| Exposure to commodity risk | Risk management |
| Commodity risk is related to potential changes in the Group’s revenue/cash flows occurring especially as a result of changes in commodity prices. The objective of commodity risk management is to maintain exposure to this risk at an acceptable level, set by limits, while optimising the return on trading activities.
A specific aspect of the Group’s commodity risk is the fact that by acting as an energy enterprise operating as ex-officio seller the Group is required to submit electricity price tariffs for approval for the tariff group G. The Group purchases energy at market prices, while its tariff is calculated on the basis of costs deemed by the President of the Energy Regulatory Office (URE) as justified and taking into account margins (in trade) planned for the next tariff period. In connection with the above, the Group in the tariff period has a limited ability to transfer adverse changes in costs onto the end recipients of electricity. The Group may file an application to the URE President to amend the tariff only in the event of a major increase in costs for reasons outside of its control. |
Commodity risk management as regards prices consists of continuous monitoring of the size of open trading position (both in terms of hedging the retail sales volume as well as in proprietary trading) and measuring – using tools based on the value at risk concept – the level of risk resulting from possible changes in electricity price in relation to such an open position. The way to reduce risk in this case is to close a position that generates a potential loss that is higher than acceptable (higher than risk appetite). The management model in this case is based on a VaR limit system, which specifies the maximum allowed size of open position that carries the commodity (price) risk.
Managing commodity risk in volumetric terms consists of using the scenario method and optimising trading planning and controlling processes that allow to most accurately estimate the expected volumes of electricity and associated commodities that are the subject of trade. Moreover, regardless of the above, ENEA Group uses management rules specified in the Group’s strategic regulations (wholesale trade mode), setting out methods for optimising the Group’s trading position, with the main aim to minimise the risk of taking action that is against market trends, while taking into account the effectiveness aspect of such actions (outperforming the market). |
In 2021, the Group was exposed to an elevated level of commodity risk (high volatility of prices) in connection with the COVID-19 pandemic. Irrespective of the above, the Group is observing a rising risk of a strategic (long-term) nature in this area, which is related to stricter EU requirements concerning climate protection, translating into considerable growth in the price of CO2 emission allowances, which in turn affect the profitability of the Group’s electricity-generation companies.