Consolidated financial statement of JSW S.A. Capital Group for 2012

20. Provisions

	Property tax	Mining damages	Decommissioning of a mining plant	Environmental fee and environ-mental protection	Other provisions	Total
As at 1 January 2011
Long-term	-	73.3	274.8	21.2	2.4	371.7
Short-term	239.7	99.2	-	3.8	66.8	409.5
	239.7	172.5	274.8	25	69.2	781.2
2011
Establishment of additional provisions	52.4	189	-	1.6	10.1	253.1
Dissolution of unused provisions	(205.5)	(6.7)	(48.3)	(4.0)	(11.5)	(276.0)
Interest expenses	34.8	-	15.7	1.8	1.3	53.6
Provisions used during the year	(54.7)	(86.3)	-	(0.6)	(2.1)	(143.7)
Acquisition of subsidiaries	6.6	-	-	-	8.2	14.8
As at 31 Dec 2011
Long-term	-	169.5	242.2	23.2	1.7	436.6
Short-term	73.3	99	-	0.6	73.5	246.4
	73.3	268.5	242.2	23.8	75.2	683
2012
Establishment of additional provisions	71.2	95.1	86.7	0.3	13.9	267.2
Dissolution of unused provisions	(21.3)	(34.0)	-	(0.6)	(10.7)	(66.6)
Interest expenses	14.2	-	10.9	2.1	-	27.2
Provisions used during the year	(34.3)	(85.4)	-	-	(1.5)	(121.2)
As at 31 Dec 2012
Long-term	-	148.1	339.8	13.2	1.8	502.9
Short-term	103.1	96.1	-	12.4	75.1	286.7
	103.1	244.2	339.8	25.6	76.9	789.6

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Property tax

The property tax provision associated with the possibility of taxation of certain property, plant and equipment components located in underground mine workings, is updated by the Parent Company on an ongoing basis. As at 31 December 2012, this provision amounts to PLN 83.4 million, which is described in more detail in Note 27.

Koksownia Przyjaźń was a party to tax and administrative court proceedings to determine the aggregated amount of the property tax liability for the years 2003-2009. In 2012, all the pending proceedings ended with decisions of the Local Government Appeal Court in Katowice, in which the 2nd instance tax authority recognized the correctness of the methodology used by Koksownia Przyjaźń to split coking furnace batteries into construction elements and non-construction elements, while repealing all the earlier decisions which were not positive for the company. Accordingly, in 2012, the company dissolved the property tax provision in the total amount of PLN 21.2 million.

The property tax provision associated with the taxation of the construction parts of coking furnace batteries, determined on the basis of KK Zabrze's assessment of risk related to the classification of property, plant and equipment for property tax purposes, is PLN 13.9 million as at 31 December 2012.

Mining damages

Under the adopted policy, the Group creates present-value provisions for future liabilities and recognizes and captures provisions for mining damage resulting from the extraction operations of mining enterprises in amounts resulting from documented claims which have been submitted or approved or are being examined by courts.

Decommissioning of a mining plant

The Group establishes a provision for future costs associated with the decommissioning of a mining plant based on the obligations existing under the applicable law. As at 31 December 2012, the amount of the mining plant decomissioning provision is PLN 339.8 million. The amount of the mine decommissioning costs is calculated on the basis of assumptions about the life of a mine, anticipated inflation and long-term discounting rates and the expected nominal cost of decomissioning the respective mining plants, which are determined inside the Company. Any changes to these assumptions affect the book value of the provision. The assumptions made to calculate this reserve are described in Note 4.

Environmental fee and environmental protection

Provisions for the environmental fee and environmental protection include a provision for waste storage fee which reached PLN 21.4 million as at 31 December 2012 (PLN 19.5 million on 31 December 2011). In connection with the termination of a landfill management agreement in 2007 and consequently lack of confirmations that waste has been accepted at the landfill site, there is a risk that the Group could be charged with waste storage fees for the period from 1 June 2007 to 15 August 2008. The Act of 10 July 2008 on Mining Waste (Journal of Laws of 2008 No. 138 Item 865) removes the obligation of calculating and paying waste storage fees after 15 August 2008. It is expected that the provision may be used in 2014.

Other provisions

In the past years, the Group created a provision for compensatory claims related to coke sales in the amount of PLN 22.5 million. After the Supreme Court judgment of 8 February 2012 abolishing the judgment issued by the Court of Appeals in Katowice on 22 October 2010, this matter is re-examined by the Court of Appeals in Katowice. Since the matter has not been ultimately resolved and there is no information about the date of another hearing, it is justified to keep the provision for the liability in the amount equal to the pending dispute.

Third parties have a potential claim for compensation for non-contractual use of real property occupied for Koksownia Przyjaźń installations and of the areas previously included in the protective zone which are affected by the company's installations, for a 10-year period. The Company must now obtain the legal title to the properties included in the “protective zone”. The greatest risk is related to the impact that the company's installations may have on land and to the use of such land whose legal status cannot be regulated, while the probability of negative effects is relatively high. In connection with the above risk, the existing provision is updated on an ongoing basis, along with the elapse of time causing prescription of non-contractual use claims. As at 31 December 2012, the provision amount is PLN 15.4 million.