The PGE Group is a party to a number of lease, tenancy, easement or rental contracts. The underlying assets include land, areas of technical infrastructure, office and utility space, equipment, plants, technical premises, as well as IT infrastructure. Contracts are concluded for a definite or indefinite period of time with a specified notice period. The Group also has the right of use land under perpetual usufruct. The Group estimates the term of each lease, taking into account relevant facts and circumstances that may affect the extension or shortening of the lease terms.
Some contracts include variable fees based on the inflation rate announced by the Central Statistical Office for the previous year. The index-based element determines their variable nature – these charges are taken into account in the measurement of lease liabilities. In some cases, the annual lease payment is increased by variable charges other than those linked to a rate or index. These include, for example, payments of property tax or building tax. These charges are not included in the measurement of lease liabilities. Leases of land for the construction and operation of wind farms, in addition to the rent, include charges for compensation for the exclusion of land from cultivation for the construction period. These charges are not included in the measurement of the lease liability as no rights to use assets are transferred to the lessee and no services are provided for the benefit of the lessee. Similarly, charges relating to compensation for losses for entering land to perform operation, maintenance and other work related to the operation of a wind power park are also treated similarly.
Decisions on the right of perpetual usufruct of land are usually granted for a fixed period of 99 years. The fee for perpetual usufruct of land is established as a percentage of the land value. The amount of the annual fee for perpetual usufruct of land property is revised no more frequently than once every 3 years, if the value of such property changes, thus it will be a variable fee depending on an index or rate that is included in the measurement of the lease liability.
The Group leases small office equipment (printing equipment, photocopiers, computers, etc.), treated as leases of low-value assets. The Group decided to apply the exemption and not to recognise the right-of-use assets and lease liabilities in respect of these contracts in the statement of financial position.
The Group also applied a practical exemption for short-term leases. This mainly concerns decisions on use of a road or rail lane strip if a decision is issued for less than 12 months.
The Group also takes advantage of a simplification for short-term leases in the case of property leases for an indefinite period with a notice period of less than 12 months, where leased space is not subject to special adjustments, there are no significant exit barriers (e.g. penalties for early termination) and both parties have a practical possibility to lease such space on the market.