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7.3.3. Liquidity risk

Liquidity risk is defined as the risk of inadequate liquidity restricting the Group’s ability to finance its capital requirements or the risk of structural excess liquidity adversely affecting profitability of the Group’s business.

The main objective of the liquidity risk management is to monitor and plan the Group’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. The Group reviews the actual cash flows against projections at regular intervals, which comprises an analysis of unmet cash-flow targets, as well as the related causes and effects.

The liquidity risk should not be associated 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 at December 31st 2016, the Group did not carry any amounts outstanding under overdraft facilities.

To enhance its liquidity position, the Group has launched several note issuance programmes. For details on note issue,
see Note 7.2.

The Group companies have also contracted lines of credit, as set out in Note 5.2.1.

The liquidity risk at the Parent is significantly mitigated through the application of the “PGNiG S.A. Liquidity Management Procedure”. which ensures proper financial liquidity management through:

  • Settlement of payments,
  • Cash flow forecasting,
  • Optimal free cash management,
  • Raising and restructuring funds used to finance day-to-day operations and investment projects,
  • Providing protection against temporary liquidity constraints resulting from unforeseen disruptions, and servicing contracted bank loans.

Measurement of the liquidity risk is based on 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 maturities of financial liabilities at contractual undiscounted amounts.

2016 Time to contractual maturity at the reporting date Total Carrying amount
Up to 3 months 3-12 months 1-3 years 3-5 years over 5 years
Financing liabilities
Bank borrowings 23 120 256 504 420 1,323 1,323
Debt securities 2,338 2,500 103 41 4,982 4,984
Other 8 18 27 53 45
Trade payables 2,168 53 34 11 45 2,311 2,311
Derivative financial liabilities    
IIRS designated for hedge accounting    
– inflows 15 46 91 152
– outflows (15) (45) (88) (148) 46
Forwards    
– inflows 405 639 200 1,244
– outflows (408) (614) (114) (1) (1,137) 179
Other derivative instruments    
– inflows 40 40
– outflows (16) (47) (20) (83) 121
Financial liabilities (outflows) 4,976 3,397 642 557 465 10,037
Financial liabilities, including inflows from derivatives 4,556 2,712 351 517 465 8,601 9,009
2015 Time to contractual maturity at the reporting date Total Carrying amount
Up to 3 months 3-12 months 1-3 years 3-5 years over 5 years
Financing liabilities    
Bank borrowings 48 235 691 550 1,524 1,524
Debt securities 184 4,619 4,803 4,772
Other 10 34 49 93 86
Trade payables 1,728 25 62 6 34 1,855 1,855
Derivative financial liabilities    
IRS designated for hedge accounting    
 – inflows 15 46 91 152
 – outflows (15) (44) (88) (147) 83
Forwards    
 – inflows 406 610 114 1,130
 – outflows (408) (621) (237) (1) (1,267) 295
Other derivative instruments    
 – inflows
 – outflows (17) (52) (28) (97) 787
Financial liabilities (outflows) 2,410 1,011 5,774 7 584 9,786
Financial liabilities, including inflows from derivatives 1,989 355 5,569 7 584 8,504 9,402