26.3 Credit risk

Credit risk is connected with a potential credit event which may have the form of a business partner’s insolvency, partial payment of liabilities, significant delay in the payment of liabilities or any other default with respect to contractual conditions (in particular a failure to make a delivery of or to accept goods under a concluded contract or to pay damages and contractual penalties).

The PGE Group companies are exposed to credit risk arising in the following areas:

• principal activities of the companies – credit risk results from, among others, purchases and sales of electricity, heat, property rights arising from certificates of origin for electricity, CO₂ emission allowances, fuels etc. This relates primarily to the possibility of a default by the other party of the transaction, if fair value of the transaction is positive from the point of view of the Group;
• investing activities of the companies – credit risk results from transactions resulting from investment projects whose success depends on the financial standing of the Group’s suppliers;
• investing free cash of the companies – credit risk results from investing free cash of the PGE Group companies in securities bearing credit risk, i.e. financial instruments other than those issued by the State Treasury.

There is a concentration of credit risk in the PGE Capital Group related to trade receivables. The three most significant customers accounted for approximately 9% of the trade receivables balance.

The maximum exposure to credit risk resulting from the financial assets of the PGE Capital Group is equal to the book values of these items.