6.3.2. OTHER PROVISIONS

If at a reporting date the number of certificates in not sufficient to meet the requirements stipulated in the Polish Energy Law and the Energy Efficiency Act, the Group recognises a provision for cancellation of certificates of origin and energy efficiency certificates or for the payment of emission charge, whichever of the two is lower. 

The provision is measured based on the carrying amount of the certificates held and the then current price (on the Polish Power Exchange) of certificates which should be additionally purchased to meet the cancellation requirement resulting from the volume of electricity sales to end users.

The provision and the registered certificates of origin disclosed under inventories (see Note 6.2.1) are accounted for at the time of registering their cancellation in the Register of Certificates of Origin maintained by the Polish Power Exchange (PPX).

The provision for energy efficiency certificates is recognised as at the end of the reporting period based on the volume of electricity consumed (excluding internally generated electricity consumed) and the volume of gas fuel (in energy units), electricity and heat sold to end customers (with the exceptions provided for in the Energy Efficiency Act), and based on the applicable regulatory percentage ratios and prices of the certificates on the Polish Power Exchange on the last trading day in the reporting period, and the average price of the entire portfolio of energy efficiency property rights. 

 

In 2013, the Parent recognised a provision for liabilities associated with the exploration work carried out by PGNiG Upstream North Africa B.V., PGNiG’s subsidiary.

Owing to the Force Majeure risk present in Libya, PGNiG Upstream North Africa B.V. has suspended operations. Therefore, the Parent has been maintaining a provision for licence obligations under licence agreements concluded with the Libyan government.

The amount of the provision is based on the obligations contracted under the licence agreements, but not met.

The Group recognises a provision for the cost of identification and rehabilitation of land and water contamination, required under the applicable laws. The provision recognised for such liabilities reflects potential costs projected to be incurred, which are estimated and reviewed periodically based on current prices.

WThe amount of the provision is based on the estimates of future restoration costs, which largely depend on the applied discount rate and the estimate of time when the cash flows are expected to take place. 

In the ordinary course of business, the Group installs technical equipment on land owned by third parties, often natural persons. Where possible, at the time of installing the elements of the infrastructure, the Group enters into agreements establishing standard land easements and transmission easements. 

The Group recognises a provision for claims under extra-contractual use of land in respect of those claims which have been confirmed to be valid (the claimant presented a legal title to land) and in the case of which correspondence has been exchanged with the claimant in the last three years.

The Group estimates the provision for claims under extra-contractual use of land based on an estimate survey made by an expert appraiser, or its own valuation, taking into account the size of the controlled area in square meters, the amount of annual rent per square meter for similar land in a given municipality, and the period of extra-contractual use of land (not 
more than ten years). 

If it is not possible to obtain reliable data required to apply the method described above, the Group analyses submitted claims on a case-by-case basis.

As the amounts used in the above calculations are arrived at based on a number of variables, the actual amounts of compensation for extra-contractual use of land that the Group will be required to pay may differ from amounts of the related provisions.