Carrying amounts

* Financial information restated as presented in point 2.3.1 of the notes to the consolidated financial statements

Carrying amounts of property, plant and equipment

Gross carrying amount of property, plant and equipment

Impairment losses

In the reporting period, the Group recognised impairment loss on property, plant and equipment of PLN 59 402 thousand (2014: PLN 43 412 thousand) presented in other operating expenses. The amount consists of:

• impairment loss for property, plant and equipment related to the fat processing plant (Chemicals Segment) in the total amount of PLN 18 405 thousand, including mainly buildings and structures of PLN 7 858 thousand and technical devices and machines of PLN 9 493 thousand. The impairment loss was recognised mainly due to the negative performance of the plant and the decrease in the forecasted future cash flows resulting from: operating below full capacity, a significant decrease in the main product’s prices – stearin, an increase in the main raw material’s prices – animal fat and strong competition from the Asian market using palm oil in production. The recoverable amount of the plant amounts to PLN 52 740 thousand and was determined as a value in use, with the nominal weighted average cost of capital of 7.85% calculated post-tax;
• impairment loss for property, plant and equipment related to the carbon disulphide plant, the sodium sulphide plant, tankers and transport containers for carbon disulphide (Chemicals Segment) in the total amount of PLN 13 245 thousand, including mainly buildings and structures of PLN 1 982 thousand, technical devices and machines of PLN 3 110 thousand and vehicles of PLN 8 079 thousand. The impairment loss was recognised following the decision to stop the production of carbon disulphide due to the low market capacity and inability to sell the volumes guaranteeing the profitability of production. The recoverable amount is nil and was estimated based on its fair value less the costs of disposal. It is estimated that the proceeds from their scrapping and removal will cover the expected costs of dismantling. The fair value measurement was categorized as a Level 3 fair value.
• impairment loss for property, plant and equipment and intangible assets of cyclohexanone from benzene plant (Plastics segment) in the amount of PLN 12 125 thousand including mainly technical devices and machines of PLN 11 535 thousand. The installation producing cyclohexanone from benzene comprises the equipment used in the production of cyclohexanone, a material used in the production of caprolactam. An impairment loss was recognised due to the changes in the Group’s business model concerning production of plastics, related completion of the investment in the installation producing cyclohexanone from phenol, limited potential for selling the cyclohexanone on the market and the decision to close plant producing cyclohexanone from benzene in 2016. The recoverable amount of the assets was estimated based on their fair value less the costs of disposal and amounts to PLN 2 291 thousand as at 31 December 2015. The fair value measurement was categorized as a Level 3 fair value. The recoverable amount concerns the installation’s buildings that will continue to be used. For the remaining assets, it is estimated that the proceeds from their scrapping and removal will cover the expected costs of dismantling;
• impairment loss for the unused plant of phthalic anhydride (Other Segments) in the amount of PLN 7 876 thousand, including buildings and structures of PLN 3 204 thousand and technical devices and machines of PLN 4 672 thousand. The increase in the impairment loss (in 2014, the Group recognised an impairment loss for the plant of PLN 40 267 thousand) results from the change in the estimate of the plant’s recoverable amount, determined based on fair value less the costs of disposal. As at 31 December 2015 the recoverable amount was PLN 2 249 thousand (as at 31 December 2014: PLN 11 873 thousand). The fair value measurement was categorized as a Level 3 fair value.

Other impairment losses concerned property, plant and equipment which are not in use and will be put into liquidation in the foreseeable future or will be physically liquidated. The utilisation of impairment allowances applies to property, plant and equipment that were put into liquidation, were removed or sold and for which impairment had previously been recognised. There were no indications in the current period that the impairment recognized in prior years for polioxymethylene (POM) installation (Plastics segment) may cease to exist and needs to be reversed.

Property, plant and equipment under construction

The most significant items of property, plant and equipment under construction included:

• Construction of the New Heat and Power Plant in Grupa Azoty ZAK S.A. which is to restore heat and power production capacity using solutions complying with the increasing environmental requirements. As at the 31 December 2015, the capitalised expenditures amounted to PLN 199 651 thousand (31 December 2014: PLN 65 549 thousand),
• Exhaust gas treatment system and modernization of ECII power plant in Grupa Azoty POLICE which is to adapt the plant to EU IED Directive. As at the 31 December 2015, the capitalised expenditures amounted to PLN 117 914 thousand (31 December 2014: PLN 60 294 thousand),
• Construction of Polyamide Plant II in the Parent Company. As at the 31 December 2015, the capitalised expenditures amounted to PLN 60 948 thousand (31 December 2014: PLN 2 325 thousand),
• Construction of Granulation Plant II in the Parent Company. As at the 31 December 2015, the capitalised expenditures amounted to PLN 30 336 thousand (31 December 2014: PLN 5 532 thousand),
• Construction of fertilizers warehouse with a capacity of 10 000 tones and associated equipment in the Parent Company. As at the 31 December 2015, the capitalised expenditures amounted to PLN 41 753 thousand (31 December 2014: PLN 10 621 thousand),
• Construction of extraction-condensing turbine set in EC-20 Mw in the Parent Company. As at the 31 December 2015, the capitalised expenditures amounted to PLN 29 704 thousand (31 December 2014: PLN 265 thousand),
• Modernization of ammonia plant in Grupa Azoty POLICE. As at the 31 December 2015, the capitalised expenditures amounted to PLN 29 497 thousand (31 December 2014: nil),
• Construction of a PDH propylene production unit in Grupa Azoty POLICE. As at the 31 December 2015, the capitalised expenditures amounted to PLN 21 277 thousand (31 December 2014:nil).

Leased assets

The Group leases under finance leases mainly computers, IT infrastructure, catalysts and vehicles including locomotives, carriages, passenger cars and fork lifts.

Security

As at 31 December 2015, the carrying amount of property, plant and equipment pledged as security for bank loans amounted to PLN 26 120 thousand (31 December 2014: PLN 555 860 thousand).

In 2015, Grupa Azoty implemented a New Financing program, which includes: Revolving Loan Agreement, Intercompany Financing Agreement, Loan Agreements with the EBRD and the EIB. In result, the majority of pledges on the Group’s assets has been released.