Tauron Polska Energia S.A.

Environmental & Social Information • Mar 31, 2021

TAURON Polska Energia S.A. Capital Group

Consolidated report on payments to governments for the year ended 31 December 2020

	INTRODUCTION 3
1.	Basis for preparation 3
2.	General information 3

4.3.
4.4.
	4.1. 4.2. 4.5.	CONSOLIDATED REPORT ON PAYMENTS TO GOVERNMENTS — REPORTING PRINCIPLES 3 Personal scope 3 Material scope 4 Governments 4 Cash basis 4 Presentation currency and materiality threshold 4 Project 4 Bases for payment 5

CONSOLIDATED REPORT ON PAYMENTS TO GOVERNMENTS 6
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INTRODUCTION

1. Basis for preparation

This consolidated report on payments to governments ("consolidated report on payments") has been prepared in compliance with the requirements of Article 6a of the Accounting Act of 29 September 1994 (Journal of Laws of 2021, items 217), hereinafter referred to as the "Accounting Act", and Chapter 10 of Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC.

2. General information

The TAURON Polska Energia S.A. Capital Group (the "Group", the "Capital Group", the "TAURON Group") is composed of TAURON Polska Energia S.A. (the "Parent", the "Company") and its subsidiaries. TAURON Polska Energia S.A. is located in Katowice at ul. ks. Piotra Ściegiennego 3. The Company operates as a joint-stock company incorporated by a notarized deed on 6 December 2006. Until 16 November 2007 it had operated under the name Energetyka Południe S.A.

The Parent has been entered in the Register of Entrepreneurs of the National Court Register kept by the District Court for Katowice-Wschód, Business Division of the National Court Register, Entry No. KRS 0000271562. It has been assigned statistical number REGON 240524697.

The duration of the Parent and the companies in the Capital Group is unlimited. The entities operate based on appropriate licences granted to individual companies of the Group.

The Group's consolidated report on payments to governments has been prepared for the year ended 31 December 2020 and comprises comparative information for the year ended 31 December 2019.

This consolidated report on payments was authorized for issue by the Management Board on 29 March 2021.

CONSOLIDATED REPORT ON PAYMENTS TO GOVERNMENTS — REPORTING PRINCIPLES

3. Personal scope

In accordance with Chapter 6a of the Accounting Act, the report on payments to governments shall be prepared by undertakings active in the extractive industry or undertakings active in the logging of primary forests.

An undertaking active in the extractive industry means an undertaking with any activity involving the exploration, prospecting, discovery, development, and extraction of minerals, oil, natural gas deposits or other materials, which falls within the scope of the activities listed in Section B.05-08 of the Polish Classification of Activities.

An entity logging primary forests is understood as an entity engaging in the activities referred to in section A.02.2 of the Polish Classification of Activities in an area covered by primary forests.

In compliance with the requirement of Article 63g of the Accounting Act, the Company has prepared the consolidated report on payments to governments for the Group's subsidiaries active in the extractive industry. The Group's subsidiaries do not engage in any activity related to the logging of primary forests.

This consolidated report on payments to governments presents payments arising from the extractive operations of two subsidiaries, namely TAURON Wydobycie S.A. and Kopalnia Wapienia Czatkowice Sp. z o.o.

In the year ended 31 December 2020 and in the comparative period, the subsidiaries TAURON Wydobycie S.A. and Kopalnia Wapienia Czatkowice Sp. z o.o. satisfied the criteria laid down in Article 63f of the Accounting Act, which means that at least two of the three thresholds specified therein were exceeded and the payments made in the year ended 31 December 2020 and in the comparative period were at least the equivalent of PLN 424 700.

The criteria adopted at the level of individual subsidiaries covered by this consolidated report on payments have been presented in the table below.

Criterion		As at 31 December 2020 o r Year ended	As at 31 December 2019 o r Year ended
Item	Threshold*	31 December 2020	31 December 2019
Total balance sheet
TAURON Wydobycie S.A.	85 000	1 254 498	1 559 451
Kopalnia Wapienia Czatkow ice Sp. z o.o.		194 410	189 222
Net revenue from sales of products, goods and materials
TAURON Wydobycie S.A.	170 000	1 051 988	944 433
Kopalnia Wapienia Czatkow ice Sp. z o.o.		105 100	107 337
Average annual headcount in FTEs
TAURON Wydobycie S.A.	250	6 606.12	6 748.31
Kopalnia Wapienia Czatkow ice Sp. z o.o.		289.95	290.24

*The threshold has been defined in Article 63f of the Accounting Act. The threshold amounts for the balance sheet total and for sales revenue have been expressed in PLN '000. The average annual headcount is expressed as the number of full-time employees (FTEs).

4. Material scope

4.1. Governments

This consolidated report on payments presents information concerning payments made in the year ended 31 December 2020 and comparative information for the year ended 31 December 2019 to governments, i.e. central and/or local governments as well as entities overseen or controlled by such governments.

The payments reported herein were made to governments in Poland. In the year ended 31 December 2020 and in the comparative period, no payments were made to foreign governments.

4.2. Cash basis

This consolidated report on payments to governments presents payments made in the year ended 31 December 2020 and comparative information for the year ended 31 December 2019.

The payments reported herein concern amounts paid in cash. In the years ended 31 December 2020 and 31 December 2019, no amounts were paid in kind and settled by delivery of a commodity or services relating to extractive operations.

4.3. Presentation currency and materiality threshold

The Polish zloty ("PLN") is the presentation currency of this consolidated report on payments and, unless otherwise stated, all figures are in PLN thousand.

Under Article 63f of the Accounting Act, the obligation to prepare a consolidated report on payments arises where a single payment or an aggregate amount of related payments made by an entity in the financial year is the equivalent of at least PLN 424 700.

This consolidated report on payments does not present single payments or aggregate amounts of related payments which are lower than PLN 424 700.

A related payment is a periodic payment or an instalment payment under an agreement.

4.4. Project

In its consolidated report on payments the Company has presented data broken down by two categories, i.e. payments to the appropriate government levels by basis, as referred to in Article 63e.6 of the Accounting Act, and by project and basis of payments.

A project means operational activities, in particular extractive operations, carried out by the Company's subsidiaries under an agreement or a decision, in particular lease, rental, licence or concession. An agreement or a decision forms a basis for determination of payments made to governments. Where multiple agreements or decisions are substantially interconnected, the operations carried out thereunder are considered a single project. In the event that there is a single framework agreement or a decision interconnected with detailed agreements or decisions, the operations carried out thereunder are considered a single project.

The payments made to governments in the year ended 31 December 2020 and in the comparative period have been assigned to two projects:

• ⎯ Extraction of coal from deposits at TAURON Wydobycie S.A.; and
• ⎯ Extraction of carboniferous limestone from the "Czatkowice" deposit.

The above projects are carried out as part of the mining business of two subsidiaries subject to the reporting obligation, i.e. TAURON Wydobycie S.A. and Kopalnia Wapienia Czatkowice Sp. z o.o.

If a payment may not assigned to a specific project, it is disclosed by the Company at the entity as opposed to the project level. This is the case when payments are made on account of obligations imposed on the Group companies at the entity as opposed to the project level. The amount of corporate income tax paid is an example of such an entity-level payment.

4.5. Bases for payment

Under Article 63e.6 of the Accounting Act, the reporting obligation applies to the following bases for payments:

• Production entitlements

Production entitlements are amounts due in relation to production, paid to governments in kind in the form of raw materials extracted, under an agreement or a decision.

In the year ended 31 December 2020 and in the comparative period, no payments were made to governments in relation to production entitlements.

• Taxes levied on the income, production or profits of companies, excluding taxes levied on consumption such as value added taxes, personal income taxes or sales taxes

This consolidated report on payments presents amounts paid as the Tax Capital Group's corporate income tax.

On 30 October 2017 the articles of association of the Tax Capital Group for the years 2018–2020 were registered. Pursuant to the previous agreement, TCG was registered for the period of three fiscal years from 2015 to 2017.

To 31 December 2020 the Tax Capital Group has comprised mainly the following companies: TAURON Polska Energia S.A., TAURON Wytwarzanie S.A., TAURON Dystrybucja S.A., TAURON Ciepło Sp. z o.o., TAURON Sprzedaż Sp. z o.o., TAURON Sprzedaż GZE Sp. z o.o., TAURON Obsługa Klienta Sp. z o.o., TAURON Ekoenergia Sp. z o.o., TAURON Wydobycie S.A. and Kopalnia Wapienia Czatkowice Sp. z o.o.

On 14 December 2020, the Tax Capital Group Agreement for the years 2021-2023 was registered by the Head of the First Silesian Tax Office in Sosnowiec. Main companies forming the Tax Group since 1 January 2021: TAURON Polska Energia S.A., TAURON Wytwarzanie S.A., Nowe Jaworzno Grupa TAURON sp. z o.o., TAURON Dystrybucja S.A., TAURON Sprzedaż Sp. z o.o., TAURON Sprzedaż GZE Sp. z o.o., TAURON Obsługa Klienta Sp. z o.o., TAURON Ekoenergia Sp. z o.o., TEC1 sp. z o.o., TEC2 sp. z o.o., TEC3 sp. z o.o. i Kopalnia Wapienia Czatkowice Sp. z o.o.

Information concerning the Tax Capital Group has been presented in more detail in Note 15.3 to the financial statements of the Company for the year ended 31 December 2020 and in Note 33 to the consolidated financial statements of the Group for the year ended 31 December 2020.

This consolidated report on payments presents payments relating to corporate income tax paid by the Tax Capital Group and refers to the subsidiaries subject to the reporting obligation, i.e. TAURON Wydobycie S.A. and Kopalnia Wapienia Czatkowice Sp. z o.o. In the years ended 31 December 2020 and 31 December 2019 the payments of corporate income tax of the subsidiary Kopalnia Wapienia Czatkowice Sp. z o.o. were PLN 2 058 thousand and PLN 2 759 thousand, respectively. In the year ended 31 December 2020 and in the comparative period, no payment was made in relation to corporate income tax of TAURON Wydobycie S.A.

Payments relating to taxes levied on consumption such as value added taxes, personal income taxes or sales taxes (including excise duty and tax on civil law transactions) and payments relating to lump-sum income tax (withholding tax), property tax, agricultural tax and forest tax have not been presented herein.

• Royalties

In the year ended 31 December 2020 and in the comparative period, no payments were made to governments in relation to royalties.

• Dividends

In the year ended 31 December 2020 and in the comparative period, no payments were made to governments in relation to dividends.

• Concession fees and discovery and production bonuses

In the year ended 31 December 2020 and in the comparative period, no payments were made to governments in relation to concession fees or discovery and production bonuses.

• Licence fees, rental fees, entry fees and other considerations for licences and/or concessions

This consolidated report on payments presents amounts paid as development fees, considerations for forest exclusion from forest production, environmental fees, mining usufruct fees, fees for using paid geological information and fees for perpetual usufruct of land.

• Payments for infrastructure improvements

In the year ended 31 December 2020 and in the comparative period, no payments were made to governments in relation to infrastructure improvements.

This consolidated report on payments presents only those bases on which payments were actually made to governments in the year ended 31 December 2020 and in the comparable period ended 31 December 2019.

CONSOLIDATED REPORT ON PAYMENTS TO GOVERNMENTS

Presented below are payments to governments across government levels by bases for payments made in the years ended 31 December 2020 and 31 December 2019.

Year ended 31 December 2020

Public administration levels	Taxes levied on the income, production or profits of companies	Licence fees, rental fees, entry fees and other considerations for licences and/or concessions	Total payments
Governments
Central government	-	24 047	24 047
Local agencies of central government	2 058	1 498	3 556
Total payments to central government	2 058	25 545	27 603
Local governments
Local governments – regions	-	181	181
Local governments – municipalities/communes	-	7 181	7 181
Local governments – districts	-	765	765
Total payments to local governments	-	8 127	8 127
Total payments to governments	2 058	33 672	35 730

Year ended 31 December 2019

Public administration levels	Taxes levied on the income, production or profits of companies	Licence fees, rental fees, entry fees and other considerations for licences and/or concessions	Total payments
Governments
Central government	-	25 325	25 325
Local agencies of central government	2 759	1 343	4 102
Total payments to central government	2 759	26 668	29 427
Local governments
Local governments – regions	-	193	193
Local governments – municipalities/communes	-	8 012	8 012
Local governments – districts	-	765	765
Total payments to local governments	-	8 970	8 970
Total payments to governments	2 759	35 638	38 397

Presented below are payments to governments across projects by bases for payments made in the years ended 31 December 2020 and 31 December 2019.

Year ended 31 December 2020

Project	Taxes levied on the income, production or profits of companies	Licence fees, rental fees, entry fees and other considerations for licences and/or concessions	Total payments
Payments at project level
Extraction of coal from deposits by TAURON Wydobycie S.A.	-	30 537	30 537
Extraction of carboniferous limestone from the "Czatkow ice" deposit	-	3 135	3 135
Total payments at project level	-	33 672	33 672
Payments at entity level	2 058	-	2 058
Total payments	2 058	33 672	35 730

Year ended 31 December 2019

Project	Taxes levied on the income, production or profits of companies	Licence fees, rental fees, entry fees and other considerations for licences and/or concessions	Total payments
Payments at project level
Extraction of coal from deposits by TAURON Wydobycie S.A.	-	32 725	32 725
Extraction of carboniferous limestone from the "Czatkow ice" deposit	-	2 913	2 913
Total payments at project level	-	35 638	35 638
Payments at entity level	2 759	-	2 759
Total payments	2 759	35 638	38 397

This consolidated report on payments has been prepared for the year ended 31 December 2020 so as to ensure transparency of information concerning payments made to governments, in compliance with the requirements set out in the applicable legal regulations and it contains 8 pages.

Management Board of the Company

Katowice, 29 March 2021

Marek Wadowski – acting President of the Management Board / Vice-President of the Management Board

Jerzy Topolski — Vice President of the Management Board