6.2.1 Inventories

The Group’s most material inventory items include:

• gas fuel and fuels for electricity and heat generation,
• certificates of origin for electricity obtained in connection with electricity production and certificates of origin for electricity purchased in order to be surrendered for cancellation in connection with the Group’s obligation under the Energy Law,
• energy efficiency (white) certificates, purchased by the Group, to be surrendered for cancellation and obtained in connection with efficiency enhancing measures taken under the Energy Efficiency Act,
• consumables used in investment projects and at oil and gas production facilities,
• CO2 emission allowances (purchased for resale).

Inventories are initially measured at cost. As at the reporting date, inventories are measured at the lower of cost and net realisable value.

Inventories of high-methane gas in storage are measured jointly for all storage units, at the average weighted cost. Changes in the inventories of gas fuel stored in the Underground Gas Storage Facilities for sale and own consumption, as well as balance-sheet differences, are measured at the average weighted cost, which includes in particular: costs of purchase of gas from all sources together with an appropriate portion of costs of system and transaction charges, actual costs of its production from domestic sources, costs of nitrogen removal and regasification.

LNG inventories are measured at actual production cost or purchase price, depending on the source. The purchase price is increased by acquisition costs, including costs of transporting the gas to the storage site (including towing and mooring services, port fees, etc.). LNG inventories are measured using the weighted average method. Changes in LNG inventories (sale and consumption, including regasification) are measured at the average actual unit cost in a given reporting period for a given location.

In accordance with the provisions of the Energy Law, the Group companies acting as producers and sellers of electricity from renewable sources or produced in cogeneration receive or acquire certificates of origin for electricity, while in their capacity of suppliers of electricity, heat or gaseous fuels to end users the Group companies receive energy efficiency certificates. These entities are required by law to obtain and present for redemption a certain number of certificates.

Property rights are assigned to certificates of origin, which arise at the time when obtaining such certificates becomes probable and the rights are recognised as inventory at market value; at the same time revenue from energy sales is recognised.

Purchased certificates of origin of electricity and energy efficiency certificates (other than those purchased for trading purposes) are recognised as inventory at cost and their outflows are measured using the weighted average method.

If the entity does not have a sufficient number of certificates at the reporting date, it recognises a provision for the purchase of certificates in order to redeem them, in correspondence with the provision (Note 6.3.3.).

The Group also recognises CO2 emission allowances purchased for resale as inventories. They are measured initially at cost; at the end of each reporting period they are measured at the lower of cost or net realisable value. In the current reporting period, their amount was not material