| 31.12.2021 | 31.12.2020 | Change (%) | 30.09.2021 | 30.06.2021 | 31.03.2021 | |
| Liabilities due to: | 5,949 | 7,335 | (18.9) | 6,019 | 5,937 | 6,547 |
| Bank loans | 735 | 1,994 | (63.1) | 725 | 689 | 1,114 |
| Other loans | 2,568 | 2,685 | (4.4) | 2,643 | 2,607 | 2,768 |
| Debt securities | 2,001 | 2,000 | 0.1 | 2,009 | 2,000 | 2,009 |
| Leases | 645 | 656 | (1.7) | 642 | 641 | 656 |
| Free cash and cash equivalents | 1,880 | 2,501 | (24.8) | 541 | 1,246 | 1,547 |
| Net debt | 4,069 | 4,834 | (15.8) | 5,478 | 4,691 | 5,000 |
Financing model
The KGHM Polska Miedź S.A. Group manages its financial resources based on the approved Financial Liquidity Management Policy in the Group. Its primary goal is to ensure continuous operations by securing the availability of funds required to achieve the Group’s business goals, while optimising incurred costs.
Moreover, the Policy regulates the Group’s borrowing principles, the principles of managing debt and monitoring the level of the Group’s debt. Financial liquidity management involves securing an appropriate amount of cash and available lines of credit in the short, medium and long term.
Net debt in the Group
Liabilities due to borrowings of the Group at the end of 2021 amounted to PLN 5,949 million and decreased as compared to the end of 2020, with the structure based on diversified and long-term financing sources ensuring financial stability in the long run.
The Group’s free cash and cash equivalents, which at 31 December 2021 amounted to PLN 1,880 million, are of a short term nature
5,949
mn PLN
Liabilities due to borrowings of the Group at the end of 2021
| 31.12.2021 | 31.12.2020 | Change (%) | 30.09.2021 | 30.06.2021 | 31.03.2021 | |
|---|---|---|---|---|---|---|
| Liabilities due to: | 5,922 | 7,115 | (16.8) | 5,911 | 5,790 | 6,249 |
| Bank loans | 593 | 1,860 | (68.1) | 582 | 553 | 974 |
| Other loans | 2,387 | 2,461 | (3.0) | 2,416 | 2,366 | 2,537 |
| Debt securities | 2,001 | 2,000 | 0.1 | 2,009 | 2,000 | 2,009 |
| Cash pooling | 360 | 284 | 26.8 | 409 | 372 | 220 |
| Leases | 581 | 510 | 13.9 | 495 | 499 | 509 |
| Free cash and cash equivalents | 1,318 | 2,120 | (37.8) | 373 | 696 | 1,141 |
| Net debt | 4,604 | 4,995 | (7.8) | 5,538 | 5,094 | 5,108 |
Sources of financing in the Group
As at 31 December 2021, the Group held open lines of credit, loans and debt securities with a total available amount of PLN 14,505 million, out of which PLN 5,304 million had been drawn.
A credit facility in the amount of USD 1,500 million (PLN 6,090 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). In 2021, the Parent Entity received a consent of the Syndicate Members to extend the term of the agreement by another year, that is to 20 December 2026. The amount of available financing during the extension period will amount to USD 1,438 million (PLN 5,838 million). Interest is based on LIBOR plus a margin, which depends on the net debt/EBITDA ratio.
The funds acquired under this credit facility are used to finance general corporate purposes.
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 were used to finance selected investment projects related to modernisation of metallurgy and development of the “Żelazny Most” tailings storage facility,
- in December 2017 in the amount of PLN 1,340 million, under which three instalments were drawn with the payback period expiring on 28 June 2030, 23 April 2031 and 11 September 2031. The deadline for accessing the unused amount of PLN 440 million, by which amount the available financing was increased in June 2021, falls in April 2023. The funds acquired through this loan were used to finance the Parent Entity’s development and replacement projects at various stages of the 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 issue had a nominal value of PLN 2,000 million, 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 WIBOR plus a margin.
The funds obtained from the bond issue were used to finance general corporate goals.
The Group holds lines of credit in the form of short-term and long-term bilateral agreements in the total amount of PLN 2,877 million. 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 and support the financing of investments
Detailed information on the above loans is presented in notes 8.4.3 of the financial statements.
Another source supporting the Group’s liquidity is reverse factoring. The main goal of the reverse factoring program was to guarantee the effective management of working capital while ensuring the timely execution of trade payables towards the Group. It should be assumed that reverse factoring a tool used by the Group as reasonably needed. Agreements with factors were entered into for an unspecified period of time and remain active with the possibility of immediately utilising the offered limits. Reverse factoring is one of the elements available to finance debt which the Group does not plan on withdrawing from, and treats the available program as an effective tool to manage working capital in a situation of negative changes in the economic environment or other factors.
The aforementioned sources fully cover the current, medium- and long-term liquidity needs of the Group.
Debt position as at 31 December 2021
The following table presents the Group’s borrowing structure and the extent to which borrowing was utilised.
Amount available and drawn by the Group (in PLN million)
| Amount drawn as at 31.12.21 |
Amount drawn as at 3 31.12.20 |
Change (%) | Amount available as at 31.12.21 |
Amount drawn (%) 31.12.21 | |
| Unsecured, revolving syndicated credit facility | (14) | (17) | (17.6) | 6,090 | (0.2) |
| Loans | 2,568 | 2,685 | (4.4) | 3,538 | 72.6 |
| Bilateral bank loans | 749 | 2,011 | (62.8) | 2,877 | 26.0 |
| Debt securities | 2,001 | 2,000 | (0.1) | 2,000 | 100.1 |
| Total | 5,304 | 6,679 | (20.6) | 14,505 | 36.6 |
As at 31 December 2021, 56% of the Group’s debt came from loans drawn in USD, 42% in PLN, and 1% in EUR and CAD, each.
Evaluation of financial resources management
In 2021 the KGHM Polska Miedź S.A. Group was fully capable of meeting its financial obligations. The cash and cash equivalents held by the Group along with the external financing obtained ensure that liquidity will be maintained and will enable the achievement of investment goals.
As at 31 December 2021, the Group held PLN 1,880 million of free cash and cash equivalents and had open credit lines for total available financing in the amount of PLN 14,505 million, out of which PLN 5,304 million had been drawn.
1,880
mn PLN
of free cash and cash equivalents as at 31 December 2021
In 2021, the Group continued activities aimed at ensuring long-term financial stability and optimising short-term sources of financing. In December 2021, the Parent Entity used the option to extend for a second time the maturity of an unsecured revolving syndicated credit facility agreement in the amount of USD 1,500 million (PLN 6,090 million) entered into in 2019. As a result of the Syndicate Members’ decision, the amount of credit available under this facility during the extension period, i.e. to 20 December 2026, amounts to USD 1,438 million (PLN 5,838 million).
Under the unsecured, syndicated credit facility, the two bilateral bank loans and the investment loans from the European Investment Bank, the Group is obliged to maintain financial covenants at specified levels. At the reporting date, during the financial year and following the reporting date, up to the date of publication of this report, the level of reportable financial covenants as at 30 June 2021 and 31 December 2021, met the amounts specified in agreements
Net debt / EBITDA of the Group
| 31.12.21 | 31.12.20 | Change (%) | 30.09.21 | 30.06.21 | 31.03.21 | |
| Net debt/ EBITDA* | 0.6 | 0.9 | (33.3) | 0.8 | 0.7 | 0.8 |
*adjusted EBITDA for the 12 month period, ending on the last day of the reporting period, excluding EBITDA of the joint venture Sierra Gorda S.C.M
Cash pooling in the Group
In managing its financial liquidity, the Group utilises tools which support its efficiency. One of the basic instruments used by the Group is the cash pooling management system – domestically in PLN, USD and EUR and abroad in USD, and additionally in CAD in the KGHM INTERNATIONAL LTD. Group. The cash pooling system is aimed at optimising cash management, limiting interest costs, the effective financing of current needs in terms of working capital and supporting short term financial liquidity in the Group.