 due to the freezing of economies, with GDP down -2.5% in Poland and -6.4% in the eurozone respectively. There was a strong rebound in GDP and industrial production in 2021, as successive waves of epidemics did not have much of an impact on restrictions on economic activity. In Poland, GDP grew by 5.7% in real terms and in the eurozone by 5.2%.

Nonetheless, the re-introduction of restrictions could result in reduced economic activity, which would give rise to a temporarily lower domestic consumption of electricity, which in turn would reduce revenue and margins on the generation, distribution and sale of energy in the Conventional Energy, Distribution, Supply and District Heating segments. PGE Group to a large extent contracts the sale of electricity produced for subsequent years in advance, therefore it protects itself in this respect against potential effects of a recurrence of an epidemic or economic recession.

If the pandemic intensifies, the Supply segment is at risk of falling demand for electricity, which could translate into lower sales to end customers and a higher cost of electricity balancing. Also in the Distribution segment, a lower volume of supplies to end customers could also directly lead to lower revenue.

As at December 31, 2021, the impact due to the anticipated increase in payment congestion, especially on receivables from small and medium-sized enterprises, was not material. As described in note 26.3.1 to the consolidated financial statements, PGE Group recognised additional impairment losses of PLN 12 million. Depending on the further development of the pandemic and economic situation, liquidity risk and the risk of higher impairment of overdue receivables at PGE Group still exist and are being monitored on an on-going basis. PGE Group currently does not expect this risk to become material and has not identified liquidity risk.

PGE Group owns facilities of strategic importance from the viewpoint of uninterrupted generation and supply of electricity and heat in Poland. The COVID-19 pandemic has changed the way work is organised, especially with regard to PGE Group’s generating assets. In many instances, this gives rise to additional costs, including for example the purchase of protective equipment for employees. Since the start of the pandemic, the Group has work rules in place that are aimed at reducing the risk of infection for employees as much as possible. As one of the largest employers in Poland, with a workforce of approx. 40 000 employees, PGE Group is undertaking a number of activities related to the organisation of work aimed at ensuring continuity of operations, protection of employees’ health and life, including the implementation of remote and rotating work, building awareness of, in particular, the basic principles of COVID-19 protection, prevention and quarantine. Having implemented appropriate remedial measures at an early stage of the pandemic, PGE Group has been producing and supplying electricity and heat with no interruptions.

PGE Group additionally conducts communication and motivational activities aimed at employees to build awareness of the positive effects of vaccination – both individual and social. In addition, there is internal communication related to the course of the pandemic and encouragement to minimise the risk of infection – that is, keeping a distance, washing hands frequently or using office spaces safely. PGE has appointed a crisis team, which collects information from all Group companies, monitors the situation at the companies and undertakes appropriate activities.

Production units also have operational plans, drafted and approved on an on-going basis, in the event of elevated absences – as they are of strategic importance from the viewpoint of maintaining the continuity of production and supply of electricity and heat, they also remain in continuous contact with local services responsible for monitoring the situation in the country across all PGE Group sites. In the retail customer area, PGE Group has been primarily focusing on expanding its remote service channels.

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