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Current Report No. 37/2020

05.08.2020 17:30

Material non-cash events: results of the impairment tests and reclassifying of assets held for sale

TAURON Polska Energia S.A. (”Issuer”, ”TAURON”) announces that the main analyses, carried out as part the impairment tests related to TAURON Capital Group’s assets carrying amount as of June 30, 2020, were completed on August 5, 2020.

The analyses demonstrated changes to the recoverable carrying value of the fixed assets in the Mining and Generation segments that were primarily the consequence of the following factors:
- a change of the assumptions related to the cost of capital for the hard coal assets resulting, among others, from the risk of a worsening of the economic situation due to the COVID 19 pandemic,
- a decrease of the margin on electricity as a consequence of the reduction of the electricity sales price at the biomass-fired units.

With respect to the consolidated financial statements of TAURON Capital Group for the first half of 2020:
- completed analyses related to the Mining segment demonstrated that the booking of the impairment charge related to the loss of the carrying value of the tangible and intangible fixed assets and the rights to use assets in the amount of PLN 179 million had been justified,
- completed analyses related to the Generation segment, demonstrated that the booking of the impairment charge related to the loss of the carrying value of the tangible and intangible fixed assets and the rights to use assets in the amount of PLN 48 million had been justified

The amount of the write-downs presented in the consolidated financial statements is PLN 227 million, and the total estimated impact on the decrease of the consolidated net financial result will reach PLN 184 million.

In addition, the Issuer informs that the analyses carried out as part of the assets’ impairment tests had not demonstrated the need to book impairment charges in the Issuer’s standalone financial statements for the first half of 2020.

The booking of the impairment charges will not affect the EBITDA reported in the consolidated financial statements (EBITDA shall be understood by the Issuer as EBIT increased by deprecation and charges related to the non-financial assets).

The Issuer makes a caveat that the amounts presented above are estimates and may be subject to change. The final results of the impairment tests and the amounts of the impairment charges related to the loss of the carrying value of the assets will be presented in the financial statements of TAURON Capital Group for the first half of 2020.

In addition, the Issuer informs that due to the ongoing process of selling shares in TAURON Ciepło Sp. z o.o. ("TAURON Ciepło") and in accordance with IFRS 5 ("Fixed assets held for sale and discontinued operations"), in the Issuer's opinion, the prerequisites for recognizing the shares in TAURON Ciepło as fixed assets held for sale in the Issuer's standalone financial statements and TAURON Ciepło's net assets as a group to be disposed of, classified as held for sale in the Issuer's consolidated financial statements, were met as of the balance sheet date, June 30, 2020. In accordance with IFRS 5, the Issuer is required to value the above assets at the lower of their balance sheet carrying amount and the fair value less costs to sell (fair value).

The preliminary analyses related to the determination of the fair value of the shares in TAURON Ciepło and the net assets of that company demonstrate that the booking of the impairment charges due to the loss of the carrying value as of the moment of their initial revaluation to fair value was justified.

With respect to the consolidated financial statements of TAURON Capital Group for the first half of 2020, the above impairment charges may amount to PLN 0.8 billion.

With respect to the standalone financial statements of TAURON for the first half of 2020, the above impairment charges may amount to PLN 1.4 billion.
The booking of the impairment charges will not affect the EBITDA reported in the Issuer's standalone and consolidated financial statements.

 

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