7.3.1.2. Credit risk related to receivables
The Group is exposed to credit risk of material value in connection with its trade receivables (i.e. amounts it is owed for any natural gas, LNG, crude oil or electricity the Group has sold) and other receivables (i.e. amounts owed to the Group for sold CO2 emission allowances and certificates of origin for electricity).
Some of the Group’s gas sales transactions are effected via the Polish Power Exchange (“PPX”). Transactions made at the Polish Power Exchange do not generate exposure to credit risk, as the system of guaranteed settlements operated by the Commodity Exchange Clearing House protects Clearing House members against insolvency of individual market participants. These transactions account for about 55% of the Group’s annual revenue. As at the reporting date, outstanding balances from settlement of transactions effected via the PPX were not material.
In order to minimise the risk of uncollectible receivables arising in connection with sale transactions executed outside of the PPE, uniform rules designed to secure trade receivables are in place.
In line with the procedures operated by the Group, each trading partner’s ability to meet current and future contractual obligations is assessed on a regular basis. Results of such assessment are used to determine individual credit limits granted to trading partners and/or security to be provided by the trading partners. The Group also minimizes its trade receivables credit risk by continuously monitoring the financial standing of each of its trading partners and taking appropriate measures to collect any debt in compliance with the procedures operated by the Group.
With respect to private customers, the Group’s debt collection teams continuously monitor the balance of a customer’s past-due receivables from the day when such arrears first arise. As part of an internally conducted pre-litigation process, customers are automatically notified of any outstanding overdue payments; with respect to those who fail to pay their overdue debt, decisions are made to discontinue supply of gas as permitted by the Energy Law. Any debt that has not been recovered by the Group as part of its internal procedures is sold.
There is no credit risk concentration within the Group. As at December 31st 2016, trade receivables from the Group’s three largest customers accounted for 4.6%, 2.8%, and 2.7% of the total balance of trade receivables, respectively ( December 31st 2015: 3.7%, 1.8%, and 0.7%, respectively).
