Our Strategy

• The advancement of projects aimed at automatisation of production in the Mining Divisions of KGHM, under the KGHM 4.0 program in the area INDUSTRY, was continued:
• The placement and identification of machinery and persons in underground mines” (pilot version and proof of proper functioning).
• “Broad-band data transmission in underground mines”.
• “Monitoring of utilities - power, ventilation, water”.
• “Robotisation of production and auxiliary processes” (construction of a CuXRF robot for scanning for copper content at the working faces in the mines) – the detailed technical scope of the project was developed. 
• “Centre of Advanced Data Analysis (Centrum Zaawansowanych Analiz Danych - CZAD)”.
• Work was also carried out on the project “Monitoring of mining vehicle parameters – continuation of the SYNAPSA project” – The functionality on mobile equipment of basic reporting of monitoring-generated data was tested. In 2019, 55 new machines equipped with monitoring were put into service, used to analyse the efficiency of the processes of ore loading and haulage, drilling and bolting. More than 200 machines in the mines are equipped with monitoring;
• To achieve savings through the acquisition of freely-granted energy efficiency certificates, in-depth energy efficiency audits were performed in respect of 9 activities which meet the requirements of the energy efficiency law. In 2020, subsequent energy efficiency audits are planned.
• In accordance with the implemented, PN-EN ISO50001:2012-compliant Energy Management System and with the Energy Savings Program (ESP), the Company continued to advance tasks aimed at reducing energy consumption. During the reporting period, tasks related to energy and savings were carried out in the Divisions of KGHM, as a result of which energy savings amounted to 3890 MWh. The energy savings planned for 2020 are around 1500 MWh.

• In 2019, production of payable copper amounted to 59.5 thousand tonnes, and production of molybdenum 11.2 million pounds (based on the 55% interest held by KGHM Polska Miedź S.A. in the Sierra Gorda mine).
• In 2019, the Sierra Gorda mine, in cooperation with representatives of KGHM Polska Miedź S.A., Sumitomo Metal Mining and Sumitomo Corporation, focused on preparing an Integrated Plan, which will comprise a new scope of work, schedule and costs involving optimisation of the production process and increasing sulphide ore throughput. The final results of this work will be known in the first half of 2020.

• The flash furnace of the Głogów I Copper Smelter and Refinery is operating in accordance with the present production plan. The project is at the conclusion stage.

• In 2019, the steam drier and the concentrate roasting installation were brought on-line. Basic work was completed under projects related to adapting technical infrastructure to the changes in smelting technology at the Głogów I Copper Smelter and Refinery. The process of concluding the project commenced.

• Revolving-Casting-Refining (RCR) Furnace
• In 2019, an RCR furnace was built and brought on-line at the Legnica Copper Smelter and Refinery with associated installations. Guarantee testing of the RCR furnace, Casting carousel and the Full Evaporation Tower with deduster was conducted with a positive result, and guarantee parameters were obtained. A scrap storage facility was constructed, thereby increasing scrap storage capacity by approx. 1500 tonnes of material.
• Permanent starter sheet technology
• In 2019, an economic feasibility study was carried out on the possibility of implementing new technology based on permanent starter sheets for the production of electrolytic copper at the Legnica Copper Smelter and Refinery with capacity of 120 thousand tonnes of copper cathode annually. Assumptions were reviewed and verified and an economic feasibility study was developed along with a sensitivity analysis regarding the conversion to permanent starter sheet technology.

•  The injection process was completed and sinking of the shaft reached a depth of 1099.3 m. Completion of the sinking of the shaft using tubing technology is planned by the end of the first quarter of 2020.

• An Area Planning Concept for the GG-2 „Odra” shaft was developed. Procedures were carried out related to the amendment of planning documentation (Study on Spatial Development Conditions and Directions and Local Zoning Plan) with a planned publication date of 15 February 2021. The inventorisation of buildings in the villages of Kamiona and Słone was carried out.

• 48.1 kilometres of tunnelling were excavated (versus a planned 46.6 km) along with added infrastructure in the Rudna and Polkowice-Sieroszowice mines. 
• Progress on the excavation of tunnels in the main directions towards the GG-1 shaft, as compared to the yearly plan, amounts to 97% (for directions D-1,2,3,4) and 95.3% (for directions T,W-169).

• Construction continued on the SCA at the GG-1 shaft. Assembly of the hall’s steel elements was completed along with construction of the power building. 
• Cooling aggregates were delivered to the construction site: compressors, absorbers. 
• 90% of the cooling tower’s supporting structure was assembled.

• Construction-mining work in feeder unit no. 1 was completed.
• 95% of drilling of technical openings TK-5 and TK-6 was completed. Completion of the drilling was planned for 30 January 2020. 
• 90% of the tri-unit feeder was assembled.
• Ułożono 15% rurociągów powierzchniowych.

• Based on the current building permits, work continued on construction of the Southern Quarter. Commencement of the gradual storage of tailings is planned for March 2021, and completion of construction by June 2022.

• The detailed design of TSCS project was prepared in that part related to hydrocyclone technology, with 70% of that part related to thickening technology being completed.
• The foundations and technical hall of the TSCS were built along with 97% of the power building using reinforced concrete. 
• Construction was carried out involving architecture and internal installations for the hall and power building, as well as on the installation of power lines. Technological equipment for the TSCS was purchased.

• Work continued on advancing stage 2 of exploration and evaluation work within the Retków-Ścinawa concession. In 2019, two surface-based drillholes were sunk and the drilling of a third commenced. In 2020, the drilling is planned to continue.
• In the first quarter of 2019, a decision was received from the Ministry of the Environment altering the Głogów concession, extending it by another three years. Further planned work within the Głogów concession involves the sinking of additional drillholes.

• Hydrogeological research continued on the terrain of the Synklina Grodziecka and Konrad concessions, which will continue to the end of August 2020.

• Concession-related proceedings are underway before the Minister of Climate. The Company expects a re-assessment of the submitted concession applications and the issuance of decisions. 

• In 2019, work on the terrain of the concession for the potassium-magnesium salts deposit in the Puck region involved the sinking of another drillhole, and a decision amending the concession was received, extending it to 2025. In 2020 further work and geological tasks are planned.

• W 2019 r. otrzymano koncesję na poszukiwanie i rozpoznawanie złóż ropy naftowej i gazu ziemnego w obszarze Nowe Miasteczko, która stała się ostateczna w grudniu 2019 r.

• In 2019, work continued on securing existing infrastructure and project terrain, as well as preparatory work aimed at conducting additional exploratory work and work related to an application to obtain the required environmental permits.
• In June 2019, the Canadian Environmental Assessment Agency decided that it was unnecessary to conduct an environmental assessment at the federal level, which means a positive conclusion to the process of obtaining an environmental permit. The Agency stated that the project’s environmental impact was properly described in the project description, and that the methods applied in the project for restricting its impact are in compliance with law in force. The Agency’s decision is a milestone in the development of the Victoria project.

• As a result of the negative decisions received from the Government of Canada and the provincial authorities of British Columbia against the granting of an Environmental Assessment Certificate for the Ajax project, in 2019 only necessary work related to securing existing infrastructure and required monitoring of the terrain was carried out.
• A strategy for further action in respect of the Ajax project was defined, foreseeing the commencement of the process of re-engaging with its stakeholders, aimed at improving relations with First Nations and the local community. Under this strategy, talks were held with First Nations representatives, among others during meetings between representatives of First Nations in the Kamloops region (Canada) and representatives of the Management Board of KGHM Polska Miedź S.A. in Poland in December 2019.

• Work continued aimed at preparing the project for realisation. This work included verifying the block model for the heaped oxide ore which has already been extracted from the mine and deposited at storage sites. The required changes for updating the project’s environmental permits were reviewed. Additional work was carried out in order to define the technical solutions for the heaped ore’s crushing and transport operations more precisely. Tests involving the leaching of the crushed ore in columns were completed and required analysis began of the post-leaching material, aimed at developing a final report.

• As a result of changes carried out in the financing structure in 2019, the average weighted maturity of the debt of KGHM Polska Miedź S.A. was extended, thereby advancing the strategic goal of utilising long-term financial instruments. The following events had a significant impact on the financing structure:

1. The opening of a renewable credit line under a working capital facility in the amount of USD 450 million under an agreement with the Bank Gospodarstwa Krajowego, concluded for a period of 7 years;
2. The drawing of two instalments from the EIB in the amount of USD 65 million and PLN 90 million, with maturity in 2031;
3. The issue of bonds, Series A, in the amount of PLN 400 million with a 5-year maturity, and Series B in the amount of PLN 1,600 million with a 10-year maturity;
4. The signing of an agreement for an unsecured syndicated credit facility in the amount of USD 1,500 million with a 5-year tenor with the option of extending for another 2 years. The credit facility replaced the current revolving syndicated credit facility in the amount of USD 2,500 million dated 11 July 2014.

• The Company is engaged in actions aimed at shortening the receivables recovery period and extending the liabilities payment period. The main area of change involved factoring and debt collection instruments. An agreement was signed for reverse factoring with a factoring limit of PLN 750 million. By the end of 2019, liabilities of PLN 596 million were transferred to factoring. An agreement was signed for the utilisation of the debtor registry, in order to minimise the risk of overdue debt arising.

• As part of the advancement of the Company’s strategic plan to secure against market risk, in 2019 hedging strategies were implemented on the copper market with a total notional amount of 153 thousand tonnes and a maturity period from July 2019 to December 2020 (of which: 135 thousand tonnes was in respect of hedging the copper price for 2020) and on the silver market with a total notional amount of 3.6 million ounces and a maturity period from January 2020 to December 2020. In addition, in 2019 the Company entered into transactions hedging against a change in the USD/PLN exchange rate with a total notional amount of USD 1,560 million and a maturity period from July 2019 to December 2021 (of which: USD 1,380 million was in respect of hedging the exchange rate for the years 2020-2021) as well as CIRS (Cross Currency Interest Rate Swap) transactions with a notional amount of PLN 2 billion, hedging against risk related to the issuance of bonds denominated in PLN with variable interest rates.

• WWith respect to ICT projects (Information and Communication Technologies):

1. The following projects were completed: Modernisation of the Central Internet Unit, Modernisation of Communications, Removing work stations with unsupported operating systems, Implementation of services-oriented architecture (SOA), Implementation of an ECM/BPM-class system, Development of network engineering, analysis and management systems and access control in an edge computing network, Implementation of a Data Loss Prevention (DLP) System, Monitoring of goods in transit.
2. With respect to the CRM (client relationship management) project – the first stage of implementation of the business concept was delivered – 61 of the planned 63 system functionalities have been delivered.
3. With respect to Industry projects (industrial production).
4. Work commenced aimed at the implementation of BigData with respect to industrial automation. 
5. Work is underway on integrating industrial programming with respect to the processing and metallurgical plants.
6. The first data was imported from the transmission systems of the Głogów Copper Smelter and Refinery aimed at supporting the efficiency of the production processes.
7. Under the project „Broadband transmission of data in underground mines” – at the Lubin mine the entire scope of work planned for 2019 was carried out. At the Rudna mine the second stage of work was completed, data transmission equipment was built. At the Polkowice-Sieroszowice mine a decision was made to cancel work in the G-63 section due to a water hazard.
8. With respect to supporting projects:
9. An IT system was implemented at the Company’s Head Office for supporting procurement.

• In 2019, under the BATAs Program, 22 projects were advanced (16 in the Głogów Copper Smelter and Refinery and 6 in the Legnica Copper Smelter and Refinery). As a result of preparatory work conducted under these projects, the decision was made to exclude six projects from the BATAs Program.
• In 2019, in the Głogów Copper Smelter and Refinery work was completed involving the sealing of conveyor belts and belt pulling stations for carrying copper concentrate, and construction of a gas desulphurisation installation for the Kaldo furnace was completed.
• At the Legnica Copper Smelter and Refinery, the modernised dedusting unit for three filters behind the shaft furnaces was brought on-line. In other projects, all planned agreements were signed for turn-key realisation and for the delivery of key equipment. In the case of most of the projects, work involving the preparation of opinions in respect of projects plans was either completed or is underway, and dismantling and re-assembly commenced. The process of receiving administrative decisions is underway.

• In 2019, in terms of the new strategy and current conditions in the Company, initiatives implemented under the previous planning outlook of the Occupational Health and Safety Program in all of its areas were reviewed and redefined: education, health and behaviour. In the second half of 2019, selected initiatives of the Occupational Health and Safety Program in KGHM Polska Miedź S.A. were implemented and a concept for implementing the new OHS ISO 45001:2018 standard was prepared.
• In the Company’s Divisions a unified plan for communicating policies, the vision, mission and the golden principles of OHS was implemented, and the system for controlling access to/egress from Company terrain and individual areas of the plants was unified. To increase employee awareness of workplace threats, instructional films and reconstruction of accidents were issued, along with iconographics and numerous articles involving industrial hygiene. The anti-collision system for supporting mining vehicle operators was developed, increasing the safety of persons working outside of mining machinery, and R&D work aimed at enhancing OHS in the Company was prepared.

Maintaining membership in the RESPECT Index / continuation in WIG-ESG

YES

YES

YES

YES

Maintaining position in the FTSE4Good Index Series

-

-

YES

YES

0% investment activity without a social dialogue policy

n/a

YES

YES

YES

Conclusion and maintaining of long-term contracts; achievement of a proper sales structure ensuring long-term relations with customers

n/a

YES

YES

YES

Sponsorship and charitable activities in building corporate social responsibility [sponsorship expenses for the purposes of the Company’s promotion and regional support. i.e. sports/culture/science]

PLN 26,6 milion

PLN 25,8 milion

PLN 29,6 milion

PLN 33,3 milion

Ore extraction (wet weight) per mine employee [tonne]

2 712

2 641

2 558

2 527

Production of electrolytic Cu per Company / metallurgical employee [tonne]

29 / 152

29 / 148

27 / 139

31 / 156

Maintaining Cu yields [%]

98,18

98,23

97,82

97,96

LTIRFKGHM (Lost Time Injury Frequency Rate KGHM)    

12.65

10,4

10,3 

10,3

Liabilities due to:

7 949

(1,0)

9 141

8 960

8 662

Bank loans

5 676

(58,0)

3 514

3 852

5 854

Other loans

2 246

+24,4

2 916

2 414

2 260

Debt securities

-

×

2 018

2 001

-

Leases

27

×25,6

693

693

548

Liabilities due to:

7 873

(3,2)

8 897

8 699

8 511

Bank loans

5 576

(58,9)

3 422

3 758

5 754

Other loans

2 217

+21,2

2 873

2 385

2 231

Debt securities

-

×

2 018

2 001

-

Cash pooling

80

+62,5

80

50

135

Leases

-

×

504

505

391

• Credit in the amount of USD 1,500 million (PLN 5,696 million), acquired on the basis of a financing agreement entered into by the Parent Entity with a syndicate banks group in 2019, with maturity falling on 19 December 2024 and the option of extending for a further 2 years (5+1+1). Interest is based on LIBOR plus a margin, which depends on the level of the net debt/EBITDA ratio. 
• The funds acquired under this credit were used to finance general corporate goals.

• Financing agreements signed by the Parent Entity with the European Investment Bank:
• in August 2014 in the amount of PLN 2,000 million, which was drawn in the form of three instalments with maturities falling on 30 October 2026, 30 August 2028 and 23 May 2029 and used to the full available amount. The funds acquired through this loan are being used to finance the Company’s investment projects related to modernisation of metallurgy and development of the Żelazny Most tailings storage facility, 
• in December 2017 in the amount of PLN 900 million, with availability of instalments of 34 months from the date the agreement was signed. Under this loan the Company drew three instalments with maturities falling on 28 June 2030, 23 April 2031 and 11 September 2031. As at 31 December 2019, the available, undrawn limit amounted to PLN 62 million. The funds acquired through this loan are being used to finance the Parent Entity’s development and replacement projects at various stages of the core production line. Interest on the instalments drawn is based on a fixed interest rate.

• The program to issue bonds on the Polish market was established under an issue agreement dated 27 May 2019. 
• The first issue of bonds with a nominal value of PLN 2,000 million took place in June 2019, under which 5-year bonds were issued in the amount of PLN 400 million with maturity falling on 27 June 2024 and 10-year bonds in the amount of PLN 1,600 million with maturity falling on 27 June 2029. Interest is based on LIBOR plus a margin. 
• The funds acquired under this credit were used to finance general corporate goals.

• The Group has open lines of credit in the form of bilateral agreements in the total amount of PLN 3,887 million. These are working capital facilities and overdraft facilities with availability of up to 4 years. Interest is based on a fixed interest rate or on the variable interest rates WIBOR, LIBOR, EURIBOR plus a margin. 
• The funds obtained under the aforementioned bank loan agreements are a tool supporting the management of current financial liquidity.

Amount drawn as at  31.12.18 ⁽²

Change (%)

Amount available as at 31.12.19

Amount drawn 
(%) 31.12.19

Unsecured, revolving syndicated credit facility

4 136

(99,6)

5 696

0,3%

Loans

2 246

+24,4

2 984

93,6%

Bilateral bank loans

1 555

+52,3

3 887

60,9%

Debt securities

-

+100,0

2 000

100,0%

Total 

7 937

(9,5)

14 567

49,3%

31.12.18

Change (%)

30.09.19

30.06.19

31.03.19

Net debt  / EBITDA⁽¹

1,6

(6,3)

1,8

1,8

1,8

Performs annual assessment of the effectiveness of the risk management process and monitors the level of risk factors and ways to address them.

Has ultimate responsibility for the risk management system and supervision of its individual elements.

Managers are responsible for identifying, assessing and analysing risk factors and for the implementation, within their daily duties, of responses to risk. The task of the management staff is ongoing supervision of the application of appropriate responses to risk within the tasks realised, to ensure the expected level of risk is not exceeded.

Support the effectiveness of the risk management process.

The Internal Audit Plan is based on assessing risk and subordinated business goals, assessed is the current level of risk factors and the degree of efficiency with which they are managed.

Manages corporate risk and continuously monitors key risk factors 

Manages risk of changes in metals prices (e.g.: copper and silver) as well as exchange and interest rates

Manages counterparty default risk

Manages risk of loss of liquidity, understood as the ability to pay financial liabilities on time and to obtain financing for operations

Corporate Risk Management Policy 

Market Risk Management Policy

Credit Risk Management Policy

Liquidity Management Policy

Internal Audit Rules 

Corporate Risk Management and Compliance Department

Executive Director for Treasury Operations -

Corporate Treasurer

Executive Director for Audit and Control 

CATEGORY– TECHNOLOGY

(Parent Entity) 

Risk of failure to adhere to the efficient working time parameter and of failure to fully utilise the capacity of metallurgical equipment to process own concentrate.

Sources of risk include potential breakdowns of key elements of the core production line and failure to adapt technology to production requirements, which could affect the availability of metallurgical infrastructure. An important risk factor is the need to maintain the production of concentrates in an amount and quality required to optimise the utilisation of the metallurgical facilities. Exposure to risk is also associated with the need to ensure required utilities to maintain the expected level of infrastructure availability.

Optimum utilisation of infrastructure, maintaining an appropriate mix of concentrates, R&D initiatives and advancement of the Metallurgy Development Program (MDP) at the Głogów Copper Smelter to adapt metallurgical structure and technology to ensure higher processing capacity for own concentrates, imported copper-bearing materials and purchased scrap. Actions undertaken are aimed at maintaining the availability of metallurgical equipment at the expected level and improving the productivity parameters of metallurgical infrastructure, as well as limiting the negative impact of this risk on KGHM’s operations.

CATEGORY – VALUE CHAIN

(KGHM Group))  

Risk related to an ineffective process of monitoring and providing early warning to management staff on deviations from the budget and financial plans as well as with respect to adopting inappropriate economic parameters related to production, investments, macroeconomics and finance, for forecasts of company results.

An ineffective process of monitoring and providing early warning to management staff on deviations from the budget and financial plans may impede or delay the appropriate early identification of deviations in respect of forecast results, at the same time shortening the time for taking appropriate corrective actions. Sources of risk are related to the possibility of ineffective mechanisms to control these processes.

Forecasts related to specific areas of the operations prepared by appropriate specialised units and ensuring the uniformity of operating plans with strategic plans. Monthly reporting of execution on forecasts in all critical areas. Regular contacts with and systematic streamlining of the communication process together with setting criteria enabling the identification of symptoms of potential deviations from the expected results of the KGHM Group. 

(KGHM INTERNATIONAL Group) 

Risk related to the precision of estimated costs of decommissioning certain mines.

With respect to risk factors related to the precision of estimated costs of decommissioning certain mines, there are questions related to the need to meet obligatory environmental conditions connected with realistic concepts for such liquidation.

Estimated costs of restoration and mine decommissioning based on expert reports and providing guarantees of future environmental obligations related to the closure and restoration of mining areas in accordance with existing laws and regulations.

(KGHM INTERNATIONAL Group) 

Risk related to exhaustion of ore resources and reserves prior to gaining familiarity with the parameters and characteristics of new planned deposits.

The risk of changes in the evaluation and management of ore resources involves, among others, geological factors related to the reliable estimation of resources or mining conditions. Risk factors related to the limited reliability and completeness of data, based on which new resource projects are evaluated, may lead to the taking of less than optimal decisions on advancing or suspending a particular project.

reliminary modelling data are collected in accordance with geological documentation held and prepared based on existing law as well as reviewed and consulted internally with experienced staff. Detailed analyses are performed on the results of on-going work, with a project’s initial assumptions being updated. It is a typical feature of projects at the exploration stage that the deposit has not been documented. Incurring expenditures on exploration and evaluation enables the assessment of ore resources and research into geological-mining conditions, aimed at planning subsequent mining activities.

(Parent Entity) 

Risk of the inability to store mine tailings. 

The KGHM Group is exposed to the risk of a lack of sufficient tailings storage capacity due to delays in the expansion of the Żelazny Most Tailings Storage Facility. Risk factors involve the management and control of the project and may affect its budget, schedule and assumed results and may lead to a failure to adhere to the technological regime for designing and execution. Another source of risk are external factors in terms of suppliers of materials and services and administrative bodies, as for the advancement of such a project it is necessary to obtain required administrative decisions. Exposure to risk is also related with eventual unplanned shutdowns resulting from infrastructure breakdowns, which could impact the continuity of KGHM’s operations.  

Operating, building and expanding the storage facility in accordance with the operating instructions. Cooperation with a team of international experts (TIE) and a General Designer during the investment process. Applying observational methods based on assessing the geotechnical parameters obtained on the basis of evaluations of the results of monitoring, enabling a picture of the behaviour of the facility built or operated. Systematic supervision and control over the entire investment process of the expansion of the Żelazny Most Tailings Storage Facility.

(KGHM Group) 

Risk related to the lack of availability of utilities.

The KGHM Group is exposed to the risk of lack of availability of power sources for its operations. Potential disruptions in the supply of key power sources is mainly related to risk on the part of external suppliers and breakdowns of their distribution infrastructure as well as force majeure. Amongst internal factors, the most important involve questions of maintaining operations, utilisation and investments and modernisation work.

Ensuring that emergency supply systems are in place for key utilities and conduct ongoing evaluation of security of grid power supply. Conducting a number of investment projects to strengthen energy security. A framework agreement with the company Polskie Górnictwo Naftowe i Gazownictwo S.A. for the sale of natural gas to increase the security of natural gas supply. Systematic limitation of energy consumption under the implemented, PN-EN ISO50001:2012-compliant Energy Management System and Energy Savings Program (POE). Planned increase in the efficiency and flexibility of the KGHM Group in terms of its Polish and international assets, among others by partially satisfying the needs for electricity from its own sources as well as from renewable energy sources (“RES”) by the end of 2030. Start of the project Monitoring of Electricity, Gas and Water under the KGHM 4.0 program with respect to INDUSTRY, to improve the efficiency of the core business in Poland.

(KGHM Group) 

Risk related to infrastructure breakdowns which disrupt the core production operations, related to natural hazards as well as internal factors related to the applied technology.

The KGHM Group is exposed to risk related to the technological potential and efficiency of its infrastructure to meet the needs of the production process. By utilising infrastructure required to maintain its operations, KGHM is exposed to the risk of industrial breakdowns resulting in unplanned shutdowns. Such breakdowns could result both from natural hazards, i.e. catastrophic natural events and force majeure as well as internal factors dependent on the KGHM Group (on-going operations, maintaining production, key suppliers, servicing).

Preventive management of key infrastructure elements affecting production continuity. Appointment of a task and expert teams of with respect to counteracting breakdowns of metallurgical infrastructure.  On-going analysis of geotechnical risk and the verification of planned recoveries In terms of ICT (information-communication technology) separating groups of projects related to reducing technological debt. Gradual replacement of older technology with newer solutions, reflecting the corporate architecture standard. 

(KGHM Group) 

Risk related to the cost efficiency of the production process, mining projects, processing of copper-bearing materials, reflecting the risk of a substantial rise in prices of materials, services, electricity, gas and water and restoration costs.

The KGHM Group is exposed to the risk of external and internal factors, such as metals prices, exchange rates, costs of supply of purchased metal-bearing materials, TC/RCs, selling premiums and costs of services and of electricity, gas and water. This risk is also related to the estimation of costs of provisions for the restoration of mining terrain based on existing law for the territories in which the KGHM Group operates.

On-going control of processing costs, monitoring the market situation, optimising costs, including supplies of purchased metal-bearing materials, hedging transactions and management of the net position. Hedging, securing the Company against changes in the USD/PLN exchange rate and metals prices (mainly copper). Creating multi-year plans and budgets enabling the achievement of profitability under conditions prevailing on the market.

CATEGORY – MARKET 

(KGHM Group)  

Market risk related to volatility in prices of copper and silver and risk of changes in USD/PLN exchange rates and interest rates.

Market risk is understood as the possibility of a negative impact on the results of the KGHM Group resulting from changes in the market prices of goods, exchange rates and interest rates, as well as changes in the value of debt securities and in the share prices of listed companies. 

This risk is actively managed by the Parent Entity, in accordance with the Market Risk Management Policy. A basic technique for managing market risk in the company are hedging strategies utilising derivative instruments. Natural hedging is also applied.

More in section 12.3. Market, credit and liquidity risk of the Management Board’s Report on activities.

(KGHM Group) 

Credit risk related to trade receivables.

The KGHM Group sells some of its products to commercial entities with deferred payment terms, as a result of which there may arise the risk of late payments for products delivered. The companies of the KGHM Group have for many years cooperated with a large number of customers, leading to the geographic diversification of trade receivables.

This risk is actively managed by the Parent Entity, in accordance with the Credit Risk Management Policy. Exposure to credit risk is limited by evaluating and monitoring the financial condition of customers, setting credit limits and applying creditor security.

More in section 12.3. Market, credit and liquidity risk of the Management Board’s Report on activities.

(KGHM Group) 

Liquidity risk.

Management of the risk of loss of liquidity, understood as the ability to pay liabilities on time and to obtain financing for operations.

This risk is actively managed in the Parent Entity in accordance with the updated Financial Liquidity Management Policy.

More in section 12.3. Market, credit and liquidity risk of the Management Board’s Report on activities.

CATEGORY – EXTERNAL RISKS

(KGHM Group) 

Risk of seismic tremors and associated roof collapses or destressings of the rock mass, and the occurrence of uncontrolled rock bursts.

The KGHM Group is exposed to the risk of natural hazards and force majeure and related insufficient geological knowledge of the rockmass. Key risk factors which affect the materialisation of such risk also involves the results of periodic analyses of the mining situation and the state of hazard and applied measurement methods. Natural hazards associated with the underground mining of copper ore deposits, in particular hazards related to mining tremors and their potential effects in the form of rock bursts and roof collapses. These factors affect safety, as their occurrence can lead to serious or even fatal injuries as well as damage to underground machinery, equipment and infrastructure, along with production downtimes.

Actions aimed at preventing rock bursts and roof collapses, such as systematic seismological observations, on-going assessment of the rock mass and the marking off of areas of particular threat of roof collapse. Use of active methods of preventing rock bursts and roof collapses based on provoking dynamic events through mass blasting of mining faces and through blasting to release stress in the orebody or its roof. Preparation of reserve fields in the orebody which could handle limited production.

(Parent Entity) 

Risk related to gas hazards (mainly hydrogen sulphide).

KGHM is exposed to the specific risk of natural hazards and force majeure (gas-related geodynamic hazards and the occurrence of naturally-occurring hazardous gases) leading to restrictions in realising production plans and the advance of preparatory work. These factors affect safety, as their occurrence can lead to serious or even fatal injuries as well as damage to underground machinery, equipment and infrastructure, along with production downtimes.

The risk of gas hazards occurring is being assessed and principles are being developed for working under the risk of such hazards. Individual employee safety measures are applied as well as equipment and means for reducing concentrations of hydrogen sulphides and neutralising oppressive odours.

(Parent Entity) 

Risk related to underground climate risk, which increases in tandem with increasing mine depth.

KGHM is exposed to risk related to the underground climate, limiting activities or increasing costs, involving geological conditions, the temperature of the air sent into the mines and underground mining conditions. 

The use of solutions to counteract underground climate risk using neutral means (e.g. the use of short airways and directing air from the lowest temperature rockmass, high-speed air) and through the use of central, workplace and personal air conditioning. The use of shortened working time.

(Parent Entity) 

Risk related to underground water hazards.

KGHM is exposed to the risk of natural hazards and force majeure in the form of underground water hazards resulting from breakdowns of the main dewatering equipment, human error (actions contrary to the project or technology) or mistaken geological conclusions.

Research into hydrogeological conditions and water hazards, measuring water inflow to the mines, conducting mining operations pursuant with technology for the safe conduct of mining operations in underground mines. Systematic control of mining areas threatened by water inflow, control of water flow pathways and dams according to a set schedule. Review and updating of the Rescue Plan in case of water inflow. Development of regional pumps and the piping system, construction of water dams aimed at restricting water inflow, drilling exploratory holes to stabilise uncontrolled water inflow.

(KGHM Group) 

Risk of failure to uphold air quality standards (including with respect to arsenic).

The KGHM Group is exposed to the risk of negative impact on various components of the natural environment resulting from the mining of copper ore, followed by its processing at all stages of the production process, which could lead to the breaching of permissible emissions limits.

Undertaking actions under the Air Protection Programs and R&D work. Advancement of the Program to adapt the technological installations of KGHM to BAT conclusions for the non-ferrous metals industry together with restriction of arsenic emissions (BAT-As).

(Parent Entity) 

Risk of restrictions to the ability to sell sulphuric acid (due to loss of market/customers and/or a drop in demand).

Risk related to macro- and microeconomic factors involving political actions which result in privileges for a specific group of producers or the introduction of additional fees/legal restrictions. Risk related to unfavourable prices (volatility to the disadvantage of KGHM), high requirements in terms of market parameters for selling sulphuric acid and lower demand for the product on international markets, including as a result of the deterioration in the financial condition of a key customer.

Increase the number of internal storage facilities at the metallurgical plants as well as of warehouses in Szczecin. Search for new sales markets. Long term contracts. Incur costs of additional storage. Payments to customers and incur transport costs. Search for alternative ways to manage the acid and utilise it in the Concentrators.

(KGHM Group)  

Risk of failure to adhere to established principles and standards of behaviour with respect to counteracting corruption and with respect to the procurement process as well as the risk of incurring losses from actions which are harmful to KGHM.

The KGHM Group is exposed to the risk of actions which are harmful to KGHM taken by external entities participating in the processes of procurement, sales and investment. Threats are in the form of potential losses by the KGHM Group resulting from the intentional actions of external entities, i.e. collusion over minimum pricing, the insufficient technical and economic potential of contractors, falsification of documentation, fictional contractors, conflicts of interest. Other important risk factors include threats as regards all types of improprieties related to breaching anticorruption and ethical standards by employees of the KGHM Group (such as corruption, conflicts of interest, abuse, discrimination, illegality, nepotism).

Implementation of the Code of Ethics of the KGHM Polska Miedź S.A. Group as the main tool in the corporate culture of the KGHM Group, and other appropriate policies and procedures ensuring the efficiency of implemented principles and values.  Meeting global corporate governance standards and increased stakeholder expectations, including above all those of customers and financial institutions. Application under the Responsible Supply Chain Policy of guarantees of the selection of responsible suppliers, especially in the case of acquiring so-called conflict minerals and ensuring that the goods and services acquired by the KGHM Group will not be used to finance terrorism, and that they will be manufactured or provided while respecting human rights, labour standards, environmental protection and counteracting corruption. Proactive monitoring and analysis of procurement processes in terms of identifying abuse and threats of corruption within the organisation and the supply chain, as well as undertaking actions with respect to ethics and counteracting corruption along with the implementation of corrective actions. Internal control with respect to the identification and uncovering of fraud, abuse and corruption in KGHM Group entities and the prevention of such based on the Internal Control Procedure in order to eliminate risk at the level of prevention.

(KGHM Group) 

Risk of changes to laws and regulations (including with respect to energy and tax law).

The KGHM Group operates in unstable regulatory environments in many jurisdictions. A consequence of the need for technological and organisational adaptation to a volatile legal environment may be higher operating costs or restriction of such activities. The risk of interruptions to operations or the need to reorganise work due to new legislation may have a substantial impact on the operations of the KGHM Group.

Active cooperation with the academic environment, which issues opinions on changes to legal acts, and the on-going providing of positions and opinions with respect to numerous areas subject to legislative change (including as part of membership of national and international organisations). Cooperation with renowned law firms and the creation of specialised organisational units which monitor the regulatory environment. Taking preventive actions aimed at adapting to organisational, infrastructural and technological changes. In the Parent Entity an energy management system was implemented and a certificate of compliance with ISO 50001 standard was received.

CATEGORY – INTERNAL RISKS

(KGHM Group) 

The risk of serious accidents or industrial illnesses caused by improper workplace organisation, the failure to follow procedures or the use of improper protective measures.

The failure to adhere to occupational health and safety rules and procedures, as well as the employment of persons lacking an appropriate psychophysical predisposition, could be a source of potential accidents. Exposure to unfavourable natural conditions together with associated natural hazards requires, apart from the high requirements in terms of essential professional preparation, that employees possess appropriate qualifications in terms of health, physical ability and psychological fitness. Risk is also associated with the possibility of temporary production stoppages caused by serious accidents, which could potentially affect the operations of the KGHM Group financially, legally and image-wise. The KGHM Group is also exposed to the risk of industrial illnesses as a consequence of the effect of the working environment on people. Enhanced exposure to risk is also related to external factors in terms of sub-contractors and their safety culture.

A detailed division of obligations between management and supervisory staff on the one hand and entities providing services to the Company on the other, to ensure safe working conditions and the proper coordination of work. Systematic discussion of workplace safety with the participation of representatives of sub-contractors and mining oversight authorities. Engaging employees and sub-contractors in campaigns carried out in the KGHM Group aimed at improving OHS standards. Advancement of development initiatives based on the idea of sustainable development and safety and enhancing the Group’s image as being socially responsible under the new Strategy adopted in 2019.  Actions involving on-going improvement consistent with the cycle of self-improvement in order to continuously seek and prepare for implementation the catalogue of initiatives aimed at further improvement of OHS, to advance the long-term goal of the Company, “Zero accidents due to human and technical errors”. Optimisation of health care for employees, in particular following workplace accidents and systematic searching for new organisational and technical initiatives to enable the achievement of a higher level of safety of employees in the Divisions of KGHM Polska Miedź S.A.

(KGHM Group) 

The risk of lack of acceptance by the public, local governments or other stakeholders for the conduct of development and exploration work.

The KGHM Group is exposed to the risk of exposure to external factors involving the environment in which it operates and consequently, exposure to changes in the image of the organisation and its products or services. Risk of ineffective management of relations with stakeholders, which affects the willingness of the environment and the taking of actions towards the Group. In extreme cases, the materialisation of this risk may lead to the blocking of development plans. 

Advancement of CSR Strategy and close cooperation with government bodies. Meetings and negotiations with stakeholders, informational campaigns, conferences, publications.  Cooperation with academic and sector bodies and authorities in order to meet the highest communication-public relations standards.

(KGHM Group) 

The risk of not being able to secure appropriate staff to advance the Group’s business goals.

The risk of not being able to acquire and keep human resources, among others to support on-going operations and development projects. The KGHM Group is exposed to risk related to the availability of qualified staff in the market as well as on-going identification of staffing needs in terms of required qualifications and supplying them while reflecting staffing fluctuations. Of significance is access to qualified employees in the future in the context of an ageing society and a market deficit of certain professions.

Advancing a variety of HR projects, identification of potential successors for key positions (including in terms of mobility) and preparations for advancement. On-going comparison of remuneration packages (including in relation to working conditions) to offers on the market. Cooperation with schools and universities to promote the company as an employer and to ensure qualified employees. Implementation of programs to develop employee skills and to secure funds for this purpose.  Development of recruiting tools and the identification of key skills to advance the company’s business goals. 

(KGHM Group)    

Risk that the confidentiality, integrity or availability of informational assets which have been collected, stored or processed on IT resources may be compromised, as well as cybernetic threats.

The KGHM Group, due to its well-developed IT structure, is exposed to the risk of a breach in the confidentiality, integrity or availability of informational assets which have been collected, stored or processed on IT resources. The sources of this risk are both forces of nature (e.g. fires, construction catastrophes, downpours) as well as hazards arising from human activities (intentional or not). The KGHM Group is exposed to the risk of an unauthorised loss, change or destruction of critical data and information as well as loss of the possibility of the operational control of equipment and systems as a result of cybernetic attacks on the infrastructure of the KGHM Group. Such incidents could generate the risk of production shutdowns, leading to production and financial losses and claims due to the loss/disclosure of personal data. This risk has a large impact on the loss of reputation of the KGHM Group.

Strict adherence to and application of principles arising among others from the IT Security Policy and from Facility Protection Plans. The systematic evaluation of risk loss of the confidentiality, integrity or availability of informational assets which have been collected, stored or processed on IT resources. On-going monitoring of the usefulness of existing infrastructure as well as the analysis of and planning for the implementation of teleinformatic solutions to increase security, in accordance with global trends and best practice in this regard. Implementation of security systems and adequate organisational solutions at various levels of the company’s infrastructure, aimed at staying ahead of any decrease in the utility of systems at risk and minimising the potential losses of the KGHM Group.

(KGHM Group) 

The risk of exceeding project/program budgets and schedules, deviating from defined scopes and failing to meet defined quality parameters as a result of the improper management of portfolios and projects. Risk related to the operational management and development of key mining projects, reflecting the question of incurred costs, permits and infrastructural requirements.

The KGHM Group is exposed to risk related to the advancement of projects and programs as a result of their improper management. The risk of changes in budgets, schedule, scope and deviations from the expected quality of project products and/or programs is related to a variety of factors of an internal nature involving both the methodical approach and the projected structure of management and supervision. Improperly selected tools and techniques, lack of established criteria and principles for evaluating projects, or inconsistency in their application or adherence to them may restrict or prevent the achievement of the KGHM Group’s strategic goals. In terms of external factors, there remains the question of meeting legal and formal requirements which could generate deviations from the assumed schedule, and in extreme instances may halt the advancement of a project/program.

Improve standards in the management of portfolios and projects and implement a projects management system aimed at supporting the organisation in the planning and management of portfolios and projects. Standardisation of planning and preparation processes and in the advancement of investment projects, comprising such aspects as scheduling, preparing costs projections, technical designing, project review, investment handover documentation, risk analysis of projects/programs. Management of projects in accordance with international standards and conducting on-going monitoring of progress.  On-going evaluation of the economic feasibility of existing and anticipated development projects.

In 2019, the Group was mainly exposed to the risk of the changes in the prices of metals it sells: copper and silver. Of major significance for the Parent Entity was the risk of changes in currency rates, in particular the USD/PLN exchange rate. The Group’s companies are additionally exposed to the risk of volatility in the prices of other metals. Market risk related to changes in metals prices arises from the formula for setting prices in physical metals sales contracts, which are usually based on the average monthly market prices for the relevant future month.

In 2019, the Group was mainly exposed to the risk of the changes in the prices of metals it sells: copper and silver. Of major significance for the Parent Entity was the risk of changes in currency rates, in particular the USD/PLN exchange rate. The Group’s companies are additionally exposed to the risk of volatility in the prices of other metals. Market risk related to changes in metals prices arises from the formula for setting prices in physical metals sales contracts, which are usually based on the average monthly market prices for the relevant future month.

With respect to strategic management of market risk, in 2019 the Parent Entity implemented copper price hedging transactions with a total notional amount of 153 thousand tonnes and maturity falling from July 2019 to December 2020 (including: 135 thousand tonnes hedging the copper price in 2020), as well as on the silver market with a total notional amount of 3.6 million ounces and maturity falling from January 2020 to December 2020. Moreover, in terms of management of the net trading position, in 2019 so-called QP adjustment swap transactions were entered into on the copper and gold markets with maturities of up to June 2020. As a result, as at 31 December 2019, the Parent Entity held open positions in derivatives on the copper market for 199.5 thousand tonnes (including: 189 thousand tonnes from strategic market risk management, while 10.5 thousand tonnes were entered into under management of the net trading position) and 3.6 million troy ounces of silver.

In 2019, the Parent Entity implemented transactions hedging against a change in the USD/PLN exchange rate for the total notional amount of USD 1,560 million with maturity from July 2019 to December 2021 (of which USD 1,380 million in respect of transactions hedging the exchange rate for the years 2020-2021). Put options were purchased as well as collar and seagull options structures (European options).  Moreover, in 2019 the Parent Entity entered into CIRS (Cross Currency Interest Rate Swap) transactions for the notional amount of PLN 2 billion, hedging against market risk related to the issue of bonds in PLN with a variable interest rate. Debt due to bonds denominated in PLN generate currency risk due to the fact that most of the Parent Entity’s sales revenue is denominated in USD.

In terms of managing currency risk, the Parent Entity applies natural hedging by borrowing in currencies in which it has revenues. The value of bank and investment loans as at 31 December 2019 drawn in USD, following their translation into PLN, amounted to PLN 4,980 million (as at 31 December 2018: PLN 7,655 million). 

As at 31 December 2019, KGHM INTERNATIONAL LTD. did not hold open derivative positions on the metals and currency markets.

Some of the Group’s Polish companies managed the currency risk related to their core businesses by opening derivative transactions on the EUR/PLN and USD/PLN markets.

Interest rate risk is the possibility of the negative impact of changes in interest rates on the Group’s position and results. In 2019, the Group was exposed to such risk due to loans granted, free cash invested on deposits, the reverse factoring program and borrowings.

As at 31 December 2019, the following positions were exposed to interest rate risk by impacting the amount of interest income and costs:

• PLN 1,373 million, including the deposits of special purpose funds: the Mine Closure Fund and the Tailings Storage Facility Restoration Fund,
• borrowings: PLN 3,873 million,
• trade and similar payables: PLN 596 million.

As at 31 December 2019, the following positions were exposed to interest rate risk due to changes in the fair value of instruments with fixed interest rates:

• receivables due to loans granted by the Group: PLN 17 million,
• liabilities due to borrowings (i.e. due to bank and other loans drawn and leases with fixed interest rates): PLN 4,000 million.

In terms of strategic management of market risk, in 2019 the Parent Entity entered into CIRS (Cross Currency Interest Rate Swap) transactions for the notional amount of PLN 2 billion, securing against market risk related to the issue of bonds in PLN with a variable interest rate.

Price risk related to the shares of listed companies held by the Group is understood as the change in their fair value due to changes in their quoted share prices.

As at 31 December 2019, the carrying amount of shares of companies which were listed on the Warsaw Stock Exchange and on the TSX Venture Exchange amounted to PLN 326 million.

The total impact of derivatives and hedging instruments (transactions on the copper, silver, currency and interest rate markets as well as embedded derivatives and USD-denominated loans designated as a hedge against a change in the exchange rate) on the Group’s profit or loss for 2019 amounted to PLN 143 million, of which:

• PLN 245 million adjusted revenues from contracts with customers,
• PLN 1 million adjusted interest on borrowings,
• PLN 79 million decreased the result on other operating activities,
• PLN 22 million decreased the result on financing activities.

Moreover, in 2019 other comprehensive income decreased by PLN 389 million (impact of hedging instruments). 

As at 31 December 2019, the fair value of open positions in derivatives of the Group (on the metals, currency and interest rate markets and in embedded derivatives) amounted to PLN 143 million.

The Group’s companies have been cooperating for many years with a large number of customers, which affects the geographical diversification of trade receivables.

The Parent Entity limits its exposure to credit risk related to trade receivables by evaluating and monitoring the financial standing of its customers, setting credit limits, using debtor security and non-recourse factoring. An inseparable element of the credit risk management process realised by the Parent Entity is the on-going monitoring of receivables and the internal reporting system. 

Buyer’s credit is only provided to proven, long-term customers. In the case of new customers, an effort is made to ensure that sales are based on prepayments or trade financing instruments which wholly transfer the credit risk to financial institutions.

In 2019, the Parent Entity secured its receivables by promissory notes, registered pledges, bank guarantees, corporate guarantees, mortgages and documentary collection. Moreover, the majority of customers who hold buyer's credit on contracts have ownership rights confirmed by a date certain.

To reduce the risk of insolvency by its customers, the Parent Entity has a receivables insurance contract, which covers receivables from entities with buyer’s credit which have not provided strong collateral or have provided collateral which does not cover the total amount of the receivables. Taking into account the collateral held and the credit limits received from the insurance company, as at 31 December 2019 the Parent Entity had secured 64% of its trade receivables (as at 31 December 2018: 75%). 

The concentration of credit risk in the Group is related to the terms of payment granted to key clients. Consequently, as at 31 December 2019 the balance of receivables from 7 of the Group’s largest clients, in terms of trade receivables at the end of the reporting period, represented 29% of the trade receivables balance (as at 31 December 2018: 28%). Despite the concentration of this type of risk, it is considered that due to the availability of historical data and the many years of experience cooperating with clients, as well as above all due to the security used, the level of credit risk is low.

The Group allocates periodically free cash in accordance with the requirements to maintain financial liquidity and limit risk and in order to protect capital and maximise interest income.

Credit risk related to deposit transactions is continuously monitored by the on-going review of the credit ratings of those financial institutions with which the Group cooperates, and by limitation of the level of concentration in individual institutions. As at 31 December 2019, the maximum share of a single entity in terms of credit risk arising from financial institutions in which the Group has deposited funds amounted to 19% (as at 31 December 2018: 24%)

All of the entities with which the Group enters into derivative transactions (with the exception of embedded derivatives) operate in the financial sector. These are mainly financial institutions, with a medium-high rating. According to fair value as at 31 December 2019, the maximum share of a single entity with respect to credit risk arising from open derivative transactions entered into by the Group and from unsettled derivatives amounted to 15% (31 December 2018: 22%). Due to diversification of risk in terms both of the nature of individual entities and of their geographical location, as well as taking into consideration the fair value of assets and liabilities arising from derivative transactions, the Group is not materially exposed to credit risk as a result of derivative transactions entered into.

As at 31 December 2019, the balance of loans granted by the Parent Entity amounted to PLN 7,227 million. The most important of these are long-term loans in the total amount of PLN 7,201 million granted to the company Future 1 and to the KGHM INTERNATIONAL LTD. Group. Detailed information on the loans granted by KGHM Polska Miedź S.A. is presented in the Financial Statements, Note 6.2.

As at 31 December 2019, the balance of loans granted by the Group amounted to PLN 5,720 million. The most important of these are long-term loans in the total amount of PLN 5,694 million, or USD 1,499 million, granted by the KGHM INTERNATIONAL LTD. Group for the financing of a mining joint venture in Chile.

Credit risk related to the loans granted to the joint venture Sierra Gorda S.C.M. is dependent on the risk related to mine project advancement and is determined by the Management Board of the Parent Entity as moderate.

Management of the Group’s liquidity is conducted in accordance with the Financial Liquidity Management Policy in the KGHM Group. This document describes the process of financial liquidity management in the Group, which is realised by the Group’s companies, while its organisation and coordination as well as the supervision thereof is performed in the Parent Entity.

The main principles resulting from this document are:

• the need to ensure stable and effective financing for the Group’s operations, 
• constant monitoring of the Group’s level of debt, and
• effective management of working capital.
• The principles of the Policy for managing liquidity of the Company and Group are described in detail in Note 8.3 respectively of the separate and consolidated financial statements.

Borrowing by the Group is based on the following pillars:

• an unsecured, revolving syndicated credit facility, obtained by the Parent Entity in the amount of USD 1,500 million with a 5-year tenor with the option of extending for another 2 years (5+1+1). The credit facility replaced the revolving syndicated credit facility in the amount of USD 2,500 million dated 11 July 2014,
• two investment loans granted to the Parent Entity by the European Investment Bank in the amount of PLN 2,000 million and PLN 900 million with financing periods of up to 12 years from the date the instalments are drawn,
• bilateral bank loans to the amount of PLN 3,887 million, supporting both the management of liquidity of companies, for the financing of working capital as well as of investments,
• the bond issue program of the Parent Entity on the Polish market, based on an issue agreement dated 27 May 2019. On 27 June 2019 the first issue was made in the nominal amount of PLN 2,000 million, under which 5-year bonds were issued in the amount of PLN 400 million and 10-year bonds in the amount of PLN 1,600 million.

Detailed information regarding available sources of financing and their utilisation in 2019 may be found in Section 6.6 of this report.

The aforementioned sources of financing fully cover the liquidity needs of the Parent Entity and the Group. During 2019, the Group made use of borrowing which was available from all of the above categories, while liabilities of the Group due to bank and other loans drawn and to bonds issued as at 31 December 2019 amounted to PLN 7,181 million.

In order to maintain the ability to operate, taking into consideration the execution of planned investments, the Group manages capital so as to be able to generate returns for shareholders and provide benefits for other stakeholders.

The Group aims to maintain the equity ratio, in the long-term, at a level of not less than 0.5, and the ratio of Net Debt/EBITDA at a level of up to 2.0.