56.2. Liquidity risk

The Group maintains a balance between continuity, flexibility and cost of financing by using various sources of funding, which enable management of liquidity risk and effective mitigation of risk consequences. The Company pursues a policy of diversification of financing instruments but first of all it seeks to secure financing and maintain the ability of the TAURON Group companies to meet current and future liabilities in the short and long term. Liquidity risk management is connected with planning and monitoring cash flows in the short and long term and taking actions to ensure funds for the operations of the Group companies.

The Company carries out a centralized finance management policy, allowing effective management in this respect on the Group level. Among others, the TAURON Group has adopted Liquidity management policy for the TAURON Group, which facilitates optimization of liquidity management at the TAURON Group, reduces the risk of liquidity loss in the Group, and in each company from the TAURON Group as well as financial expenses. Having implemented appropriate projection standards, TAURON Group can precisely determine its liquidity position allowing to optimize the time of obtaining funding, maturity and types of deposit instruments, as well as an appropriate level of the liquidity provision.

Additionally, in order to mitigate a possibility of cash flow disruption and liquidity risk, the TAURON Group uses the cash pooling mechanism. The cash pooling structure enables the Group companies that experience short-term shortage of funds to use cash provided by companies with cash surplus, without the need to obtain borrowings from third parties.

The Group has financing available under concluded financing agreements. Agreements of the parent company with funding available as at the balance sheet day and the use of funds are shown in the table below.

After the balance sheet day:

• on the basis of an annex to the overdraft agreement, the amount of the limit was increased to PLN 500 million and the repayment date was extended to 30 September 2023;
• on 10 March 2022, the Company also concluded an annex to the documentation of the subordinated bond issue program up to PLN 450 million concluded in 2021 with Bank Gospodarstwa Krajowego. The annex extends the period enabling the issue of subordinated bonds to 36 months from the date of signing the documentation.

As indicated in the table above, available financing agreements can be used for investment and corporate-wide purposes, including securing the Group’s current liquidity position.

The policy pursued with regard to the acquisition of financing sources enables, above all, an increase in the possibility of obtaining financing for general corporate purposes and capital expenditure, a reduction in the cost of external capital, a reduction in the amount and forms of collateral established on TAURON Group assets and covenants required by financial institutions, and a reduction in administrative costs. The corporate finance model also makes it possible to acquire sources of financing that are not available to individual companies.

In 2022, the Group demonstrated full capacity to settle its liabilities on their maturity date.

The tables below show the ageing of the Group’s financial liabilities by non-discounted contractual payments.