Liquidity risk

Maturity analysis for financial liabilities as at 31 December 2022

Maturity analysis for financial liabilities as at 31 December 2021  

A financial liquidity risk is the loss of ability to settle current liabilities on time.

The ORLEN Group is exposed to liquidity risk resulting from the relation between current assets and current liabilities. As at 31 December 2022 and 31 December 2021, the current liquidity indicator amounted to 1.3.

The objective of the liquidity risk management process is to ensure the Group's financial security and financial stability, and the basic tool limiting the above risk is the ongoing review of matching maturities of assets and maturity of liabilities. Moreover, the ORLEN Group carries out a policy of its financing sources diversification and uses range of tools for effective liquidity management.

The ORLEN Group uses systems of cash concentration ("cash-pool systems") which is a solution to optimize financial liquidity and financial costs within the ORLEN Group. As at 31 December 2022, the following cash-pool systems existed operated by:

a) ORLEN:

• cash-pooling systems dedicated to Polish subsidiaries of the ORLEN Group, including in a total 60 ORLEN Group subsidiaries,
• international cash-pooling system dedicated to foreign subsidiaries of the ORLEN Group, including 8 ORLEN Group foreign subsidiaries;

b) ENERGA:

• cash-pooling systems for Polish companies of the ENERGA Group, including in a total 23 companies of the ENERGA Group.

To service the Group's liquidity, the Group utilised full factoring agreements (non-recourse)  in 2022, enabling it to raise additional funds during periods of temporary, increased demand for funds. Additional information about value of trade receivables available to use within valid limits is presented in note 14.5.2.

Group may issue bonds within the settled limits as well as purchase bonds issued by the ORLEN Group entities when managing liquidity. Additional information about bonds in note 14.7.3.

There is no concentration of credit risk in ORLEN Group in relation to cooperating banks. The percentage share of the three banks with the highest concentration of cash as at 31 December 2022 is: 17%, 16% and 13% of the total cash balance. In 2022, the ORLEN Group invested surplus cash mainly in bank deposits. Decisions made regarding bank deposits are based on maximising the rate of return with respect of set concentration limits for each bank and the current assessment of the financial condition of the banks which requires an investment grade of short-term deposit rating for the bank. The expected credit loss (ECL) on the short-term deposits opened in the ORLEN Group as at 31 December 2022 was not material. 

As at 31 December 2022 and as at 31 December 2021 the maximum possible indebtedness due to loans amounted to PLN 51,860 million and PLN 19,063 million, respectively. As at 31 December 2022 and as at 31 December 2021 PLN 43,314 million and PLN 14,960 million, respectively, remained unused. The increase in the maximum possible indebtedness in Group and the availability of open credit lines results mainly from:

• financial agreements signed by ORLEN: in October 2022 an annex to the loan agreement amending the amount to PLN 1.1 billion with Bank Gospodarstwa Krajowego and in July 2022 loan agreement in the amount of EUR 300 million with SMBC Group entities,
• merger with the PGNiG Group together with its active financial agreements and the maximum possible indebtedness in the amount of PLN 29,853 million and the open credit lines in the amount of PLN 26,208 million.

The value of guarantees regarding liabilities to third parties granted during ongoing operations as at 31 December 2022 and as at 31 December 2021 amounted to PLN 780 million (including PLN 316 million of exPGNiG Group subsidiaries) and PLN 486 million, respectively. Guarantees concerned mainly: civil-law guarantees of contract performance and public-law guarantees resulting from generally applicable regulations secured regularity of business licensed in the liquid fuels sector and resulting from this activity tax and customs receivables.

In addition, guarantees and sureties granted in the Group on behalf of related parties as at 31 December 2022 and as at 31 December 2021 amounted to PLN 31,632 million and PLN 14,385 million, respectively. They were mainly related to secure liabilities of PGNiG Supply&Trading GmbH and PGNiG Upstream Norway AS arising from operational activities in the total amount of PLN 14,094 million and secure of ORLEN Group subsidiaries’  future liabilities due to transactions of Eurobonds issuance in total amount of PLN 11,424 million as well as timely payment of liabilities by related parties.

The agreement to terminate a corporate suretyship granted by Rafineria Gdańska for ORLEN in the amount of  PLN 1,373 million, was signed on 3 March 2023.

Based on analysis and forecasts as at the end of the reporting period, the Group recognised the probability of payment of above amounts as low.

Credit risk

The Group is exposed to credit risk resulting mainly from trade receivables and granted borrowings as well as traded derivative transactions.

The Group assess that the risk of unsettled trade receivables by customer in the field of undue receivables and due receivables not covered by write-down is negligible due to management of trade credit and debt collection.

In the process of granting trade credit, the Group: assesses the creditworthiness of its customers on the basis of conducted financial analysis and on the basis of past cooperation history or a current report from business information agency, and then sets credit limits and, in certain cases, establishes appropriate securities. The Group has the possibility to compensate mutual receivables and also uses the solution in the form of reverse factoring. In addition, the Group performs periodic financial verification of customers, including the amount of granted credit limits. The securities to be accepted mainly include: bank or insurance guarantees, sureties of other entities, deposits placed on the Group's account, mortgages, bills of exchange, credit limit insurance, voluntary submission to execution (Article 777 of the Code of Civil Procedure).  As at 31 December 2022 and as at 31 December 2021 the Group received bank and insurance guarantees in the amount of PLN 7,585 million and PLN 5,482 million, respectively.

As a result of the foregoing actions, the probability of concluding a credit-risky deferred payment transaction is reduced.

In the process of debt collection, the Group monitors the status of overdue receivables and number of overdue days on an ongoing basis. In its debt collection activities, it uses standard actions: notification of existing outstanding debts, request for payment, withholding of deliveries, activation of securities held, directing the case to external debt collection companies and, ultimately, termination of the contract and taking legal and enforcement action. Receivables not recovered in the process of collection, as provided for in the procedures, may be submitted for sale.

Part of gas and electric sales transactions are traded on Towarowa Giełda Energii (TGE). Transactions entered into TGE do not generate credit risk exposure, as the clearing system operated through the Izba Rozliczeniowa Giełd Towarowych (IRGiT), is based on established transaction margins and, in addition, the guarantee fund, which ensure the security of deferred payments for each House Member, even in the event of insolvency of market participants.

Derivative transactions are traded with banks with a recognised reputation and high financial standing or are concluded on commodity exchanges with a margin-based clearing system in place. Cooperation with banks is based on the concluded Master Agreements or ISDA agreements, where for some of the agreements threshold amounts are defined for the maximum exposure from the traded derivatives transactions. In view of the above, the Group assesses the risk of incurring losses due to the failure of banks to pay or settle their hedging transactions on time as low. There is no such risk with commodity exchange transactions.

In the Group opinion, there is no significant concentration of credit risk.

The maximum credit risk exposure for each class of financial assets held by the Group is equal to their book values (note 14.5.2, 14.10.1).