On 24 February 2022, the Russian Armed Forces attacked Ukraine and thus began a large-scale armed conflict. This event has a considerable impact on the social, political and economic situation not just in the region but also globally. The Group is monitoring on an on-going basis the impact of the political and economic situation in Ukraine on its financial statements as well as the Group’s future financial and operating results, however at this point it is not possible to precisely define this impact.
An elevated aversion to risk and significant volatility of the prices of commodities and financial instruments can be seen on the commodities and financial markets. The considerable volatility of electricity and EUA prices may result in the necessity to supplement margins at clearinghouse IRGIT and in foreign markets for trade in GHG emission allowances (The ICE, EEX), thus increasing the amount of working capital needed. Higher commodity prices strengthen the expectations for higher interest rates (stronger inflationary pressure), which may increase the cost of debt financing. A significant weakening of PLN may increase operating costs.
In connection with alert level CHARLIE-CRP being announced for the entire country, Group companies have implemented the measures specified in the Regulation of the Prime Minister of 25 July 2016 on the scope of measures to be taken at specific alert levels and CRP alert levels. Restrictions in access to IT systems as a result of alert level CHARLIE-CRP being maintained may cause delays in implementing projects and deploying IT systems.
In the Mining segment, hard coal exports being recently developed by LW Bogdanka S.A., much of which was going to Ukraine, accounted for 5.5% of the company’s revenue from sales in 2021. In 2022, the sale of coal to Ukraine may be significantly more difficult due to the armed conflict, damaged infrastructure and higher risk associated with deliveries. It is currently not possible to precisely predict the scale and duration of these difficulties. On the other hand, the demand for thermal coal is currently very high in the country, also due to lower production in Poland and difficulties with imports, therefore this event should not significantly impact current and future financial results in the Mining segment.
In the Trade segment, growth in the price of gas fuel and electricity may weaken the results of energy vendors in the present year (necessity to buy for balancing purposes) and affect prices for customers (those customers who do not purchase energy at a guaranteed “fixed” price).
In the Generation segment, intervention support in the electricity balance may be necessary, leading to higher electricity output from conventional units. The Group currently does not perceive the war in Ukraine as having an impact on deliveries of hard coal to ENEA Group’s generating assets. According to the Group, difficulties may materialise with regard to the supply of biomass from Ukraine and Belarus, however their impact on the financial results of the segment’s companies is currently difficult to determine. If deliveries from the east are reduced, they can be replaced with deliveries from other directions (domestic, alternative). For electricity generation purposes at units 2-7 of ENEA Elektrownia Połaniec S.A. and the generation of heat at ENEA Ciepło sp. z o.o.’s assets, biomass can be replaced by coal.
In the Distribution segment, the Group has not identified any negative impact of the political and economic situation in Ukraine on the segment’s operating activities and financial results.
As of the date on which these consolidated financial statements were prepared, it is not possible to predict the further development of the armed conflict in Ukraine as well as any potential negative effects for the operating activities and finances of the Parent and the Group.
As of the date on which these consolidated financial statements were prepared, the Group sees no going-concern risk.