23 – Provisions

Provisions

In EUR mn

 

 

 

 

 

Pensions and similar obligations

Decommissioning and restoration obligations

Other provisions

Total

January 1, 2020

1,111

3,959

865

5,935

Currency translation differences

4

(138)

(15)

(149)

Changes in consolidated Group

457

38

39

533

Usage and releases

(104)

(350)

(183)

(637)

Payments to funds

(10)

(10)

Allocations

73

567

184

825

Transfers

(13)

13

0

Reclassified to liabilities associated with assets held for sale

(59)

(78)

(22)

(159)

December 31, 2020

1,458

3,999

881

6,337

thereof short-term as of December 31, 2020

72

304

377

thereof short-term as of January 1, 2020

87

293

379

Pensions and similar obligations include mainly provisions for pensions, severances and anniversary bonuses. More information on material  19 employee benefits is included in chapter Provisions for pensions and similar obligations.

Decommissioning and restoration details are included in chapter Provisions for decommissioning and restoration obligations.

Other provisions include mainly other personnel provisions and provisions for shortfall of emission certificates. More information is provided in chapter Other provisions.

Provisions for pensions and similar obligations accounted for according to IAS 19

Following tables include details on funded and unfunded pension plans (mainly Austria, Germany and Belgium) as well as severance plans (mainly in Austria) and medical plans (in Belgium).

The majority of pension commitments of several OMV companies were transferred to a country-specific external pension funds. Pension commitments were calculated based on country- and plan-specific assumptions. Refer to Note 2 – Accounting policies, judgments and estimates – for more details.

Defined benefit pension plans, obligations for severance and other plans

In EUR mn

 

 

 

 

 

 

2020

2019

2019

2017

2016

Present value of funded obligations

1,102

840

776

729

764

Market value of plan assets

(589)

(473)

(413)

(436)

(453)

Provision for funded obligations

513

366

363

293

311

Present value of unfunded obligations

619

499

490

463

479

Provision for unfunded obligations

619

499

490

463

479

Present value of obligations of severance and other plans

197

141

129

135

144

Effect of asset ceiling

3

 

 

 

 

Total

1,332

1,007

982

891

935

Present value of obligations

In EUR mn

 

 

 

 

 

2020

2019

 

Pensions

Severance & other plans

Pensions

Severance & other plans

Present value of obligation as of January 1

1,339

141

1,266

129

Changes in the consolidated group

519

78

Currency translation differences

4

(1)

1

(1)

Reclassification to liabilities associated with assets held for sale

(79)

(11)

Current service cost

8

5

7

4

Past service cost 1

(5)

0

Interest cost

13

2

23

3

Benefits paid

(72)

(18)

(75)

(11)

Expected defined benefit obligations as per December 31

1,733

192

1,221

126

Actual defined benefit obligations as per December 31

1,722

197

1,339

141

Remeasurements of the period (OCI)

(11)

5

118

15

thereof changes in demographic assumptions

(25)

thereof changes in financial assumptions

(2)

2

133

14

thereof experience adjustments

(9)

3

9

1

1

mainly related to outsourcing activities in Romania

Market value of plan assets

In EUR mn

 

 

 

2020

2019

Market value of plan assets as of January 1

473

413

Changes in the consolidated group

177

Reclassification to held for sale

(33)

Interest income

5

8

Allocation to funds

10

51

Benefits paid

(41)

(41)

Remeasurements of the period (OCI)

(1)

43

Market value of plan assets as of December 31

589

473

The majority of pension commitments are attributable to plans in Austria and Belgium and were transferred to external pension funds managed by APK Pensionskasse AG in Austria as well as Vivium and KBC Asset Management in Belgium. The investment of plan assets in Austria is governed by section 25 Austrian Pension Fund Act and the Investment Fund Act. In addition to these regulations, the investment guidelines of APK-Pensionskasse AG regulate the spread of asset allocation, the use of umbrella funds and the selection of fund managers. The investment plans in Belgium follow the investment strategy of the respective insurance company as well as local legal regulations.

The allocation of plan assets was mainly in debt securities and insurance contracts. Except for the insurance contracts, which are not quoted, the majority of plan assets are invested in liquid active markets for which quoted prices are available.

In 2021, defined benefit related contributions for 2020 to exteral pension funds of  2 mn are planned.

Provisions and expenses

In EUR mn

 

 

 

 

 

2020

2019

 

Pensions

Severance & other plans

Pensions

Severance & other plans

Provision as of January 1

866

141

853

129

Changes in the consolidated group

345

78

thereof effect of asset ceiling

3

Currency translation differences

5

(1)

0

(1)

Reclassification to liabilities associated with assets held for sale

(45)

(11)

Expense for the year

16

2

23

8

Benefits paid

(32)

(18)

(34)

(11)

Payments to funds

(10)

(51)

Remeasurements for the year

(10)

5

75

15

thereof changes in demographic assumptions

(25)

thereof changes in financial assumptions

(1)

2

91

14

thereof experience adjustments

(10)

3

9

1

Provision as of December 31

1,135

197

866

141

thereof effect of asset ceiling

3

 

 

 

 

 

Current service cost

8

5

7

4

Past service cost 1

(5)

0

Net interest cost

9

2

16

3

Expenses of defined benefit plans for the year

16

2

23

8

1

mainly related to outsourcing activities in Romania

Underlying assumptions for calculating pension expenses and expected defined benefit entitlements as of December 31

 

 

 

 

 

 

2020

2019

 

Pensions

Severance & other plans

Pensions

Severance & other plans

Capital market interest rate

0.79-2.60%

0.64-3.35%

1.00%

0.70-4.41%

Future increases in salaries

2.00-5.00%

2.00-3.50%

3.00%

3.00-4.19%

Future increase in pensions

1.25-2.00%

2.00%

The following actuarial assumptions for calculating pension expenses and expected defined benefit entitlements are considered as material and are stress tested within the following ranges. The increase or decrease compared to the values accounted for defined benefit obligations in relative deviation terms and in absolute values are as follows:

Sensitivities – percentage change

 

 

 

 

 

 

 

 

2020

 

Capital market interest rate

Future increases in salaries

Future increases in pensions

 

0.50%

(0.50)%

0.25%

(0.25)%

0.25%

(0.25)%

Pensions

(6.08)%

6.76%

0.96%

(0.90)%

2.56%

(2.42)%

Severance & other plans

(5.48)%

6.13%

2.36%

(2.25)%

Sensitivities – absolute change

In EUR mn

 

 

 

 

 

 

 

2020

 

Capital market interest rate

Future increases in salaries

Future increases in pensions

 

0.50%

(0.50)%

0.25%

(0.25)%

0.25%

(0.25)%

Pensions

(106)

117

16

(15)

44

(41)

Severance & other plans

(10)

11

4

(4)

Duration profiles and average duration of defined benefit obligations as of December 31

In EUR mn

 

 

 

 

 

2020

 

Duration profiles

Duration

 

1–5 years

6–10 years

>10 years

in years

Pensions

392

391

939

12

Severance & other plans

53

55

88

10

Allocation of plan assets as of December 31

 

 

 

 

2020

2019

Asset category

 

 

Equity securities

18%

27%

Debt securities

37%

58%

Cash and money market investments

7%

8%

Insurance contracts

28%

Other

10%

7%

Total

100%

100%

Provisions for decommissioning and restoration obligations

In EUR mn

 

 

Carrying amount

January 1, 2020

3,959

Currency translation differences

(138)

Changes in consolidated Group

38

New obligations

51

Increase arising from revisions in estimates

432

Reduction arising from revisions in estimates

(299)

Unwinding of discounting

84

Reclassification to liabilities associated with assets held for sale

(78)

Usage, disposals and other changes

(51)

December 31, 2020

3,999

thereof short-term as of December 31, 2020

72

thereof short-term as of January 1, 2020

87

The increase arising from revisions in estimates was mainly driven by decreased real interest rates for , and EUR compared to 2019.

Reclassifications to liabilities associated with assets held for sale were mainly related to disposal groups in Germany, Malaysia and Kazakhstan. For details see Note 20 – Assets and liabilities held for sale.

Estimation of maturities of decommissioning and restoration obligations

In EUR mn

 

 

2020

≤1 year

72

1 – 5 years

368

5 – 10 years

956

10 – 20 years

1,686

20 – 30 years

654

30 – 40 years

261

>40 years

1

Total

3,999

A decrease of 1 percentage point in the real interest rates used to calculate the decommissioning provisions would lead to an additional provision of EUR 545 mn.

The provision for decommissioning and restoration costs included obligations in respect of OMV Petrom SA amounting to EUR 1,542 mn (2019: EUR 1,401 mn). Part of the obligations is to be recovered from the Romanian State in accordance with the privatization agreement. As of December 31, 2020, OMV Petrom SA held receivables from the Romanian state related to decommissioning and restoration costs amounting to EUR 442 mn (2019:  375 mn).

Other provisions

In EUR mn

 

 

 

 

 

2020

2019

 

Short-term

Long-term

Short-term

Long-term

Environmental costs

13

90

12

81

Onerous contracts

31

364

29

383

Other personnel provisions

134

6

119

14

Emissions Certificates

75

61

Other

51

116

71

95

Other provisions

304

576

293

572

As at December 31, 2020 the provision for environmental costs included EUR 65 mn referring to the provision for soil remediation in relation to the Arpechim refinery site in Romania.

The provisions for onerous contracts were mainly related to the Gate obligation and associated transportation commitments of OMV Gas Marketing & Trading GmbH.

The provision for the Gate LNG obligation is related to a long-term, non-cancellable contract for regasification capacity and storage that became onerous due to the negative development of market conditions for LNG terminal capacities in Europe. The present value of the provision as at December 31, 2020 was EUR 327 (2019: EUR 327 mn). The provision represents the unavoidable costs of meeting the contractual obligations. Thereby, income and costs from future purchases and sales of LNG are taken into account, since the regasification of LNG and subsequent sale of the gas positively contributes to the coverage of the fixed costs. The volume assumptions are based on management’s best estimates of available LNG volumes in the future. The prices are based on forward rates, where available. If no forward prices are available, the prices represent management’s best estimate of future prices, derived from current market prices or forward rates of the preceding period. The calculation is based on an interest rate of 3.96% (2019: 3.88%). A 50% decrease in either volumes or margin would lead to an additional provision of EUR 173 mn. Furthermore, a 1 percentage point decrease in the discount rate would lead to an additional provision of EUR 23 mn.

As per end of 2020, the provision for the related non-cancellable transportation commitments of OMV Gas Marketing & Trading GmbH amounted to EUR 68 mn (2019: EUR 78 mn). The calculation is based on the difference between the fixed costs for using the capacities and the net profit from usage expected to be generated by using the capacities. The discount rate applied is 3.96% (2019: 3.88%). Besides the discount rates, the key assumptions are the gas prices at the relevant gas hubs which are based on forward rates where available and on management’s best estimates for the remaining contract term.

Other personnel provisions included short-term provisions related to personnel reduction schemes of EUR 29 mn (2019: EUR 28 mn).

Emissions certificates

Directive 2003/87/EC of the European Parliament and of the European Council established a greenhouse gas emissions trading scheme, requiring member states to draw up national plans to allocate emissions certificates. Under this scheme, affected OMV Group companies received a total of 3,038,336 free emissions certificates in 2020 (2019: 3,181,456).

The New Zealand Government established a greenhouse gas emissions trading scheme under the Climate Change Response Act 2002. Under this scheme New Zealand companies are not entitled to receive free emission certificates. OMV has purchased certificates to meet its own use liability. Apart from purchased certificates, each sale of gas to domestic customers in New Zealand creates an obligation for OMV. OMV receives units of emission certificates from customers to meet this obligation.

As of December 31, 2020, the total market value of emissions certificates amounted to EUR 400 mn (December 31, 2019: EUR 232 mn).

OMV expects to surrender 14,325,729 emissions certificates in 2021 for (not yet externally verified) emissions, out of which 3,510,052 emissions certificates are expected to be transferred to OMV from customers in New Zealand.

Emissions certificates

 

 

 

 

2020

2019

Certificates held as of January 1

9,437,367

9,077,418

Free allocation for the year

3,038,336

3,181,456

Certificates surrendered according to verified emissions for the prior year

(12,238,002)

(9,685,184)

Changes in consolidated Group

5,310,058

Net purchases and sales during the year

1,577,313

4,005,464

Certificates received from customers

5,196,819

2,858,213

Certificates held as of December 31

12,321,891

9,437,367

IASs
International Accounting Standards
EUR
Euro
RON
New Romanian leu
USD
US dollar
EUR
Euro
LNG
Liquefied Natural Gas
mn
Million
LNG
Liquefied Natural Gas