PGE Polska Grupa Energetyczna S A : Financial statements of PGE Polska Grupa Energetyczna S.A. for 2021

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SEPARATE FINANCIAL STATEMENTS

PGE Polska Grupa Energetyczna S.A.

for 2021

ended December 31, 2021

in accordance with IFRS (in PLNm)

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PGE S.A.

Separate financial statements for 2021 in accordance with IFRS (in PLNm)

PGE S.A.'S SELECTED FINANCIAL DATA

	Period ended December 31	Period ended December 31
	2021	2020	2021	2020
	PLN million	PLN million	EUR million	EUR million
Revenue from sales	35,917	27,541	7,846	6,156
Operating profit/(loss)	601	712	131	159
Gross profit/loss (before tax)	1,914	1,809	418	404
Net profit/loss for the reporting period	1,734	1,744	379	390
Comprehensive income	2,273	1,525	497	341
Net cash from operating activities	953	2,035	208	455
Net cash from investing activities	1,887	2,642	412	590
Net cash from financing activities	(1,016)	(1,403)	(222)	(314)
Net change in cash and equivalents	1,824	3,274	398	732
Net profit per share (in PLN/EUR per share)	0.93	0.93	0.20	0.21
Diluted profit per share (in PLN/EUR per share)	0.93	0.93	0.20	0.21
Weighted average number of ordinary shares used to	1,869,760,829	1,869,760,829	1,869,760,829	1,869,760,829
calculate profit per share
	As at	As at
	December 31,	December 31,	December 31,	December 31,
	2021	2020	2021	2020
	PLN million	PLN million	EUR million	EUR million
Non-current assets	36,929	39,067	8,029	8,466
Current assets	27,881	14,937	6,062	3,236
Total assets	64,810	54,004	14,091	11,702
Equity	41,302	39,029	8,980	8,457
Share capital	19,165	19,165	4,167	4,153
Non-current liabilities	7,144	9,023	1,553	1,955
Current liabilities	16,364	5,952	3,558	1,290

The above financial data was converted into EUR in accordance with the following rules:

• asset and equity and liability items - at the average exchange rate announced by the National Bank of Poland for December 31, 2021 - EURPLN 4.5994 and for December 31, 2020 - EURPLN 4.6148.
• items in the statement of comprehensive income and statement of cash flows - at an exchange rate constituting the arithmetic mean of the average exchange rates published by the National Bank of Poland for the last day of each month in the financial year from January 1, 2021 to December 31, 2021 - EURPLN 4.5775; for the period from January 1, 2020 to December 31, 2020 - EURPLN 4.4742.

The accounting rules and additional explanatory notes
constitute an integral part of these financial statements.	2

PGE S.A.

Separate financial statements for 2021 in accordance with IFRS (in PLNm)

Table of contents

STATEMENT OF COMPREHENSIVE INCOME ...................................................................	5
STATEMENT OF FINANCIAL POSITION ..........................................................................	6
STATEMENT OF CHANGES IN EQUITY............................................................................	7
STATEMENT OF CASH FLOWS ........................................................................................	8
GENERAL INFORMATION, BASIS FOR PREPARATION OF FINANCIAL
STATEMENTS AND OTHER EXPLANATORY INFORMATION ............................................	9
1.	General information.....................................................................................................	9
	1.1	Company operations.........................................................................................	9
	1.2	Ownership structure .........................................................................................	9
	1.3	Composition of the Company's Management Board............................................	10
2.	Basis for preparation of financial statements ................................................................	10
	2.1	Statement of compliance.................................................................................	10
	2.2	Presentation and functional currency ................................................................	10
	2.3	New standards and interpretations published, not yet effective ...........................	11
3.	Changes in accounting principles and data presentation ................................................	11
EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS............................................	12
EXPLANATORY NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME ................	12
4.	Revenue and costs ....................................................................................................	12
	4.1	Revenue from sales ........................................................................................	12
	4.2	Costs by nature and function ...........................................................................	14
	4.3	Finance income and finance costs ....................................................................	16
5.	Income tax ...............................................................................................................	17
	5.1	Tax in the statement of comprehensive income .................................................	17
	5.2	Effective tax rate ............................................................................................	18
	5.3	Deferred tax in the statement of financial position .............................................	18
EXPLANATORY NOTES TO THE STATEMENT OF FINANCIAL POSITION.......................	20
6.	Property, plant and equipment....................................................................................	20
7.	Right-of-use assets....................................................................................................	21
8.	Shares in subsidiaries ................................................................................................	22
	8.1	Analysis of non-current financial assets ............................................................	24
	8.2	Shares in associates and other entities .............................................................	30
9.	Joint ventures ...........................................................................................................	30
10. Other current assets ..................................................................................................	31
11. Cash and cash equivalents .........................................................................................	31

12. Equity

12.1	Share capital..................................................................................................	32
12.2	Reserve capital...............................................................................................	33
12.3	Hedging reserve.............................................................................................	34
12.4	Unallocated financial result and dividend payment restrictions ............................	34
12.5	Earnings per share .........................................................................................	34
12.6	Dividends paid and recommended for payment .................................................	35
13. Provisions .................................................................................................................	35
14. Post-employment benefits..........................................................................................	37
15. Other non-financial liabilities.......................................................................................	37
EXPLANATORY NOTES TO FINANCIAL INSTRUMENTS ................................................	38
16. Financial Instruments ................................................................................................	38

The accounting rules and additional explanatory notes
constitute an integral part of these financial statements.	3

PGE S.A.

Separate financial statements for 2021 in accordance with IFRS (in PLNm)

16.1 Description of significant items within particular classes of financial

	instruments ...................................................................................................	39
16.2	Fair value of financial instruments ....................................................................	45
16.3	Fair value hierarchy ........................................................................................	45
16.4	Collateral for repayment of receivables and liabilities .........................................	46
16.5	Statement of comprehensive income................................................................	47
17. Objectives and principles of financial risk management .................................................	47
17.1	Market risk ....................................................................................................	48
17.2	Liquidity risk ..................................................................................................	51
17.3	Credit risk......................................................................................................	53
17.4	Market (financial) risk - sensitivity analysis .......................................................	56
17.5	Hedge accounting...........................................................................................	59
EXPLANATORY NOTES TO THE STATEMENT OF CASH FLOWS .....................................	60
18. Statement of cash flows.............................................................................................	60
18.1	Cash flows from operating activities .................................................................	60
18.2	Cash flows from investing activities ..................................................................	61
THE AMOUNT OF PROCEEDS FROM THE SALE OF OTHER FINANCIAL ASSETS
RELATES MAINLY TO THE SALE OF SHARES IN PGE EJ1 SP. Z O.O. (PLN 368
MILLION). ....................................................................................................................	61
INCLUDED UNDER EXPENDITURES ON THE ACQUISITION OF SUBSIDIARIES
ARE AMOUNTS RELATING TO THE ACQUISITION OF SHARES IN
SUBSIDIARIES, AS DESCRIBED IN NOTE 8 OF THESE FINANCIAL
STATEMENTS................................................................................................................	61
18.3	Cash flows from financing activities ..................................................................	61
OTHER EXPLANATORY NOTES......................................................................................	62
19. Contingent liabilities and receivables. Legal claims........................................................	62
19.1	Contingent liabilities .......................................................................................	62
19.2	Other significant issues related to contingent liabilities .......................................	63
19.3	Other court cases and disputes ........................................................................	63
20. Tax settlements ........................................................................................................	64
21. Information on related parties ....................................................................................	65
21.1	Transactions with related parties......................................................................	66
21.2	Balances with related parties ...........................................................................	66
21.3	Management remuneration .............................................................................	67
22. Remuneration of the entity authorised to audit financial statements ...............................	67

23. Disclosures resulting from art. 44 of the Energy Law regarding specific types of

activities...................................................................................................................	68
23.1	Principles for allocation to different types of activities .........................................	68
23.2	Breakdown by type of business activity ............................................................	69
24. Significant events during and after the reporting period ................................................	71
24.1	Significant events during the reporting period ...................................................	71
24.2	Significant events after the reporting period......................................................	73
25. Approval of financial statements .................................................................................	76
26. Glossary of terms and abbreviations............................................................................	77

The accounting rules and additional explanatory notes
constitute an integral part of these financial statements.	4

PGE S.A.

Separate financial statements for 2021 in accordance with IFRS (in PLNm)

STATEMENT OF COMPREHENSIVE INCOME

		Year ended			Year ended
	Note	December 31,			December 31,
		2021			2020
STATEMENT OF PROFIT OR LOSS
REVENUE FROM SALES	4.1	35,917		27,541
Cost of goods sold	4.2	(35,094)		(26,564)
GROSS PROFIT ON SALES		823		977
Distribution and selling expenses	4.2	(17)		(21)
General and administrative expenses	4.2	(206)		(239)
Other operating income / (expenses)		1		(5)
OPERATING PROFIT		601		712
Finance income / (costs), including	4.3	1,313		1,097
Interest income calculated using the effective interest rate method		154		150
GROSS PROFIT/(LOSS)		1,914		1,809
Income tax	5.1	(180)		(65)
NET PROFIT/(LOSS) FOR THE REPORTING PERIOD		1,734		1,744
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss:
Measurement of hedging instruments	12.3	659		(267)
Deferred tax	5.1	(125)		51
Items that may not be reclassified to profit or loss:
Actuarial gains and losses from valuation of provisions for employee benefits		6		(3)
Deferred tax		(1)		-
OTHER COMPREHENSIVE INCOME FOR THE REPORTING PERIOD, NET		539		(219)
TOTAL COMPREHENSIVE INCOME		2,273		1,525
NET PROFIT/(LOSS) PER SHARE AND DILUTED NET PROFIT/(LOSS) PER
SHARE	12.5	0.93		0.93
/IN PLN/

The accounting rules and additional explanatory notes
constitute an integral part of these financial statements.	5