14. Property, plant and equipment

Property, plant and equipment items are measured at purchase price or cost to manufacture, less accumulated depreciation and impairment.

Subsequent expenditures are included in the book value of a given tangible asset or are recognised as a separate asset (wherever appropriate) only if it is likely that this item will bring economic benefits to the Group and the item’s cost can be reliably measured. All other expenses on repairs and maintenance are recognised as profit or loss in the reporting period in which they are incurred.

Mine closure costs initially recognised in the value of tangible assets are subject to depreciation using the same method as the tangible assets they concern, starting from the moment a given tangible asset is put into service, over a period specified in the mine closure plan within the expected mine closure schedule.

Land is not subject to depreciation. Other tangible assets are depreciated on a straight-line basis throughout the period of use or using the natural method based on the longwall length (in the case of operational excavations). The base for calculating depreciation constitutes the initial value less final value, if significant. Each significant part of a property, plant and equipment item with a different period of use is depreciated separately.

Depreciation begins when an asset is available for use. Depreciation ends when an asset is designated as available for sale in accordance with IFRS 5 or when it is removed from the statement of financial position, depending on which occurs earlier.

Within its activities, the Group receives tangible assets for free, which are initially measured at fair value. Property, plant and equipment received for free, in the form of power infrastructure (connections, lighting grid) is recognised by the Group on a one-off basis in other operating revenue when it is received (except for the receipt of lighting infrastructure in exchange for services – in which case they are accounted for over time).

External financing costs

Costs of external financing that can be directly attributed to an asset purchase, build or manufacture are capitalised as part of the purchase price or cost to manufacture such an asset. Other external financing costs are recognised as a cost in the period in which they are incurred.

The capitalisation of external financing costs begins at the later of the two dates: commencement of investment or commencement of financing. The Group ceases to capitalise external financing costs when the asset is handed over for use. The Group suspends capitalising external financing costs over a longer time period in which it suspended works focused on adapting the asset.

Economic life and residual value

The amount of depreciation charges is determined on the basis of expected period of use for tangible assets. The verification conducted this year resulted in changes to depreciation/amortisation periods. Their impact in 2022 on the amount of depreciation is PLN (11 985 thousand).

The residual values and economic life of property, plant and equipment are verified at least once a year. Each change of depreciation period requires agreement and necessitates an adjustment to the depreciation charges in subsequent financial years.

At each balance sheet date ending a financial year, impairment assessments are carried out in compliance with IAS 36. If indications of impairment are identified, an impairment test is carried out in accordance with IAS 36 (section in these financial statements concerning impairment of non-financial assets).

Use periods for property, plant and equipment are as follows:

• buildings and structures 10 – 80 years
• including power grids 33 years
• structures (operational excavations) natural method depreciation based on length of wall
• technical equipment and machinery 2 – 50 years
• means of transport 3 – 30 years
• other property, plant and equipment 3 – 25 years

Estimating the useful life of mines and coal resources

The end of the lifecycle of the mine (LWB) is currently estimated to be 2051, and this did not change from the previous annual financial statements (for 2020). The actual deadline for mine closure might be different from the Group’s estimates. This results from the calculation being based on the mine’s estimated life-cycle and only the coal resources being available as of the reporting date. A decline in demand for the Group’s coal might result in production falling below capacities, which would extend the mine life-cycle.

The Group is taking account of the on-going restructuring of the mining sector, as previously announced in Poland’s Energy Strategy 2040, as well as the shut-down of hard coal mining in Poland by 2049, as specified in the „Social agreement regarding the transition of the hard coal mining sector and selected transition processes for the Silesia voivodship.” However, at the moment – especially due to its financial results and operational efficiency – the Group remains beyond the direct impact of the aforementioned regulations. At the same time, the Group is undertaking activities intended to diversify its business and is searching for new product development opportunities consisting of the selective mining of coking coal.

For the financial year ended 31 December 2021:

No collateral is established on property, plant and equipment assets. External financing costs capitalised in 2021 were immaterial.

For the financial year ended 31 December 2020:

Future contract liabilities related to the purchase of property, plant and equipment incurred as at the reporting date but not yet recognised in the statement of financial position reached PLN 1 444 989 thousand as at 31 December 2021 (PLN 1 067 174 thousand as at 31 December 2020).