61. Finance and capital management

The Company carries out a centralised finance management policy, allowing effective management in this respect at a level of the entire TAURON Group. The main tools allowing for effective management include the appropriate internal corporate regulations, as well as the TAURON Group’s cash pool service and intra-group loans. In addition, the finance management system is supported by the TAURON Group’s central financial risk management policy and the TAURON Group’s insurance policy. In these areas, the Company acts as a manager and decides on the direction of activities, enabling it to set appropriate risk exposure limits.

Detailed information concerning finance management is described in section 7.3. of the Management Board report on the activities of TAURON Polska Energia S.A. and TAURON Capital Group for the financial year 2022.

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

The main objective of the Group’s capital management is to maintain a good credit rating and safe capital ratios that would support the Group’s operations and increase value for its shareholders.

The Company primarily monitors the debt ratio of the Group, defined as the ratio of net financial debt to EBITDA. The TAURON Group’s net financial debt is defined in individual financing agreements and generally represents the obligation to pay or reimburse the money on account of loans, borrowings and debt securities and on account of financial leases (within the meaning of the provisions of the IAS 17 standard), excluding subordinated bond liabilities, less cash and short-term investments with a maturity of up to 1 year. EBITDA means the TAURON Group’s operating profit or loss plus depreciation and amortisation and write-downs on non-financial assets. The Company has the option, at its own discretion, to resign from including in the calculation the debt ratio the financing contracted by special purpose vehicles implementing RES projects under the project finance formula (as long as such debt has no recourse to the Company), while excluding the EBITDA value and cash of the relevant special purpose vehicle. In addition, sustainability indicators in the form of a RES capacity growth indicator and the CO₂ emission reduction indicator are monitored for some financing agreements.

The value of the indicators is monitored by the institutions financing the Group and rating agencies and affects the possibility and cost of fund-raising as well as the Company credit rating.

As at the balance sheet date, the debt ratio stood at 2.93, what is included in the terms of the financing agreements.

The change in debt liabilities is shown in the table below.