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Note Year ended
31 December 2016
Year ended
31 December  2015
(restated figures)
Sales revenue 12
12. Sales revenue
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Year ended
31 December 2016
Year ended
31 December 2015
(restated figures)
Sale of goods for resale, finished goods and materials without elimination of excise 11 575 033 12 080 940
Excise (395 601) (425 691)
Sale of goods for resale, finished goods and materials, of which: 11 179 432 11 655 249
Electricity 9 521 948 10 099 333
Heat energy 650 625 613 660
Energy certificates 127 791 272 896
Coal 467 962 439 608
Gas 230 466 117 867
Other goods for resale, finished goods and materials 180 640 111 885
Rendering of services, of which: 6 409 430 6 552 945
Distribution and trade services 6 051 410 6 184 958
Connection fees 102 657 124 866
Maintenance of road lighting 116 463 116 042
Other services 138 900 127 079
Other revenue 57 627 56 246
Total sales revenue 17 646 489 18 264 440
Additional assessment of the revenue from sale of electricity and distribution services in the Sales segment

Additional assessment of the revenue from the sale of electricity and distribution services has been discussed in Note 9.26 Sales revenue.

As at 31 December 2016, additionally assessed revenue from sale of electricity and distribution services in the Sales segment totaled PLN 353 065 thousand and, when revered estimations from the prior year have been accounted for, the impact on the profit or loss for the period was PLN 104 592 thousand.

17 646 489 18 264 440
Cost of sales, of which: 13 (15 717 462) (19 028 962)
Impairment of non-financial non-current assets 13.3
13.3. Depreciation and amortization charges and impairment losses
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Year ended
31 December 2016
Year ended
31 December 2015
Items included in cost of sales: (2 409 461) (5 337 505)
Depreciation of property, plant and equipment (1 532 717) (1 703 932)
Impairment of property, plant and equipment (757 974) (3 437 907)
Amortization of intangible assets (43 487) (36 909)
Impairment of intangible assets (22 215) (1 749)
Impairment of goodwill (51 903) (154 998)
Other (1 165) (2 010)
Items included in selling and distribution expenses: (33 318) (33 291)
Depreciation of property, plant and equipment (17 639) (16 999)
Amortization of intangible assets (15 679) (16 292)
Items included in administrative expenses: (75 640) (42 354)
Depreciation of property, plant and equipment (27 868) (25 286)
Impairment of property, plant and equipment (33 245) (2 262)
Amortization of intangible assets (14 308) (14 806)
Impairment of intangible assets (219)
Items included in cost of goods produced for internal
purposes:
(17 416) (18 466)
Depreciation of property, plant and equipment (16 751) (18 117)
Impairment of property, plant and equipment (388)
Amortization of intangible assets (277) (349)
Total depreciation/amortization expense and impairment, of which: (2 535 835) (5 431 616)
Depreciation and amortization (1 668 726) (1 832 690)
Impairment (867 109) (3 598 926)

In the year ended 31 December 2016, the Group recognized impairment losses on property, plant and equipment as well as goodwill, in addition to reversing in part the impairment losses recognized before in the Generation segment, which was due to impairment tests performed as at 31 December 2016 and 30 June 2016. The total effect on the Group’s gross profit/loss for 2016 was PLN 786 595 thousand (surplus of recognition over reversal). The tests and their results have been discussed in more detail in Note 11  to these consolidated financial statements.

Additionally in the year ended 31 December 2016, the Group companies recognized and derecognized impairment losses on individual assets. The related total charges to operating expenses of the Group amounted to PLN 80 514 thousand.  The key items include impairment losses recognized by a Generation segment company on property, plant and equipment in relation to a subsidy obtained under contracts on co-funding of RES units construction of PLN 68 875 thousand, and intangible assets regarding land used for waste storage purposes of PLN 22 734 thousand.

Depreciation and amortization rates

A review of the estimated useful lives of fixed assets and intangible assets, conducted in 2016, had a material effect on the amortization and depreciation expense in the following operating segments:

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Increase (decrease) in depreciation
and amortization costs
Year ended
31 December 2016
Year ended
31 December 2015
Mining (13 286) (1 744)
Generation 520 5 567
Distribution (25 900) (10 000)

A review of the estimated useful lives in the remaining segments did not have a considerable effect on the amortization and depreciation expense.

(832 092) (3 594 654)
Profit (loss) on sale   1 929 027 (764 522)
Selling and distribution expenses 13 (459 191) (489 963)
Administrative expenses 13 (652 827) (618 969)
Other operating income and expenses 14
14. Other operating revenue and expenses
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Year ended
31 December 2016
Year ended
31 December 2015
Penalties, fines, compensations received or receivable 48 256 28 043
Surplus of (recognition)/reversal of actuarial provisions for the existing pensioners and disability pensioners 58 528 45 557
Surplus of other provisions (recognized)/derecognized (115 733) (12 616)
Subsidies/grants and revenue representing the equivalent of amortization/depreciation charges on subsidies/grants to fixed assets or fixed assets received free of charge 38 434 39 404
Surplus of subsidies written-off over provision created for their return 29 684
Loss on the disposal of property, plant and equipment / intangible assets and costs
of damages to non-current assets
(116) (14 973)
Write-off for abandoned investments and production as well as liquidated
materials
(2 821) (81 540)
Costs of court proceedings, fines and damages (24 675) (12 322)
Costs of participation in Polish National Foundation (32 500)
Other operating income 22 208 43 878
Other operating expenses (36 752) (63 193)
Total other operating income and expenses (15 487) (27 762)

In the year ended 31 December 2016, following the modification of their Collective Labor Agreements, some Group companies reversed their provisions for post-employment benefits for their existing pensioners. Consequently, PLN 58 528 thousand was recognized within other operating revenue.

In the year ended 31 December 2016 the amount of provisions recognized in the Group exceeded the amount of unrecognized ones by PLN 115 733 thousand.  The basis for provisions which were recognized or remeasured and had a material effect on the profit/loss of the Group have been presented in Note 37 to these consolidated financial statements.

A decrease in the cost of writing off discontinued investments was driven by a write-off of capitalized costs of work relating to drilling drifts and reinforcing walls of PLN 78 610 thousand in the comparative period, as they were no longer suitable for economic use.

(15 487) (27 762)
Operating profit (loss)   801 522 (1 901 216)
Share in profit/(loss) of joint ventures 22
22. Shares in joint ventures
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Elektrociepłownia
Stalowa Wola S.A.
Elektrownia
Blachownia Nowa
Sp. z o.o.
in liquidation
TAMEH HOLDING
Sp. z o.o.*
As at 31 December 2016
Non-current assets 1 126 668 1 479 845 2 606 513
Current assets, including: 5 739 37 056 501 547 544 342
cash and cash equivalents 3 809 37 009 196 442 237 260
Non-current liabilities (-) including: (1 028 954) (664 603) (1 693 557)
debt (980 977) (536 585) (1 517 562)
Current liabilities (-) including: (132 395) (97) (349 101) (481 593)
debt (65 752) (1 647) (67 399)
Total net assets (28 942) 36 959 967 688 975 705
Share in net assets (14 471) 18 479 483 844 487 852
Investment in joint ventures 18 479 442 869 461 348
Share in revenue of joint ventures 6 675 449 559 624 566 748
Share in profit/(loss) of joint
ventures
18 60 022 60 040
Share in other comprehensive income of joint
ventures
(1 040) (1 040)

The data presented concern the TAMEH HOLDING Sp. z o.o. Capital Group. The value of the interest held in TAMEH HOLDING Sp. z o.o. differs from the value of net assets attributable to the Group, because the cost of shares in TAMEH HOLDING Sp. z o.o. was calculated taking into account the fair value of the share contributed to the joint venture by companies from the ArcelorMittal Capital Group.

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Elektrociepłownia
Stalowa Wola S.A.
Elektrownia
Blachownia Nowa
Sp. z o.o.
TAMEH HOLDING
Sp. z o.o.*
As at 31 December 2016
Non-current assets 1 085 917 1 295 743 2 381 660
Current assets, including: 12 387 37 008 341 716 391 111
cash and cash equivalents 91 36 943 14 880 51 914
Non-current liabilities (-) including: (965 514) (378 507) (1 344 021)
debt (963 766) (295 503) (1 259 269)
Current liabilities (-) including: (125 610) (85) (377 432) (503 127)
debt (40 149) (2 134) (42 283)
Total net assets 7 180 36 923 881 520 925 623
Share in net assets 3 590 18 461 440 760 462 811
Investment in joint ventures 18 461 399 666 418 127
Share in revenue of joint ventures 18 490 545 175 545 683
Share in profit/(loss) of joint
ventures
(1 474) (13 644) 23 051 7 933
Share in other comprehensive income of joint ventures (387) (387)

The data presented concern the TAMEH HOLDING Sp. z o.o. Capital Group.

Elektrociepłownia Stalowa Wola S.A.

Elektrociepłownia Stalowa Wola S.A. is a special purpose vehicle established in 2010 on the initiative of TAURON Polska Energia S.A. and PGNiG S.A. The entity was registered to carry out an investment project, i.e. construction of a gas and steam unit in Stalowa Wola fueled with natural gas, with the gross electrical capacity of 400 MWe and the net thermal capacity of 240 MWt.

On 27 October 2016, a conditional agreement was made among the Company, PGNiG S.A. and Elektrociepłownia Stalowa Wola S.A. to set out the key boundary conditions for project restructuring along with a conditional annex to the electricity sales contract. Furthermore, PGNiG S.A. and Elektrociepłownia Stalowa Wola S.A. executed a conditional annex to the gaseous fuel supply contract, which has been discussed in more detail in Note 35 to these consolidated financial statements.

The agreement reflects the will of the Company and PGNIG S.A. to continue the construction of the gas and steam unit. According to the Management Board of the Company, the aforesaid documents enable completion of the investment in 2019 (preliminary estimate).

TAURON Polska Energia S.A. holds 50% indirect interest in the issued capital of this company and in its governing body through TAURON Wytwarzanie S.A. Due to the fact that in 2015 the accumulated share in losses of the joint venture and the adjustment to “top-down” transactions between the Group companies and the joint venture exceeded the value of the interest in the joint venture, the Company discontinued to recognize its share in any further losses of the joint venture.

Additionally, the Company has receivables due to loans granted to Elektrociepłownia Stalowa Wola S.A. in the amount of PLN 256 067 thousand, which has been discussed in more detail in Note 23, as well as provisions for onerous commercial contracts in the amount of PLN 198 844 thousand, which have been discussed in Note 35.3.

Elektrownia Blachownia Nowa Sp. z o.o. in liquidation

On 5 September 2012, TAURON Wytwarzanie S.A., a subsidiary, and KGHM Polska Miedź S.A. established a special purpose vehicle named Elektrownia Blachownia Nowa Sp. z o.o., with its registered address in Kędzierzyn Koźle. The company was set up to perform a comprehensive investment project including preparation, construction and operation of a gas and steam unit with the capacity of ca. 850 MWe on the site of TAURON Wytwarzanie S.A. – Oddział Elektrownia Blachownia.

TAURON Polska Energia S.A. holds 50% indirect interest in the issued capital of this company and in its governing body through TAURON Wytwarzanie S.A.

On 28 July 2016, TAURON Polska Energia S.A., KGHM Polska Miedź S.A. and TAURON Wytwarzanie S.A. signed an agreement pursuant to which they unanimously decided to discontinue the construction of the gas and steam unit in Elektrownia Blachownia Nowa Sp. z o.o. and terminate the shareholders agreement concluded by KGHM Polska Miedź S.A. and TAURON Wytwarzanie S.A., which denotes expiration of all contractual obligations and discontinuation of all works specified in the agreement. KGHM Polska Miedź S.A. and TAURON Wytwarzanie S.A. unanimously decided to commence the liquidation of the company, in line with its articles of association and laws of general application. On 11 October 2016, the Extraordinary General Shareholders’ Meeting dissolved Elektrownia Blachownia Nowa Sp. z o.o. and placed it into liquidation, in addition to appointing a receiver. As Elektrownia Blachownia Nowa Sp. z o.o. in liquidation holds current assets which may be subject to distribution among the partners in the joint venture to a considerable extent, the Group does not recognize any additional impairment losses on its interest in the company.

TAMEH HOLDING Sp. z o.o. and subsidiaries

In 2014, the TAURON Group entered into an agreement with the ArcelorMittal Group. The shareholders agreement states that TAMEH HOLDING Sp. z o.o. will carry out investment and operational projects related to the industrial power sector. The agreement was concluded for a term of 15 years, which may be further extended. Following the transactions concluded in 2014, each capital group holds 50% of shares in TAMEH HOLDING Sp. z o.o.

TAMEH HOLDING Sp. z o.o. holds 100% of shares in TAMEH POLSKA Sp. z o.o. composed of: Zakład Wytwarzania Nowa and Elektrownia Blachownia contributed in kind by the TAURON Group and Elektrociepłownia in Kraków contributed in kind by the ArcelorMittal Group. Moreover, TAMEH HOLDING Sp. z o.o. holds 100% of shares in TAMEH Czech s.r.o.

On 29 June 2016, the General Shareholders’ Meeting of TAMEH HOLDING Sp. z o.o. decided to allocate PLN 48 000 thousand to pay dividends to the shareholders. The Group’s interest in the joint venture TAMEH HOLDING Sp. z o.o. was reduced by the value of the dividend payable to the Group in the amount of PLN 24 000 thousand.

60 040 7 933
Interest expense on debt 15
15. Finance income and costs
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Year ended
31 December 2016
Year ended
31 December 2015
(restated figures)
Income and costs from financial instruments, of which: (252 206) (242 535)
Interest income 35 314 60 385
Interest costs (259 564) (279 673)
Commission relating to borrowings and debt securities (18 767) (12 514)
Gain/loss on derivative instruments 14 138 (7 089)
Foreign exchange gains/losses (30 261) 524
Dividend income 5 728 4 684
Other 1 206 (8 852)
Other finance income and costs, of which: (100 495) (51 953)
Interest on employee benefits (50 101) (44 491)
Interest on discount of other provisions (19 106) (5 272)
Other (31 288) (2 190)
Total finance income and costs, including recognized in the statement of comprehensive income: (352 701) (294 488)
Interest expense on debt (259 564) (279 673)
Other finance income and costs (93 137) (14 815)

In the year ended 31 December 2016, exchange losses exceeded exchange gains by PLN 30 261 thousand, which was mainly driven by exchange losses on an intra-group loan in the euro.

(259 564) (279 673)
Other finance income and costs 15
15. Finance income and costs
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Year ended
31 December 2016
Year ended
31 December 2015
(restated figures)
Income and costs from financial instruments, of which: (252 206) (242 535)
Interest income 35 314 60 385
Interest costs (259 564) (279 673)
Commission relating to borrowings and debt securities (18 767) (12 514)
Gain/loss on derivative instruments 14 138 (7 089)
Foreign exchange gains/losses (30 261) 524
Dividend income 5 728 4 684
Other 1 206 (8 852)
Other finance income and costs, of which: (100 495) (51 953)
Interest on employee benefits (50 101) (44 491)
Interest on discount of other provisions (19 106) (5 272)
Other (31 288) (2 190)
Total finance income and costs, including recognized in the statement of comprehensive income: (352 701) (294 488)
Interest expense on debt (259 564) (279 673)
Other finance income and costs (93 137) (14 815)

In the year ended 31 December 2016, exchange losses exceeded exchange gains by PLN 30 261 thousand, which was mainly driven by exchange losses on an intra-group loan in the euro.

(93 137) (14 815)
Profit (loss) before tax   508 861 (2 187 771)
Income tax expense 16 (138 724) 383 556
Net profit (loss)   370 137 (1 804 215)
  
Measurement of hedging instruments 30.5
30.5. Revaluation reserve from valuation of hedging instruments
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Year ended
31 December 2016
Year ended
31 December 2015
Opening balance (73 414) (143 019)
Remeasurement of hedging instruments 132 108 85 466
Remeasurement of hedging instruments charged to profit or loss (4 856) 466
Deferred income tax (24 178) (16 327)
Closing balance 29 660 (73 414)

The revaluation reserve from valuation of hedging instruments results from valuation of Interest Rate Swaps (IRS) hedging the interest rate risk arising from bonds issued, which has been discussed in more detail in Note 45.3 to these consolidated financial statements.

The Company applies hedge accounting to hedging transactions covered by the policy for specific risk management in the area of finance.

As at 31 December 2016, the Company recognized PLN 29 660 thousand of revaluation reserve from valuation of hedging instruments. It represents receivables arising from valuation of interest rate swaps as at the end of the reporting period, totaling PLN 36 641 thousand, adjusted by a portion of valuation relating to interest accrued on bonds as at the end of the reporting period, including deferred tax.

The profit/loss for the period was charged with PLN 80 658 thousand, where PLN 85 514 thousand was the amount paid in respect of hedges used in relation to closed interest periods and PLN (4 856) thousand resulted from a change in valuation of instruments related to interest on bonds accrued as at the end of the reporting period. The aforementioned costs of IRS hedging transactions adjusted finance costs arising from interest on bonds issued in the statement of comprehensive income.

127 252 85 932
Foreign exchange differences from translation of foreign entities   9 991 595
Income tax 16 (24 178) (16 327)
Other comprehensive income subject to reclassification to
profit or loss
   113 065  70 200
Actuarial gains/(losses) 34.1
34.1. Provisions for post-employment benefits and jubilee bonuses
Change in provisions for employee benefits in the year ended 31 December 2016
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Provision for retirement,
disability and similar benefits
Employee electricity rates Social Fund Provision for coal allowances Jubilee bonuses Provisions, total
Opening balance 341 124 722 734 131 110 2 242 653 165 1 850 375
Current service costs 17 093 14 003 2 170 37 519 70 785
Actuarial gains and losses, of which: (27 145) (148 051) (29 401) (40 296) (244 893)
arising from changes in financial assumptions (6 026) (54 665) (15 892) (7 245) (83 828)
arising from changes in demographic assumptions 10 566 (32 751) (3 966) 3 035 (23 116)
arising from other changes (31 685) (60 635) (9 543) (36 086) (137 949)
Benefits paid (22 065) (22 432) (3 677) (2 241) (74 090) (124 505)
Past service costs (20 470) (53 901) 8 677 (84 487) (150 181)
Interest expense 9 308 19 831 3 590 17 372 50 101
Acquisition of ZCP Brzeszcze 9 436 17 026 26 462
Other changes 2 247 2 247
Closing balance 307 281 532 184 112 469 2 248 526 209 1 480 391
Non-current 271 934 512 671 108 116 468 963 1 361 684
Current 35 347 19 513 4 353 2 248 57 246 118 707
Change in provisions for employee benefits in the year ended 31 December 2015
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Provision for retirement, disability and similar benefits Employee electricity rates Social Fund Provision for coal allowances Jubilee bonuses Provisions, total
Opening balance 357 017 769 975 170 242 67 661 679 510 2 044 405
Current service costs 14 533 8 144 2 960 983 39 023 65 643
Actuarial gains and losses, of which: (11 222) (47 439) (6 084) 222 (8 683) (73 206)
arising from changes in financial assumptions (29 065) (63 451) (12 090) (39 657) (144 263)
arising from changes in demographic assumptions 2 439 15 946 3 749 6 687 28 821
arising from other changes 15 404 66 2 257 222 24 287 42 236
Benefits paid (24 011) (22 784) (3 943) (1 321) (61 515) (113 574)
Past service costs (3 115) (2 321) (35 561) (68 432) (10 197) (119 626)
Interest expense 7 922 17 159 3 496 887 15 027 44 491
Other changes 2 242 2 242
Closing balance 341 124 722 734 131 110 2 242 653 165 1 850 375
Non-current 318 390 699 207 126 824 581 372 1 725 793
Current 22 734 23 527 4 286 2 242 71 793 124 582

In the year ended 31 December 2016, the Group reduced its provisions for post-employment benefits and jubilee bonuses relating to past service costs by the total of PLN 150 181 thousand, which increased the Group’s profit/loss. Past service costs resulted mainly from:

  • modification of the Collective Labor Agreements in companies mainly from the Distribution segment – reversal of provisions totaling PLN 156 792 thousand;
  • changes in the retirement age – increase in provisions by PLN 7 174 thousand.

Following a change in actuarial assumptions made for purposes of the actuarial valuation as at 31 December 2016, provisions were reduced by PLN 244 893 thousand, which drove an increase in other comprehensive income by PLN 204 597 thousand (provisions for post-employment benefits) and in the Group’s profit/loss by PLN 40 296 thousand (provisions for jubilee bonuses).

Measurement of provisions for employee benefits

Provisions for post-employment benefits and jubilee bonuses have been estimated using actuarial methods. Key actuarial assumptions made as at the end of the reporting period for provision calculation purposes:

 

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31 December 2016 31 December 2015
Discount rate (%) 3.00% 2.75%
Estimated inflation rate (%) 2.50% 2.35%
Employee rotation rate (%) 0.04% – 7.95% 1.14% – 9.10%
Estimated salary increase rate (%)  1.00% – 3.50%  0.23% – 2.43%
Estimated electricity price increase rate (%) 3.50% 4.30%
Estimated increase rate for contribution to the Social Fund (%) 3.50% 4.50%
Remaining average employment period 9.27 – 25.00 9.80 – 14.90
Sensitivity analysis

As at 31 December 2016, the Group analyzed sensitivity of measurement results to changes in the financial discount rates and changes in the planned increases in the base amounts in the range of -0.5 p.p./+0.5 p.p.

The carrying amounts of individual provisions and provisions calculated based on the changed assumptions have been presented below:

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Provision title Carrying amount as at 31 December 2016 Financial discount rate Planned base increases
-0.5 p.p. +0.5 p.p. -0.5 p.p. +0.5 p.p.
Provision for retirement, disability and similar benefits 307 281 321 730 293 961 294 146 321 401
Employee electricity rates 532 184 575 395 493 934 493 934 574 953
Costs of appropriation to Social Benefits Fund 112 469 123 616 106 232 106 294 123 453
Jubilee bonuses 526 209 544 509 509 054 512 185 541 052
Total   1 565 250 1 403 181 1 406 559 1 560 859

The table below presents the carrying amounts of individual provisions and how these carrying amounts would change with different assumptions applied:

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Provision title Carrying amount Deviations
Financial discount rate Planned base increases
-0.5 p.p. +0.5 p.p. -0.5 p.p. +0.5 p.p.
Provision for retirement, disability and similar benefits 307 281 14 449 (13 320) (13 135) 14 120
Employee electricity rates 532 184 43 211 (38 250) (38 250) 42 769
Costs of appropriation to Social Benefits Fund 112 469 11 147 (6 237) (6 175) 10 984
Jubilee bonuses 526 209 18 300 (17 155) (14 024) 14 843
Total, including:   87 107 (74 962) (71 584) 82 716
effect on profit/loss 18 300 (17 155) (14 024) 14 843
effect on other comprehensive income 68 807 (57 807) (57 560) 67 873

The Group classifies provisions as current and non-current based on estimates regarding distribution of payments over time, prepared with the use of actuarial methods.

Provisions for employee benefits by maturity
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Retirement, disability
and similar benefits
Employee electricity rates Social Fund Coal allowances Jubilee bonuses Provisions, total
2017 35 347 19 513 4 353 2 248 57 246 118 707
2018 14 346 21 557 4 421 48 304 88 628
2019 14 675 21 067 4 321 44 081 84 144
2020 14 167 20 606 4 227 39 598 78 598
2021 13 702 20 130 4 134 37 973 75 939
Other years 215 044 429 311 91 013 299 007 1 034 375
Total 307 281 532 184 112 469 2 248 526 209 1 480 391
204 597 64 523
Income tax 16 (38 874) (12 260)
Share in other comprehensive income of joint ventures 22
22. Shares in joint ventures
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Elektrociepłownia
Stalowa Wola S.A.
Elektrownia
Blachownia Nowa
Sp. z o.o.
in liquidation
TAMEH HOLDING
Sp. z o.o.*
As at 31 December 2016
Non-current assets 1 126 668 1 479 845 2 606 513
Current assets, including: 5 739 37 056 501 547 544 342
cash and cash equivalents 3 809 37 009 196 442 237 260
Non-current liabilities (-) including: (1 028 954) (664 603) (1 693 557)
debt (980 977) (536 585) (1 517 562)
Current liabilities (-) including: (132 395) (97) (349 101) (481 593)
debt (65 752) (1 647) (67 399)
Total net assets (28 942) 36 959 967 688 975 705
Share in net assets (14 471) 18 479 483 844 487 852
Investment in joint ventures 18 479 442 869 461 348
Share in revenue of joint ventures 6 675 449 559 624 566 748
Share in profit/(loss) of joint
ventures
18 60 022 60 040
Share in other comprehensive income of joint
ventures
(1 040) (1 040)

The data presented concern the TAMEH HOLDING Sp. z o.o. Capital Group. The value of the interest held in TAMEH HOLDING Sp. z o.o. differs from the value of net assets attributable to the Group, because the cost of shares in TAMEH HOLDING Sp. z o.o. was calculated taking into account the fair value of the share contributed to the joint venture by companies from the ArcelorMittal Capital Group.

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Elektrociepłownia
Stalowa Wola S.A.
Elektrownia
Blachownia Nowa
Sp. z o.o.
TAMEH HOLDING
Sp. z o.o.*
As at 31 December 2016
Non-current assets 1 085 917 1 295 743 2 381 660
Current assets, including: 12 387 37 008 341 716 391 111
cash and cash equivalents 91 36 943 14 880 51 914
Non-current liabilities (-) including: (965 514) (378 507) (1 344 021)
debt (963 766) (295 503) (1 259 269)
Current liabilities (-) including: (125 610) (85) (377 432) (503 127)
debt (40 149) (2 134) (42 283)
Total net assets 7 180 36 923 881 520 925 623
Share in net assets 3 590 18 461 440 760 462 811
Investment in joint ventures 18 461 399 666 418 127
Share in revenue of joint ventures 18 490 545 175 545 683
Share in profit/(loss) of joint
ventures
(1 474) (13 644) 23 051 7 933
Share in other comprehensive income of joint ventures (387) (387)

The data presented concern the TAMEH HOLDING Sp. z o.o. Capital Group.

Elektrociepłownia Stalowa Wola S.A.

Elektrociepłownia Stalowa Wola S.A. is a special purpose vehicle established in 2010 on the initiative of TAURON Polska Energia S.A. and PGNiG S.A. The entity was registered to carry out an investment project, i.e. construction of a gas and steam unit in Stalowa Wola fueled with natural gas, with the gross electrical capacity of 400 MWe and the net thermal capacity of 240 MWt.

On 27 October 2016, a conditional agreement was made among the Company, PGNiG S.A. and Elektrociepłownia Stalowa Wola S.A. to set out the key boundary conditions for project restructuring along with a conditional annex to the electricity sales contract. Furthermore, PGNiG S.A. and Elektrociepłownia Stalowa Wola S.A. executed a conditional annex to the gaseous fuel supply contract, which has been discussed in more detail in Note 35 to these consolidated financial statements.

The agreement reflects the will of the Company and PGNIG S.A. to continue the construction of the gas and steam unit. According to the Management Board of the Company, the aforesaid documents enable completion of the investment in 2019 (preliminary estimate).

TAURON Polska Energia S.A. holds 50% indirect interest in the issued capital of this company and in its governing body through TAURON Wytwarzanie S.A. Due to the fact that in 2015 the accumulated share in losses of the joint venture and the adjustment to “top-down” transactions between the Group companies and the joint venture exceeded the value of the interest in the joint venture, the Company discontinued to recognize its share in any further losses of the joint venture.

Additionally, the Company has receivables due to loans granted to Elektrociepłownia Stalowa Wola S.A. in the amount of PLN 256 067 thousand, which has been discussed in more detail in Note 23, as well as provisions for onerous commercial contracts in the amount of PLN 198 844 thousand, which have been discussed in Note 35.3.

Elektrownia Blachownia Nowa Sp. z o.o. in liquidation

On 5 September 2012, TAURON Wytwarzanie S.A., a subsidiary, and KGHM Polska Miedź S.A. established a special purpose vehicle named Elektrownia Blachownia Nowa Sp. z o.o., with its registered address in Kędzierzyn Koźle. The company was set up to perform a comprehensive investment project including preparation, construction and operation of a gas and steam unit with the capacity of ca. 850 MWe on the site of TAURON Wytwarzanie S.A. – Oddział Elektrownia Blachownia.

TAURON Polska Energia S.A. holds 50% indirect interest in the issued capital of this company and in its governing body through TAURON Wytwarzanie S.A.

On 28 July 2016, TAURON Polska Energia S.A., KGHM Polska Miedź S.A. and TAURON Wytwarzanie S.A. signed an agreement pursuant to which they unanimously decided to discontinue the construction of the gas and steam unit in Elektrownia Blachownia Nowa Sp. z o.o. and terminate the shareholders agreement concluded by KGHM Polska Miedź S.A. and TAURON Wytwarzanie S.A., which denotes expiration of all contractual obligations and discontinuation of all works specified in the agreement. KGHM Polska Miedź S.A. and TAURON Wytwarzanie S.A. unanimously decided to commence the liquidation of the company, in line with its articles of association and laws of general application. On 11 October 2016, the Extraordinary General Shareholders’ Meeting dissolved Elektrownia Blachownia Nowa Sp. z o.o. and placed it into liquidation, in addition to appointing a receiver. As Elektrownia Blachownia Nowa Sp. z o.o. in liquidation holds current assets which may be subject to distribution among the partners in the joint venture to a considerable extent, the Group does not recognize any additional impairment losses on its interest in the company.

TAMEH HOLDING Sp. z o.o. and subsidiaries

In 2014, the TAURON Group entered into an agreement with the ArcelorMittal Group. The shareholders agreement states that TAMEH HOLDING Sp. z o.o. will carry out investment and operational projects related to the industrial power sector. The agreement was concluded for a term of 15 years, which may be further extended. Following the transactions concluded in 2014, each capital group holds 50% of shares in TAMEH HOLDING Sp. z o.o.

TAMEH HOLDING Sp. z o.o. holds 100% of shares in TAMEH POLSKA Sp. z o.o. composed of: Zakład Wytwarzania Nowa and Elektrownia Blachownia contributed in kind by the TAURON Group and Elektrociepłownia in Kraków contributed in kind by the ArcelorMittal Group. Moreover, TAMEH HOLDING Sp. z o.o. holds 100% of shares in TAMEH Czech s.r.o.

On 29 June 2016, the General Shareholders’ Meeting of TAMEH HOLDING Sp. z o.o. decided to allocate PLN 48 000 thousand to pay dividends to the shareholders. The Group’s interest in the joint venture TAMEH HOLDING Sp. z o.o. was reduced by the value of the dividend payable to the Group in the amount of PLN 24 000 thousand.

(1 040) (387)
Other comprehensive income not subject to reclassification to
profit or loss
164 683 51 876
Other comprehensive income, net of tax   277 748 122 076
Total comprehensive income   647 885 (1 682 139)
Net profit (loss):
Attributable to equity holders of the Parent   367 468 (1 807 317)
Attributable to non-controlling interests   2 669 3 102
Total comprehensive income:
Attributable to equity holders of the Parent   644 944 (1 685 301)
Attributable to non-controlling interests   2 941 3 162
Basic and diluted earnings (loss) per share (in PLN): 17
17. Earnings (loss) per share
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Earnings (loss) per share (in PLN) Year ended
31 December 2016
Year ended
31 December 2015
Basic and diluted, for profit (loss) for the year attributable to equity
holders of the Parent
0.21 (1.03)

Presented below is information about the earnings (loss) and number of shares which served as the basis for calculation of the basic and diluted earnings (loss) per share presented in the statement of comprehensive income.

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Year ended
31 December 2016
Year ended
31 December 2015
Net profit (loss) for the year attributable to equity
holders of the Parent
367 468 (1 807 317)
Number of ordinary shares 1 752 549 394 1 752 549 394
0.21 (1.03)
White certificates white certificates "White" certificates "white" certificates Certificates confirming the saving of a specific quantum of energy as a result of completing investments to enhance energy efficiency.
Biomass biomass Denotes a biodegradable fraction of products, waste and residue from agricultural and forestry production and related branches of industry, including fishing and aquaculture, and biogas and a biodegradable fraction of industrial and communal waste.
Sub peak power generation units sub peak power generation units Power generation units used during a period when the power system has a higher demand for capacity. Power generation units in this class are used from 2000 to 4000 hours a year.
Peak power generation units peak power generation units Power generation units used only during a period when the power system has the highest demand for capacity. Power generation units in this class are used fewer than 2000 hours a year.
Blue certificates blue certificates "Blue" certificates "blue" certificates Certificates confirming the generation of energy from agricultural biomass.
CAPEX Capital expenditures.
Red certificates red certificates "Red" certificates "red" certificates Certificates confirming the generation of energy in highly-efficient coal co-generation.
Net debt net debt Liabilities for loans and borrowings less cash and cash equivalents.
Dividend dividend Portion of a company’s net earnings per share designated for payment to shareholders.
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization.
Electromobility electromobility Using electric vehicles, both individual vehicles such as an electric car, electric scooter, electric motorcycle and electric bicycle and public transport means: trams, trolleybuses and trains. The assumptions for the Electromobility Development Plan and the domestic framework for the policy of alternative fuel infrastructure development call for there being one million electric vehicles on Polish roads by 2025. TAURON is conducting research and analyses on developing, promoting and disseminating electromobility among Polish nationals, developing the electromobility industry in Poland and in particular collaborating in launching and implementing the findings of scientific and technical work in this area. Moreover, jointly with PGE, Energa and Enea, TAURON has submitted an application to the Office of Competition and Consumer Protection to receive a permit to establish a company called ElectroMobilityPoland to create grounds for developing electromobility.
EMAS EMAS Eco Management and Audit Scheme, an EU instrument to encourage all types of organizations to improve their environmental protection constantly. Functions on the basis of Regulation (EU) no. 1221/2009 of the European Parliament and of the Council of 25 November 2009 on the voluntary participation by organizations in a Community eco-management and audit scheme (EMAS). The EMAS requirements constitute guidelines for organizations to structure their environmental protection duties, optimize costs and effectively manage energy and resources. EMAS is also a system for reporting an organization’s environmental impact making it easier to conduct dialogue in this area with stakeholders. Registration in the EMAS system means that an organization has satisfied the most rigorous environmental requirements.
Prosumer energy prosumer energy Generation of electricity, chiefly for one’s own needs and on a small-scale in installations harnessing renewable energy sources. Households and businesses that do this are called prosumers, meaning that they simultaneously play the role of energy producer and consumer.
Energy from distributed sources energy from distributed sources energii ze źródeł rozproszonych energetyka rozproszona rozproszone wytwarzanie generacja rozproszona energetyki rozproszonej generacji rozproszonej distributed energy Generation of energy by small generation units or facilities connected directly to distribution grids or located in the user’s electrical energy grid that usually generate electricity from renewable energy sources or non-conventional sources, frequently in cogeneration with the generation of thermal energy (distributed cogeneration). The following parties, for instance, may be part of a distributed generation grid: prosumers, energy cooperatives and municipal power plants.
Purple certificates purple certificates "Purple" certificates "purple" certificates Certificates confirming the generation of energy from methane captured in mines.
grid parity Grid parity Signifies the equivalence of the production costs of renewable energy with the energy generated in conventional power plants.
TGE’s FCM Indices Towarowa Giełda Energii (TGE) is the power exchange running the following markets: electricity (Forward Commodity Market - FCM), Day-Ahead Market - DAM, Intraday Market - IDM) and gas (FCMg, DAMg) and the Property Right Market.
smart metering Smart metering Comprehensive and integrated information system encompassing electrical energy smart meters for users of energy, telecommunication infrastructure, central database and management system. Smart metering systems support two-way communication in real time between information systems and electronic electricity meters installed in customers’ locations. Moreover, they may automate the entire billing process for energy users - from obtaining metering data to processing and aggregating them to issuing invoices.
Stakeholder stakeholder stakeholders Natural or legal entity (individual, community, institution, organization, office etc.) which may affect the company or remain under the influence of its actions.
IoT Internet of Things – concept according to which clearly identified objects may directly or indirectly collect, process or exchange data via computer network.
Emergency Cold Reserve IRZ Mechanism introduced by the transmission system operator in 2016. It involves the TSO paying the owners of generation sources which are planned to be withdrawn for keeping them ready to run in response to the operator’s instruction during the anticipated periods of capacity shortage.
ISO 14001 PN-EN ISO 14001:2005 standard PN-EN 14001 standard One of the ISO standards used in managing environmental protection. This standard designated for all organizations regardless of their type and size defines the requirements whose satisfaction supports the achievement of environmental (for instance preventing the emission of pollutants) and economic objectives.
Covenant covenant Contractual clause, order or ban imposed on a borrower to minimize the risk of its invsolvency. Covenents most frequently constitute protection for sources of debt payment to creditors, e.g. by banning further borrowing or disposing of assets.
Aggregate aggregate Bulk organic or mineral material used mainly to produce construction mortar and concrete and build roads.
HV and MV Lines linii WN i SN sieci WN i SN HV - high voltage grid in which the voltage ranges from 110 kV. This grid is used to transmit electrical energy over large distances. MV - medium voltage grid, i.e. an electrical energy grid in which the electrical voltage ranges from 1 kV to 110 kV. Medium voltage is broadly used in electrical energy grids to transmit electrical energy over medium distances and switch energy. It is used as an intermediate voltage between high voltage and low voltage connected to end-users.
Customer loyalization customer loyalization Strategy to acquire and retain customers in this time of growing competition.
Micro-grid micro-grid Electrical energy micro-grid – set of generation equipment, electrical energy storage and receiver units connected in a joint network to ensure the reliable supply of electrical energy and minimize its cost.
Micro-cogeneration micro-cogeneration Technological process involving the cogeneration of thermal and electrical energy based on the utilization of small-scale equipment and medium capacities. Micro-cogeneration may be employed in all facilities in which there is a concurrent need for electrical and thermal energy. The greatest benefits from employing micro-generation are obtained in facilities in which the demand for these two types of energy does not oscillate much or is constant. That is why individual users, hospitals and educational centers, sports centers, hotels and public utilities are usually the most frequent users of cogeneration systems.
MSCI Emerging Markets Europe 10/40 Index Index comprising key companies listed on emerging markets in Europe.
MSCI Poland Index Index comprising more than 20 key companies listed on the Warsaw Stock Exchange.
Best Available Technology BAT The most efficient and sophisticated level of technology development and methods for conducting a given business. BAT are defined for various branches of industry. In the energy sector BAT forms the basis for determining borderline emission quantities, among others, to eliminate, or if that is not practicable, limit emissions and their overall environmental impact.
Sensitive user sensitive user According to the Act entitled Energy Law, a sensitive user is a person to whom a housing allowance has been awarded and who is a party to a comprehensive agreement or electricity sale agreement and who lives in the place where electrical energy is supplied.
Impairment losses impairment losses Losses because of the impairment of non-current assets taken in accordance with the regulations of international accounting IFRS (MSSF) standard.
Corporate Social Responsibility CSR Corporate Social Responsibility – business philosophy and management strategy calling for an organization to take responsibility for the impact exerted by its decisions and actions on society and the environment. Its foundations are rooted in ethical and transparent conduct, taking into consideration the expectations of stakeholders and cultivating good long-term relations with the overall environment. Corporate social responsibility is one of the key methods of achieving sustainable socio-economic development.
PV cells Photovoltaic cell (PV) – semi-conductor material in which the energy of solar radiation is converted into electrical energy.
omni-channel Omni-channel According to the omni-channel idea, the future of commerce is to conduct online sales while simultaneously encouraging customers to make traditional purchases. Online and offline sales during the digital revolution should fluidly penetrate one another.
Operating Capacity Reserve ORM Mechanism of providing operational reserves by the Centrally Discharged Units (JWCD), where they were able to deliver electricity to the system, but for market reasons were not used. It was implemented in Poland in 2014.
RES Renewable energy sources.
PM-RES Property rights to certificates of energy for electrical energy generated in RES.
Polygeneration polygeneration Parallel generation of energy and chemicals.
RESPECT Index Index consisting of companies listed on the Warsaw Stock Exchange to identify companies managed in a responsible and sustainable manner. It takes into account the quality of reporting, the level of investor relations, corporate governance and liquidity, among others, whereby it simultaneously constitutes a real point of reference to measure the attractiveness of companies as investments.
Balancing market balancing market The balancing market is what is referred to as a technical market. That means it is not a place to sell energy. Its purpose is the physical delivery of the energy purchase/sale agreements executed by participants and balancing the demand for electricity with its generation in real time in the national electrical energy system (KSE). The existence of the balancing market is indispensable for the energy market to function. Entities that buy energy have an obligation to participate in this market.
CATALYST Market Catalyst market Bond market. It is run on the transaction platforms of the Warsaw Stock Exchange and BondSpot.
SAIDI System average interruption duration index in the supply of electricity calculated in minutes per user. It is a reliability index whose value is the sum of the products of interruption duration in energy supply and the number of users affected by the consequences of such an interruption during a year divided by the total number of users connected to a grid.
SAIFI System average interruption frequency index of long interruptions in energy supply. It is a reliability index whose value is the number of users affected by the consequences of all such interruptions during a year divided by the total number of users.
Gangue gangue The rock that is extracted from a deposit of a given mineral that is considered to be unusable waste.
Smart City smart city Smart city is a project involving the implementation of specific solutions exerting a real impact on citizens. One example is supplying tools to urban residents to monitor energy consumption, among others. This is possible thanks to the special platform called eLicznik (eMeter). TAURON supplies smart meters, for instance, under the Smart City Wrocław project.
Smart Home smart home System to control a smart home. SMART HOME technologies control burglar alarms, temperature control and electricity supply systems. This is a real-time power consumption monitoring solution that TAURON offers via a platform to check readings from the smart power meter.
Smart grid smart grid Smart electrical energy grids to facilitate communication between participants on the energy market to supply energy services while cutting costs and enhancing efficiency and integrating distributed sources of energy, including renewable energy.
smart metering Smart metering Smart metering system – electronic system used to measure energy consumption obtaining more information than from a conventional meter, and to send and receive data through electronic communication.
small carbonate sorbent Small carbonate sorbent Fine carbonate sorbent (limestone powder) – is a product derived from the process of dehydrating and profound milling of limestone whose active ingredient is calcium carbonate, CaCO3. Fine carbonate sorbent is used in processes to desulfurize flue gas – to remove SOx.
Enterprise Risk Management System ERM Set of rules, standards and tools to accomplish the fundamental objective of risk management i.e. ensuring the security of the TAURON Group’s operations. This system is regulated by the document entitled Enterprise Risk Management System in the TAURON Group, defining the TAURON Group’s enterprise risk management framework and rules.
Tauronet tauronet TAURON Group’s corporate intranet portal, one of the most important tools of communicating with employees. One of the largest platforms of its type in Poland at the time of publishing this report.
CCS Carbon dioxide capture, transport and geological storage technology.
CCU Capture and use (management) of carbon dioxide, eg. in the the chemical industry.
Smart Technology smart technology Control system in a smart home, among others - it is responsible for the safety and living comfort of residents.
Towarowa Giełda Energii S.A. Polish Power Exchange TGE Towarowa Giełda Energii (TGE) (Polish Power Exchange) is the only licensed power exchange in Poland. Presently, TGE runs the following markets: Day-Ahead Market (DAM), Commodity Forward Market with physical delivery (CFM), Property Rights Market for RES and Cogeneration. TGE also keeps a register of the Certificates of Origin for electrical energy produced in RES and in highly efficient cogeneration sources and the CO2 Emission Allowance Market.
Energy Regulatory Office ERO Government authority regulating the Polish energy market (electricity and gas, among others).
Coal winnings coal winnings The rock material taken from the mine face. It includes the mineral and gangue.
WACC Financial ratio - weighted average cost of capital.
WIBOR Warsaw Inter Bank Offered Rate Warsaw Inter Bank Offered Rate - interest rate used on the Polish interbank market for interbank loans.
WIG Index comprising all the companies listed on the Main Market of the Warsaw Stock Exchange that fulfill the basic criteria for inclusion in its indices.
WIG20 Index comprising the 20 largest and most liquid companies listed on the Main Market of the Warsaw Stock Exchange.
WIG30 Index comprising the 30 largest and most liquid companies listed on the Main Market of the Warsaw Stock Exchange.
WIG-Energy Sectoral index comprising companies participating in the WIG index and simultaneously classified in the energy generation sector.
WIG-Poland National index comprising only the domestic companies listed on the Main Market of the Warsaw Stock Exchange that fulfill the basic criteria for inclusion in its indices.
Underground mining pit underground mining pit Space created as a result of mining works.
Highly-efficient cogeneration high-efficiency cogeneration Generating electrical or mechanical energy and usable thermal energy in cogeneration to save the original energy used in the cogeneration unit in an amount no lower than 10% compared to the generation of electrical energy and thermal energy in separate systems or in a cogeneration unit with an installed electricity capacity under 1 MW compared to the generation of electrical energy and thermal energy in separate systems.
Green certificates green certificates "Green" certificates "green" certificates Certificates of origin, i.e. a document that confirms the generation of electricity with renewable energy sources. The green certificate system has been in force in Poland since 1 October 2005 (and has changed in the new RES Act).
Yellow certificates yellow certificates "Yellow" certificates "yellow" certificates Certificate certifying the origin of energy. Operators of cogeneration units fired with gaseous fuels or with a total installed power source of less than 1 MW may be compensated with yellow certificates.
TPA Third Party Access - TPA is one of the most important principles (besides unbundling) on which the deregulated energy market is founded. TPA gives an energy user the right to buy it from any energy seller of its choosing.
EUA CO2 emission unit.
IFRS International Financial Reporting Standards – standards and their interpretations approved by the International Accounting Standards Board (IASB).
RFX Request for proposal.
Global Reporting Index GRI Independent international organization whose mission is to create a joint global framework for communicating responsibility and sustainable development. The GRI guidelines are an international reporting standard for organizations regardless of size, business sector and venue. Their application gives a guarantee of consistency in terminology and indicators.
International Integrated Reporting Council IIRC The International Integrated Reporting Council is an organization whose purpose is to create globally accepted integrated reporting guidelines based on combining financial, environmental, social and corporate governance reporting in a clear, succinct, coherent and comparable format. It consists of global leaders such as the International Federation of Accountants (IFAC), the International Accounting Standards Board, the United Nations Environmental Program (UNEP), the International Organization of Securities Commissions, the World Business Council for Sustainable Development and the Global Reporting Initiative (GRI).
integrated reporting non-financial reporting standard International integrated reporting standard encompassing financial and non-financial data devised by IIRC.

GRI indicators