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7.3.2.2. Currency risk

Currency risk is defined as the risk of the Group’s financial results being adversely affected by changes in the price of one currency against another.

Currency risk largely arises on account of fluctuations in the EUR/PLN, USD/PLN and NOK/PLN exchange rates, and it mainly affects the Parent. The key sources of exposure include:

  • Trade payables (mainly in respect of natural gas purchased by the Group (Note 6.2.3.),
  • EUR-denominated debt securities in issue (Note 5.2.),
  • CCIRS hedging a NOK-denominated loan to PGNiG Upstream International AS (the loan is eliminated in the consolidated financial statements) (Note 7.2.), and
  • Cash and cash equivalents (Note 5.4.).

The hedging measures implemented by the Group are mainly intended to provide protection against currency risk. For details of the hedging transactions, see Note 7.2.

Derivative instruments used to hedge against currency risk associated with trade payables denominated in foreign currencies (chiefly USD and EUR) include call options, option strategies, swaps, and forwards. For detailed information on derivative transactions executed by the Group (derivatives designated for hedge accounting and economic hedges not designated for hedge accounting), see Note 7.2.

The table below presents the Group’s exposure to currency risk arising in connection with material items denominated in foreign currencies, and an analysis of the Group’s sensitivity to the risk of movements in foreign exchange rates that the Group considers to be reasonably possible as at the reporting date (December 31st 2016).

 

2016 Carrying amount Value at risk EUR/PLN USD/PLN NOK/PLN
Exchange rate change: +10% Exchange rate change: -10% Exchange rate change: +10% Exchange rate change: -10% Exchange rate change: +10% Exchange rate change: -10%v
Profit/
(loss)
Other compre-hensive income Profit/
(loss)
Other compre-hensive income Profit/
(loss)
Other compre-hensive income Profit/
(loss)
Other compre-hensive income Profit/
(loss)
Other compre-hensive income Profit/
(loss)
Other compre-hensive income
Financial assets
Trade receivables 3,516 686 32 (32) 19 (19) 1 (1) Note 6.2.2.
Derivative financial instruments (assets) 623 233 187 24 94 Note 7.2.
Cash and cash equivalents 5,829 640 18 (18) 32 (32) Note 5.4.
Financial liabilities  
Financing liability 6,352 3,609 (243) 243 (49) 49 Note 5.2.
Trade payables 1,290 939 (23) 23 (48) 48 (2) 2 Note 6.2.3.
Derivative financial instruments (liabilities) 346 (187) (12) (94) Note 7.2.
Effect of exchange rate movements     (29) 29 (46) 24 46 (12) (95) 95  
2015 Carrying amount Value at risk EUR/PLN USD/PLN NOK/PLN
Exchange rate change: +10% Exchange rate change: -10% Exchange rate change: +10% Exchange rate change: -10% Exchange rate change: +10% Exchange rate change: -10%
Profit/
(loss)
Other compre-hensive income Profit/
(loss)
Other compre-hensive income Profit/
(loss)
Other compre-hensive income Profit/
(loss)
Other compre-hensive income Profit/
(loss)
Other compre-hensive income Profit/
(loss)
)
Other compre-hensive income
Financial assets
Trade receivables 2,541 391 16 (16) 14 (14) 1 (1) Note 6.2.2.
Derivative financial instruments (assets) 709 326 190 8 46 10 112 Note 7.2.
Cash and cash equivalents 6,022 834 18 (18) 47 (47) 1 (1) Note 5.4.
Financial liabilities  
Financing liability 6,382 3,567 (238) 238 (51) 51 Note 5.2.
Trade payables 956 600 (14) 14 (24) 24 (9) 9 Note 6.2.3.
Derivative financial instruments (liabilities) 1,165 1 (190) (13) (24) (112) Note 7.2.
Effect of exchange rate movements     (28) 8 28 (27) 46 24 (24) (119) 119