15. Sales revenue
SELECTED ACCOUNTING PRINCIPLES
The Group has introduced a five-step model of revenue recognition comprising, successively: identifying the agreement with a customer; identifying the performance obligations contained in the agreement; determining the transaction price; allocating the transaction price to each performance obligation; and recognising the revenue upon satisfying a performance obligation arising from the agreement.
Revenue is recognised when (or as) the performance obligation is fulfilled in the form of transferring the promised goods, products, materials (i.e. assets) or providing a service to a client. The asset transfer takes place when a client acquires control over such an asset whereas in the case of sales of electricity, gaseous fuel and heat, the energy is deemed sold when delivered to a consumer.
Revenue is recognised in the amount expected by the Group, following reduction by VAT, excise duty and other sales taxes, charges and discounts.
The revenue comprises only the inflows of economic benefits received or receivable to the entity’s own account. Amounts obtained on behalf of third parties, with the Group acting as an agent, such as taxes on sales or VAT do not constitute economic benefits of the Company and do not result in equity increases. Therefore, these amounts are not recognised in revenue. Where the Company acts as an agent, the amount recognised as revenue is the commission payable to it and does not include amounts received on behalf of the principal. Examples of this type of revenue include:
- the transitional fee, the RES fee, the capacity charge and the cogeneration fee collected from the end user of electricity and transferred to the System Operator;
- revenue from maintenance services under contracts for the sales of products and services combined with additional services.
For goods and materials, the revenue is recognised when the Group ceases to be permanently involved in the management of the goods and materials sold to the extent the function is usually performed in relation to owned goods, and when it ceases to effectively control these items.
Revenue of the financial year includes also accrued revenue which has not been measured and invoiced due to the settlement system used by customers.
The Group generates its most significant revenues from the sale of electricity, gaseous fuel and distribution services in the Sales segment, distribution services in the Distribution segment and electricity in the Generation segment.
Revenue from the sale of electricity, gas fuel and distribution services in the Sales segment
The Group companies operating in the Sales segment generate revenue from sales of electricity, gaseous fuel and distribution services to retail and wholesale customers. This segment also generates revenues from road lighting maintenance services.
As at each balance sheet date, subject to observance of the prudence principle, an estimate is made of the amount of revenue from the sale of electricity, gaseous fuel and distribution services relating to the financial year which, due to the settlement cycle established in agreements with customers and the fact that invoicing is performed for a significant number of customers in periods other than the reporting periods, will be invoiced in the subsequent year.
The types of estimates of the amounts of revenues from the sale of electricity, gaseous fuel and distribution services are presented below.
| Type of revaluation | Description |
|---|---|
| Revenues on sales of electricity | |
| Revaluation for customers not invoiced at a given balance sheet date | Metering and billing system readings of the volume of retail electricity sold and its invoicing are largely carried out in periods other than the reporting periods. Accordingly, the Group companies belonging to the Sales segment make appropriate estimates of sales of electricity and distribution services as at the balance sheet date. For customers with comprehensive agreements and sales contracts, the revaluation is calculated in the billing systems based on the average 24-hour electricity consumption between the last actual reading and the balance sheet date. |
| Estimation for customers billed using forecast payments | As at each balance sheet date, a revaluation is performed, comprising customers with 6-month or 12-month billing periods, using forecast payments in the periods between readings of the metering and billing systems. The revaluation of electricity sales and distribution services is determined on the basis of sales data obtained from the billing system and the revaluation factor. The revaluation factor is based on the number of days from the reading date for billing invoices or the payment date for forecast invoices to the last day of the calendar month relative to the actual number of days in the calendar month. |
| Revenue revaluation for customers for whom sales are performed at balancing market prices | The revaluation covers customers for whom, in accordance with the concluded contracts, electricity is sold at prices in the balancing market. As at each balance sheet date, for those customers for whom the revaluation of non-invoiced sales of electricity has been calculated in the billing system, the revaluation is determined, which is the difference between the prices accepted for calculating the revaluation and the prices that will be accepted for invoicing the sales. |
| The revaluation resulting from the reconciliation of the energy balance | As at each balance sheet date, the Group companies in the Sales segment reconcile the electricity balance, determining the estimated imbalance volume on the purchase or sales side. As part of such revaluation, an amount is recognised that increases or decreases revenues from the sale of electricity, determined as a product of the estimated imbalance volume and the weighted average purchase price of electricity on the balancing market. |
| Revenues from the sale of gas fuel | |
| Revaluation for customers not invoiced at a given balance sheet date | Metering and billing system readings related to the volume of retail gas fuel sold and its invoicing are largely performed in periods other than the reporting periods. Accordingly, the Group companies belonging to the Sales segment make appropriate estimates of sales of gas fuel and distribution services as at the balance sheet date. The revaluation of gas fuel sales is calculated in the billing systems based on the average 24-hour electricity consumption between the last actual reading and the balance sheet date. The sales revaluation for distribution services is determined as a difference between the cost of purchasing gas distribution services and the invoiced revenue from the sale of distribution services. |
| The revaluation resulting from the reconciliation of gas balance | As at each balance sheet date, the Group companies in the Sales segment reconcile the gas fuel balance, determining the estimated imbalance volume on the purchase or sales side. As part of this revaluation, an amount is recognised which increases or decreases revenues from the sale of gas fuel, determined as a product of the estimated imbalance volume and the average monthly balancing settlement price for high-methane gas published by the Gas Transmission Operator, GAZ-SYSTEM S.A. |
Revenue on sales of electricity distribution services in the Distribution Segment
The Group presents mainly revenue related to distribution operations in the revenue on sales of services. Electricity distribution services are deemed sold upon service provision to the customer, as registered by the electricity meter, including the projected energy consumption and estimated additional revenue which has not been measured and invoiced due to the consumer settlement system used.
Revenue on wholesale of electricity in the Generation segment
Wholesale of electricity from the centrally dispatched generation units and as part of trading operations takes place through the customer’s and the supplier’s notification of the volume of electricity declared per each hour to the Transmission System Operator (TSO), which the Generation segment company is obliged to deliver as the supplier or ensure its provision and the client is obliged to accept. Both the price and the volume per each hour result from transactions signed in advance or (in the case of the Polish Power Exchange – TGE) recorded electronically. The TSO as a sort of guarantor of quantitative settlements, secures the reliability of data in the scope of the volume of energy supplied. Billing is based on reports generated by the TSO.
Invoices for sales of electricity supplied to the Balancing Market shall be issued on the basis of reports from the centralised sales balancing system in the National Power System. These settlements are performed every decade. Wholesale sales of electricity from non-centrally dispatched generating units (generating units under 100 MW cleared on the local market) follow similar rules. For non-centrally dispatched units (nCDGU), the entity responsible for balancing and settlement until December 14, 2022 was the Distribution System Operator (DSO). As of 15 December 2022, in accordance with the electricity distribution services agreement, TAURON Wytwarzanie S.A. took over responsibility for the commercial balancing of non-centrally dispatched units from the DSO’s area. From that moment, wholesale sales of electricity from non-centrally dispatched units are carried out on the same basis as centrally dispatched generation units (CDGUs). Settlement and invoicing is based on reports generated by the TSO.
PROFESSIONAL JUDGEMENT AND ESTIMATES
The TAURON Group estimates revenue as described above whereas the most important estimate regards the additional assessment of revenue from sales of electricity, gaseous fuel and distribution services in the Sales segment.
As at 31 December 2022, additionally assessed revenue from sales of electricity and distribution services in the Sales segment amounted to PLN 824 million and, whereas when reversed estimations from the previous year have been accounted for, the impact on the profit or loss for 2022 amounted to PLN (135) million.
As at 31 December 2022, the additional assessment of revenue from sales of gas fuel and distribution services in the Sales segment amounted to PLN 72 million and, whereas when reversed estimations from the previous year have been accounted for, the impact on the profit or loss for 2022 amounted to PLN (28) million.
| Year ended 31 December 2022 |
Year ended 31 December 2021 (restated figures) |
|
|---|---|---|
| Sale of goods for resale, finished goods and materials without elimination of excise | 28 280 |
17 139 |
| Excise | (49) | (109) |
| Sale of goods for resale, finished goods and materials | 28 231 | 17 030 |
| Electricity | 25 134 | 15 026 |
| Heat energy | 860 | 763 |
| Gas | 1 092 | 576 |
| CO2 emission allowances | 635 | 204 |
| Energy certificates and similar | 258 | 245 |
| Other goods for resale, finished goods and materials | 252 | 216 |
| Rendering of services | 8 013 | 7 761 |
| Distribution and trade services | 6 933 | 6 709 |
| Capacity Market | 646 | 652 |
| Maintenance of road lighting | 130 | 123 |
| Connection fees | 111 | 83 |
| Other services | 193 | 194 |
| Other revenue | 67 | 69 |
| Total revenue from contracts with customers | 36 311 | 24 860 |
| Restructuration in the portfolio of CO2 emission allowances | − | 304 |
| Total sales revenue | 36 311 | 25 164 |
In the year ended 31 December 2022, a significant increase of sales revenues was recorded in relation to the comparative period, while the main changes concerned sales revenues of the following finished products, goods and services:
- Electricity – increase mainly as a result of obtaining higher prices as a consequence of the upward market trend and price increases in tariffs approved by the President of the ERO and price lists approved by the management boards of the companies in the Sales segment. The main reason for the market rise in energy prices was the increase in energy commodity prices caused by the disruption of supply chains as a result of Russian aggression against Ukraine;
- Gas – the increase is mainly driven by a significant rise in prices due to the observed growth in the domestic and global markets;
- CO2 emission allowances – the increase results from the recognition of the effects of measures aimed at managing surplus CO2 emission allowances arising from the delayed commissioning of the 910 MW unit in Jaworzno and the subsequent failure of the unit.
In connection with the failure of the 910 MW unit at Jaworzno continuing from mid-2021 until April 2022 and the resulting surplus of allowances acquired over the redemption needs for 2021, a part of the resulting surplus in the amount of 1 717 000 EUAs was allocated for redemption purposes of another Group installation for 2022. Considering the rationality of matching the delivery date of allowances and the cash expenditure, in the first quarter of 2022, the Group took the decision and sold the aforementioned volume of allowances held and simultaneously bought back this volume in the EUA MAR’23 forward product for the purpose of redemption of 2022 allowances. The revenue from contracts with customers on account of sales of the aforementioned allowances amounted to PLN 604 million while the result of the Group on the transaction amounted to PLN 405 million. At the same time, the repurchase of the volume in the EUA MAR’23 forward product at prices higher than the average price of resold allowances will increase the cost of the Group’s provision created for CO2 emission liabilities for 2022. As a result of the foregoing, the Group estimates that the cumulative impact of the measures described on its operating profit is not significant. The transaction is one-off and incidental in nature and it is a direct result of an unplanned, one-off event such as the failure of the 910 MW unit. According to the Group’s judgement, the transaction is subject to exemption from the scope of IFRS 9 Financial Instruments and does not have an impact on the classification of other contracts for the purchase of CO2 emission allowances for redemption purposes.
In the comparative period, as part of its efforts to manage the surplus allowances for 2020, due to the delayed commissioning of the 910 MW unit and the consequent lower production, the Group sold a volume of 691 000 CO2 emission allowances to the market, resulting in the recognition of the revenue from customer contracts in the amount of PLN 135 million.
As part of the restructuring of the portfolio of CO2 emission allowances, in the comparable period, in the first quarter of 2021, with respect to the volume of 3 258 000 CO2 emission allowances with the delivery date in March 2021, their roll-over was performed by concluding new contracts with the delivery dates in March 2022, 2023 and 2024. The Group recognised the result from the settlement of instruments in accordance with IFRS 9 Financial Instruments, thereby increasing sales revenue and the operating result in the amount of PLN 304 million.
Revenues from the sale of continuing operations by operating segment are shown in the tables below.
Year ended 31 December 2022
| Generation | Renewable Energy Sources | Distribution | Sales | Other | Total | |
|---|---|---|---|---|---|---|
| Sale of goods for resale, finished goods and materials | 4 858 | 158 | 3 | 22 969 | 243 | 28 231 |
| Electricity | 3 920 | 1 | − | 21 131 | 82 | 25 134 |
| Heat energy | 860 | − | − | − | − | 860 |
| Gas | − | − | − | 1 092 | − | 1 092 |
| CO2 emission allowances | − | − | − | 635 | − | 635 |
| Energy certificates and similar | 77 | 157 | − | 13 | 11 | 258 |
| Other goods for resale, finished goods and materials | 1 | − | 3 | 98 | 150 | 252 |
| Rendering of services | 724 | 8 | 3 657 | 3 557 | 67 | 8 013 |
| Distribution and trade services | 258 | − | 3 474 | 3 201 | − | 6 933 |
| Capacity Market | 446 | 6 | − | 194 | − | 646 |
| Maintenance of road lighting | − | − | − | 130 | − | 130 |
| Connection fees | − | − | 111 | − | − | 111 |
| Other services | 20 | 2 | 72 | 32 | 67 | 193 |
| Other revenue | 14 | − | 36 | 5 | 12 | 67 |
| Total revenues from contracts with customers | 5 596 | 166 | 3 696 | 26 531 | 322 | 36 311 |
| Total sales revenue | 5 596 | 166 | 3 696 | 26 531 | 322 | 36 311 |
Year ended 31 December 2021 (restated data)
| Generation | Renewable Energy Sources | Distribution | Sales | Other | Total | |
|---|---|---|---|---|---|---|
| Sale of goods for resale, finished goods and materials | 2 495 | 152 | 2 | 14 229 | 152 | 17 030 |
| Electricity | 1 644 | 1 | − | 13 351 | 30 | 15 026 |
| Heat energy | 763 | − | − | − | − | 763 |
| Gas | − | − | − | 576 | − | 576 |
| CO2 emission allowances | − | − | − | 204 | − | 204 |
| Energy certificates and similar | 83 | 151 | − | 1 | 10 | 245 |
| Other goods for resale, finished goods and materials | 5 | − | 2 | 97 | 112 | 216 |
| Rendering of services | 701 | 6 | 3 443 | 3 556 | 55 | 7 761 |
| Distribution and trade services | 241 | − | 3 270 | 3 198 | − | 6 709 |
| Capacity Market | 442 | 5 | − | 205 | − | 652 |
| Maintenance of road lighting | − | − | − | 123 | − | 123 |
| Connection fees | − | − | 83 | − | − | 83 |
| Other services | 18 | 1 | 90 | 30 | 55 | 194 |
| Other revenue | 14 | 1 | 38 | 4 | 12 | 69 |
| Total revenues from contracts with customers | 3 210 | 159 | 3 483 | 17 789 | 219 | 24 860 |
| Restructuration in the portfolio of CO2 emission | 304 | − | − | − | − | 304 |
| Total sales revenue | 3 514 | 159 | 3 483 | 17 789 | 219 | 25 164 |
Revenues from the sale of electricity by customer groups are presented in the following table.
| Year ended 31 December 2022 | Year ended 31 December 2021 (restated figures) | |
|---|---|---|
| Revenue from sales of electricity | 25 134 | 15 026 |
| Retail sale | 14 733 | 9 442 |
| Strategic clients | 2 237 | 1 179 |
| Business clients | 7 062 | 4 399 |
| Mass clients – Group G | 3 646 | 2 971 |
| Mass clients – SME | 1 520 | 912 |
| Other | 317 | 90 |
| Excise duty | (49) | (109) |
| Wholesale | 9 738 | 4 941 |
| Other | 663 | 643 |