27. Borrowings, other debt instruments and finance lease liabilities

A A A
PLN ’000 Note Dec 31 2013 Dec 31 2012
Bank borrowings: 27.1 5,851,809 6,373,535
- investment credit facilities   4,512,290 4,598,145
- working capital facilities   831,739 1,036,012
- inventory refinancing and financing facilities   753,296 930,574
- funds in bank deposits securing repayment of interest and principal instalments   (245,516) (191,196)
Non-bank borrowings 27.1 10,306 17,056
Notes 27.2 198,240 -
Finance lease liabilities 27.3 151,031 166,109
Total   6,211,386 6,556,700
including:      
non-current   4,496,190 4,462,098
current   1,715,196 2,094,602

27.1 Borrowings

Borrowings as at December 31st 2013, by currency and by maturity

PLN ’000 Borrowings
in EUR
Borrowings
in USD
Borrowings
in PLN
Total
2014 2,448 1,226,142 449,901 1,678,491
2015 2,444 432,606 60,657 495,707
2016 - 404,569 25,750 430,319
2017 - 801,939 26,000 827,939
2018 - 470,697 24,750 495,447
after 2018 - 1,894,326 39,886 1,934,212
Total 4,892 5,230,279 626,944 5,862,115

Borrowings as at December 31st 2012. by currency and by maturity

PLN ’000 Borrowings
in EUR
Borrowings
in USD
Borrowings
in PLN
Total
2013 16,712 1,818,861 239,419 2,074,992
2014 2,409 415,753 74,553 492,715
2015 2,409 444,706 20,382 467,497
2016 - 416,167 17,606 433,773
2017 - 409,554 9,333 418,887
po 2017 - 2,494,643 8,084 2,502,727
Total 21,530 5,999,684 369,377 6,390,591

Repayment of the above facilities is secured with:

  • power of attorney over bank accounts
  • registered pledge over bank accounts
  • registered pledge over inventories
  • registered pledge over existing and future movables
  • mortgage
  • assignment of property, plant and equipment
  • assignment of rights under inventory insurance agreement
  • assignment of rights under inventory storage agreements
  • assignment of rights to compensation from the State Treasury due in the event of the requirement to sell stocks below market price
  • assignment of rights under insurance agreements relating to the Gdańsk refinery
  • assignment of rights under licence agreements
  • assignment of rights under agreements for sale of products,
  • assignment of rights under crude oil sales agreements,
  • shares in subsidiaries,
  • representation on voluntary submission to enforcement
  • blank promissory note
  • bank guarantees.

The credit facilities bear interest based on:

  • 1M, 3M or 6M LIBOR (USD), depending on the interest period selected at a given time - in the case of USD-denominated facilities,
  • 1M or 3M EURIBOR - in the case of EUR-denominated facilities,
  • O/N, 1M or 3M WIBOR - in the case of PLN-denominated facilities.

The bank margins on to the contracted facilities are within the range of 0.30pp. – 3.75pp.

As at December 31st 2013, the average effective interest rate for the credit facilities denominated in USD and EUR was approximately 2.49% (2.47% as at December 31st 2012). The average effective interest rate for PLN-denominated facilities (excluding the syndicated facilities contracted by the Parent) was approximately 3.96% (4.81% as at December 31st 2012).

Borrowings by lender
PLN ’000 Dec 31 2013 Dec 31 2012
Non-current    
Kredyt Bank S.A. - 8,987
Pekao S.A. 16,101 20,008
PKO BP S.A. 417,424 15,125
National Fund for Environmental
Protection and Water Management
- 6,056
Provincial Fund for Environmental
Protection and Water Management
of Gdańsk
3,250 4,250
Nordea Bank Lithuania 28,836 44,240
Bank Ochrony Środowiska S.A. 4,844 36,902
Bank Syndicate (2) 2,598,132 2,988,669
Bank Syndicate (3) 940,647 1,080,892
Bank Syndicate (5) 141,667 43,448
Bank Syndicate (6) 32,723 67,022
Non-current - total 4,183,624 4,315,599
Current    
Kredyt Bank S.A. - 6,000
Pekao S.A. 3,976 174,866
ING Bank Śląski S.A. 298 4,830
PKO BP S.A. 194,518 308,815
National Fund for Environmental
Protection and Water Management
6,056 6,000
Provincial Fund for Environmental
Protection of Gdańsk
1,000 750
Bank Millennium S.A. 6,529 -
Nordea Bank Polska S.A. 7,379 23,810
Nordea Bank Lithuania 14,418 14,747
Bank Ochrony Środowiska S.A. 4,844 -
BRE Bank S.A. 396 10,278
Bank Syndicate (1) 753,296 930,574
Bank Syndicate (2) 270,050 207,042
Bank Syndicate (3) 105,438 83,182
Bank Syndicate (4) 444,268 409,245
Bank Syndicate (5) 51,818 43,462
Bank Syndicate (6) 59,723 42,587
Funds in bank deposits securing
payment of interest and principal
(245,516) (191,196)
Current - total 1,678,491 2,074,992
Total 5,862,115 6,390,591

Bank Syndicate (1):
Pekao S.A., BRE Bank S.A., ING Bank Śląski S.A., Société Générale S.A., Bank Handlowy w Warszawie S.A., Bank Zachodni WBK S.A.; on December 20th 2013, there was a change in the composition of the syndicate; see below for details.

Bank Syndicate (2):
Banco Bilbao Vizcaya Argentaria S.A., Bank of Tokyo-Mitsubishi UFJ (Holland) N.V., Pekao S.A., BNP Paribas S.A., Caja de Ahorros y Monte de Piedad de Madrid, Credit Agricole CIB (formerly Calyon), DnB Nor Bank ASA, DnB Nord Polska S.A., ING Bank Śląski S.A., KBC Finance Ireland, Kredyt Bank S.A., Nordea Bank AB, PKO BP S.A., The Royal Bank of Scotland plc, Société Générale S.A., Bank Zachodni WBK S.A., Rabobank Polska S.A., Bank Gospodarki Żywnościowej S.A. and Sumitomo Mitsui Banking Corporation Europe Ltd.

Bank Syndicate (3): 
Banco Bilbao Vizcaya Argentaria S.A., BNP Paribas S.A.,

Bank Syndicate (4):
Pekao S.A., PKO BP S.A., BNP Paribas S.A., ING Bank Śląski S.A., Nordea Bank Polska S.A., Rabobank Polska S.A. and Bank Gospodarki Żywnościowej S.A.

Bank Syndicate (5):
Pekao S.A. and PKO BP S.A.

Bank Syndicate (6):
Nordea Bank Finland Plc. Lithuania Branch, Nordea Bank Polska S.A.

* In accordance with IAS 32, Grupa LOTOS S.A. offsets a financial asset (cash reserved for repayment of the facilities) against a financial liability under the facilities, because it holds a valid legal title to set off the amounts and intends to realise the asset and settle the liability at the same time. The purpose of adopting the net-basis presentation approach in the statement of financial position is to reflect the expected future cash flows from settlement of two or more financial instruments.

Bank borrowings of the Parent
Inventory financing and refinancing facility

As at December 31st 2013, the nominal amount drawn under the credit facility for the refinancing and financing of inventories, advanced by Bank Syndicate (1), amounted to PLN 753m (USD 250m).

In connection with the credit facility incurred to finance and refinance inventories, Grupa LOTOS S.A. is required to maintain the Tangible Consolidated Net Worth (TCNW) ratio of no less than specified in the facility agreement. The Company is also required to meet a financial covenant of maintaining the Loan to Pledged Inventory Value Ratio at a level not higher than specified in the facility agreement. As at December 31st 2013 and December 31st 2012, the covenants were complied with.

Amendments to the inventory financing and refinancing facility

On November 7th 2013, Grupa LOTOS S.A. and a syndicate of five banks (Bank Syndicate (1)), comprising:

  • Pekao S.A. of Warsaw,
  • BRE Bank S.A. of Warsaw,
  • ING Bank Śląski S.A. of Katowice,
  • Nordea Bank AB of Stockholm,
  • Société Générale S.A of Paris,

signed an amendment extending by 12 months, i.e. until December 20th 2014, the term of the credit facility agreement for refinancing and financing of Grupa LOTOS S.A.’s inventories, of October 10th 2012, providing for a revolving credit facility of up to USD 400m (i.e. PLN 1,268m, as translated at the mid rate quoted by the National Bank of Poland for October 10th 2012).

Under the amended agreement, as of December 20th 2013 Nordea Bank AB of Stockholm was no longer a party to the credit facility agreement, and its entire credit commitment had been taken over by Bank Handlowy w Warszawie S.A. and Bank Zachodni WBK S.A. of Wrocław.

The other legal terms of the credit facility agreement of October 10th 2012, as well as its provisions concerning penalties, did not change, and they did not differ from those commonly applied in agreements of such type. The financial covenants have been adjusted to current market conditions.

Investment facilities

As at December 31st 2013, the Company had drawn (in nominal terms) PLN 3,960.9m (USD 1,315.0m) under investment facilities advanced by Bank Syndicates (2) and (3). As at December 31st 2012, PLN 4,412.8m (USD 1,423.7m) had been drawn.

In connection with the credit facilities incurred to finance the 10+ Programme, Grupa LOTOS S.A. is required to maintain the Tangible Consolidated Net Worth ratio of no less than specified in the facility agreements. As at December 31st 2013 and December 31st 2012, the covenants were complied with.

Working-capital facilities

The working capital facility was made available to Grupa LOTOS S.A. by Bank Syndicate (4) in the form of overdraft facilities which are used by the Company on an as-needed basis.

The Parent may also finance its working capital requirements of up to PLN 600m with funds available under credit facilities contracted from PKO BP S.A. (a PLN 300m credit facility of June 26th 2009) and Pekao S.A. (a PLN 300m credit facility of May 16th 2012).

As at December 31st 2013, the Company carried no liabilities under these facilities (December 31st 2012: PLN 23,710 thousand).

Borrowings of other Group companies

The aggregate value of liabilities under borrowings disclosed by other companies of the Group as at December 31st 2013 was PLN 995.8m (December 31st 2012: PLN 858.5m). This amount includes mainly liabilities of LOTOS Exploration and Production Norge AS and LOTOS Paliwa Sp. z o.o.

Bank borrowings of LOTOS Exploration and Production Norge AS

On December 11th 2013, LOTOS Exploration and Production Norge AS and PKO BP S.A. signed an agreement concerning an investment credit facility for a total amount of USD 110m, intended for financing of the purchase of Heimdal assets (for a more detailed description of the transaction, see Note 13). The final repayment date of the facility is December 31st 2016. As at December 31st 2013, liabilities under the agreement were PLN 316.9m (USD 105.0m).

In addition, LOTOS Exploration and Production Norge AS uses a working capital facility contracted with PKO BP S.A., which is intended for the financing of its day-to-day operations and investment activities. As at December 31st 2013, liabilities under this credit facility were PLN 240.4m (USD 79.8m).

Bank borrowings of LOTOS Paliwa Sp. z o.o.

On March 6th 2013, LOTOS Paliwa Sp. z o.o and a consortium of Pekao S.A. and PKO BP S.A. signed an agreement for a PLN 150m credit facility intended for the financing and refinancing of the purchase of service stations. The final repayment date of the facility is June 30th 2024, and as at December 31st 2013 the amount outstanding under this facility was PLN 150m.

Furthermore, as at December 31st 2013, LOTOS Paliwa Sp. z o.o. disclosed liabilities under investment credit facilities contracted in the previous years with PKO BP S.A. and Pekao S.A., totalling PLN 73.8m, and liabilities of PLN 40m under a working capital facility advanced by PKO BP S.A.

Proceeds from and repayment of bank borrowings

In 2013, proceeds from the credit facilities contracted by the Group were PLN 963,045 thousand (2012: PLN 542,530 thousand), while the cash outflows on repayment of borrowings were PLN 1,263,548 thousand (2012: PLN 1,171,040 thousand). These amounts were presented in the consolidated statement of cash flows from financing activities under Proceeds from borrowings and Repayment of borrowings, respectively. In 2013 and in 2012, the Group did not contract any non-bank borrowings.

In 2013, the proceeds under the contracted bank borrowings related mainly to:

  • LOTOS Exploration and Production Norge AS' investment credit facility intended for the financing of the Heimdal assets (PLN 343,847 thousand),
  • LOTOS Paliwa Sp. z o.o.'s investment credit facility intended for the financing and refinancing of the purchase of service stations (PLN 150,000 thousand),
  • working capital facilities of the Parent (PLN 189,965 thousand),
  • working capital facilities of AB LOTOS Geonafta (PLN 255,642 thousand).

In 2013, the outflows on repayment of the contracted bank borrowings related mainly to:

  • investment credit facilities of the Parent (PLN 495,300 thousand zł),
  • working capital facilities of the Parent (PLN 213,675 thousand),
  • investment credit facilities of LOTOS Paliwa (PLN 61,434 thousand),
  • working capital facilities of LOTOS Petrobaltic S.A. (PLN 159,579 thousand)
  • working capital facilities of AB LOTOS Geonafta (PLN 286,192 thousand).

In 2013, none of the Group companies defaulted on credit facilities or other borrowings or breached any material covenants under agreements on credit facilities or other borrowings.

27.2 Notes

In 2013, LOTOS Petrobaltic S.A. issued medium-term notes under an agreement with Bank Pekao S.A. of October 29th 2013. Pursuant to the agreement, LOTOS Petrobaltic S.A. issued notes for up to the equivalent of PLN 200m in USD.

The notes were acquired by Bank Pekao S.A.

Carrying amount of notes issued
(PLN '000) Nominal value (USD) Nominal value
translated into PLN
Issue date Redemption date Interest rate
Series A 5,000 15,060 Nov 7 2013 Dec 31 2014 1M LIBOR USD + bank margin
Series B 5,000 15,060 Nov 7 2013 Dec 31 2015 1M LIBOR USD + bank margin
Series C 10,000 30,120 Nov 7 2013 Dec 31 2016 1M LIBOR USD + bank margin
Series D 35,000 105,420 Nov 7 2013 Dec 31 2017 1M LIBOR USD + bank margin
Series E 10,898 32,825 Dec 9 2013 Dec 31 2017 1M LIBOR USD + bank margin
TOTAL 65,898 198,485      

As at December 31st 2013 the total value of liabilities under the issue of notes presented above was PLN 198.2m and included interest accrued of PLN 0.1m and a deferred arrangement fee of PLN (0.4m), which reduces the liability.

From 2010 LOTOS Asfalt Sp. z o.o., another Group company, operates a short-term note issue programme. The term of the programme is five years. In 2013, no notes were issued by LOTOS Asfalt Sp. z o.o. under the programme. As part of the programme, in 2012 LOTOS Asfalt Sp. z o.o. issued notes with a nominal value of PLN 364m to investors from outside the LOTOS Group. As at December 31st 2013 and December 31st 2012, LOTOS Asfalt Sp. z o.o. did not carry any liabilities under issue of notes.

Proceeds from notes issued by the Group to investors outside the Group, including expenses related to the issue, were PLN 203,050 thousand , after issue costs (2012: PLN 362,367 thousand). The Group did not redeem any notes in 2013. In 2012, the Group spent PLN 364,000 thousand on redemption of notes. Issue proceeds and expenses were presented in the statement of cash flows as cash flows from financing activities under Issue of notes and Redemption of notes, respectively.

27.3 Finance lease liabilities

PLN ’000 Minimum lease
payments
Present value of
minimum lease payments
Dec 31 2013 Dec 31 2012 Dec 31 2013 Dec 31 2012
Up to 1 year 34,994 36,794 21,636 19,610
From 1 to 5 years 122,836 134,813 96,764 92,155
Over 5 years 33,816 57,639 32,631 54,344
Total 191,646 229,246 151,031 166,109
Less finance costs (40,615) (63,137) - -
Present value of minimum
lease payments
151,031 166,109 151,031 166,109
including:        
non-current     129,395 146,499
current     21,636 19,610

The Group uses finance leases to finance primarily rolling stock assets.

27.3.1 Commitments related to operating leases

As at December 31st 2013 and December 31st 2012, future minimum lease payments under non-cancellable operating leases were as follows:

PLN’000 Dec 31 2013 Dec 31 2012
Up to 1 year 35,107 58,697
From 1 to 5 years 36,426 99,824
Over 5 years 157 2.142
Total 71,690 160,663

The Group uses operating leases to finance primarily rolling stock assets, whose value as at December 31st 2013 was PLN 259,776 thousand (December 31st 2012: PLN 485,346 thousand).