35. Derivative Financial Instruments
Measurement of derivatives
As required by the International Financial Reporting Standards, derivative financial instruments disclosed by the Group in its financial statements are measured at fair value.
As at December 31st 2013, the Group held the following types of derivatives: Cross Currency Interest Rate Swaps (CCIRS), Interest Rate Swaps (IRS), purchased European and Asian currency call options, purchased and sold currency and commodity forwards (physically settled), purchased and sold futures (cash settled), as well as purchased average rate forwards. In 2013, the Group also hedged against commodity risk using Asian call options, risk reversal strategies (purchase of Asian commodity call options and sale of put options) and purchased commodity swaps.
Currency call options were measured at fair value using the Garman-Kohlhagen model, whereas Asian commodity call and put options were measured at fair value using the Espen-Levy model. Forwards, average rate forwards, swaps, CCIRS and IRS transactions are measured at fair value using the discount method. The measurement was based on market data such as interest rates, foreign-exchange rates, basis spreads, commodity prices and volatility of commodity prices as at December 31st 2013.
Hedge accounting
The Parent applies cash-flow hedge accounting with respect to foreign exchange transactions and commodity transactions, as well as fair-value hedge accounting with respect to an advanced loan. For details, see Note 2.3.12.
Derivative Instruments
in PLN m
| Measurement at fair value | |||||||
|---|---|---|---|---|---|---|---|
| Hedged item | Par value in currency | Currency / asset | Maturity date | Exercise price (exercise price range) | Dec 31 2013 | Dec 31 2012 | Hedged risk |
| Cross Currency Interest Rate Swap | |||||||
| Euronotes | 500 | EUR | over 3 years | 4.1580 | 108 | 82 | currency and interest rate risk |
| loan | 3,900 | NOK | 1–3 months | 0.5051 | (25) | - | foreign exchange and interest-rate risk |
| loan | 1,150 | NOK | 1–3 months | 0.5664 | 64 | - | foreign exchange and interest-rate risk |
| loan | 730 | NOK | 1–3 years | 0.5595 | 35 | - | foreign exchange and interest-rate risk |
| loan | 4,350 | NOK | more than 3 years | 0.5033 | (14) | - | foreign exchange and interest-rate risk |
| Loan | 5,244 | NOK | 1–3 years | 0.5198 | - | (317) | foreign exchange and interest-rate risk |
| Loan | 481 | NOK | 1–3 years | 0.5684 | - | 3 | currency and interest rate risk |
| 168 | (232) | ||||||
| Interest Rate Swap | |||||||
| loan | 1,500 | PLN | more than 3 years | - | (23) | - | interest rate risk |
| (23) | - | ||||||
| Forward | |||||||
| loan | 333 | NOK | 1–3 months | 0.4978 | 1 | - | foreign exchange risk |
| payments for gas | 10 | EUR | 1–3 months | 4.2659 | (1) | - | foreign exchange risk |
| payments for gas | 29 | EUR | 3–12 months | 4.2189 | (1) | - | foreign exchange risk |
| payments for gas | 130 | USD | 1–3 months | 3.1221 | (14) | - | foreign exchange risk |
| payments for gas | 80 | USD | 3–12 months | 3.1234 | (7) | - | foreign exchange risk |
| payments for gas | 24 | EUR | 1–3 months | 4.2889 | (3) | - | foreign exchange risk |
| payments for gas | 78 | EUR | 3–12 months | 4.2660 | (6) | - | foreign exchange risk |
| EUR/PLN | 1 | EUR | up to 1 month | 4.4530 | - | - | foreign exchange risk |
| EUR/PLN | 1 | EUR | up to 1 month | 4.4300 | - | - | foreign exchange risk |
| EUR/PLN | 1 | EUR | 6–12 months | 4.2195 | - | - | foreign exchange risk |
| payments for gas | 27 | EUR | up to 1 month | 4.1665 | - | (2) | foreign exchange risk |
| payments for gas | 34 | EUR | 1–3 months | 4.1739 | - | (2) | foreign exchange risk |
| payments for gas | 150 | USD | up to 1 month | 3.3414 | - | (36) | foreign exchange risk |
| payments for gas | 210 | USD | 1–3 months | 3.2690 | - | (31) | foreign exchange risk |
| payments for gas | 60 | USD | 3–6 months | 3.2338 | - | (5) | foreign exchange risk |
| EUR/PLN | 4 | EUR | up to 1 month | 4.2422 | - | - | foreign exchange risk |
| EUR/PLN | 2 | EUR | 1–3 years | 4.4419 | - | - | foreign exchange risk |
| (31) | (76) | ||||||
| Futures | |||||||
| trading activities | 1 | electricity | 1–3 months | 151.3070 | 7 | - | energy price risk |
| trading activities | 1 | electricity | 1–3 months | 151.3070 | (3) | - | energy price risk |
| trading activities | 10 | electricity | 3–12 months | 151.8480 | 8 | - | energy price risk |
| trading activities | 10 | electricity | 3–12 months | 151.8480 | (12) | - | energy price risk |
| trading activities | 0.2 | TGE gas | 1–3 months | 116.8200 | 1 | - | gas price risk |
| trading activities | 1 | TGE gas | 3–12 months | 114.8530 | - | - | gas price risk |
| 1 | - | ||||||
| Call options | |||||||
| payments for gas | 35 | EUR | 1–3 months | 4.3826 | - | - | foreign exchange risk |
| payments for gas | 21 | EUR | 3–12 months | 4.3515 | 1 | - | foreign exchange risk |
| payments for gas | 188 | EUR | 1–3 months | 4.4278 | - | - | foreign exchange risk |
| payments for gas | 265 | EUR | 3–12 months | 4.3848 | 6 | - | foreign exchange risk |
| payments for gas | 160 | USD | 1–3 months | 3.3566 | - | - | foreign exchange risk |
| payments for gas | 180 | USD | 3–12 months | 3.3077 | 5 | - | foreign exchange risk |
| payments for gas | 90 | USD | up to 1 month | 3.4742 | - | - | foreign exchange risk |
| payments for gas | 290 | USD | 1–3 months | 3.4839 | - | 2 | foreign exchange risk |
| payments for gas | 30 | USD | 3–6 months | 3.4583 | - | 1 | foreign exchange risk |
| payments for gas | 31 | EUR | up to 1 month | 4.2552 | - | - | foreign exchange risk |
| payments for gas | 117 | EUR | 1–3 months | 4.2670 | - | 2 | foreign exchange risk |
| 12 | 5 | ||||||
| Put options | |||||||
| proceeds from sale in foreign currency | 1 | EUR | up to 1 month | strike price: PUT − 4.1100; strike price: CALL − 4.2545 | - | - | foreign exchange risk |
| proceeds from sale in foreign currency | 1 | EUR | 1–3 months | strike price: PUT − 4.1200; strike price: CALL − 4.2545 | - | - | foreign exchange risk |
| proceeds from sale in foreign currency | 1 | EUR | 1–3 months | strike price: PUT − 4.1250; strike price: CALL − 4.2545 | - | - | foreign exchange risk |
| - | - | ||||||
| Commodity call options | |||||||
| payments for gas | 0.150 | FO | 1–3 months | 711.52 | - | - | commodity price risk |
| payments for gas | 0.502 | FO | 3–12 months | 643.72 | 3 | - | commodity price risk |
| payments for gas | 0.038 | FO | 1–3 years | 630 | 1 | - | commodity price risk |
| payments for gas | 0.186 | FO | 3–12 months | 569.08 | - | - | commodity price risk |
| payments for gas | 0.084 | GO | 1–3 months | 1,050.45 | - | - | commodity price risk |
| payments for gas | 0.251 | GO | 3–12 months | 955.38 | 8 | - | commodity price risk |
| payments for gas | 0.020 | GO | 1–3 years | 955 | 1 | - | commodity price risk |
| payments for gas | 5.800 | TTF | 1–3 months | 28.11 | 1 | - | commodity price risk |
| payments for gas | 8.650 | TTF | 3–12 months | 26.73 | 26 | - | commodity price risk |
| payments for gas | 0.176 | HFO | up to 1 month | 793.52 | - | - | gas price risk |
| payments for gas | 0.503 | HFO | 1–3 months | 791.65 | - | - | gas price risk |
| payments for gas | 0.416 | HFO | 3–6 months | 732.38 | - | 2 | gas price risk |
| payments for gas | 0.118 | HFO | 6–12 months | 749.92 | - | - | gas price risk |
| payments for gas | 0.127 | GO | up to 1 month | 1,108.82 | - | - | gas price risk |
| payments for gas | 0.373 | GO | 1–3 months | 1,097.37 | - | - | gas price risk |
| payments for gas | 0.338 | GO | 3–6 months | 1,014.05 | - | 13 | gas price risk |
| payments for gas | 0.123 | GO | 6–12 months | 1,052.68 | - | - | gas price risk |
| 40 | 15 | ||||||
| Put commodity options | |||||||
| payments for gas | 0.109 | GO | 3–12 months | 826.80 | - | - | commodity price risk |
| payments for gas | 0.138 | HFO | up to 1 month | 587.04 | - | - | gas price risk |
| payments for gas | 0.454 | HFO | 1–3 months | 594.79 | - | - | gas price risk |
| payments for gas | 0.222 | HFO | 3–6 months | 545.11 | - | - | gas price risk |
| payments for gas | 0.105 | GO | up to 1 month | 841.90 | - | - | gas price risk |
| payments for gas | 0.373 | GO | 1–3 months | 858.16 | - | - | gas price risk |
| payments for gas | 0.211 | GO | 3–6 months | 818.72 | - | - | gas price risk |
| - | - | ||||||
| Commodity swap | |||||||
| payments for gas | 0.023 | FO | 1–3 months | 602.13 | - | - | commodity price risk |
| payments for gas | 0.042 | FO | 1–3 months | 607.73 | - | - | commodity price risk |
| payments for gas | 0.015 | FO | 3–12 months | 609.75 | - | - | commodity price risk |
| payments for gas | 0.085 | FO | 3–12 months | 602.18 | 1 | - | commodity price risk |
| payments for gas | 0.028 | GO | 1–3 months | 869.77 | 4 | - | commodity price risk |
| payments for gas | 0.049 | GO | 3–12 months | 893.39 | 6 | - | commodity price risk |
| payments for gas | 1.730 | TTF | 1–3 months | 27.47 | 3 | - | commodity price risk |
| payments for gas | 7.050 | TTF | 3–12 months | 25.79 | 17 | - | commodity price risk |
| payments for gas | 4.135 | TTF | 1–3 months | 27.78 | (10) | - | commodity price risk |
| payments for gas | 2.035 | TTF | 3–12 months | 27.16 | (5) | - | commodity price risk |
| 16 | - | ||||||
| including: | 183 | (288) | |||||
| positive valuation | assets | 307 | 105 | ||||
| negative valuation | liabilities | (124) | (393) | ||||
GO − Gasoil
FO − Fuel Oil
HFO − Heavy Fuel Oil
TTF – Natural Gas at the Title Transfer Facility
Positive valuation of derivatives as at the end of the period is presented in the statement of financial position as a separate item of current assets. Negative valuation of derivatives is presented in the statement of financial position as a separate item of current liabilities. Effects of valuation of open positions are taken to profit or loss for the period, or directly to equity if there is an effective portion which constitutes an effective hedge of changes in fair value of financial derivatives designated as cash flow hedges. In such a case, at the time of exercise of the derivative financial instrument and of the hedged item, the Group’s equity is decreased or increased, and the effective portion is charged to profit or loss at the place of origination of the hedged item’s costs. The non-effective portion and the fair value of transactions not designated as hedges is recognised under other items of the profit or loss of the period.
in PLN m
| Period from Jan 1 – Dec 31 2013 | Period from Jan 1 – Dec 31 2012 | |
|---|---|---|
| Net gain/loss on valuation of derivative financial instruments – unrealised | 257 | 109 |
| Net gain/loss on valuation of derivative financial instruments – realised | (177) | (217) |
| Total net gain/loss on valuation of derivative financial instruments recognised in profit or loss | 80 | (108) |
| including: | ||
| recognised in raw material and consumables used | (53) | 37 |
| recognised in other income and expenses | 168 | (116) |
| recognised in finance income or costs | (35) | (29) |
| Net gain/loss on valuation of derivative financial instruments recognised in other comprehensive income – unrealised | 72 | (250) |
| Total net gain/loss on valuation of derivative financial instruments – recognised in equity | 152 | (358) |
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