Polskie Górnictwo Naftowe i Gazownictwo S A : Consolidated Quarterly Report for the III quarter 2020

Polskie Górnictwo Naftowe i Gazownictwo S.A.

INTERIM REPORT for the three months ended September 30th 2020

PGNiG GROUP Interim report for Q3 2020 (all amounts in PLN million, unless stated otherwise)

Financial highlights

	Key data from the interim condensed consolidated			PLNm		EURm
	financial statements
				9 months ended			9 months ended		9 months ended			9 months ended
				September			September		September			September
				30th 2020			30th 2019		30th 2020			30th 2019
	Revenue		27,430			29,653			6,175			6,882
	Operating profit before interest, taxes, depreciation and		10,685			3,983			2,405			924
	amortisation (EBITDA)
	Operating profit (EBIT)		8,244			1,848			1,856			429
	Profit before tax		7,540			1,819			1,697			422
	Net profit attributable to owners of the parent		6,036			1,347			1,359			313
	Net profit		6,036			1,346			1,359			312
	Total comprehensive income attributable to owners of the		5,391			1,707			1,214			396
	parent
	Total comprehensive income		5,391			1,706			1,214			396
	Net cash from operating activities		12,418			4,288			2,796			995
	Net cash from investing activities		(4,564)			(3,718)			(1,027)			(863)
	Net cash from financing activities		(3,688)			(1,698)			(830)			(394)
	Net cash flows		4,166			(1,128)			938			(262)
	Basic and diluted earnings per share (in PLN and EUR,		1.04			0.23			0.24			0.05
	respectively)
				As at			As at		As at			As at
				September			December		September			December
				30th 2020			31st 2019		30th 2020			31st 2019
	Total assets		60,032			59,185			13,262			13,898
	Total liabilities		16,738			21,078			3,698			4,950
	Total non-current liabilities		11,054			10,378			2,442			2,437
	Total current liabilities		5,684			10,700			1,256			2,513
	Total equity		43,294			38,107			9,564			8,948
	Share capital		5,778			5,778			1,276			1,357
	Weighted average number of ordinary shares (million)		5,778			5,778			5,778			5,778
	Book value per share and diluted book value per share		7.49			6.60			1.66			1.55
	(PLN/EUR)
	Dividend per share paid (PLN/EUR)		0.09			0.11			0.02			0.03
	Key data from the interim condensed separate financial			PLNm		EURm
	statements
				9 months ended		9 months ended			9 months ended				9 months ended
				September		September			September				September
				30th 2020		30th 2019			30th 2020				30th 2019
	Revenue			14,517		15,632		3,268				3,628
	Operating profit before interest, taxes, depreciation and			7,529		1,050		1,695				244
	amortisation (EBITDA)
	Operating profit (EBIT)			6,918		424		1,557				98
	Profit before tax			7,471		2,004		1,682				465
	Net profit			6,102		1,867		1,374				433
	Total comprehensive income			5,522		2,216		1,243				514
	Net cash from operating activities			7,392		693		1,663				161
	Net cash from investing activities			(1,539)		(1,447)		(346)				(336)
	Net cash from financing activities			(3,577)		(1,430)		(805)				(332)
	Net cash flows			2,276		(2,184)		512				(507)
	Earnings and diluted earnings per share attributable to holders			1.06		0.32		0.24				0.07
	of ordinary shares (PLN/EUR)
				As at		As at			As at				As at
				September		December			September				December
				30th 2020		31st 2019			30th 2020				31st 2019
	Total assets			42,624		41,044		9,416				9,638
	Total liabilities			6,709		10,426		1,482				2,448
	Total non-current liabilities			3,524		3,315		778				778
	Total current liabilities			3,185		7,111		704				1,670
	Equity			35,915		30,618		7,934				7,190
	Share capital and share premium			7,518		7,518		1,661				1,765
	Weighted average number of shares (million) in the period			5,778		5,778		5,778				5,778
	Book value per share and diluted book value per share			6.22		5.30		1.37				1.24
	(PLN/EUR)
	Dividend per share paid (PLN/EUR)			0.09		0.11		0.02				0.03
	Average EUR/PLN exchange rates quoted by the NBP
			September 30th 2020		September 30th 2019		December 31st 2019
	Average exchange rate for period		4.4420		4.3086	4.3018
	Exchange rate at end of period		4.5268		4.3736	4.2585

Items of the statement of profit or loss, statement of comprehensive income, and statement of cash flows were translated at the EUR/PLN exchange rate computed asthe arithmetic mean of the mid rates quoted by the National Bank of Poland (NBP) for the last day of each calendar month in the reporting period.

Items of the statement of financial position were translated at the mid rate for EUR/PLN quoted by the NBP for the reporting date.

		PGNiG GROUP
		Interim report for Q3 2020
		(all amounts in PLN million, unless stated otherwise)
TABLE OF CONTENTS
Interim condensed consolidated financial statements ........................................................................................................................	4
General information ...............................................................................................................................................................................	8
1.1.	BASIC INFORMATION ABOUT THE GROUP.....................................................................................................................	8
1.2.	BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS INCLUDED IN THE REPORT .......................................................	8
1.3.	APPLIED ACCOUNTING POLICIES .................................................................................................................................	9
1.4.	EFFECT OF NEW STANDARDS ON THE FINANCIAL STATEMENTS OF THE PGNIG GROUP ....................................................	9
1.5.	PRESENTATION CHANGES IN THE FINANCIAL STATEMENTS .............................................................................................	9
The Group and its reportable segments .............................................................................................................................................	11
2.1.	CHANGES IN THE GROUP STRUCTURE ......................................................................................................................	13
2.2.	EQUITY-ACCOUNTEDINVESTEES ..............................................................................................................................	13
2.3.	KEY DATA ON THE REPORTABLE SEGMENTS...............................................................................................................	14
2.4.	REVENUE BY SEGMENT ...........................................................................................................................................	15
2.5.	SEGMENTS' FINANCIAL RESULTS ..............................................................................................................................	16
2.6.	FACTORS AND EVENTS WHICH MAY AFFECT FUTURE RESULTS OF THE PGNIG GROUP ...................................................	18
Notes to the interim condensed consolidated financial statements .................................................................................................	19
3.1.	DEFERRED TAX ......................................................................................................................................................	19
3.2.	IMPAIRMENT LOSSES/WRITE-DOWNS.........................................................................................................................	19
3.3.	PROVISIONS ..........................................................................................................................................................	21
3.4.	REVENUE BY PRODUCT ...........................................................................................................................................	22
3.5.	OPERATING EXPENSES (SELECTED ITEMS) ................................................................................................................	22
3.6.	OTHER INCOME AND EXPENSES ...............................................................................................................................	23
3.7.	NET FINANCE INCOME/(COSTS) ................................................................................................................................	23
3.8.	INCOME TAX ..........................................................................................................................................................	24
3.9.	PROPERTY, PLANT AND EQUIPMENT..........................................................................................................................	25
3.10. DERIVATIVE FINANCIAL INSTRUMENTS .......................................................................................................................	26
3.11. CONTINGENT ASSETS AND LIABILITIES.......................................................................................................................	29
3.12. FAIR VALUE HIERARCHY ..........................................................................................................................................	29
3.13. CLASSIFICATION OF FINANCIAL ASSETS .....................................................................................................................	29
Supplementary information to the report ...........................................................................................................................................	30
4.1. KEY EVENTS RELATED TO THE ISSUER IN THE REPORTING PERIOD ................................................................................	30
4.2. SHARES HELD BY MANAGEMENT AND SUPERVISORY PERSONNEL .................................................................................	35
4.3.	DIVIDEND PAID (DECLARED).....................................................................................................................................	35
4.4. ISSUE, REDEMPTION, AND REPAYMENT OF DEBT SECURITIES .......................................................................................	35
4.5.	SEASONALITY ........................................................................................................................................................	35
4.6. MATERIAL COURT, ARBITRATION AND ADMINISTRATIVE PROCEEDINGS ..........................................................................	35
4.7.	SETTLEMENTS RELATED TO COURT PROCEEDINGS .....................................................................................................	37

4.8. CHANGES IN THE ECONOMIC ENVIRONMENT AND TRADING CONDITIONS WITH A MATERIAL BEARING ON FAIR VALUE OF FINANCIAL

ASSETS AND LIABILITIES ..........................................................................................................................................

37

4.9. CREDIT DEFAULT OR BREACH OF MATERIAL CREDIT COVENANTS WITH RESPECT TO WHICH NO REMEDIAL ACTION WAS TAKEN

BEFORE THE END OF THE REPORTING PERIOD ............................................................................................................	37
4.10. RELATED-PARTYTRANSACTIONS..............................................................................................................................	37
4.11. MANAGEMENT BOARD'S POSITION ON FEASIBILITY OF MEETING PUBLISHED FORECASTS FOR THE YEAR ............................	37
4.12. EVENTS SUBSEQUENT TO THE REPORTING DATE ........................................................................................................	37
4.13. OTHER INFORMATION MATERIAL TO THE ASSESSMENT OF ASSETS, FINANCIAL CONDITION AND RESULTS ...........................	38
Quarterly financial data of PGNiG S.A. ...............................................................................................................................................	39
5.1. INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS............................................................................................	39
5.2. NOTES TO THE INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS ......................................................................	44

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PGNiG GROUP

Interim report for Q3 2020

(all amounts in PLN million, unless stated otherwise)

Interim condensed consolidated financial statements

		3 months ended		9 months ended		3 months ended	9 months ended
Consolidated statement of profit or loss		September		September		September	September
		30th 2020		30th 2020		30th 2019	30th 2019
		unaudited		unaudited		unaudited	unaudited
Revenue from sale of gas		4,094		19,384		4,749	21,574	Note 3.4.1.
Other revenue		2,298		8,046		2,280	8,079	Note 3.4.1.
Revenue		6,392		27,430		7,029	29,653
Cost of gas		(2,552)		(14,010)		(4,099)	(18,876)	Note 3.5
Effect of the annex executed with PAO
Gazprom/OOO Gazprom Export on the cost of gas		-		4,915		-	-	Note 3.5
in 2014-2019
Other raw materials and consumables used		(717)		(2,266)		(615)	(2,042)	Note 3.5
Employee benefits expense		(730)		(2,331)		(697)	(2,244)	Note 3.5
Transmission services		(264)		(783)		(269)	(788)
Other services		(465)		(1,324)		(470)	(1,319)	Note 3.5
Taxes and charges		(126)		(766)		(103)	(648)
Other income and expenses		(472)		(13)		(194)	(211)	Note 3.6
Work performed by the entity and capitalised		271		769		263	746
Recognition and reversal of impairment losses on		(4)		(936)		(42)	(288)	Note 3.5
property, plant and equipment and intangible assets
Operating profit before interest, taxes,		1,333		10,685		803	3,983
depreciation and amortisation (EBITDA)
Depreciation and amortisation expense		(745)		(2,441)		(669)	(2,135)
Operating profit (EBIT)		588		8,244		134	1,848
Net finance costs		12		(109)		(77)	(64)	Note 3.7
Profit/(loss) from equity-accounted investees		(387)		(595)		9	35
Profit before tax		213		7,540		66	1,819
Income tax		(97)		(1,504)		(52)	(473)	Note 3.8
Net profit		116		6,036		14	1,346
Net profit attributable to:
Owners of the parent		116		6,036		14	1,347
Non-controlling interests		-		-		-	(1)
Weighted average number of ordinary shares		5,778		5,778		5,778	5,778
(million)
Basic and diluted earnings per share (PLN)		0.02		1.04		0.00	0.23
Consolidated statement of comprehensive		3 months ended			9 months ended		3 months ended	9 months ended
	September			September		September	September
income
	30th 2020			30th 2020		30th 2019	30th 2019

Net profit

Exchange differences on translating foreign operations

unaudited	unaudited	unaudited	unaudited
116	6,036	14	1,346
(18)	(39)	18	20

Hedge accounting		(376)		(690)		92	437
Deferred tax*		71		131		(17)	(83)
Other comprehensive income subject to		(322)		(597)		93	374
reclassification to profit or loss
Actuarial losses on employee benefits		-		(54)		-	(15)
Deferred tax		-		10		-	3
Share of other comprehensive income of equity-		-		(4)		-	(2)
accounted investees
Other comprehensive income not subject to		-		(48)		-	(14)
reclassification to profit or loss
Other comprehensive income, net		(322)		(645)		93	360
Total comprehensive income		(206)		5,391		107	1,706
Total comprehensive income attributable to:
Owners of the parent		(206)		5,391		107	1,707
Non-controlling interests		-		-		-	(1)

• In the reporting period, the Group changed the presentation of deferred tax relative to the comparative period: PLN 15m (PLN 20m for the three months ended September 30th 2019) was reclassified to the consolidated statement of changes in equity and disclosed under 'Change in equity recognised in inventories'. For more details, see additional information on the consolidated statement of changes in equity.

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