32. Financial instruments

32.1. Financial instruments by category and class 

Financial assets

31/12/2014

Financial instruments by category
Financial instruments by classNOTEFinancial assets at
fair value through
profit or loss
Loans andreceivablesFinancial assetsavailable for saleHedging financial instrumentsTotal
Unquoted shares - - 40 -
40
Deposits 21 - 24 - - 24
Trade receivables 20 - 5 938 - - 5 938
Loans granted 17,21 - 3 - - 3
Embedded derivatives and hedging instruments 17,21 44 - - 994 1 038
Cash and cash equivalents 22 - 3 937 - - 3 937
Other 17,20,21 - 142 - - 142
44 10 044 40 994 11 122

31/12/2013

Financial instruments by category
Financial instruments by class (restated data)NOTEFinancial assets at fair value through profit or lossLoans and receivablesFinancial assets available for saleHedging financial instrumentsTotal
Unquoted shares - - 40 - 40
Deposits 21 - 4 - - 4
Trade receivables 20 - 6 372 - - 6 372
Sale of non-financial non-current assets 17 - 8 - - 8
Loans granted 17,21 - 11 - - 11
Embedded derivatives and hedging instruments 17,21 11 - - 266 277
Cash and cash equivalents 22 - 2 689 - - 2 689
Other 17,20 - 171 - - 171
11 9 255 40 266 9 572

Financial liabilities

31/12/2014

Financial instruments by category
Financial instruments by classNOTEFinancial liabilities at fair value through profit or lossFinancial liabilities measured at amortised costHedging financial instrumentsLiabilities excluded from the scope of IAS 39Total
Bonds 24 - 4 161 - - 4 161
Loans 24 - 6 491 - - 6 491
Borrowings 24 - 5 - - 5
Finance lease 26,27 - - - 116 116
Trade liabilities 27 - 7 049 - - 7 049
Investment liabilities 26,27 - 1 048 - - 1 048
Embedded derivatives and hedging instruments 26,29 30 - 2 589 - 2 619
Other 26,27 - 137 - - 137
30 18 891 2 589 116 21 626

31/12/2013

Financial instruments by category
Financial instruments by class (restated data)NOTEFinancial liabilities at fair value through profit or lossFinancial liabilities measured at amortised costHedging financial instrumentsLiabilities excluded from the scope of IAS 39Total
Bonds 24 - 1 718 - - 1 718
Loans 24 - 5 638 - - 5 638
Borrowings 24 - 1 - - 1
Finance lease 26,27 - - - 102 102
Trade liabilities 27 - 9 889 - - 9 889
Investment liabilities 26,27 - 872 - - 872
Hedging instruments 26,29 46 - 93 - 139
Other 26,27 - 124 - - 124
46 18 242 93 102 18 483

     

32.2. Income, expense, profit and loss in the consolidated statement of profit or loss and other comprehensive income

2014

Financial instruments by category
NOTEFinancial assets and liabilities at fair value through profit or lossLoans and receivablesFinancial assets available for saleFinancial liabilities measured at amortised costHedging financial instrumentsLiabilities excluded from the scope of IAS 39Total
Interest income 10.1 - 75 - - - - 75
Interest costs 10.2 - - - (236) - (6) (242)
Foreign exchange (losses) 10 - (200) - (1 259) - - (1 459)
Recognition/reversal of receivables impairment allowances recognized in:
- other operating income/expenses 9.1,9.2 - (36) - - - - (36)
- finance income/costs 10 - 5 - - - - 5
Settlement and valuation of financial derivatives, net 10 102 - - - (5) - 97
Dividends 10 - - 2 - - - 2
Income/costs on fees and commissions 10 - 18 - (29) - - (11)
102 (138) 2 (1 524) (5) (6) (1 569)
other, excluded from the scope of IFRS 7
Provisions discounting 10 (2)
Recognition/reversal of allowance for impairment of receivables recognised in
other operating income/expenses 9.1,9.2 5
3

2013

Financial instruments by category
(restated data)NOTEFinancial assets and liabilities at fair value through profit or lossLoans and receivablesFinancial assets available for saleFinancial liabilities measured at amortised costHedging financial instrumentsLiabilities excluded from the scope of IAS 39Total
Interest income 10.1 - 113 - - - - 113
Interest costs 10.2 - - - (262) - (6) (268)
Foreign exchange gains/(losses) 10 - (102) - 223 - - 121
Recognition/reversal of receivables impairment allowances recognized in:
- other operating income/expenses 9.1,9.2 - (18) - - - - (18)
- finance income/costs 10 - (4) - - - - (4)
Settlement and valuation of financial derivatives, net 10 (16) - - - 2 - (14)
Dividends 10 - - 2 - - - 2
Income/costs on fees and commissions 10 - (2) - (24) - - (26)
(16) (13) 2 (63) 2 (6) (94)
other, excluded from the scope of IFRS 7
Provisions discounting 10 (2)
Interest costs 10.2 (72)
Recognition/reversal of allowance for impairment of receivables recognised in
other operating income/expenses 9.1,9.2 (9)
(83)

      

32.3. Financial assets pledged as collateral for liabilities or contingent liabilities 

Information about the collaterals is presented in note 30

32.4. Hedge accounting 

32.4.1. Cash flow hedge accounting 

As a part of hedging strategy the ORLEN Group hedges its cash flows:

  • from operating activities using non-deliverable sales/purchase forwards, 
  • from sales of the Group’s products and purchase of crude oil using commodity swaps,
  • from periodic changes in the operating inventory level using commodity swaps, 
  • from interest payments concerning external financing using interest rate swaps (IRS),
  • from investment projects using foreign exchange forwards,
  • from repurchase of previously sold mandatory reserves tranches of crude oil using commodity swaps and currency forwards.

As at 31 December 2014 the net negative valuation of instruments in hedge accounting presented in notes 17, 21, 26, 29 of these financial statements amounted to PLN (1,595) million and concerned mainly valuation of commodity swaps hedging future price of repurchase of mandatory crude oil reserves planned for January 2015 and 2016 – additional information on the above transactions in note 19.2. As at 31 December 2014 the valuation results mainly from decrease in crude oil prices on global markets observed especially in the II half of 2014 and the beginning of 2015. 

Hedging transactions, which settlement and fair value measurement influence the foregoing consolidated financial statements were concluded in the years 2012 – 2014.

– net fair value which will be recognized in the profit or loss at the realization date

31/12/201431/12/2013
Planned realization date of hedged cash flows
Currency operating exposure
2014 - 56
2015 133 -
Finance currency exposure
2014 - (47)
2015 16 -
2016 16 -
Interest rate exposure
2014 - 2020 - (8)
2015 - 2017 (15) -
2015 - 2018 (6) -
2015 - 2019 (90) -
2015 - 2020 (93) -
Commodity risk exposure
2014 - 78
2015 (432) 94
2016 (1 086) -
2017 (33) -
2018 (5) -
(1 595) 173

In 2014 and 2013 the cash flow hedges that meet the criteria for hedge accounting, an ineffective part was recognized in profit or loss of PLN (5) million and PLN 2 million, respectively.

32.4.2.Net investment hedge in a foreign operation 

From 2008 to 30 June 2014 the Group had been using net investement hedge in a foreign operation. Net investment hedge hedged currency risk of the portion of net investment in AB ORLEN Lietuva that uses USD as its functional currency. Financial liabilities denominated in USD were designated as an instrument hedging share in net assets of ORLEN Lietuva Group. As at 31 December 2013, negative foreign exchange differences resulting from translation of the above liabilities into PLN amounted to PLN (659) million (including the impact of income tax) and were recognized in equity in the line “Foreign exchange differences on subsidiaries from consolidation”.

As at 30 June 2014 this reclassification to the consolidated statement of profit or loss and other comprehensive income was made and thereby the Group ceased using of net investment hedge in a foreign operation, due to decrease in hedged position as a result of a recognition of the impairment allowance of non-current assets in ORLEN Lietuva Group. The reclassification had no influence on total equity of the Group.

32.5. Financial risk management 

The ORLEN Group's operations are exposed to the following risks:

  • market risk, including:
    • commodity risk
    • foreign currency risk and
    • interest rate risk
  • liquidity and credit risk 
  • other, disclosed in details in the Management Board Report on the operations of ORLEN Capital Group in point 5.4.

The ORLEN Group applies a consistent financial risk hedging policy based on market risk management policy supported and supervised by the Financial Risk Committee, Management Board and Supervisory Board.

32.5.1.Market risks 

Market risk is a possible negative impact on the Group’s results due to changes of commodities prices, currency exchange rates and interest rates. 

The objective of market risk management is to reduce the unfavorable effects of changes in market risk factors on the cash flows and financial results. 

The above mentioned risks are managed on the basis of market risk management policy and hedging strategies, which define the principles of measurement of individual exposure parameters and the time horizon of risk hedging and hedging instruments. 

Market risk management is conducted using derivative instruments which are used solely to reduce the risk of changes in fair value and risk of changes in cash flows. 

As far as market valuation of the instruments is concerned, the Group uses its own records and valuation for derivatives as well as relies on information obtained from market leading banks, brokers and information services. Transactions are concluded only with reliable partners, authorized to participate in transactions through the application of appropriate procedures and signing the relevant documentation.

32.5.1.1.Commodity risks 

As part of its operating activity the ORLEN Group is exposed mainly to the following commodity risks:

  • risk of changes in refining and petrochemical margins on the sale of products and Ural/Brent differential fluctuations- hedges on an irregular basis as a part of hedging strategies.
  • risk of changes in crude oil and products prices related to the time mismatch between the date of the crude oil purchase and the date of its processing and sale of products, oversize periodic stock of operational crude oil and/or products, as well as future sales transactions - identified and hedged in a systematic and regular manner, 
  • risk of changes in CO2 emission rights prices - hedged on a regular basis through periodic verification of numbers of owned and required rights to CO2 emission with determining the method of balancing of the future shortages or surpluses. In 2014 and 2013, the Group concluded forward and spot transactions for purchase of rights which in the future will be amortized as a settlement of CO2 emissions. Valuations of these transactions are not subject to recognition in the consolidated financial statement, as purchased emission rights will be used for own purposes,
  • risk of changes in crude oil and refinery product prices related to the obligation to maintain mandatory reserves of crude oil and fuels - is not hedged on purpose due to the permanent exposure and non-cash impact on the Group’s results.

32.5.1.1.1.The impact of commodity hedging instruments on the Group's financial statements 

Type of hedged raw material/productUnit of measure31/12/201431/12/2013
Crude oil bbl 24 839 704 11 964 386
Diesel oil Mt 1 428 580 130 515
Gasoline Mt 370 814 51 477
Heating oil Mt 769 694 26 095

Sensitivity analysis of commodity risk 

Analysis of the influence of changes in the carrying amount of financial instruments on result before tax and hedging reserve to a hypothetical change in prices of products and raw materials:

31/12/2014

Increase of pricesTotal influenceDecrease of pricesTotal influence
Crude oil USD/bbl; CAD/bbl 19% 591 -19% (591)
Diesel oil USD/Mt 17% (120) -17% 120
Gasoline USD/Mt 21% (74) -21% 74
Heating oil USD/Mt 20% 22 -20% (22)
419 (419)

including:

Influence on result before tax
Increase of pricesInfluenceDecrease of pricesInfluence
Crude oil USD/bbl; CAD/bbl 19% 219 -19% (219)
Diesel oil USD/Mt 17% (106) -17% 106
Gasoline USD/Mt 21% (70) -21% 70
Heating oil USD/Mt 20% (26) -20% 26
17 (17)

Influence on hedging reserve
Increase of pricesInfluenceDecrease of pricesInfluence
Crude oil USD/bbl; CAD/bbl 19% 372 -19% (372)
Heating oil USD/Mt 17% (14) -17% 14
Gasoline USD/Mt 21% (4) -21% 4
Heating oil USD/Mt 20% 48 -20% (48)
402 (402)

31/12/2013

 Increase of pricesTotal influenceDecrease of pricesTotal influence
Crude oil USD/bbl; CAD/bbl 17% 178  -17% (178)
Diesel oil USD/Mt 17% (63) -17% 63 
Gasoline USD/Mt 17% (14) -17% 14 
Heating oil USD/Mt 14% -14% (5)
    106   (106)

including:

Influence on result before tax
Increase of pricesInfluenceDecrease of pricesInfluence
Crude oil USD/bbl; CAD/bbl 17% (166) -17% 166
Diesel oil USD/Mt 17% (63) -17% 63
Gasoline USD/Mt 17% (13) -17% 13
(242) 242

Influence on hedging reserve
Increase of pricesInfluenceDecrease of pricesInfluence
Crude oil USD/bbl; CAD/bbl 17% 344 -17% (344)
Heating oil USD/Mt 14% 5 -14% (5)
Gasoline USD/Mt 17% (1) -17% 1
348 (348)

Applied for the sensitivity analysis of commodity risk hedging instruments variations of crude oil and products prices were calculated based on volatility for 2014 and 2013 and available analysts’ forecasts.

The influence of changes of prices was presented on annual basis. 

Fair value of commodity swaps is calculated based on discounted future cash flows of executed transactions, calculated as a difference between term and transaction price.

In case of derivatives, the influence of crude oil, and products prices variations on fair value were examined at constant level of currency rates.

The net carrying amount of hedging instruments for commodity risk as at 31 December 2014 and as at 31 December 2013 amounted to PLN (1,550) million and PLN 131 million, respectively.

32.5.1.2. Currency risk 

As part of its business activities the ORLEN Group is exposed to the following risks from foreign currency:

  • economic currency exposure over the next 12 months that results from reduced by indexed of denominated in other that functional currency expense - regularly and actively hedged using purchase or sales currency forwards, 
  • balance sheet exposure resulting from denominated in foreign currency assets and liabilities – hedged on an irregular basis in selected elements of exposure, 
  • currency risk related to investments expenditures - regularly hedged by forward currency purchase transactions of foreign currencies in which the expenses are incurred,
  • currency risk related to economic currency exposure and to concluded future transactions of sales or purchase -  regularly and actively hedged using purchase or sales currency forwards.

32.5.1.2.1.The impact of currency changes on the Group’s financial statements 

Currency structure of financial instruments as at 31 December 2014

Financial instruments by categoryEURUSDCZKCADLTLOther currencies after translation to PLNTotal after translation to PLN
Financial assets
Deposits 2 - - - 13 - 24
Trade receivables 408 95 6 424 - 101 76 3 259
Loans granted - - 12 - - - 3
Embedded derivatives and 2 251 911 - - 10 1 038
hedging instruments
Cash and cash equivalents 52 47 1 406 - 9 - 617
Other 5 - 484 2 23 129
469 393 9 237 2 146 86 5 070
Financial liabilities
Bonds 502 - - - - 2 141
Loans 981 156 5 504 147 1 - 6 020
Finance lease - - 1 - - -
Trade liabilities 207 1 210 3 797 - 86 28 5 845
Investment liabilities 47 14 358 - 4 98 407
Embedded derivatives and 50 676 224 - - - 2 618
hedging instruments
Other 4 1 195 - - - 48
1 791 2 057 10 080 147 91 126 17 079

Sensitivity analysis for currency changes risk 

The influence of changes in carrying amounts of financial instruments arising from hypothetical changes in exchange rates of relevant currencies in relation to presentation currency (PLN) on profit before tax (A), hedging reserve (B) and foreign exchange differences on subsidiaries from consolidation (C):

31/12/2014

Increase of exchange rateTotal influenceDecrease of exchange rateTotal influence
EUR/PLN 15% (706) -15% 706
USD/PLN 15% (1 058) -15% 1 058
CZK/PLN 15% (42) -15% 42
CAD/PLN 15% (66) -15% 66
LTL/PLN 15% 16 -15% (16)
(1 856) 1 856

including:

Influence on result before tax (A)
Increase of exchange rateInfluenceDecrease of exchange rateInfluence
EUR/PLN 15% 128 -15% (128)
USD/PLN 15% (779) -15% 779
CAD/PLN 15% (66) -15% 66
(717) 717

Influence on hedging reserve (B)
Increase of exchange rateInfluenceDecrease of exchange rateInfluence
EUR/PLN 15% (683) -15% 683
USD/PLN 15% (58) -15% 58
(741) 741

Influence of foreign operations on foreign exchange differences on subsidiaries from consolidation ( C )
Increase of exchange rateInfluenceDecrease of exchange rateInfluence
EUR/PLN 15% (151) -15% 151
USD/PLN 15% (221) -15% 221
CZK/PLN 15% (42) -15% 42
LTL/PLN 15% 16 -15% (16)
(398) 398

The influence of changes in relevant currencies in relation to presentation currency (PLN) on equity due to foreign exchange differences on translation of total net assets in a foreign operation (including sensitivity of financial instruments of foreign entities on foreign exchange differences on subsidiaries from consolidation) as at 31 December 2014:

Sensitivity of a net investment in a foreign operations including hedging reserve (D)
Increase of exchange rateInfluenceDecrease of exchange rateInfluence
EUR/PLN 15% 71 -15% (71)
USD/PLN 15% 56 -15% (56)
CZK/PLN 15% 650 -15% (650)
CAD/PLN 15% 178 -15% (178)
955 (955)

Currency structure of financial instruments as at 31 December 2013

Financial instruments by category (restated data)EURUSDCZKCADLTLJPYOther currencies after translation to PLNTotal after translation to PLN
Financial assets
Deposits - 1 - - - - - 4
Trade receivables 380 160 6 157 - 144 - 39 3 202
Loans granted - 1 37 - - - - 9
Embedded derivatives and hedging instruments 18 60 11 - 1 - - 257
Cash and cash equivalents 87 56 826 - 14 - 44 716
Other - 33 46 - - - - 108
485 311 7 077 - 159 - 83 4 296
Financial liabilities
Loans 550 844 3 529 59 1 - - 5 524
Trade liabilities 344 2 048 4 967 - 118 - 31 8 518
Investment liabilities 41 3 608 - 12 139 38 326
Hedging instruments 1 20 250 - - - - 110
Other 3 5 17 - 10 - - 42
939 2 920 9 371 59 141 139 69 14 520

Sensitivity analysis for currency changes risk 

The influence of changes in carrying amounts of financial instruments arising from hypothetical changes in exchange rates of relevant currencies in relation to presentation currency (PLN) on profit before tax (A), hedging reserve (B) and foreign exchange differences on subsidiaries from consolidation (C):

31/12/2013

(restated data)Increase of exchange rateTotal influenceDecrease of exchange rateTotal influence
EUR/PLN 15% (846) -15% 846
USD/PLN 15% (909) -15% 909
CZK/PLN 15% (58) -15% 58
CAD/PLN 15% (25) -15% 25
LTL/PLN 15% 4 -15% (4)
JPY/PLN 15% (1) -15% 1
(1 835) 1 835

including:

Influence on result before tax (A)
(restated data)Increase of exchange rateInfluenceDecrease of exchange rateInfluence
EUR/PLN 15% (312) -15% 312
USD/PLN 15% (688) -15% 688
CAD/PLN 15% (25) -15% 25
JPY/PLN 15% (1) -15% 1
(1 026) 1 026

Influence on hedging reserve (B)
Increase of exchange rateInfluenceDecrease of exchange rateInfluence
EUR/PLN 15% (552) -15% 552
USD/PLN 15% 255 -15% (255)
(297) 297

Influence of foreign operations on foreign exchange differences on subsidiaries from consolidation including net investment hedge in foreign operations ( C )
Increase of exchange rateInfluenceDecrease of exchange rateInfluence
EUR/PLN 15% 18 -15% (18)
USD/PLN 15% (476) -15% 476
CZK/PLN 15% (58) -15% 58
LTL/PLN 15% 4 -15% (4)
(512) 512

The influence of changes in relevant currencies in relation to presentation currency (PLN) on equity due to foreign exchange differences on translation of net assets in a foreign operation (including sensitivity of financial instruments of foreign entities on foreign exchange differences on subsidiaries from consolidation) as at 31 December 2013:

Sensitivity of a net investment in a foreign operations including hedging reserve (D)
Increase of exchange rateInfluenceDecrease of exchange rateInfluence
EUR/PLN 15% 82 -15% (82)
USD/PLN 15% 292 -15% (292)
CZK/PLN 15% 635 -15% (635)
CAD/PLN 15% 89 -15% (89)
1 098 (1 098)

Total influence of changes in exchange rates of significant currencies in relation to presentation currency (PLN) on equity including foreign exchange differences on translation of a net assets in a foreign operation as at 31 December 2013:

Total influence on profit or loss and other comprehensive income (A+B+D)
(restated data)Increase of exchange rateTotal influenceDecrease of exchange rateTotal influence
EUR/PLN 15% (782) -15% 782
USD/PLN 15% (141) -15% 141
CZK/PLN 15% 635 -15% (635)
CAD/PLN 15% 64 -15% (64)
JPY/PLN 15% (1) -15% 1
(225) 225

Variations of currency rates described above were calculated based on average volatility of particular currency rates in 2014 and 2013.

Sensitivity of financial instruments for currency risk was calculated as a difference between the initial carrying amount of financial instruments (excluding derivative instruments) and their potential amount calculated using assumed changes in currency rates. In case of derivative instruments the influence of currency rate variations on fair value was examined at constant level of interest rates. Fair value of currency forwards and foreign exchange swaps is calculated based on discounted future cash flows of concluded transactions as a difference between forward price and transaction price. 

32.5.1.3. Interest rate risk 

The ORLEN Group is exposed to the risk of volatility of cash flows due to changes in interest rates resulting from owned assets and liabilities for which interest gains or losses are dependent on the floating interest rates.

The ORLEN Group hedges the consolidated exposure to the variability of cash flows due to changes in interest rates. The key indicator of the Group's exposure to interest rate risk is the net positions for which interest costs are dependent on floating interest rates to total debt ratio. The objective of interest rate risk management is to maintain the above ratio at a certain level in a defined period of time. For this purpose interest rate swaps and currency interest rate swaps are being used.

32.5.1.3.1. The impact of interest rate on the Group’s financial statements 

Structure of financial instruments subject to interest rate risk

31/12/2014

Financial instruments by classNOTEWIBOREURIBORLIBOR USDPRIBORLIBOR CADVILIBORTotal
Financial assets
Deposits 21 - 9 - - - 15 24
Loans granted 17,21 - - - 3 - - 3
- 9 - 3 - 15 27
Financial liabilities
Bonds 24.2 1 919 - - - - - 1 919
Loans 24.1 471 4 183 547 846 443 1 6 491
Borrowings 24 5 - - - - - 5
Embedded derivatives and hedging instruments 26 111* 193* 11 - - - 204**
2 506 4 376 558 846 443 1 8 619**

*In the position financial liabilities - embedded derivatives and hedging instruments, the Group recognized cross interest rate swaps (CIRS) of PLN 111 million, which are sensitive to both WIBOR and EURIBOR interest rates. 

**Total includes CIRS valuation of PLN 111 million. 

The sensitivity analysis for interest rate risk includes interest rate swaps and cross interest rate swaps. The currency forwards and commodity swaps are not presented in the above table due to its transitory sensitivity for interest rate change. The sensitivity analysis for commodity risk and currency risk for those instruments is presented in notes 32.5.1.1.1 and 32.5.1.2.1.

Sensitivity analysis for interest rate risk

Interest rateAssumed variationInfluence on result before taxInfluence on hedging reserveTotal
31/12/201431/12/201320142013 (restated data)2014201320142013 (restated data)
WIBOR +0.5p.p. +0,5p.p. (12) (9) (3) (3) (15) (12)
LIBOR USD +0.5p.p. +0,5p.p. (3) (13) 14 14 11 1
EURIBOR +0.5p.p. +0,5p.p. (21) (11) 70 75 49 64
(36) (33) 81 86 45 53
WIBOR -0.5p.p. -0,5p.p. 12 9 3 4 15 13
12 9 3 4 15 13

The above interest rates variations were calculated based on observations of average interest rates fluctuations in 2014 and 2013.

Low interest rates of EURIBOR and LIBORUSD at the end of 2014 and 2013 and market forecasts for further periods caused that the Group did not take the further decrease in the sensitivity analysis into consideration. The Group does not consider in the sensitivity analysis change of PRIBOR and VILIBOR due to their insignificant impact.

The sensitivity analysis was performed on the basis of instruments held as at 31 December 2014 and as at 31 December 2013, the influence of interest rates changes was presented on annual basis.

The sensitivity of financial instruments for the risk of interest rate changes was calculated as arithmetic product of the balance of items, sensitive to interest rates changes (excluding derivatives) multiplied by adequate variation of interest rate.

For derivatives in sensitivity analysis for the risk of interest rate changes interest rate curve displacement due to potential reference rate change was used, provided that other risk factors remain constant.

32.5.2.Credit and liquidity risk 

Liquidity risk is the risk that the Group may be unable to settle its current liabilities on time.

The ORLEN Group is exposed to liquidity risk arising from the ratio of current assets to current liabilities. As at 31 December 2014 and 31 December 2013, the ratio of current assets to current liabilities (current ratio) amounted to 1.6 and 1.5, respectively.

The objective of liquidity risk management is to ensure the financial security and stability of the Group and the basic tool reducing above risk is the ongoing review of assets and liabilities maturity. Additionally, the ORLEN Group carries out a policy of its funding sources diversification and uses a range of tools for effective liquidity management. 

Banking sector has the majority share in Group’s financing and provides financing in the form of syndicated loans (representing the core bank funding source) and bilateral loans (overdrafts, multi-purpose credit lines, investment loans) of diversed maturity structure. 

The Group additionally takes advantage of two programs of PLN bonds and EUR bonds, that enable to use of resources outside the bank sector. 

Bonds issued under the Program realized since 2007 can be purchased by financial institutions and companies. The above mentioned program is also used in the ORLEN Group’s working capital management.

In 2013 a public bond issue program was launched, aimed at retail investors that ended by the last issuance tranche in 2014.

On 30 June 2014, PKN ORLEN’s subsidiary - ORLEN Capital AB issued eurobonds. Additional information is presented in note 5 and ‎24.

As at 31 December 2014 and as at 31 December 2013 the maximum possible indebtedness due to loans amounted to PLN 14,752 million and PLN 17,995 million, respectively. As at 31 December 2014 and as at 31 December 2013 PLN 7,150 million and PLN 11,232 million, respectively, remained unused. 

Additional information regarding loans, borrowings and debt securities is presented in note ‎24.

The ORLEN Group also uses cash pool systems to optimize financial costs and effective management of current liquidity within the Group.

In 2014 operated: PLN cash pool facility systems comprising 35 entities of the ORLEN Group as at 31 December 2014 and cross border cash pool facility system denominated in EUR, USD and PLN, comprised PKN ORLEN and foreign subsidiaries of the ORLEN Group (ORLEN Finance AB, ORLEN Lietuva Group, ORLEN Deutschland, Unipetrol Group).

The Group is exposed to credit risk associated with granted guarantees to contractors. The value of guarantees regarding liabilities to third parties granted during ongoing operations as at 31 December 2014 and as at 31 December 2013 amounted to PLN 592 million and PLN 508 million, respectively. These concern mainly: contract performance guarantees, customs and deposits guarantees, payment guarantees. Based on analysis and forecasts as at the end of the reporting period, the Group recognized the probability of payment of the above amounts as low.

Credit risk associated with cash and bank deposits is assessed by the Group as low due to domestic banks and branches of foreign banks in which cash is deposited have the highest short-term credit rating (57% of deposited cash) or good rating (43% of deposited cash).

Credit risk associated to assets resulting from the positive valuation of derivative instruments is assesses by the Group as low, due to the fact that all transactions are concluded with banks having high credit rating - one of the factors for bank choice is short-term and long-term investment rating on the level not lower than A.

The measure of credit risk is the maximum credit risk for each class of financial instruments, which is equal to their carrying amount. 

In order to minimize the risk the Group as at 31 December 2014 and as at 31 December 2013 received bank and issurance guarantees of PLN 3,143 million and PLN 2,218 million, respectively. Additionally the Group receives from its customers securities such as blockade of cash on bank accounts, semi deposits, mortgage and bills of exchange.

Credit risk is also related to the credit credibility of customers with whom sales transactions are concluded. Granting credit limit is subject to risk associated with unsettled receivables for the delivered products and services by the customers.

Above risk in the Group is partly reduced through a wide range of customers dispersed in various sectors of domestic and foreign economy. 

In order to minimize the above risk, detailed procedures are used regarding granting credit limits to the customers. Each time of customers’ financial situation is assessed and their credibility and solvency are verified and also ongoing monitoring of debtors turnover and their aging structure. The Group implements various legal forms of legal pledges (mortgages, guarantees, warranties, blockade of cash on bank accounts, security deposits, bills of exchange). For the customers to whom credit limits are granted, prepayment or cash is the valid form of payment in the initial period of cooperation.

In order to reduce the risk of customers’ insolvency, the Group also insures portion of its receivables within the organized trade credit insurance programs.

Based on the analysis of receivables the customers were divided into two groups:

  • I group – customers with good or very good history of cooperation in the current year;
  • II group – other customers.

The division of not past due receivables

NOTE31/12/201431/12/2013 (restated data)
Group I 4 558 5 021
Group II 937 1 061
17, 20 5 495 6 082

The ageing analysis of current receivables past due, but not impaired as at the end of the reporting period

NOTE31/12/201431/12/2013 (restated data)
up to 1 month 407 419
from 1 to 3 months 35 25
from 3 to 6 months 6 9
from 6 to 12 months 22 4
above 1 year 14 12
17,2 484 469

Maturity analysis for financial liabilities

31/12/2014

NOTEup to 1 yearfrom 1 to 3 yearsfrom 3 to 5 yearsabove 5 yearsTotalCarrying amount
Bonds 24.2 76 842 1 268 2 244 4 430 4 161
floating-rate bonds 71 832 1 258 - 2 161 1 919
- undiscounted value
fixed rate bonds 5 10 10 2 244 2 269 2 242
- undiscounted value
Loans - undiscounted value 24 1 055 825 4 645 302 6 827 6 491
Borrowings - undiscounted value 24 2 3 - - 5 5
Finance lease 26,27 26 36 16 38 116 116
Trade liabilities 27 7 049 - - - 7 049 7 049
Investment liabilities 26,27 923 14 110 1 1 048 1 048
Embedded derivatives and
hedging instruments- undiscounted value 
26,29 1 027 1 454 39 5 2 525 2 619
gross exchange amounts (10) (2) 17 - 5 112
currency swaps 29 1 - - - 1 1
currency interest rate swaps 26 (11) (2) 17 - 4 111
net exchange amounts 1 037 1 456 22 5 2 520 2 507
currency forwards 29 31 - - - 31 31
interest rate swaps 26 25 41 22 5 93 93
commodity swaps 26,29 981 1 415 - - 2 396 2 383
Other 26,27 108 29 - - 137 137
10 266 3 203 6 078 2 590 22 137 21 626

31/12/2013

(restated data)NOTEup to 1 yearfrom 1 to 3 yearsfrom 3 to 5 yearsabove 5 yearsTotalCarrying amount
Bonds 24.2 74 145 807 1 022 2 048 1 718
floating-rate bonds - undiscounted value 74 145 807 1 022 2 048 1 718
Loans - undiscounted value 24 917 4 882 1 - 5 800 5 638
Borrowings - undiscounted value 24 - 1 - - 1 1
Finance lease 26,27 30 32 13 27 102 102
Trade liabilities 27 9 889 - - - 9 889 9 889
Investment liabilities 26,27 871 1 - - 872 872
Hedging instruments - undiscounted value 26,29 105 (15) (37) (26) 27 139
gross exchange amounts (4) (17) (36) (24) -81 29
currency interest rate swaps 26 (4) (17) (36) (24) -81 29
net exchange amounts 109 2 (1) (2) 108 110
interest rate swaps 29 5 2 (1) (2) 4 6
currency forwards 29 60 - - - 60 60
commodity swaps 29 44 - - - 44 44
Other 26,27 93 31 - - 124 124
11 979 5 077 784 1 023 18 863 18 483

For currency interest rate swaps the level of discount rates cause that undiscounted value is a financial asset and discounted value is a financial liability.