PGE Polska Grupa Energetyczna S.A. Condensed interim consolidated financial statements for the 3 months period

Transcription

1 PGE Polska Grupa Energetyczna S.A. Condensed interim consolidated financial statements for the 3 months period ended in accordance with IFRS EU (in PLN million) zakończony dnia 2014 roku zgodne z MSSF (w tysiącach złotych)

2 TABLE OF CONTENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY... 5 CONSOLIDATED STATEMENT OF CASH FLOWS... 6 GENERAL INFORMATION, BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS AND OTHER EXPLANATORY INFORMATION General information Information about the parent company Information about the PGE Group Structure of the PGE Group Basis for preparation of the financial statements Statement of compliance Presentation and functional currency New standards and interpretations published, not yet effective Professional judgment of management and estimates Changes of accounting principles and data presentation Fair value hierarchy EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS EXPLANATORY NOTES TO THE OPERATING SEGMENTS Information on operating segments Information on business segments for the period ended EXPLANATORY NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME Revenues and expenses Sales revenues Cost by nature and function Other operating income and expenses Financial income and expenses Impairment allowances of assets Tax in the statement of comprehensive income EXPLANATORY NOTES TO THE STATEMENT OF FINANCIAL POSITION Significant purchase transactions of property, plant and equipment and intangible assets Future investment commitment Deferred tax in the statement of financial position Deferred tax asset Deferred tax liability CO2 emission rights for captive use Other current and non-current assets Other non-current assets Other current assets Significant financial assets Trade and other financial receivables Cash and cash equivalents Derivatives Equity Share capital Hedging reserve Dividends paid and dividends declared Provisions Provision for employee benefits Rehabilitation provision Provision for deficit of CO2 emission rights Provision for non-contractual use of property Other provisions Financial liabilities Loans, borrowings, bonds and lease Trade and other financial liabilities OTHER EXPLANATORY NOTES Contingent liabilities and receivables. Legal claims Contingent liabilities Other significant issues related to contingent liabilities Contingent receivables Other legal claims and disputes Tax settlements Information on related parties Associates Subsidiaries of the State Treasury Management personnel remuneration Significant events of the reporting period and subsequent events Compensation resulting from termination of long term contracts LTC Signing of agreement on initiation of Polska Grupa Górnicza (Polish Mining Group) Approval of the financial statements of 38 2

3 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF PROFIT OR LOSS Note (not audited) (not audited) data restated* SALES REVENUES 6.1 7,133 7,553 Costs of goods sold 6.2 (5,605) (5,548) GROSS PROFIT/(LOSS) ON SALES 1,528 2,005 Distribution and selling expenses 6.2 (379) (395) General and administrative expenses 6.2 (183) (208) Other operating income Other operating expenses 6.3 (47) (67) OPERATING PROFIT/(LOSS) 1,123 1,416 Financial income Financial expenses 6.4 (74) (105) PROFIT/(LOSS) BEFORE TAX 1,075 1,362 Current income tax 8 (116) (179) Deferred income tax 8 (90) (85) NET PROFIT/(LOSS) FOR THE REPORTING PERIOD 869 1,098 OTHER COMPREHENSIVE INCOME Items, which may be reclassified to profit or loss, including: Valuation of hedging instruments Foreign exchange differences from translation of foreign entities - (5) Deferred tax 8 - (13) OTHER COMPREHENSIVE INCOME FOR THE REPORTING PERIOD, NET 1 53 TOTAL COMPREHENSIVE INCOME 870 1,151 NET PROFIT/(LOSS) ATTRIBUTABLE TO: equity holders of the parent company 870 1,095 non-controlling interests (1) 3 COMPREHENSIVE INCOME ATTRIBUTABLE TO : equity holders of the parent company 871 1,148 non-controlling interests (1) 3 NET PROFIT/(LOSS) AND DILUTED NET PROFIT/(LOSS) PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY (IN PLN) * for information regarding restatement of comparative figures please refer to note 3 of these financial statements of 38 3

4 CONSOLIDATED STATEMENT OF FINANCIAL POSITION NON-CURRENT ASSETS Note (not audited) December 31, 2015 (audited) (not audited) data restated* Property, plant and equipment 48,205 47,068 50,296 Investment property Intangible assets Financial receivables Derivatives Available-for-sale financial assets Shares in associates accounted for under the equity method Other non-current assets ,063 1,488 Deferred tax assets ,544 49,586 53,117 CURRENT ASSETS Inventories 1,854 1,959 2,241 CO 2 emission rights for own use 12 2,325 2,172 1,565 Income tax receivables Derivatives Trade and other financial receivables ,011 3,748 3,764 Available-for-sale financial assets Other current assets Cash and cash equivalents ,629 3,104 4,943 Assets classified as held-for-sale ,330 11,710 13,051 TOTAL ASSETS 60,874 61,296 66,168 EQUITY Share capital ,698 18,698 18,698 Hedging reserve 16.2 (20) (21) (3) Foreign exchange differences from translation of foreign entities (1) (1) (6) Reserve capital 13,009 13,009 9,231 Retained earnings 9,506 8,636 17,996 EQUITY ATTRIBUTED TO EQUITY HOLDERS OF THE PARENT COMPANY 41,192 40,321 45,916 Non-controlling interests TOTAL EQUITY 41,286 40,417 46,036 NON-CURRENT LIABILITIES Non-current provisions 17 6,109 6,044 6,165 Loans, borrowings, bonds and lease ,124 5,118 4,566 Derivatives Deferred tax liabilities ,165 Deferred income and government grants ,199 1,192 1,144 Other financial liabilities ,379 13,295 14,202 CURRENT LIABILITIES Current provisions 17 2,094 1,809 2,186 Loans, borrowings, bonds and lease Derivatives Trade and other financial liabilities ,682 3,945 2,057 Income tax liabilities Deferred income and government grants Other current non-financial liabilities 1,027 1,388 1,122 * for information regarding restatement of comparative figures please refer to note 3 of these financial statements 6,209 7,584 5,930 TOTAL LIABILITIES 19,588 20,879 20,132 TOTAL EQUITY AND LIABILITIES 60,874 61,296 66,168 4 of 38 4

5 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY EQUITY ATTRIBUTED TO EQUITY HOLDERS OF THE PARENT COMPANY Share capital Hedging reserve Foreign exchange differences from translation of foreign entities Reserve capital Retained earnings TOTAL Noncontrolling interests TOTAL EQUITY Note JANUARY 1, ,698 (61) (1) 9,231 16,901 44, ,884 Net loss for the reporting period (3,032) (3,032) (5) (3,037) Other comprehensive income COMPREHENSIVE INCOME (3,020) (2,980) (5) (2,985) Retained earnings distribution ,778 (3,778) Dividend (1,458) (1,458) (4) (1,462) Changes within the PGE Group Purchase of additional shares in the PGE Group companies (10) (10) (78) (88) Other changes (1) - TRANSACTIONS WITH OWNERS ,778 (5,245) (1,467) (15) (1,482) AS AT DECEMBER 31, ,698 (21) (1) 13,009 8,636 40, ,417 Net profit for the reporting period (1) 869 Other comprehensive income COMPREHENSIVE INCOME (1) 870 Acquisition of non-controlling interest without a change in control (1) (1) TRANSACTIONS WITH OWNERS (1) (1) MARCH 31, ,698 (20) (1) 13,009 9,506 41, ,286 EQUITY ATTRIBUTED TO EQUITY HOLDERS OF THE PARENT COMPANY Share capital Hedging reserve Foreign exchange differences from translation of foreign entities Reserve capital Retained earnings TOTAL Noncontrolling interests TOTAL EQUITY JANUARY 1, ,698 (61) (1) 9,231 16,901 44, ,884 Net profit for the reporting period ,095 1, ,098 Other comprehensive income - 58 (5) COMPREHENSIVE INCOME - 58 (5) - 1,095 1, ,151 Other changes TRANSACTIONS WITH OWNERS MARCH 31, ,698 (3) (6) 9,231 17,996 45, ,036 5 of 38 5

6 CONSOLIDATED STATEMENT OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES Note (not audited) (not audited) data restated* Profit/(loss) before tax 1,075 1,362 Income tax paid (82) (109) Adjustments for: Depreciation, amortization, disposal and impairment losses Interest and dividend, net Profit / loss on investment activities (34) (55) Change in receivables (266) (152) Change in inventories 106 (81) Change in liabilities, excluding loans and borrowings (812) (617) Change in other non-financial assets, prepayments and CO 2 emission rights 15 (58) Change in provisions Other NET CASH FROM OPERATING ACTIVITIES 1,068 1,361 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment and intangible assets 2 10 Purchase of property, plant and equipment and intangible assets (2,522) (2,434) Deposits with a maturity over 3 months (205) (120) Termination of deposits over 3 months Other 9 - NET CASH FROM INVESTING ACTIVITIES (2,522) (2,433) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from loans, borrowings and issue of bonds Repayment of loans, borrowings, bonds and finance lease (33) (170) Interest paid (7) (8) Grants received for non-current assets 8 - Other - (2) NET CASH FROM FINANCING ACTIVITIES (20) (150) NET CHANGE IN CASH AND CASH EQUIVALENTS (1,474) (1,222) Effect of movements in exchange rates on cash held - 1 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD ,101 6,183 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD ,627 4,961 Restricted cash * for information regarding restatement of comparative figures please refer to note 3 of these financial statements 6 of 38 6

7 GENERAL INFORMATION, BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS AND OTHER EXPLANATORY INFORMATION 1. General information 1.1 Information about the parent company PGE Polska Grupa Energetyczna S.A. ( parent company, the Company, PGE S.A. ) was founded on the basis of the Notary Deed of August 2, 1990 and registered in the District Court in, XVI Commercial Department on September 28, The Company was registered in the National Court Register of the District Court for the capital city of, XII Commercial Department, under no. KRS The parent company is seated in, 2 Mysia Street. January 1, 2016 the composition of the Management Board was as follows: Marek Woszczyk the President of the Management Board, Jacek Drozd the Vice-President of the Management Board, Grzegorz Krystek the Vice-President of the Management Board, Dariusz Marzec the Vice-President of the Management Board. From January 1, 2016 till March the following changes occurred in the composition of the Management Board: on January 29, 2016 the Supervisory Board decided to recall Mr. Jacek Drozd and Mr. Dariusz Marzec from the Management Board and temporarily delegated its member Mr. Marek Pastuszko to perform the duties of the Member of the Management Board for the 3-month period. on February 25, 2016 the Supervisory Board cancelled delegation of Mr. Marek Pastuszko to temporarily perform the duties of the Member of the Management Board and appointed Mr. Marek Pastuszko for the position of the Vice-President of the Management Board. on February 26, 2016 the Supervisory Board appointed Mr. Emil Wojtowicz to the Management Board as from March 15, 2016 entrusting him the position of the Vice-President of the Management Board and appointed Mr. Ryszard Wasiłek to the Management Board of office as from March 7, 2016 entrusting him the position of the Vice-President of the Management Board. on March 2, 2016 Mr. Marek Woszczyk and Mr. Grzegorz Krystek submitted resignations from their positions in the Management Board as from March 30, on March 22, 2016 Mr. Paweł Śliwa submitted his resignation from the Supervisory Board and the Supervisory Board appointed four members of the Management Board as from : Mr. Henryk Baranowski, entrusting him the position of the President of the Management Board and Ms. Marta Gajęcka, Mr. Bolesław Jankowski and Mr. Paweł Śliwa to the positions of the Vice-Presidents of the Management Board. and as at the date of preparation of these financial statements the composition of the Company s Management Board is as follows: Henryk Baranowski the President of the Management Board, Marta Gajęcka the Vice-President of the Management Board, Bolesław Jankowski the Vice-President of the Management Board, Marek Pastuszko the Vice-President of the Management Board, Paweł Śliwa the Vice-President of the Management Board, Ryszard Wasiłek the Vice-President of the Management Board, Emil Wojtowicz the Vice-President of the Management Board. 7 of 38 7

8 Ownership structure the ownership structure of the parent company is as follows: State Treasury Other shareholders Total January 1, % 41.61% % 57.39% 42.61% % As of March 30, 2016 the State Treasury transferred 18,697,608 shares, constituting 1% of the share capital of the Company. According to the information received from the Ministry of the State Treasury, after the transaction the State Treasury holds 57.39% in the share capital of the Company. According to information available in the Company, as at the date of publication of these financial statements the sole shareholder who holds at least 5% of votes on the General Meeting of PGE S.A. is the State Treasury. After the reporting date up to the date of preparation of these financial statements, there have been no changes in the amount of the Company s share capital. 1.2 Information about the PGE Group PGE Polska Grupa Energetyczna S.A. Group ( PGE Group, Group ) comprises the parent company PGE Polska Grupa Energetyczna S.A., 50 subsidiaries subject to consolidation and 1 associate. For additional information about subsidiaries included in the consolidated financial statements please refer to notes 1.3. The consolidated financial statements of the PGE Group comprise financial data for the period from January 1, 2016 to ( financial statements, consolidated financial statements ) and include comparative data for the period from January 1, 2015 to December 31, 2015 and from January 1, 2015 to. The financial statements of all affiliated companies were prepared for the same reporting period as the financial statements of the parent company, using consistent accounting principles except for the financial statements of the associated company. Core operations of the PGE Group companies are as follows: production of electricity, distribution of electricity, wholesale and retail sale of electricity, energy origin rights, CO 2 emission rights and gas, production and distribution of heat, rendering of other services related to the above mentioned activities. Business activities are conducted under appropriate concessions granted to particular Group companies. Going concern These consolidated financial statements were prepared under the assumption that the Group companies will continue to operate as a going concern in the foreseeable future. the date of the approval of these consolidated financial statements, there is no evidence indicating that the significant Group companies will not be able to continue its business activities as a going concern. In these financial statements, the accounting rules (policy) and calculation methods are the same as the ones applied in the latest annual financial statements and they shall be read in conjunction with the audited consolidated financial statements of PGE S.A. for the year ended December 31, of 38 8

9 1.3 Structure of the PGE Group During the reporting period, PGE Group consisted of the enumerated below companies, consolidated directly and indirectly: Entity Entity holding shares Share of the Group entities as at Share of the Group entities as at December 31, SEGMENT: SUPPLY PGE Polska Grupa Energetyczna S.A. PGE Dom Maklerski S.A. PGE Trading GmbH Berlin PGE Obrót S.A. Rzeszów ENESTA sp. z o.o. Stalowa Wola SEGMENT: CONVENTIONAL GENERATION PGE Górnictwo i Energetyka Konwencjonalna S.A. Bełchatów ELBIS sp. z o.o. Rogowiec MEGAZEC sp. z o.o. Bydgoszcz MegaSerwis sp. z o.o. Bogatynia ELMEN sp. z o.o. Rogowiec Przedsiębiorstwo Usługowo-Produkcyjne ELTUR-SERWIS sp. z o.o. Bogatynia Przedsiębiorstwo Usługowo-Produkcyjne TOP SERWIS sp. z o.o. Bogatynia Przedsiębiorstwo Transportowo-Sprzętowe BETRANS sp. z o.o. Bełchatów Przedsiębiorstwo Wulkanizacji Taśm i Produkcji Wyrobów Gumowych BESTGUM POLSKA sp. z o.o. Rogowiec RAMB sp. z o.o. Piaski EPORE sp. z o.o. 16. Bogatynia Energoserwis Kleszczów sp. z o.o. 17. Rogowiec Przedsiębiorstwo Energetyki Cieplnej sp. z o.o. 18. Zgierz SEGMENT: RENEWABLE ENERGY PGE Energia Odnawialna S.A. 19. Elektrownia Wiatrowa Baltica-1 sp. z o.o. 20. Elektrownia Wiatrowa Baltica-2 sp. z o.o. 21. Elektrownia Wiatrowa Baltica-3 sp. z o.o. 22. PGE Energia Natury sp. z o.o. 23. PGE Energia Natury Omikron sp. z o.o. 24. PGE Energia Natury PEW sp. z o.o. 25. The Parent Company PGE Obrót S.A % 87.33% PGE Polska Grupa Energetyczna S.A 99.97% 99.96% PGE Polska Grupa Energetyczna S.A % - PGE Górnictwo i Energetyka Konwencjonalna S.A. PGE Górnictwo i Energetyka Konwencjonalna S.A. PGE Górnictwo i Energetyka Konwencjonalna S.A. PGE Górnictwo i Energetyka Konwencjonalna S.A % 85.38% 85.38% 51.00% 51.00% 50.98% 50.98% PGE Energia Odnawialna S.A % % PGE Energia Odnawialna S.A % % PGE Energia Odnawialna S.A % % PGE Energia Odnawialna S.A % % PGE Energia Odnawialna S.A % % PGE Energia Odnawialna S.A % % 9 of 38 9

10 Entity Entity holding shares Share of the Group entities as at Share of the Group entities as at December 31, SEGMENT: DISTRIBUTION PGE Dystrybucja S.A. Lublin SEGMENT: OTHER OPERATIONS PGE EJ 1 sp. z o.o. 27. PGE Systemy S.A. 28. EXATEL S.A. 29. PGE Sweden AB (publ) 30. Stockholm PGE Obsługa Księgowo-Kadrowa sp. z o.o. 31. Lublin Elbest sp. z o.o. 32. Bełchatów Elbest Security sp. z o.o. 33. Bełchatów PGE Inwest 2 sp. z o.o. 34. PGE Inwest 4 sp. z o.o. 35. PGE Inwest 5 sp. z o.o. 36. PGE Inwest 6 sp. z o.o. 37. PGE Inwest 7 sp. z o.o. 38. PGE Inwest 8 sp. z o.o. 39. PGE Inwest 9 sp. z o.o. 40. PGE Inwest 10 sp. z o.o. 41. PGE Inwest 11 sp. z o.o. 42. PGE Inwest 12 sp. z o.o. 43. PGE Inwest 13 sp. z o.o. 44. PGE Inwest 14 sp. z o.o. 45. PGE Inwest 15 sp. z o.o. 46. PGE Inwest 16 sp. z o.o. 47. ENERGO-TEL S.A. 48. BIO-ENERGIA sp. z o.o. 49. Przedsiębiorstwo Transportowo-Usługowe 50. ETRA sp. z o.o. Białystok Energetyczne Systemy Pomiarowe sp. z o.o. 51. Białystok PGE Polska Grupa Energetyczna S.A % 70.00% EXATEL S.A % % PGE Energia Odnawialna S.A % % PGE Dystrybucja S.A % % PGE Dystrybucja S.A % % The table above includes the following changes in the structure of the PGE Group companies subject to full consolidation which took place during the period ended : on March 10, 2016 PGE Polska Grupa Energetyczna S.A. and PGE Górnictwo i Energetyka Konwencjonalna S.A. concluded agreement for purchase of 100% shares of subsidiary RAMB sp. z o.o. The transaction did not have influence on these financial statements. 10 of

11 2. Basis for preparation of the financial statements 2.1 Statement of compliance These financial statements of PGE Polska Grupa Energetyczna S.A. were prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and in accordance with the Regulation of the Polish Minister of Finance of February 19, 2009 on current and periodic information published by issuers of securities and on conditions under which such information may be recognized as being equivalent to information required by the regulations of law of a state which is not a member state (Dz. U. No 33, item 259) (the Regulation ). International Financial Reporting Standards ( IFRS ) comprise standards and interpretations, approved by the International Accounting Standards Board ( IASB ) and International Financial Reporting Interpretation Committee ( IFRIC ). 2.2 Presentation and functional currency The functional currency of the parent company and the presentation currency of these consolidated financial statements is Polish Zloty ( PLN ). All amounts are in PLN million, unless indicated otherwise. For the purpose of translation at the reporting date of items denominated in currency other than PLN the following exchange rates were applied: December 31, 2015 USD EUR New standards and interpretations published, not yet effective The following standards, changes in already effective standards and interpretations are not endorsed by the European Union or are not effective as at January 1, 2016: Standard Description of changes Effective date IFRS 9 Financial Instruments (along with amendments) IFRS 14 Regulatory Deferral Accounts IFRS 15 Revenue from Contracts with Customers IFRS 16 Leases Amendments to IAS 12 Amendments to IAS 7 Amendments to IFRS 10, IFRS 12 and IAS 28 Amendments to IFRS 10 and IAS 28 Changes to the classification and measurement requirements replacement of the existing categories of financial instruments with the two following categories: measured at amortized cost and at fair value. Changes to hedge accounting. Accounting and disclosure principles for regulatory deferral accounts. The standard applies to all contracts with customers, except for those within the scope of other IFRSs (e.g. lease contracts, insurance contracts and financial instruments). IFRS 15 clarifies principles of revenue recognition. IFRS 16 eliminates the classification of leases as either operating lease or finance lease. All contracts which meet the criteria of lease will be recognized as finance lease. Clarification of the method of deferred tax asset settlement on unrealized losses. The initiative on changes to the disclosures. Clarification of the provisions on recognition of investment units in the consolidation. Deals with the sale or contribution of assets between an investor and its joint venture or associate. * Not approved by the EU until the approval date of these financial statements January 1, 2018 January 1, 2016* January 1, 2018 January 1, 2019 January 1, 2017 January 1, 2017 January 1, 2016* Not specified The Capital Group intends to adopt the above mentioned new standards, amendments to standards and interpretations published by the International Accounting Standards Board but not yet effective at the reporting date, when they become effective. 11 of

12 The influence of new regulations on future financial statements of the Group The new IFRS 9 Financial Instruments introduces fundamental changes in respect of classification, presentation and measurement of financial instruments. As part of IFRS 9, new model for calculating impairment will be introduced that will require more timely recognition of expected credit losses and rules for hedge accounting will be updated. Most of all, these changes are intended to adapt the requirements in the field of risk management, allowing preparers of financial statements to reflect entity s actions more accurately. New IFRS 9 will possibly have material influence on future financial statements of the Group. At the date of preparation of these financial statements all phases of IFRS 9 have not been published and standard is not yet approved by the European Union. As a result analysis of its impact on the future financial statements of the Group has not been finished yet. The new IFRS 15 Revenue from Contracts with Customers is intended to unify principles of revenue recognition (except for specific revenues regulated by other IFRS) and indicate disclosure requirements. Adoption of IFRS 15 may cause changes in the Company s revenue recognition. Analysis of the impact of IFRS 15 has not been completed yet, nonetheless preliminary evaluation indicates that the standard should not have significant influence on the Group s future financial statements. The new IFRS 16 Leases changes principles for the recognition of contracts which meet the criteria of lease. The main change is to eliminate the classification of leases as either operating leases or finance leases. All contracts which meet the criteria of lease will be recognized as finance lease. Adoption of the standard will have the following effect: in the statement of financial position: increase of non-financial non-current assets and financial liabilities, in the statement of comprehensive income: decrease of operating expenses (other than amortization), increase of amortization and financial expenses. The standard has been published in January 2016 and the PGE Group has not performed yet the analysis of its impact on the future financial statements. Other standards and their changes should have no significant impact on future financial statements of the PGE Group. Amendments to standards and interpretations that entered into force in the period from January 1, 2016 to the date of approval of these consolidated financial statements did not have significant influence on these financial statements. 2.4 Professional judgment of management and estimates In the process of applying accounting rules with regards to the below issues, management has made judgments and estimates that affect the amounts presented in the consolidated financial statements, including in other explanatory information. The estimates were based on the best knowledge of the Management Board relating to current and future operations and events in particular areas. Detailed information on the assumptions made was presented below or in relevant explanatory notes to the consolidated financial statements. In 2015 an impairment loss of property, plant and equipment of PLN 9,039 million was recognized. In the reporting period, the Group did not identify indicators for performing impairment tests and for reversal of impairments recognized in previous periods. Provisions are liabilities of uncertain timing or amount. During the reporting period, PGE Group changed estimations regarding the basis and amounts of some provisions. Changes of estimations are presented in note 17 of these financial statements. The Group s estimates of compensation related to early termination of long-term contracts for sale of capacity and electricity resulting in recognition of related revenues and receivables are based on appropriate, in the Group s opinion, interpretation of the Act dated June 29, 2007 on the principles for coverage of costs incurred due to early termination of long-term contracts for sales of capacity and electricity (Official Journal from 2007, No. 130, item 905) (" the LTC Act"), the anticipated outcome of disputes with the President of the Energy Regulatory Office and on a number of significant assumptions to the factors, some of which are outside the control of the Group. An unfavorable outcome of the dispute with the President of the Energy Regulation Office, described in note 22.1 of these financial statements, with respect to the interpretation of the LTC Act, and changes in assumptions used, including those resulting from mergers within the PGE Group, may significantly impact the estimates and as a consequence may lead to significant changes in the financial position and results of the PGE Group. It is not possible to predict the final outcome of the dispute with the President of the Energy Regulation Office as at the date of preparation of these consolidated financial statements. 3. Changes of accounting principles and data presentation New standards and interpretations which became effective on January 1, 2016 Amendments to IAS 19 Employee benefits; Changes resulting from reviews of IFRS ; 12 of

13 Amendments to IFRS 11 Settlement of acquisition of an interest in a joint operation; Amendments to IAS 16 and IAS 38 Explanation of allowed depreciation methods; Amendments to IAS 16 and IAS 41 Agriculture: bearer plants; Amendments to IAS 27 Equity method in separate financial statements; Changes resulting from reviews of IFRS ; Amendments to IAS 1 Disclosures. The above amendments had no influence on the accounting policy and did not require amendments to the financial statements. Change in presentation of impairment losses of property, plant and equipment, intangible assets and goodwill IFRS EU regulations do not explicitly indicate the line in the statement of profit or loss in which the impairment loss should be recognized, thus it depends on the adopted accounting policy. In practice, different approaches can be observed, however, both companies applying IFRS EU and audit firms prefer to recognize impairment losses in cost by nature (as part of the depreciation and amortization or in a separate line). Thus, the recognition or reversal of impairment losses does not affect the reported EBITDA. In accordance with the previously applied accounting policy, the PGE Group recognized impairment losses of property, plant and equipment, intangible assets and goodwill in other operating expenses. Starting from the interim financial statements for the period ended June 30, 2015, the PGE Group changed its accounting policy in such a way, that the recognition or reversal of impairment of property, plant and equipment, intangible assets and goodwill is included in cost by nature. According to the Group's management, the changed accounting policy applies IFRS EU regulations in a better way and provides greater transparency and comparability of financial statements with other entities. Other presentation changes The following items were merged in the statement of financial position: trade receivables with other financial receivables and trade liabilities with other financial liabilities. Moreover, the PGE Group has made the following presentation changes: accrual of electricity sales was reclassified from other current assets to trade receivables; CCIRS and IRS derivatives were reclassified from financial instruments measured at fair value through profit or loss to derivatives ; funds of Mine Liquidation Fund collected and invested in accordance with the Geological and Mining Law Act from were reclassified from cash and cash equivalents and other loans and financial assets to non-current financial receivables; other operating income and expenses were reclassified to operating revenues and expenses; reclassification between costs of goods sold and general and administrative expenses. New way of presentation reflects more adequately the character of the items and ensures increased comparability of the statements with other entities. Restatement of comparative information In accordance with the above, the PGE Group restated the comparative data presented in the statement of comprehensive income, statements of financial position and statement of cash flows. The restatement is presented in the below tables. Information presented in explanatory notes to the financial statements was also restated accordingly. 13 of

14 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME published Change in recognition of impairment allowances Reclassification data restated STATEMENT OF PROFIT OR LOSS SALES REVENUES 7, ,553 Costs of goods sold (5,507) (24) (17) (5,548) GROSS PROFIT ON SALES 2,046 (24) (17) 2,005 Distribution and selling expenses (395) - - (395) General and administrative expenses (218) - 10 (208) Other operating income 82 - (1) 81 Other operating expenses (99) 24 8 (67) OPERATING PROFIT 1, ,416 CONSOLIDATED STATEMENT OF FINANCIAL POSITION published Reclassification Merger of items data restated NON-CURRENT ASSETS, including: Financial receivables Derivatives TOTAL NON-CURRENT ASSETS 52, ,117 CURRENT ASSETS, including: Trade and other financial receivables - - 3,764 3,764 Trade receivables 1, (2,547) - Other loans and financial assets 1,339 (122) (1,217) - Other current assets 1,042 (627) TOTAL CURRENT ASSETS 13,173 (122) - 13,051 TOTAL ASSETS 66, ,168 NON-CURRENT LIABILITIES, including: Derivatives TOTAL NON-CURRENT LIABILITIES 14, ,202 CURRENT LIABILITIES, including: Trade and other financial liabilities - - 2,057 2,057 Trade liabilities (860) - Other financial liabilities 1,224 (27) (1,197) - Financial liabilities at fair value through profit or loss / Derivatives 151 (136) - 15 TOTAL CURRENT LIABILITIES 6,066 (136) - 5,930 TOTAL LIABILITIES 20, ,132 TOTAL EQUITY AND LIABILITIES 66, , of

15 CONSOLIDATED STATEMENT OF CASH FLOWS published Change in recognition of impairment allowances Reclassification data restated Profit before tax 1, ,362 Adjustments for: Amortization, disposal and impairment Profit / loss on investment activities (31) (24) - (55) Change in receivables (157) - 5 (152) Change in other non-financial assets, prepayments and CO 2 emission rights (53) - (5) (58) NET CASH FROM OPERATING ACTIVITIES 1, ,361 Termination of deposits over 3 months NET CASH FROM INVESTING ACTIVITIES (2,519) - 86 (2,433) NET CHANGE IN CASH AND CASH EQUIVALENTS (1,308) - 86 (1,222) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 6,269 - (86) 6,183 4, ,961 Restricted cash (85) Fair value hierarchy The rules for the valuation of inventories, derivatives, stocks, shares and non-quoted instruments on the active markets, for which the fair value is not possible to be determined, are the same as presented in the separate financial statements for year ended December 31, During the reporting period and comparative reporting period, there have been no transfers of derivatives between the first and the second level of fair value hierarchy. December 31, 2015 FAIR VALUE HIERARCHY Level 1 Level 2 Level 1 Level 2 CO 2 emission rights Inventories FX forward Commodity forward CCIRS valuation Financial assets FX forward Commodity forward IRS valuation Financial liabilities the reporting date, the book value of inventories amounted to PLN 1,854 million. The item contains CO 2 emission rights at fair value in the amount of PLN 62 million, as presented in the table above. Valuation of derivatives is presented in note 15 of these financial statements. 15 of

16 EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS EXPLANATORY NOTES TO THE OPERATING SEGMENTS 5. Information on operating segments Companies of the PGE Group conduct their business activities based on relevant concessions, including primarily concession on: production, trading and distribution of electricity, generation, transmission and distribution of heat, granted by the President of Energy Regulatory Office and concessions for the extraction of lignite deposits, granted by the Minister of the Environment. Concessions, as a rule, are being issued for the period between 10 and 50 years. Main concessions in the PGE Group expire in the years Relevant assets are assigned to the held concessions on lignite mining and generation and distribution of electricity and heat, which was presented in detailed information on operating segments. For holding concessions concerning electricity and heat the Group incurs annual charges dependent on the level of turnover, whereas for conducting licensed extraction of lignite the exploitation charges as well as fees for the use of mining are borne. The exploitation charges depend on the current rate and the volume of the extraction. PGE Group presents information on operating segments in the current and comparative reporting period in accordance with IFRS 8 Operating Segments. The PGE Group segment reporting is based on the following business segments: Conventional Generation comprises exploration and mining of lignite and production of electricity in the Group s power plants and heat and power plants as well as ancillary services. Renewables comprise generation of electricity in pumped-storage power plants and from renewable sources. Supply includes sales and purchases of electricity and gas on the wholesale market, trading in emissions certificates and energy origin rights, purchases and supply of fuel, as well as sales of electricity and rendering services to end users. Distribution comprises management over local distribution networks and transmission of electricity. Other operations comprise services rendered by the subsidiaries for the Group, e.g. fund raising, IT, telecommunication, accounting and HR, and transport services. Additionally, the other operations segment comprises the activities of a subsidiary whose main business is preparation and implementation of a nuclear power plant construction project. Organization and management over the PGE Group is based on segment reporting separated by nature of the products and services provided. Each segment represents a strategic business unit, offering different products and serving different markets. Assignment of particular entities to operating segments is described in note 1.3 of these financial statements. As a rule, inter-segment transactions are disclosed as if they were concluded with third parties under market conditions. The exception to this rule were new bonds issued by subsidiaries belonging the tax group with interest rates below market rates and settlements of tax losses within the tax group. When analysing the results of particular business segments the management of the PGE Group draws attention primarily to EBITDA reached. Seasonality of business segments Atmospheric conditions cause seasonality of demand for electricity and heat, and have an impact on technical and economic conditions of their production, distribution and transmission, and thus influence the results obtained by the companies of the PGE Group. The level of electricity sales per year is variable and depends primarily on air temperature and day length. As a rule, lower air temperature in winter and shorter days cause the growth of electricity demand, while higher temperatures and longer days during summer contribute to its decline. Moreover, seasonal changes are evident among selected groups of end users. In particular, seasonality effects are more significant for households than for the industrial sector. Sales of heat depend in particular on air temperature and are higher in winter and lower in summer. 16 of

17 5.1 Information on business segments for the period ended STATEMENT OF PROFIT OR LOSS Conventional Generation Renewables Supply Distribution Other operations Consolidation adjustments Sales revenues from external customers 2, , ,133 Sales revenues from inter-segment transactions , (1,978) - TOTAL SEGMENT REVENUES 3, ,142 1, (1,968) 7,133 Costs of goods sold (2,315) (144) (3,624) (1,170) (152) 1,800 (5,605) EBIT *) (17) 6 1,123 Financial income / (expenses), net (48) Share of profit of associates - PROFIT/(LOSS) BEFORE TAX 1,075 Income tax (206) NET PROFIT/(LOSS) FOR THE REPORTING PERIOD 869 Amortization, disposal and impairment (7) 699 EBITDA **) 1, (1) 1,822 ASSETS AND LIABILITIES Segment assets excluding trade receivables 33,029 4,622 1,038 15, (875) 54,701 Trade receivables , (1,353) 2,623 Shares in associates 9 Unallocated assets 3,541 TOTAL ASSETS 60,874 Segment liabilities excluding trade liabilities 8, ,515 1, (155) 12,555 Trade liabilities , (1,303) 707 Unallocated liabilities 6,326 TOTAL LIABILITIES 19,588 OTHER INFORMATION ON BUSINESS SEGMENT Capital expenditure 1, (21) 1,841 Impairment allowances on financial and nonfinancial assets Other non-monetary expenses ***) *) EBIT = operating profit (loss) **) EBITDA = EBIT + depreciation, amortization, disposal and impairment losses reflected in financial result ***) monetary expenses include mainly changes in provisions such as: rehabilitation provision, provision for CO2 emission rights, provision for jubilee awards and employee tariff that are recognized in profit or loss and other comprehensive income. Total 17 of 38

18 Information on business segments for the period ended data restated STATEMENT OF PROFIT OR LOSS Conventional Generation Renewables Supply Distribution Other operations Consolidation adjustments Sales revenues from external customers 3, , ,553 Sales revenues from inter-segment transactions , (1,699) - TOTAL SEGMENT REVENUES 3, ,797 1, (1,690) 7,553 Costs of goods sold (2,472) (128) (3,230) (1,100) (149) 1,531 (5,548) EBIT *) (5) 21 1,416 Financial income / (expenses), net (54) Share of profit of associates - PROFIT/(LOSS) BEFORE TAX 1,362 Income tax (264) NET PROFIT/(LOSS) FOR THE REPORTING PERIOD 1,098 Amortization, disposal and impairment (12) 786 EBITDA **) 1, ,202 ASSETS AND LIABILITIES Segment assets excluding trade receivables 36,149 4,029 1,515 15, (1,029) 56,814 Trade receivables , (936) 2,548 Shares in associates 9 Unallocated assets 6,797 TOTAL ASSETS 66,168 Segment liabilities excluding trade liabilities 8, ,109 1, (736) 11,976 Trade liabilities (879) 859 Unallocated liabilities 7,297 TOTAL LIABILITIES 20,132 OTHER INFORMATION ON BUSINESS SEGMENT Capital expenditure 1, (17) 1,393 Impairment allowances on financial and nonfinancial assets (1) - 42 Other non-monetary expenses ***) *) EBIT = operating profit (loss) **) EBITDA = EBIT + depreciation, amortization, disposal and impairment losses reflected in financial result ***) monetary expenses include mainly changes in provisions such as: rehabilitation provision, provision for CO2 emission rights, provision for jubilee awards and employee tariff that are recognized in profit or loss and other comprehensive income. Total 18 of 38

19 EXPLANATORY NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME 6. Revenues and expenses 6.1 Sales revenues SALES REVENUES The decrease in revenues from sale of electricity in the period ended as compared to the corresponding period of the previous year is mainly due to lower wholesale volumes and lower average price of electricity sold. Revenues from LTC compensations are described in note 22.1 of these financial statements. 6.2 Cost by nature and function COST BY NATURE Sales of merchandise and finished goods with excise tax 7,001 7,374 Excise tax (126) (116) Revenues from sale of merchandise and finished goods, including: 6,875 7,258 Sale of electricity 4,678 4,988 Sale of distribution services 1,433 1,455 Sale of heat Sale of energy origin rights Regulatory system services Others sale of merchandise and materials Revenues from sale of services Revenues from LTC compensations TOTAL SALES REVENUES 7,133 7,553 data restated Depreciation, amortization and impairment losses Materials and energy External services Taxes and charges Employee benefits expenses 1,117 1,121 Other cost by nature TOTAL COST BY NATURE 4,155 4,277 Change in inventories (29) (44) Cost of products and services for the entity s own needs (264) (307) Distribution and selling expenses (379) (395) General and administrative expenses (183) (208) Cost of merchandise and materials sold 2,305 2,225 COST OF GOODS SOLD 5,605 5, of

20 6.2.1 Depreciation, amortization, disposal and impairment losses Recognition of depreciation, amortization, disposal and impairment losses of property, plant and equipment and intangible assets in the financial statement of comprehensive income is presented below. Depreciation, amortization and disposal Property, plant and equipment Intangible assets TOTAL Property, plant and equipment Impairment losses Intangible assets Cost of goods sold Distribution and selling expenses General and administrative expenses TOTAL DEPRECIATION, AMORTIZATION AND IMPAIRMENT LOSSES REFLECTED IN FINANCIAL RESULT TOTAL Change in inventories Cost of products and services for the entity s own needs TOTAL DEPRECIATION, AMORTIZATION AND IMPAIRMENT LOSSES Depreciation, amortization and disposal Property, plant and equipment Intangible assets TOTAL Property, plant and equipment Impairment losses Intangible assets Cost of goods sold Distribution and selling expenses General and administrative expenses TOTAL DEPRECIATION, AMORTIZATION AND IMPAIRMENT LOSSES REFLECTED IN FINANCIAL RESULT TOTAL Change in inventories Cost of products and services for the entity s own needs TOTAL DEPRECIATION, AMORTIZATION AND IMPAIRMENT LOSSES 6.3 Other operating income and expenses OTHER OPERATING INCOME data restated Adjustment of revenues from LTC compensations Reversal of other provisions Penalties, fines and compensations received Grants received 7 6 Reversal of impairment allowances on receivables 6 10 Tax refunds 4 - Property, plant and equipment, intangible assets received free of charge 3 2 Revenues from illegal energy consumption 2 2 Profit on disposal of property, plant and equipment / intangible assets 1 4 Surpluses / recognition of assets - 4 Other 8 16 TOTAL OTHER OPERATING INCOME Revenues from LTC compensations are described in note 22.1 of these financial statements. 20 of

21 OTHER OPERATING EXPENSES data restated Recognition of other provisions Recognition of impairment allowances on receivables Liquidation of damages / breakdowns 3 8 Legal proceedings costs 2 3 Compensations 2 1 Liquidation of property, plant and equipment and intangible assets associated with other operations 1 1 Donations granted - 8 Other 9 9 TOTAL OTHER OPERATING EXPENSES Financial income and expenses FINANCIAL INCOME FROM FINANCIAL INSTRUMENTS Interest Revaluation of financial instruments 1 11 Foreign exchange gain 12 6 FINANCIAL INCOME FROM FINANCIAL INSTRUMENTS OTHER FINANCIAL INCOME Reversal of provisions 1 1 OTHER FINANCIAL INCOME 1 1 TOTAL FINANCIAL INCOME The Group recognizes interest income primarily on cash and on receivables. In the corresponding period Revaluation of financial instruments includes valuation of transactions concluded on the market for CO 2 emission rights and an ineffective portion of valuation of CCIRS hedging transactions designated as hedging instruments in the cash-flow hedge accounting and total valuation of other derivatives. FINANCIAL EXPENSES FROM FINANCIAL INSTRUMENTS Interest Revaluation of financial instruments 5 7 Impairment loss 1 2 Foreign exchange losses - 26 FINANCIAL EXPENSES FROM FINANCIAL INSTRUMENTS OTHER FINANCIAL EXPENSES Interest expenses, including unwinding of the discount Other - 1 OTHER FINANCIAL EXPENSES TOTAL FINANCIAL EXPENSES Interest cost (unwinding of discount) of non-financial items relates mainly to provision for rehabilitation and provision for employee benefits. 21 of

22 7. Impairment allowances of assets IMPAIRMENT ALLOWANCES ON PROPERTY, PLANT AND EQUIPMENT Impairment allowances raised 8 28 Reversal of impairment allowance - - IMPAIRMENT ALLOWANCES ON INTANGIBLE ASSETS Impairment allowances raised 1 - IMPAIRMENT ALLOWANCES ON INVENTORIES Impairment allowances raised 12 7 Reversal of impairment allowance Tax in the statement of comprehensive income Main elements of income tax expense for the periods ended and are as follows: INCOME TAX PRESENTED IN THE STATEMENT OF PROFIT OR LOSS Current income tax Previous periods current income tax adjustments Deferred income tax INCOME TAX EXPENSE PRESENTED IN THE STATEMENT OF PROFIT OR LOSS INCOME TAX PRESENTED IN OTHER COMPREHENSIVE INCOME From actuarial gains and losses from valuation of provisions for employee benefits - - From valuation of hedging instruments - 13 (Tax benefit) / expense recognized in other comprehensive income (equity) - 13 Previous periods current income tax adjustments relate mainly to sales of electricity for the previous year invoiced in the first quarter of the current year. In the previous period sales as recognised basing on estimates, on which deferred tax was recognised. 22 of

23 EXPLANATORY NOTES TO THE STATEMENT OF FINANCIAL POSITION 9. Significant purchase transactions of property, plant and equipment and intangible assets During the reporting period, PGE Group purchased tangible fixed assets and intangible assets of a total amount of PLN 1,841 million. The largest expenditures were incurred by Conventional Generation segment (PLN 1,471 million) and PGE Dystrybucja S.A. (PLN 287 million). The main items of expenditure were: construction of units 5 and 6 in Opole power plant (PLN 904 million) and comprehensive modernization of units 7-12 in Bełchatów power plant (PLN 267 million). In the current period there were no significant sales transactions regarding property, plant and equipment. 10. Future investment commitment the PGE Group committed to incur capital expenditures on property, plant and equipment of approximately PLN 13,428 million. These amounts relate mainly to construction of new power units, modernization of Group s assets and a purchase of machinery and equipment. December 31, 2015 Conventional Generation 10,819 11,603 Distribution 1, Renewables Supply 2 3 Other operations 1,419 1,323 TOTAL FUTURE INVESTMENT COMMITMENTS 13,428 13,895 The most significant future investment commitments concern: Conventional Generation: Branch Opole Power Plant construction of power units no. 5 and 6 approximately PLN 5,008 million, Branch Turów Power Plant contract for construction of new power unit approximately PLN 3,493 million, Branch Turów Power Plant modernization of boilers and turbines on power units no. 1-3 approximately PLN 463 million, Branch Bełchatów Power Plant reconstruction and modernization of power units approximately PLN 379 million, Distribution investment commitments related to network distribution assets of the total value of approximately PLN 1,109 million, Other operations, PGE EJ 1 sp. z o.o. agreement for owners engineer in the investment process related to construction of the first Polish nuclear power plant approximately PLN 1,307 million (including PLN 205 million as base case remaining part of the contract is optional). 11. Deferred tax in the statement of financial position 11.1 Deferred tax asset December 31, 2015 Difference between tax value and carrying amount of property, plant and equipment 1,531 1,520 Difference between tax value and carrying amount of financial assets Difference between tax value and carrying amount of liabilities Difference between tax value and carrying amount of inventories LTC compensations Rehabilitation provision Provision for CO 2 emission rights Provisions for employee benefits Other provisions Energy infrastructure acquired free of charge and connection payments received Other DEFERRED TAX ASSET 3,754 3, of