24. Property, plant and equipment
SELECTED ACCOUNTING PRINCIPLES
The Group’s key fixed assets by segment include:
- in the Generation Segment:
- boilers with accessories, turbines with generators, transformers and thermal stations as well as equipment used for purposes of fuel unloading, storage and transportation, pumping stations and desulphurisation installations, steam generators, landfills, warehouses and other buildings, switchgears for the highest voltages;
- heating stations, fuel unloading and transportation facilities, as well as pumping stations and water treatment plants.
- in the area of Renewable Energy Sources:
- wind turbines, photovoltaic farms, hydroelectric power stations, hydroelectric power station buildings and weirs, dams and hydroelectric equipment.
- in the Distribution Segment:
- power lines with a total length of approximately 246 thousand km;
- electrical substations (approximately 62 thousand units);
- transformers (approximately 60 thousand units).
tems of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. The cost includes:
- acquisition price or manufacturing cost,
- costs directly attributable to the purchase and bringing the asset to a usable condition,
- the expected cost of disassembly and removal of items of property, plant and equipment and restoration of their current location to its original condition (the accounting policy in the scope of creating provisions for these costs are presented in Note 43 to consolidated financial statements),
- external financing costs.
All material elements included in an asset but having various useful lives (components) are identified and separated as at the date of acquisition of an item of property, plant and equipment. Components also include costs of overhauls, periodic inspections and costs of replacing the main components. The Group recognises specialised spare parts and servicing equipment as separate items of property, plant and equipment, if their useful life period exceeds one year.
Depreciation is calculated by reference to the acquisition price or manufacturing cost of the fixed asset less its residual value. Depreciation of property, plant and equipment takes place based on the depreciation plan determining the estimated useful life of each fixed asset. Items of property, plant and equipment (including components) are depreciated on a straight-line basis over the period of their expected useful lives, except for land and fixed assets under construction, which are not subject depreciation. Specialised spare parts and service equipment are depreciated over the useful life of the fixed asset to which they relate.
External financing costs activated as assets component
Borrowing costs are capitalised as part of the manufacturing cost or acquisition price of the qualifying non-current assets. Borrowing costs consist primarily of interest on specific and general financing calculated using the effective interest rate method and foreign exchange differences arising on foreign currency financing to the extent that they are recognised as an adjustment to interest costs. The effective portion of the hedge for contracts that satisfy the hedge accounting criteria and are concluded in connection with financing the development of non-current assets is also capitalised.
The amount of general borrowing costs subject to activation is defined through the application of the capitalisation rate to the expenditure incurred for the adjustment of the component of assets. The rate of capitalisation is the average weighted rate of all borrowing costs related to external financing constituting liabilities in a given period, other than specific financing.
Fixed assets received free of charge and connection charges and subsidies to assets
Fixed assets received free of charge and connection fees are initially recognised at acquisition cost corresponding to the estimated fair value or value of cash received as a subsidy to assets. Revenues from fixed assets received free of charge, funded with subsidies, are recognized as accruals, deferred income in statement in financial position, are recognized as other operating revenues in the manner proportionate to the corresponding depreciation costs of received or purchased components of property, plant and equipment.
PROFESSIONAL JUDGEMENT AND ESTIMATES
Impairment
As at every balance sheet date the Group assesses whether objective indication of impairment occurs in relation to property, plant and equipment. Impairment tests for property, plant and equipment are carried out in line with the accounting policy presented in Note 14 hereto.
Average remaining useful lives of individual groups of fixed assets
| Generic group | Average remaining depreciation and amortisation period in years |
|---|---|
| Buildings, premises, civil and water engineering structures | 20 years |
| Technical equipment and machines | 12 years |
| Other tangible fixed assets | 4 years |
The depreciation method, the period of use and the residual value of fixed assets are reviewed at least at each financial year-end and any adjustments to depreciation charges are applied with effect from the beginning of the reporting period in which the review is completed. The review of the economic useful lives of property, plant and equipment and intangible assets carried out in 2022 resulted in a decrease in depreciation and amortisation costs by PLN 18 million in the Distribution segment and a decrease of PLN 11 million in the Generation segment.
Year ended 31 December 2022
| Land | Buildings, premises and civil engineering structures | Plant and machinery | Mine workings | Other | Assets under construction | Property, plant and equipment, total |
|
|---|---|---|---|---|---|---|---|
| COST | |||||||
| Opening balance | 144 | 31 221 | 25 948 | 280 | 978 | 1 773 | 60 344 |
| Direct purchase | − | 5 | 5 | 2 | − | 2 862 | 2 874 |
| Borrowing costs | − | − | − | − | − | 28 | 28 |
| Transfer of assets under construction | 2 | 1 741 | 964 | − | 45 | (2 752) | − |
| Sale | − | 1 | (115) | − | (14) | (2) | (130) |
| Transfer to/from assets held for sale | (3) | (1 487) | (1 691) | (408) | (71) | (304) | (3 964) |
| Liquidation | − | (57) | (107) | (138) | (14) | − | (316) |
| Received free of charge | − | 27 | 1 | − | − | − | 28 |
| Acquisition of a subsidiary | 3 | 30 | 2 | − | − | − | 35 |
| Overhaul expenses | − | − | − | − | − | 152 | 152 |
| Items generated internally | − | − | − | 270 | − | 76 | 346 |
| Cost of disassembly of wind farms and decommissioning of mines | − | (100) | (15) | − | − | − | (115) |
| Other movements | − | 76 | (24) | − | − | (13) | 39 |
| Closing balance | 146 | 31 457 | 24 968 | 6 | 924 | 1 820 | 59 321 |
| ACCUMULATED DEPRECIATION | |||||||
| Opening balance | − | (14 276) | (15 840) | (105) | (728) | (221) | (31 170) |
| Depreciation for the period | − | (896) | (892) | (110) | (59) | − | (1 957) |
| Impairment | − | (47) | (30) | (52) | (1) | (60) | (190) |
| Sale | − | (1) | 114 | − | 14 | − | 127 |
| Liquidation | − | 50 | 98 | 138 | 14 | − | 300 |
| Transfer to/from assets held for sale | − | 1 395 | 1 531 | 129 | 66 | 179 | 3 300 |
| Other movements | − | (15) | (1) | − | 2 | 14 | − |
| Closing balance | − | (13 790) | (15 020) | − | (692) | (88) | (29 590) |
| NET CARRYING AMOUNT AT THE BEGINNING OF THE PERIOD | 144 | 16 945 | 10 108 | 175 | 250 | 1 552 | 29 174 |
| NET CARRYING AMOUNT AT THE END OF THE PERIOD | 146 | 17 667 | 9 948 | 6 | 232 | 1 732 | 29 731 |
| of which operating segments: | |||||||
| Generation | 46 | 2 460 | 3 503 | − | 20 | 352 | 6 381 |
| Renewable Energy Sources | 1 | 903 | 1 191 | − | 2 | 74 | 2 171 |
| Distribution | 83 | 13 559 | 5 065 | − | 177 | 1 193 | 20 077 |
| Other segments and other operations | 16 | 745 | 189 | 6 | 33 | 113 | 1 102 |
Year ended 31 December 2021
| Land | Buildings, premises and civil engineering structures | Plant and machinery | Mine workings | Other | Assets under construction | Property, plant and equipment, total |
|
|---|---|---|---|---|---|---|---|
| COST | |||||||
| Opening balance | 143 | 29 748 | 25 206 | 258 | 976 | 1 888 | 58 219 |
| Zakup bezpośredni | – | – | – | 2 | – | 2 487 | 2 489 |
| Borrowing costs | – | – | – | – | – | 14 | 14 |
| Transfer of assets under construction | 2 | 1 702 | 994 | – | 38 | (2 736) | − |
| Sale | (1) | (38) | (137) | – | (6) | (4) | (186) |
| Liquidation | – | (46) | (140) | (149) | (17) | – | (352) |
| Received free of charge | – | 43 | – | – | – | – | 43 |
| Overhaul expenses | – | – | – | – | – | 94 | 94 |
| Items generated internally | – | – | – | 169 | – | 48 | 217 |
| Cost of disassembly of wind farms and decommissioning of mines | – | (159) | (14) | – | – | – | (173) |
| Other movements | – | (29) | 39 | – | (13) | (18) | (21) |
| Closing balance | 144 | 31 221 | 25 948 | 280 | 978 | 1 773 | 60 344 |
| ACCUMULATED DEPRECIATION | |||||||
| Opening balance | – | (13 010) | (14 570) | (138) | (704) | (292) | (28 714) |
| Depreciation for the period | – | (887) | (850) | (83) | (59) | – | (1 879) |
| Impairment | – | (484) | (674) | (33) | (1) | 71 | (1 121) |
| Sale | – | 36 | 135 | – | 6 | 3 | 180 |
| Liquidation | – | 41 | 136 | 149 | 17 | – | 343 |
| Other movements | – | 28 | (17) | – | 13 | (3) | 21 |
| Closing balance | − | (14 276) | (15 840) | (105) | (728) | (221) | (31 170) |
| NET CARRYING AMOUNT AT THE BEGINNING OF THE PERIOD | 143 | 16 738 | 10 636 | 120 | 272 | 1 596 | 29 505 |
| NET CARRYING AMOUNT AT THE END OF THE PERIOD | 144 | 16 945 | 10 108 | 175 | 250 | 1 552 | 29 174 |
| of which operating segments: | |||||||
| Mining | 3 | 201 | 176 | 169 | 3 | 117 | 669 |
| Generation | 42 | 2 513 | 3 651 | – | 24 | 114 | 6 344 |
| Renewable Energy Sources | – | 791 | 1 172 | – | 3 | 93 | 2 059 |
| Distribution | 81 | 12 851 | 4 939 | – | 196 | 1 065 | 19 132 |
| Other segments and other operations | 18 | 589 | 170 | 6 | 24 | 163 | 970 |
In the year ended 31 December 2022, the Group purchased property, plant and equipment (including capitalised borrowing costs) in the amount of PLN 2 902 million. The major purchases were performed in connection with investment in the following operating segments:
| Operating segment | Year ended 31 December 2022 |
Year ended 31 December 2021 |
|---|---|---|
| Distribution | 2 082 | 1 988 |
| Renewable Energy Sources | 367 | 81 |
| Generation | 166 | 116 |
The average capitalisation rate of borrowing costs was 4.7% for the year ended 31 December 2022 and 2.8% for the year ended 31 December 2021.
The main investment tasks implemented by the Group in the financial year 2022 are described in section 1.5. of the Management Board report on the activities of TAURON Polska Energia S.A. and TAURON Capital Group for the financial year 2022.
The impairment losses on property, plant and equipment had an impact on the results of continued and discontinued operations in the following operating segments:
Year ended 31 December 2022
| Continuing operations | Discontinued operations | Total | ||
|---|---|---|---|---|
| Generation | Distribution | Mining | ||
| Increase of impairment | (59) | (3) | (128) | (190) |
| Total impact on the profit (loss) for the period: | (59) | (3) | (128) | (190) |
| Continuing operations | (59) | (3) | − | (62) |
| Discontinued operations | − | − | (128) | (128) |
Year ended 31 December 2021
| Continuing operations | Discontinued operations | Total | |||
|---|---|---|---|---|---|
| Generation | Distribution | Other | Mining | ||
| Increase of impairment | (942) | (1) | (1) | (181) | (1 125) |
| Decrease of impairrment | 1 | 3 | − | – | 4 |
| Total impact on the profit (loss) for the period: | (941) | 2 | (1) | (181) | (1 121) |
| Continuing operations | (941) | 2 | (1) | − | (940) |
| Discontinued operations | − | − | − | (181) | (181) |
In addition, the Group measured the net assets of TAURON Wydobycie S.A. to the fair value due to its classification as a disposable group held for sale, resulting in the recognition of an impairment allowance of PLN 460 million, which reduced the value of non-financial non-current assets within the disposable group classified as held for sale.