27. Borrowings, other debt instruments and finance lease liabilities
|PLN ’000||Note||Dec 31 2013||Dec 31 2012|
|- 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)|
|Finance lease liabilities||27.3||151,031||166,109|
Borrowings as at December 31st 2013, by currency and by maturity
Borrowings as at December 31st 2012. by currency and by maturity
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
- 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|
|Kredyt Bank S.A.||-||8,987|
|PKO BP S.A.||417,424||15,125|
|National Fund for Environmental
Protection and Water Management
|Provincial Fund for Environmental
Protection and Water Management
|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|
|Kredyt Bank S.A.||-||6,000|
|ING Bank Śląski S.A.||298||4,830|
|PKO BP S.A.||194,518||308,815|
|National Fund for Environmental
Protection and Water Management
|Provincial Fund for Environmental
Protection of Gdańsk
|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
|Current - total||1,678,491||2,074,992|
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.
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.
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.
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|
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.
|PLN ’000||Minimum lease
|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|
|Less finance costs||(40,615)||(63,137)||-||-|
|Present value of minimum
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|
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).