Notes to the Consolidated Financial Statements – Contents

34. Financial Instruments and Financial Risk Management Policy

34.1. Financial instruments by category (carrying amounts)

in PLN m

Dec 31 2013 Categories of financial instruments
Classes of financial instruments Notes Financial assets available for sale Financial assets at fair value through profit or loss Financial assets held to maturity Loans and receivables Financial liabilities at fair value through profit or loss Financial liabilities at amortised cost  Hedging instruments Assets and liabilities excluded from the scope of IAS 39 Total
Total financial assets   51 223 - 6.687 - - 84 - 7,045
Unlisted shares 14, 22 51 - - - - - - - 51
Trade and other receivables 19 - - - 3669 - - - - 3,669
Derivative financial instrument assets 35 - 223 - - - - 84 - 307
Cash and cash equivalents 23 - - - 2827 - - - - 2,827
Other financial assets 14, 15, 22 - - - 191 - - - - 191
Total financial liabilities   - - - - 77 10216 47 157 10,497
Borrowings 26 - - - - - 1619 - - 1,619
Debt securities 26 - - - - - 5885 - - 5,885
Finance lease 26 - - - - - - - 157 157
Trade payables 31, 32 - - - - - 2712 - - 2,712
Derivative financial instrument liabilities 35 - - - - 77 - 47 - 124
Dec 31 2012 Categories of financial instruments
Classes of financial instruments Notes Financial assets available for sale Financial assets at fair value through profit or loss Financial assets held to maturity Loans and receivables Financial liabilities at fair value through profit or loss Financial liabilities at amortised cost  Hedging instruments Assets and liabilities excluded from the scope of IAS 39 Total
Total financial assets   48 89 - 6,921 - - 16 - 7,074
Unlisted shares 14, 22 48 - - - - - - - 48
Trade and other receivables 19 - - - 4,849 - - - - 4,849
Derivative financial instrument assets 35 - 89 - - - - 16 - 105
Cash and cash equivalents 23 - - - 1,948 - - - - 1,948
Other financial assets 14, 15, 22 - - - 124 - - - - 124
Total financial liabilities   - - - - 317 12,157 76 183 12,733
Borrowings 26 - - - - - 1,429 - - 1,429
Debt securities 26 - - - - - 8,599 - - 8,599
Finance lease 26 - - - - - - - 183 183
Trade payables 31, 32 - - - - - 2,129 - - 2,129
Derivative financial instrument liabilities 35 - - - - 317 - 76 - 393
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34.2. Fair value hierarchy

in PLN m

 Dec 31 2013   Dec 31 2012 
Classes of financial instruments level 1 level 2 level 3 level 1 level 2 level 3
Derivative financial instrument assets  -  307  -   -  105  - 
Derivative financial instrument liabilities  -  124  -   -  393  - 
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34.3. Fair value of financial instruments

in PLN m

Classes of financial instruments Dec 31 2013 Dec 31 2012
Carrying amount Fair value Carrying amount Fair value
Total financial assets 7,045 6,994 7,074 7,026
Unlisted shares* 51 - 48  - 
Trade and other receivables 3,669 3,669 4,849 4,849
Derivative financial instrument assets 307 307 105 105
Cash and cash equivalents 2,827 2,827 1,948 1,948
Other financial assets 191 191 124 124
Total financial liabilities 10,497 10,497 12,733 12,733
Borrowings 1,619 1,619 1,429 1,429
Debt securities 5,885 5,885 8,599 8,599
Finance lease 157 157 183 183
Trade payables 2,712 2,712 2,129 2,129
Derivative financial instrument liabilities 124 124 393 393

* Measured at cost less impairment losses.

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34.4. Items of income, expenses, profit and loss related to financial assets and liabilities, presented in the consolidated statement of comprehensive income

in PLN m

Jan 1–Dec 31 2013 Jan 1–Dec 31 2012
Total effect on net profit/(loss), including: (152) (206)
Financial assets available for sale (4) (4)
 Impairment recognised in profit or loss for the reporting period (4) (4)
Financial assets and financial liabilities at fair value through profit or loss  362 87
Loans and receivables 191 86
 Interest on deposits 56 63
 Interest on receivables 58 43
 Interest on loans advanced 9 3
 Impairment losses on receivables 70 (21)
 Impairment losses on loans (2) (1)
 Foreign currency measurement of loans advanced in foreign currencies  -  (1)
Financial liabilities at amortised cost (412) (175)
Derivative financial instruments (282) (195)
Assets and liabilities excluded from the scope of IAS 39 (7) (5)
Total effect on other comprehensive income, net, including: 72 (250)
Derivative financial instruments 72 (250)
Total effect on comprehensive income (80) (456)
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34.5. Objectives and policies of financial risk management

The Group is exposed to financial risks, including in particular:

In order to manage financial risk effectively, the Parent operates ‘Policy of Financial Risk Management at PGNiG S.A.’, (the "Policy"), which defines the division of competencies and tasks among the Company’s organisational units in the process of financial risk management and control. The body responsible for ensuring compliance with the Policy and its periodic updates is the Risk Committee, which proposes risk management procedures, monitors the Policy implementation and revises the Policy as needed.

Credit risk

Credit risk is defined as the probability of failure by the Group’s trading partner to meet its obligations on time or failure to meet such obligations at all. The credit risk resulting from a third party’s inability to perform its obligations under a financial instruments contract is generally limited to the amounts, if any, by which the third party’s liabilities exceed the Group’s liabilities. As a rule, the Group concludes transactions in financial instruments with multiple entities with high creditworthiness. The key criteria applied by the Group in the selection of counterparties include their financial standing as confirmed by rating agencies, as well as their respective market shares and reputation.
The PGNiG Group is exposed to credit risk in connection with its:

The maximum exposures to credit risk for individual financial instrument categories are presented below.

Maximum exposure to credit risk

in PLN m

Dec 31 2013 Dec 31 2012
Cash and cash equivalents 2,827 1,948
Trade and other receivables 3,669 4,849
Non-bank borrowings and other financial assets 191 124
Positive value of derivatives 307 105
Total 6,994 7,026
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The highest credit risk, in value terms, is related to receivables. Most of the receivables are due under sales of gas fuel and network services by PGNiG S.A.
In order to minimise the risk of uncollectible receivables under gas fuel sales, uniform rules designed to secure trade receivables are in place and must be observed while concluding general gas supply contracts.
Prior to the conclusion of a sale contract of significant value, the financial standing of the potential customer is reviewed and analysed based on generally available financial data (checks in registers of debtors) in order to determine the trading partner’s creditworthiness. If a trading partner is found to be entered in a register of debtors, PGNiG S.A. requires that the partner provides special security.
The Parent monitors customers’ performance of their contractual financial obligations on an on-going basis. In most cases, customers are required to make advance payments within deadlines provided for in the contracts. At the end of the settlement period, the customer is required to make payment for gas fuel actually received by the deadline provided for in the contract. The standard payment deadline is 14 days from the invoice date, but other payment terms are also applied.
PGNiG S.A. has implemented measures to monitor and assess the financial standing of customers receiving natural gas in excess of 1 mcm a year based on corporate financial documents (once every three months and once a year). The measures are to help monitor the financial standing of customers and determine the probability of the customers becoming insolvent.
PGNiG S.A. uses the following types of instruments to secure contract performance:

For new contracts, the type of security instrument used is agreed between PGNiG S.A. and the customer. As part of the mandatory harmonisation of sale contracts with the requirements of the Polish Energy Law, the Company enters into negotiations with certain customers with to create or strengthen contract performance security.
Receivables from customers are monitored on an ongoing basis, in line with internal procedures applicable at the Parent. If a customer’s failure to make a payment when due has been identified, the Company takes appropriate measures to collect the debt.
All debt-collection measures are taken based on the procedures set out in ‘Pre-Legal Collection of Receivables from Business Customers’ and ‘Court Collection of Receivables from Business Customers’, as well as in ‘The Guidelines for Writing Off and Cancelling PGNiG S.A.’s Receivables’.
During debt collection, measures are taken to assess the risk of non-payment of receivables by customers and the causes of such non-payment. In this respect, a standard debt-collection process is followed: a call for payment, a telephone call to the customer, notice and discontinuance of gas fuel supply with simultaneous termination of the contract and a warning of discontinuing gas supplies under Art. 6b.1.2 of the Polish Energy Law. If all other measures fail, debt cases are submitted to be resolved through court and enforcement proceedings, while the defaulting customer is registered with the National Register of Debts maintained by Biuro Informacji Gospodarczej S.A. of Wrocław.
Statutory interest is charged on late payments.
In line with the pre-legal collection procedure, in the event of a temporary deterioration of a customer’s financial standing, at the customer’s request an agreement is concluded for repayment of debt in instalments or extension of the payment date, and additionally, negotiations are undertaken to establish new or strengthen the existing security for the contract.
As at December 31st 2013, the value of unimpaired past due receivables, as disclosed in the Group’s statement of financial position, was PLN 418m (2012: PLN 594m).

Receivables past due but not impaired, as at the balance-sheet date – by length of delay

in PLN m

Delay Dec 31 2013 Dec 31 2012
Up to 1 month 324 508
From 1 to 3 months 67 64
From 3 months to 1 year 20 16
from 1 to 5 years 5 6
over 5 years 2 -
Total net past due receivables 418 594
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The Group identifies, measures and minimises its credit exposure to individual banks with which it places its funds. The credit exposure was reduced through diversification of the portfolio of counterparties (mainly banks) with which the Group companies place their funds. The Parent has also concluded Framework Agreements with all its relationship banks. These Framework Agreements stipulate detailed terms of execution and settlement of financial transactions between the parties.
The Group measures the related credit risk by regularly reviewing the banks’ financial standing, as reflected in ratings assigned by rating agencies such as Fitch, Standards&Poor’s and Moody’s.
In 2013, the Group invested its long-term cash surplus of significant value in highly liquid, credit risk-free instruments, in particular treasury bills and bonds.
The Group's credit risk exposure under provided guarantees is substantially limited to the risk of default by the banks which, acting on the Group's instructions, issued guarantees to other external entities. However, the banks on which the Group relies for provision of guarantees are reputable institutions with high ratings; therefore, both the probability of their default and the associated credit risk are insignificant. As in the case of the risk related to cash deposits, the credit risk under provided guarantees is measured by regularly reviewing the financial standing of the banks issuing the guarantees.
The exposure to credit risk under financial derivatives is equal to the net carrying amount of the positive valuation of the derivative (at fair value). As in the case of placements, transactions in financial derivatives are executed with most reputable banks with high credit ratings. The Group companies have also concluded either Framework Agreements or ISDA Agreements with each of their relationship banks, stipulating detailed terms of service and limits of maximum exposure arising from the fair value of derivatives.
Exposure to credit risk under loans advanced arises in connection with loans advanced by the Parent to the PGNiG Group companies: subsidiaries not accounted for with the full method, jointly-controlled entities and associates. Loans to those entities are advanced in line with the internal procedure “PGNiG S.A.’s Lending Policy with Respect to the Group Companies and Entities in which PGNiG S.A. Holds Equity Interests”. The policy stipulates detailed rules governing the conclusion and monitoring of loan agreements, thus minimising the Group’s exposure to credit risk under such agreements. Loans are advanced only if the borrower meets a number of conditions and provides appropriate security.
The Group believes that all these measures protect it from any material credit-risk-related losses.

Market risk

Market risk is defined as the probability that the Group’s financial performance or economic value will be adversely affected by changes in the financial and commodity markets.
In order to manage market risk effectively, the Group operates "Policy of Market Risk Management at the PGNiG Group" (the "Policy"). The Policy applies to subsidiaries in which material exposure to market risks has been identified.
To implement the Policy, two models of market risk management were put in place, for which PGNiG S.A. acts as the Group's competence and support centre:

The body responsible for ensuring compliance with the Policy and its periodic updates is the Group's Risk Committee, which proposes risk management procedures, monitors the Policy implementation and revises the Policy as needed.
The main objective of the market risk management is to identify, measure, monitor and mitigate key sources of risk, including:

Currency risk

Currency risk is defined as the probability that the Group’s financial performance will be adversely affected by changes in the price of one currency against another.
Trade payables under long-term contracts for gas fuel deliveries are denominated in the US dollar and the euro. The Group has a considerable exposure to currency risk; for details, see "Sensitivity analysis".
The hedging measures implemented by the Group are mainly intended to provide protection against the currency risk accompanying payments settled in foreign currencies (mainly payments for gas fuel supplies). To hedge its payables, the Group uses call options, symmetrical options strategies as well as forwards and average rate forwards.

Interest rate risk

Interest rate risk is defined as the probability that the Group's financial performance will be adversely affected by changes in interest rates.
The Group is exposed to interest rate risk primarily in connection with its financial liabilities. For detailed information on the Group's financial liabilities and the applicable interest rates, see Note 26.
The Parent measures its market risk (including the currency and interest rate risks) by monitoring VaR (value at risk). VaR means that the maximum loss arising from a change in the market (fair) value will not exceed that value over the next n business days, given a specified probability level (e.g. 99%). VaR is estimated using the variance-covariance method. The Company uses cross currency interest rate swaps (CCIRS) and interest rate swaps (IRS) to hedge the aggregate currency and interest rate risks.

Commodity risk

Commodity risk is defined as the probability that the Group’s financial performance will be adversely affected by changes in commodity prices.
The price risk to which the Group is exposed, mainly in connection with its contracts for gas fuel deliveries, is substantial. It stems from volatility of prices of gas and oil products quoted on global markets. Under some of the contracts for gas fuel deliveries, the pricing formula relies on a weighted average of the prices from previous months, which mitigates the volatility risk.
Commodity risk is also related to electricity trading, certificates of origin and carbon credits. Electricity trading in Poland is conducted on a regulated market, in the form of energy exchange and over-the-counter trading. The Group actively manages its exposure to commodity risk using implemented VaR measures. VaR values are measured and VaR limits are set to limit the potential losses related to the Company's exposure to commodity risk.
In 2013, the Group closely monitored and hedged against the risk. To hedge against price risk, the Group used Asian call options settled as European options, symmetrical risk reversal options strategies and commodity swaps.
In addition, under the Energy Law an application for tariff adjustment may be filed if, within a quarter, the purchase costs of gas rise by more than 5%.

Liquidity risk

The main objective of the liquidity risk management is to monitor and plan the Company's liquidity on a continuous basis. Liquidity is monitored through at least 12-month projections of future cash flows, which are updated once a month. PGNiG S.A. reviews the actual cash flows against projections at regular intervals – an exercise which comprises an analysis of unmet cash-flow targets, as well as the related causes and effects. The liquidity risk should not be equated exclusively with the risk of loss of liquidity by the Group. An equally serious threat is that of having excess structural liquidity, which could adversely affect the Group’s profitability.
The Group monitors and plans its liquidity levels on a continuous basis. As part of its strategy to hedge against liquidity risk, as at December 31st 2013 the Group had in place the following debt securities issuance programmes:

Any surplus cash is invested, mainly in treasury securities, or deposited with reputable banks.
The liquidity risk at the Parent is significantly mitigated through the application of the “PGNiG S.A. Liquidity Management Procedure”. This procedure has been implemented across the Company’s organisational units. It offers a systematised set of measures designed to ensure proper liquidity management through: settlement of payments, preparation of cash-flow projections, optimum management of free cash flows, securing and restructuring of financing for day-to-day operations and investment projects, protection against the risk of temporary liquidity loss due to unforeseen disruptions, and appropriate servicing of credit agreements.
Measurement of the liquidity risk is based on an ongoing detailed monitoring of cash flows, which takes into account the probability that specific flows will materialise, as well as the planned net cash position.
The tables below present a breakdown of financial liabilities by maturity.

Financial liabilities at amortised cost, by maturity

in PLN m

Dec 31 2013 Liabilities under borrowings and notes Finance lease liabilities Trade payables Total 
up to 1 year 2,207 53 2,654 4,914
from 1 to 5 years 3,227 115 54 3,396
over 5 years 2,087 - 4 2,091
Total 7,521 168 2,712 10,401
Dec 31 2012 Liabilities under borrowings and notes Finance lease liabilities Trade payables Total 
up to 1 year 4,685 48 2,076 6,809
from 1 to 5 years 3,339 129 47 3,515
over 5 years 2,030 14 6 2,050
Total 10,054 191 2,129 12,374
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The items in the above tables are presented at gross (undiscounted) amounts.
In the current and comparative periods, the Group met its liabilities under borrowings in a timely manner. Further, there were no defaults under any of its agreements that would trigger accelerated repayment.

Derivative financial instruments by maturity

in PLN m

Dec 31 2013 Carrying amount Contractual cash flows, including: up to 1 year from 1 to 5 years over 5 years
Interest rate swaps (IRS) and forward contracts, used as risk hedging instruments 145 (48) (10) (38) –
– inflows – 10,390 5,032 5,358 –
– outflows – (10,438) (5,042) (5,396) –
Forward contracts (31) (28) (28) – –
– inflows – 1,354 1,352 2 –
– outflows – (1,382) (1,380) (2) –
Futures contracts 1 (1) (1) – –
– inflows – 16 16 – –
– outflows – (17) (17) – –
Currency options** 12 – – – –
– inflows – – – – –
– outflows – – – – –
Commodity options** 40 – – – –
– inflows – – – – –
– outflows – – – – –
Commodity swaps 16 – – – –
– inflows – – – – –
– outflows – – – – –
Total 183 (77) (39) (38) –
Dec 31 2012 Carrying amount Contractual cash flows, including: up to 1 year from 1 to 5 years over 5 years
Interest rate swaps (IRS) and forward contracts, used as risk hedging instruments (232) (482) (24) (458) –
– inflows – 5,700 262 5,438 –
– outflows – (6,182) (286) (5,896) –
Forward contracts (76) (48) (48) – –
– inflows – 1,722 1,715 7 –
– outflows – (1,770) (1,763) (7) –
Currency options** 5 1 1 – –
– inflows – 1 1 – –
– outflows – – – – –
Commodity options** 15 – – – –
– inflows – – – – –
– outflows – – – – –
Total (288) (529) (71) (458) –
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* Net carrying amount (positive valuation less negative valuation of assets) represents the fair value, i.e. payments under swap contracts are discounted, whereas cash flows are shown at undiscounted amounts.
** The disclosed carrying amounts of currency and commodity options include any option premiums paid; as possible cash flows depend on the exchange rates or commodity prices prevailing on the market at the time when the option is exercised, no cash flows are shown.

The Group has not identified any other material risks inherent in its day-to-day operations.

Sensitivity analysis

To determine a reasonable range of changes which may occur with respect to currency or interest rate risks, the Group assumed an (implied) market volatility level for semi-annual periods, i.e. an average change of 10% as at the end of 2013 for the analysis of exchange rate sensitivity (as at the end of 2012:15%), +100 bpfor the analysis of interest rate sensitivity (as at the end of 2012, also +100 bp) and 15% for energy commodity derivatives ( December 31st 2012: 25%). The half-year period is the frequency at which the Group discloses results of financial instrument sensitivity analyses in its reports.
The results of the analysis of sensitivity to currency risk carried out as at December 31st 2013 indicate that net profit would have been lower by PLN 329m, had the EUR/PLN, USD/PLN, NOK/PLN and other currencies’ exchange rates increased by 10%, ceteris paribus (net profit decrease of PLN 262m due to stronger NOK, decrease of PLN 58m due to stronger USD, decrease of PLN 11m due to stronger EUR, and increase of PLN 2m due to strengthening of other currencies).
The most significant factor with a bearing on the outcome of the sensitivity analysis is higher negative valuation of CCIRS derivatives hedging the credit facility advanced to PGNiG Upstream International AS, which is eliminated from the consolidated financial statements.
If the credit facility was recognised in the statement of financial position (as is the case in the Parent's separate financial statements), the cash flows related to the credit facility and the cash flows from the hedging transactions would offset one another. As a result, the changes in positive (negative) valuation of the credit facility would be offset by negative (positive) changes in the valuation of CCIRS transactions. In aggregate, the items would show no sensitivity to the exchange rate and interest rate changes.
Lower profit would be mainly attributable to an increase in the negative portion of the fair value of financial derivatives (negative fair value of swap transactions in NOK).
The adverse effect on the net profit of NOK-denominated financial instruments would be substantially amplified by an increase in valuation of the USD credit facility contracted by PGNiG Upstream International AS and reduced by an increase in the valuation of assets in this currency. Any increase in foreign exchange losses from valuation of the Euronotes in EUR would be offset by an increase in the positive portion of the fair value of financial derivatives for EUR.
As at December 31st 2013, net profit would have been higher by PLN 325m, if the EUR, USD, NOK and other currencies depreciated against the złoty by 10%, ceteris paribus (net profit higher by PLN 263m due to weaker NOK, higher by PLN 62m due to weaker USD, higher by PLN 2m due to weaker EUR, and lower by PLN 2m due to depreciation of other currencies). A positive result would be mainly attributable to an increase in the positive portion of the fair value of financial derivatives (positive fair value of swap transactions in NOK). Any increase in foreign exchange gains from valuation of the Euronotes in EUR would be offset by an increase in the negative portion of the fair value of financial derivatives for EUR. On the other hand, any decrease in the valuation of the USD-denominated credit facility contracted by PGNiG Upstream International AS would have a positive effect on net profit, which would be partially offset by a decrease in assets (receivables) measured in the same currency.
The results of the analysis of sensitivity to currency risk carried out as at December 31st 2012 indicate that the net profit would have been lower by PLN 423m, had the EUR, USD, NOK and other currencies appreciated against the złoty by 15%, all other things being equal (net profit decrease of PLN 416m due to stronger NOK and of PLN 13m due to stronger USD vs. increase of PLN 5m on the back of stronger EUR and of PLN 1m due to strengthening of other currencies).
The most significant factor with a bearing on the outcome of the sensitivity analysis is higher negative valuation of CCIRS derivatives hedging the credit facility advanced to PGNiG Upstream International AS, which is eliminated from the consolidated financial statements.
If the credit facility was recognised in the statement of financial position (as is the case in the Parent's separate financial statements), the cash flows related to the credit facility and the cash flows from the hedging transactions would offset one another. As a result, the changes in positive (negative) valuation of the credit facility would be offset by negative (positive) changes in the valuation of CCIRS transactions. In aggregate, the items would show no sensitivity to the exchange rate and interest rate changes.
Lower profit would be mainly attributable to an increase in the negative portion of the fair value of financial derivatives (negative fair value of swap transactions in NOK).
The adverse effect on the net profit of NOK-denominated financial instruments would be substantially amplified by an increase in valuation of the USD credit facility contracted by PGNiG Upstream International AS and reduced by an increase in the valuation of assets in this currency. Any increase in foreign exchange losses from valuation of the Euronotes in EUR would be offset by an increase in the positive portion of the fair value of financial derivatives for EUR.
As at December 31st 2012, net profit would have been higher by PLN 421m, had the EUR, USD, NOK and other currencies depreciated against the złoty by 15%, all other things being equal (profit higher by PLN 415m due to weaker NOK and by PLN 15m due to weaker USD, and lower by PLN 8m due to weaker EUR and by PLN 1m due to depreciation of other currencies). A positive result would be mainly attributable to an increase in the positive portion of the fair value of financial derivatives (positive fair value of swap transactions in NOK). Any increase in foreign exchange gains from valuation of the Euronotes in EUR would be offset by an increase in the negative portion of the fair value of financial derivatives for EUR. On the other hand, any decrease in the valuation of the USD-denominated credit facility contracted by PGNiG Upstream International AS would have a positive effect on net profit, which would be partially offset by a decrease in assets (receivables) measured in the same currency.
Detailed results of the analysis of sensitivity of financial instruments held by the Group to exchange rate fluctuations for 2013 and 2012 are presented below.

Sensitivity of financial instruments denominated in foreign currencies to exchange rate fluctuations charged to profit or loss

in PLN m

Dec 31 2013 Carrying amount Currency risk
 Exchange rate change by: 10% -10%
EUR USD NOK other currencies EUR USD NOK other currencies
Financial assets  
Financial assets available for sale* 9 - - - - - - - -
Trade and other receivables 317 13 14 1 3 (13) (14) (1) (3)
Derivative financial instrument assets** 267 230 15 - - - - 329 -
Cash and cash equivalents 995 20 66 11 2 (20) (66) (11) (2)
Effect on financial assets before tax   263 95 12 5 (33) (80) 317 (5)
 19% tax   (50) (18) (2) (1) 6 15 (60) 1
Effect on financial assets after tax 213 77 10 4 (27) (65) 257 (4)
Total currencies   304 161
Financial liabilities  
Borrowings and debt securities (including finance lease) 3,449 230 115 - - (230) (115) - -
Trade and other payables 1,088 47 52 7 3 (47) (52) (7) (3)
Derivative financial instrument liabilities** 124 - - 329 - 241 10 - -
Effect on financial liabilities before tax   277 167 336 3 (36) (157) (7) (3)
 19% tax   (53) (32) (64) (1) 7 30 1 1
Effect on financial liabilities after tax 224 135 272 2 (29) (127) (6) (2)
Total currencies   633 (164)
Total increase/decrease (11) (58) (262) 2 2 62 263 (2)
Total currencies   (329) 325
Exchange rates as at the balance-sheet date and their changes:
EUR/PLN 4.1472 - 4.5619 4.5619 4.5619 - 3.7325 3.7325 3.7325
USD/PLN 3.012 3.3132 - 3.3132 3.3132 2.7108 - 2.7108 2.7108
NOK/PLN 0.4953 0.5448 0.5448 - 0.5448 0.4458 0.4458 - 0.4458
Dec 31 2012 Carrying amount Currency risk
   Exchange rate change by: 15% -15%
  for EUR for USD for NOK for other currencies for EUR for USD for NOK for other currencies
Financial assets  
Financial assets available for sale* 3  -   -   -   -  -   -  -  - 
Other financial assets 1  -   -   -   -  -   -  -  - 
Trade and other receivables 1,248 35 148 2 3 (35) (148) (2) (3)
Financial assets held for trading  -   -   -   -   -  -   -  -  - 
Derivative financial instrument assets** 90 357 5  -   -  -   -  507 - 
Cash and cash equivalents 337 19 23 6 2 (19) (23) (6) (2)
Effect on financial assets before tax   411 176 8 5 (54) (171) 499 (5)
19% tax   (78) (34) (2) (1) 10 33 (95) 1
Effect on financial assets after tax   333 142 6 4 (44) (138) 404 (4)
Total currencies   485 218
Financial liabilities  
Borrowings and debt securities (including finance lease) 3,406 324 186  -  1 (324) (186) -  (1)
Trade and other payables 677 81 5 14 2 (81) (5) (14) (2)
Derivative financial instrument liabilities** 393  -   -  507  -  361 2 -  - 
Effect on financial liabilities before tax   405 191 521 3 (44) (189) (14) (3)
19% tax   (77) (36) (99)  -  8 36 3 - 
Effect on financial liabilities after tax   328 155 422 3 (36) (153) (11) (3)
Total currencies   908 (203)
Total increase/decrease   5 (13) (416) 1 (8) 15 415 (1)
Total currencies   (423) 421
Exchange rates as at the balance-sheet date and their change:
EUR/PLN 4.0882 - 4.7014 4.7014 4.7014 - 3.475 3.475 3.475
USD/PLN 3.0996 3.5645 - 3.5645 3.5645 2.6347 - 2.6347 2.6347
NOK/PLN 0.5552 0.6385 0.6385 - 0.6385 0.4719 0.4719 - 0.4719
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* Includes shares disclosed at historical values, therefore the change in exchange rates will not affect the valuation of those assets and the profit/loss for the period.
** In the case of financial derivatives, the table presents only the effect of exchange rate fluctuations on profit or loss. In connection with the use of hedge accounting, part of the changes in the valuation of financial derivatives is charged to equity through other comprehensive income. The effect of fluctuations in exchange rates on this portion of financial derivatives is presented in a separate table below.

Analysis of derivatives' sensitivity to fluctuations of exchange rates charged to equity

in PLN m

Dec 31 2013 10% -10%
for EUR for USD for EUR for USD
Effect on equity before tax 143 72 (59) (57)
 19% tax (27) (14) 11 11
Effect on financial assets/liabilities after tax 116 58 (48) (46)
Total currencies 174 (94)
Dec 31 2012 15% -15%
for EUR for USD for EUR for USD
Effect on equity before tax 106 241 (38) (196)
 19% tax (20) (46) 7 37
Effect on financial assets/liabilities after tax 86 195 (31) (159)
Total currencies 281 (190)
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The analysis of derivative instruments' sensitivity to exchange rate fluctuations, charged to equity and presented in the table below, shows that a 10% increase in the PLN/USD and PLN/EUR exchange rates would cause an increase in equity through other comprehensive income. A 10% decline in the PLN/USD and PLN/EUR exchange rates would reduce equity. This is due to the valuation of derivative instruments used by the Group to hedge against an increase in USD- and EUR-denominated liabilities and cost of gas purchases. Valuation of the effective portion of such hedges is charged to equity.
The Group also analysed the sensitivity of energy commodity derivatives. For the sensitivity analysis for 2013, a 15% volatility was assumed for such instruments (25% as at December 31st 2012).
The tables below present an analysis of sensitivity of energy commodity derivatives to price changes for 2013 and 2012.

Sensitivity of derivatives to commodity price fluctuations charged to profit or loss

in PLN m

Dec 31 2013 Carrying amount Price risk
 Price change by: 15% -15%
 Gasoil   Fuel oil   Title Transfer Facility   Electricity   TGE Gas   Gasoil   Fuel oil   Title Transfer Facility   Electricity   TGE Gas 
Financial assets  
Energy commodity derivative assets 40  -  3  -  1  -   -   -   -   -  21
Effect on financial assets before tax    -  3  -  1  -   -   -   -   -  21
19% tax    -  (1)  -  -  -   -   -   -   -  (4)
Effect on financial assets after tax  -  2  -  1  -   -   -   -   -  17
Total commodities           3         17
Financial liabilities  
Energy commodity derivative liabilities  -  2  -  19  -  21 5 4 22 1  - 
Effect on financial liabilities before tax   2  -  19  -  21 5 4 22 1  - 
19% tax    -   -  (4)  -  (4) (1) (1) (4)  -   - 
Effect on financial liabilities after tax 2  -  15  -  17 4 3 18 1  - 
Total commodities           34         26
Total increase/decrease (2) 2 (15) 1 (17) (4) (3) (18) (1) 17
Total commodities           (31)         (9)
Dec 31 2012 Carrying amount Price risk
 Price change by: 25% -25%
 Gasoil   Fuel oil   Gasoil   Fuel oil 
Financial assets  
Energy commodity derivative assets 15 15 2  -   - 
Effect on financial assets before tax   15 2  -   - 
19% tax   (3)  -   -   - 
Effect on financial assets after tax 12 2  -   - 
Total commodities     14    - 
Financial liabilities  
Energy commodity derivative liabilities  -   -   -  (3) (2)
Effect on financial liabilities before tax    -   -  (3) (2)
19% tax    -   -  1  - 
Effect on financial liabilities after tax  -   -  (2) (2)
Total commodities      -    (4)
Total increase/decrease 12 2 2 2
Total commodities    -  14  -  4
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The above tables present only the effect of price fluctuations on profit or loss. Some changes in the value of energy commodity derivatives affect equity directly.

Analysis of derivatives' sensitivity to fluctuations of commodity prices charged to equity

in PLN m

Dec 31 2013
Price change by: 15% -15%
Gasoil Fuel oil Title Transfer Facility Gasoil Fuel oil Title Transfer Facility
Effect on equity, before tax 73 62 411 (22) (28) (193)
19% tax (14) (12) (78) 4 5 37
Effect on financial assets/liabilities after tax 59 50 333 (18) (23) (156)
Dec 31 2012
Price change by: 25% -25%
Gasoil Fueloil Gasoil Fueloil
Effect on equity, before tax 53 20 (16) (3)
19% tax (10) (4) 3 1
Effect on financial assets/liabilities after tax 43 16 (13) (2)
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The analysis of derivative instruments' sensitivity to fluctuations of commodity prices, charged to equity, as presented in the table above, shows that a 15% increase (25% increase at the end of 2012) in commodity prices would result in equity increase through other comprehensive income. A 15% decline in the prices (25% decline at the end of 2012) would reduce equity. This is due to the fact that the Group uses derivatives to hedge against an increase in prices of energy commodities, and the valuation of the effective portion of such hedges is charged to equity.
The Group analysed the sensitivity of financial instruments under contracted borrowings, notes in issue and variable-rate lease liabilities, assuming interest rate changes of -/+100 bp for 2013 (-/+100 bp as at the end of 2012).
As at December 31st 2013, the sensitivity of liabilities under borrowings, notes in issue, and variable-rate lease liabilities to interest rate changes of -/+100 bp was -/+ PLN 77m (+/- PLN 102m as at the end of 2012). The sensitivity of loans advanced to interest rate changes of -/+100 bp for 2013 was -/+ PLN 2m (+/- PLN 1m as at the end of 2012).

Sensitivity of financial instruments to interest rate changes

in PLN m

Dec 31 2013 Carrying amount Change by:
+100 bp -100 bp
Loans advanced 185 2 (2)
Borrowings and other debt instruments 1,619 16 (16)
Notes issued 5,885 59 (59)
Lease liabilities 157 2 (2)
Total liabilities 7,661 77 (77)
Dec 31 2012 Carrying amount Change by:
+100 bp -100 bp
Loans advanced 117 1 (1)
Borrowings and other debt instruments 1,429 14 (14)
Notes issued 8,599 86 (86)
Lease liabilities 183 2 (2)
Total liabilities 10,211 102 (102)
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