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Enea S.A. Interim / Quarterly Report 2017

May 25, 2017

5597_rns_2017-05-25_90a695b4-9dc6-46f4-9737-afefde384021.pdf

Interim / Quarterly Report

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Extended consolidated quarterly report of the Enea Group for the first quarter of 2017

Poznań, 23 May 2017

Contents of the extended consolidated quarterly report

1. Selected consolidated financial data of the Enea Group for the period from 1 January 2017 to
31 March 2017 3
2. Condensed interim consolidated financial statements of the Enea Group for the period
from 1 January 2017 to 31 March 2017 4
3. Selected separate financial data for the period from 1 January 2017 to
31 March 2017 44
4. Condensed interim separate financial statements of the Enea S.A. for the period
from 1 January 2017 to 31 March 2017 45

Selected consolidated financial data of Enea Group

in PLN '000 in EUR '000
3 months ended
31.03.2017		 3 months ended
31.03.2016		 3 months ended
31.03.2017		 3 months ended
31.03.2016
Net sales revenue 2 709 690 2 936 751 631 762 674 201
Operating profit 382 579 388 637 89 198 89 221
Profit before tax 402 805 366 965 93 914 84 246
Net profit for the reporting period 321 190 290 405 74 885 66 669
Net cash flows from operating
activities		 572 270 395 232 133 424 90 735
Net cash flows from investing
activities		 (1 732 991) (573 393) (404 045) (131 636)
Net cash flows from financing
activities		 55 166 60 967 12 862 13 996
Total net cash flows (1 105 555) (117 194) (257 759) (26 905)
Weighted average number of
shares (in units)
Net earnings per share (in		 441 442 578 441 442 578 441 442 578 441 442 578
PLN/EUR per share)
Diluted earnings per share (in		 0.67 0.62 0.16 0.14
PLN/EUR per share) 0.67 0.62 0.16 0.14
Balance as at
31.03.2017		 Balance as at
31.12.2016		 Balance as at
31.03.2017		 Balance as at
31.12.2016
Total assets 24 982 881 24 536 519 5 920 395 5 546 229
Total liabilities 11 656 751 11 524 790 2 762 394 2 605 061
Non-current liabilities 8 908 565 8 606 757 2 111 134 1 945 469
Current liabilities 2 748 186 2 918 033 651 260 659 592
Equity 13 326 130 13 011 729 3 158 000 2 941 168
Share capital 588 018 588 018 139 347 132 915
Book value per share (in PLN/EUR
per share)		 30.19 29.48 7.15 6.66
Diluted book value per share (in
PLN/EUR per share)		 30.19 29.48 7.15 6.66

The above financial data for 1st quarter of 2017 and 2016 were translated into EUR in line with the following principles:

  • individual assets and liabilities at the average exchange rate as of 31 March 2017 PLN/EUR 4.2198 (as at 31 December 2016 – PLN/EUR 4.4240),
  • individual items from the statement of profit or loss and other comprehensive income and the statement of cash flows – as per the arithmetic mean of the average exchange rates determined by the National Bank of Poland as at the last day of each month of the financial period from 1 January to 31 March 2017 – PLN/EUR 4.2891 ( for the period from 1 January to 31 March 2016 – PLN/EUR 4.3559).

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

Poznań, 23 May 2017

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Index to the condensed interim consolidated financial statements

Consolidated statement of financial position 7
Consolidated statement of profit or loss and other comprehensive income 9
Consolidated statement of changes in equity 10
Consolidated statement of cash flows 12
Notes to the condensed interim consolidated financial statements 13
1. General information about Enea S.A. and the Enea Group 13
2. Statement of compliance 14
3. Accounting principles 14
4. Material estimates and assumptions 14
5. Composition of the Group - list of subsidiaries, associates and jointly controlled entities 15
6. Segment reporting 16
7. Property, plant and equipment 21
8. Intangible assets 21
9. Acquisition of new subsidiaries, associates and jointly controlled entities 21
9.1.
Acquisition of shares of ENGIE Energia Polska S.A. (currently Enea Elektrownia Połaniec S.A.) 21
9.2.
Acquisition of shares of Polimex-Mostostal S.A. 22
9.3.
Realization of the Investment Agreement with Energa S.A. and Elektrownia Ostrołęka S.A.
on the construction and operation of a power unit in Ostrołęka Power Plant 24
10.Assets held for sale 25
11.Allowance on trade and other receivables 25
12.Inventories 26
13.Certificates of energy origin 26
14.Restricted cash 26
15. Financial assets measured at fair value through profit or loss 26
16. Loans, borrowings and debt securities 27
17. Financial instruments 32
18.Deferred income due to subsidies, connection fees and other 34
19.Deferred income tax 34
20.Provisions for liabilities and other charges 35
21.Related party transactions 37
22. Future liabilities under contracts concluded as at the end of the reporting period 38
23.Contingent liabilities and proceedings before courts, arbitration or public administration bodies 38
23.1. Sureties and guarantees 38
23.2. Pending proceedings before courts of general jurisdiction 39
23.3. Motions for settlement of not balanced energy trading in 2012 39
23.4. Dispute concerning energy origin certificate prices 40
24. The participation on the construction of the atomic power plant programme 40
25.Capital injections in Polska Grupa Górnicza Sp. z o.o. 41
26.Agreement for the purchase of the company Eco-Power Sp. z o.o. 42
27.Initial offer for acquisition of EDF's assets in Poland 43

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards IAS 34 Interim Financial Reporting, as endorsed by the European Union and approved by the Management Board of Enea S.A.

Members of the Management Board

President of the Management Board Mirosław Kowalik ………………………………
Member of the Management Board Piotr Adamczak …………………………………
Member of the Management Board Mikołaj Franzkowiak …………………………………
Member of the Management Board Wiesław Piosik …………………………………
Enea Centrum Sp. z o.o.
The entity responsible for keeping the accounting records
and the preparation of financial statements
……….………………………………
Enea Centrum Sp. z o.o. ul. Górecka 1, 60-201 Poznań
KRS 0000477231, NIP 777-000-28-43, REGON 630770227

Poznań, 23 May 2017

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Consolidated statement of financial position

Balance as at
Note 31.03.2017 31.12.2016
ASSETS - -
Non-current assets - -
Property, plant and equipment 7 19 431 835 18 382 498
Perpetual usufruct of land 82 604 74 899
Intangible assets 8 380 125 370 638
Investment property 27 767 28 020
Investments in subsidiaries 113 081 2 518
Deferred tax assets 19 396 832 403 257
Financial assets available for sale 43 039 42 482
Financial assets measured at fair value through profit or loss 60 927 112
Derivatives 16 33 703 40 267
Trade and other receivables 51 327 30 690
Cash deposits at Mine Closure Fund 111 244 111 218
Aktywa razem 20 732 484 19 486 599
Current assets - -
CO2 emission rights 407 223 417 073
Inventories 12 621 461 448 941
Trade and other receivables 11 1 953 378 1 824 488
Current income tax assets 25 017 9 541
Financial assets held to maturity 480 478
Financial assets measured at fair value through profit or loss 15 6 355 4 852
Cash and cash equivalents 14 1 234 662 2 340 217
Non-current assets classified as held for sale 10 1 821 4 330
Aktywa obrotowe 4 250 397 5 049 920
Total assets 24 982 881 24 536 519

The consolidated statement of financial position should be analyzed together with the notes, which constitute an integral part of the condensed interim consolidated financial statements.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Balance as at
Note 31.03.2017 31.12.2016
EQUITY AND LIABILITIES - -
Equity - -
Equity attributable to shareholders of the Parent Company - -
Share capital 588 018 588 018
Share premium 3 632 464 3 632 464
Financial instruments revaluation reserve 740 744
Other capital (27 132) (25 652)
Reserve capital from valuation of hedging instruments 28 797 33 826
Retained earnings 8 241 842 7 946 612
Kapitał własny przypadający dominującej 12 464 729 12 176 012
Non-controlling interests 861 401 835 717
Total equity 13 326 130 13 011 729
LIABILITIES - -
Non-current liabilities - -
Loans, borrowings and debt securities 16 6 541 675 6 275 644
Trade and other liabilities 45 529 48 373
Finance lease liabilities 2 591 2 997
Deferred income due to subsidies, connection fees and other 18 659 175 660 032
Deferred tax liability 19 193 518 191 798
Liabilities due to employee benefits 814 616 792 156
Financial liabilities measured at fair value through profit or loss 487 269
Provisions for other liabilities and charges 20 650 974 635 488
Zobowiązania długoterminowe 8 908 565 8 606 757
Current liabilities - -
Loans, borrowings and debt securities 16 285 382 448 902
Trade and other liabilities 1 121 144 1 141 600
Finance lease liabilities 1 858 2 141
Deferred income due to subsidies, connection fees and other 18 85 323 84 150
Current income tax liabilities 2 584 32 071
Liabilities due to employee benefits 389 961 416 937
Liabilities due to an equivalent of the right to acquire shares
free of charge		 281 281
Financial liabilities measured at fair value through profit or loss 15 108 2 233
Provisions for other liabilities and charges 20 846 545 789 718
Zobowiązania krótkoterminowe 2 748 186 2 918 033
Total liabilities 11 656 751 11 524 790
Total equity and liabilities 24 982 881 24 536 519

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Consolidated statement of profit or loss and other comprehensive income

3 months
ended		 3 months
ended
Note 31.03.2017 31.03.2016
Sales revenue 2 778 261 3 005 283
Excise tax (68 571) (68 532)
Net sales revenue 2 709 690 2 936 751
Other operating revenue 16 238 30 164
Depreciation (283 847) (279 708)
Costs of employee benefits (386 987) (362 731)
Consumption of materials and supplies and costs of goods sold (285 611) (366 990)
Energy and gas purchase for sale (792 416) (1 123 042)
Transmission services (261 823) (190 389)
Other external services (149 899) (131 005)
Taxes and charges (106 327) (93 571)
Profit on sale and liquidation of property, plant and equipment (3 787) (419)
Other operating expenses (72 652) (30 423)
Operating profit 382 579 388 637
Financial expenses (45 957) (35 736)
Financial revenue 66 183 14 064
Profit before tax 402 805 366 965
Income tax 19 (81 615) (76 560)
Net profit for the reporting period 321 190 290 405
Other comprehensive income
Items that are or may be reclassified to profit or loss:
- valuation of hedging instruments (6 209) (28 799)
- other (4) (337)
- income tax 19 1 180 5 472
Net other comprehensive income (5 033) (23 664)
Total comprehensive income for the reporting period 316 157 266 741
Including net profit:
attributable to Parent's shareholders 295 230 272 941
attributable to non-controlling interests 25 960 17 464
Including comprehensive income:
attributable to Parent's shareholders 290 197 249 277
attributable to non-controlling interests 25 960 17 464
Net profit attributable to shareholders of the Parent 295 230 272 941
Weighted average number of ordinary shares 441 442 578 441 442 578
Basic earnings per share (in PLN per share) 0.67 0.62
Diluted earnings per share (in PLN per share) 0.67 0.62

Enea Group Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Consolidated statement of changes in equity

(a)1st quarter of 2017

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Enea Group Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

(b)1st quarter of 2016

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Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Consolidated statement of cash flows

3 months ended 3 months ended
31.03.2017 31.03.2016
Cash flows from operating activities - -
Net profit for the reporting period 321 190 290 405
Adjustments:
Income tax in profit or loss 81 615 76 560
Depreciation 283 847 279 708
Loss on sale and liquidation of tangible fixed assets 3 787 419
Profit on sale of financial assets (50 556) (2 219)
Interest income (2 113) (3 255)
Interest expense 21 031 21 799
Gain on measurement of financial instruments (70 211) (148 613)
Other adjustments (2 998) (5 359)
264 402 219 040
Income tax paid (104 302) (134 433)
Changes in working capital
CO2 emission rights 13 874 1 478
Inventories 41 273 19 721
Trade and other receivables (99 444) (79 030)
Trade and other liabilities 140 462 94 427
Liabilities due to employee benefits (30 879) (76 570)
Deferred income due to subsidies, connection fees and other (4 588) (1 136)
Provisions for other liabilities and charges 30 282 61 330
90 980 20 220
Net cash flows from operating activities 572 270 395 232
Cash flows from investing activities - -
Acquisition of property, plant and equipment and intangible assets (559 046) (562 743)
Proceeds from disposal of property, plant and equipment and intangible assets 1 017 2 440
Acquisition of financial assets (6 500) (2 173)
Proceeds from disposal of financial assets 1 223 601
Acquisition of subsidiaries adjusted by acquired cash (1 172 857) (2 974)
Outflows related to cash deposits at Mine Closure Fund (26) (9 502)
Interest received 2 083 1 726
Other proceeds/(expenses) from investing activities 1 115 (768)
Net cash flows from investing activities (1 732 991) (573 393)
Cash flows from financing activities - -
Loans and borrowings received 250 000 105 369
Bond issue 150 000 -
Loans and borrowings repaid (2 815) (3 380)
Bonds redemption (300 000) -
Payment of finance lease liabilities
Interest paid		 (612)
(38 034)		 (300)
(37 267)
Expenses related to future issue of bonds (422) (124)
Other payments from financing activities (2 951) (3 331)
Net cash flows from financing activities 55 166 60 967
Total net cash flow (1 105 555) (117 194)
Opening balance of cash 2 340 217 1 822 094
Closing balance of cash 1 234 662 1 704 900

The consolidated statement of cash flows should be analyzed together with the notes, which constitute an integral part of consolidated condensed interim financial statements.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Notes to the condensed interim consolidated financial statements

1. General information about Enea S.A. and the Enea Group

Name (business name): Enea Spółka Akcyjna
Legal form: joint-stock company
Country: Rzeczpospolita Polska
Registered office: Poznań
Address: ul. Górecka 1, 60-201 Poznań
National Court Register – District Court in Poznań KRS 0000012483
Telephone: (+48 61) 884 55 44
Fax: (+48 61) 884 59 59
E-mail: [email protected]
Website: www.enea.pl
Statistical number (REGON): 630139960
Tax identification number (NIP): 777-00-20-640

The main activities of the Enea Group ("Group", "Capital Group") are:

  • production of electricity and heat (Enea Wytwarzanie Sp. z o.o., Enea Elektrownia Połaniec S.A., Przedsiębiorstwo Energetyki Cieplnej Sp. z o.o. in Oborniki, Miejska Energetyka Cieplna Piła Sp. z o.o., Miejskie Przedsiębiorstwo Energetyki Cieplnej Sp. z o.o. in Białystok);
  • electricity trade (Enea S.A., Enea Trading Sp. z o.o.);
  • distribution of electricity (Enea Operator Sp. z o.o.);
  • distribution of heat (Enea Wytwarzanie Sp. z o.o., Przedsiębiorstwo Energetyki Cieplnej Sp. z o.o. in Oborniki, Miejska Energetyka Cieplna Piła Sp. z o.o., Miejskie Przedsiębiorstwo Energetyki Cieplnej Sp. z o.o. in Białystok);
  • mining and agglomeration of hard coal (Lubelski Węgiel "Bogdanka" S.A. Group).

As at 31 March 2017 the shareholding structure of the Parent Entity was the following: the State Treasury of the Republic of Poland – 51.5% of shares, PZU TFI 10.1% and other shareholders – 38.4%.

As at 31 March 2017 the statutory share capital of Enea S.A. equalled PLN 441 443 thousand (PLN 588 018 thousand upon adoption of IFRS-EU and considering hyperinflation and other adjustments) and was divided into 441 442 578 shares.

As at 31 March 2017 Enea Group consisted of the parent entity Enea S.A. ("the Company", "Parent Entity"), 13 subsidiaries, 10 indirect subsidiaries, 1 associates and 2 jointly-controlled entities.

These condensed interim consolidated financial statements should be analyzed together with the consolidated financial statements of the Enea Group for the financial year ended 31 December 2016.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

These condensed interim consolidated financial statements have been prepared on the going concern basis. There are no circumstances indicating that the ability of Enea Group to continue as a going concern might be at risk.

2. Statement of compliance

These condensed interim consolidated financial statements were prepared in accordance with the requirements of International Financial Reporting Standards IAS 34 Interim Financial Reporting as endorsed by the European Union and were approved by the Management Board of Enea S.A.

The Management Board of the Parent Entity has used its best knowledge as to the application of standards and interpretations as well as measurement methods and principles applicable to the individual items of the condensed interim consolidated financial statements of the Enea Group in accordance with IFRS-EU as at 31 March 2017. The presented statements and explanations have been prepared using due diligence. These condensed interim consolidated financial statements have not been reviewed by a certified auditor.

3. Accounting principles

These condensed interim consolidated financial statements were prepared in accordance with accounting policies consistent with those applied during the preparation of the most recent annual consolidated financial statements for the financial year ended 31 December 2016.

The Polish zloty has been used as the reporting currency of these condensed interim consolidated financial statements. The data in the condensed interim consolidated financial statements have been presented in PLN thousand (PLN '000), unless stated otherwise.

4. Material estimates and assumptions

The preparation of condensed interim consolidated financial statements in accordance with IAS 34 requires that the Management Board makes certain estimates and assumptions that affect the adopted accounting policies and the amounts disclosed in the condensed interim consolidated financial statements and notes thereto. The adopted assumptions and estimates are based on the Management Board's best knowledge of the current and future activities and events. The actual figures, however, can be different from those assumed. The estimates adopted for the needs of preparation of these condensed interim consolidated financial statements are consistent with the estimates adopted during preparation of the consolidated financial statements for the previous financial year. The estimates presented in the previous financial years do not exert any significant influence on the current interim period.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

5. Composition of the Group - list of subsidiaries, associates and jointly controlled entities

Name and address of the Company Share of Enea S.A.
in the total
number of
votes in %
31.03.2017		 Share of Enea S.A.
in the total
number of
votes in %
31.12.2016
1. Enea Operator Sp. z o.o.
Poznań, Strzeszyńska 58		 100 100
2. Enea Wytwarzanie Sp. z o.o.
Świerże Górne, gmina Kozienice, Kozienice 1		 100 100
3. Enea Elektrownia Połaniec S.A. 6
Połaniec, Zawada 26		 100 -
4. Enea Oświetlenie Sp. z o.o.
Szczecin, Ku Słońcu 34		 100 100
5. Enea Trading Sp. z o.o. 100 100
6. Świerże Górne, gmina Kozienice, Kozienice 1
Enea Logistyka Sp. z o.o.		 100 100
7. Poznań, Strzeszyńska 58
Enea Serwis Sp. z o.o.		 100 100
8. Lipno, Gronówko 30
Enea Centrum Sp. z o.o.		 100 100
9. Poznań, Górecka 1
Enea Pomiary Sp. z o.o.
Poznań, Strzeszyńska 58		 100 100
10. ENERGO-TOUR Sp. z o.o. w likwidacji
Poznań, Strzeszyńska 58		 1005 1005
11. Enea Innovation Sp. z o.o.
Warszawa, Jana Pawła II 25		 100 100
12. Lubelski Węgiel BOGDANKA S. A.
Bogdanka, Puchaczów		 65.99 65.99
13. Annacond Enterprises Sp. z o.o.
Warszawa, Jana Pawła II 25		 61 61
14. Polimex – Mostostal S.A.
Warszawa, Jana Pawła II 12		 16.48 -
15. Elektrownia Ostrołęka S.A.
Ostrołęka, Elektryczna 5		 11.89 -
16. ENGIE Bioenergia Sp. z o.o.
Połaniec, Zawada 26		 1004 -
17. Przedsiębiorstwo Energetyki Cieplnej Zachód Sp. z o.o.
Białystok, Starosielce 2/1		 1001 1001
18. Centralny System Wymiany Informacji Sp. z o.o.
Poznań, Strzeszyńska 58		 1003 1003
19. Przedsiębiorstwo Energetyki Cieplnej Sp. z o.o.
Oborniki, Wybudowanie 56		 99.931 99.931
20. Miejskie Przedsiębiorstwo Energetyki Cieplnej Sp. z o.o.
Białystok, Warszawska 27		 91.121 91.021
21. Miejska Energetyka Cieplna Piła Sp. z o.o.
Piła, Kaczorska 20		 71.111 71.111
22. EkoTRANS Bogdanka Sp. z o.o.
Bogdanka, Puchaczów		 65.992 65.992
23. RG Bogdanka Sp. z o.o.
Bogdanka, Puchaczów		 65.992 65.992
24. MR Bogdanka Sp. z o.o.
Bogdanka, Puchaczów		 65.992 65.992
25. Łęczyńska Energetyka Sp. z o.o.
Bogdanka, Puchaczów		 58.532 58.532
26. ElectroMobility Poland S.A.
Warszawa, Mysia 2		 25 25

The notes presented on pages 13 – 43 constitute an integral part of the condensed interim consolidated financial statements.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

1 – an indirect subsidiary held through shares in Enea Wytwarzanie Sp. z o.o.

On 17 September 2015, by Resolution no. 547/2015 adopted by the Management Board of Enea Wytwarzanie Sp. z o.o., a project titled "Purchase of employee shares of MPEC sp. z o.o. in Białystok" was launched. On 17 November 2015, by Resolution no. 661/2015, powers of attorney were granted in terms of concluding of the preliminary contracts and final agreements. The number of shares available for purchase is 75 thousand. The concluding of the Preliminary Agreeements was planned for the period between 7 December 2015 and 27 January 2016. The Final Contracts shall be concluded after 16 September 2016. By the end of December 2015, Preliminary Agreements on Sale of shares worth in total PLN 747 thousand were concluded. In 2016, Enea Wytwarzanie Sp. z o.o. purchased 67 209 shares of MPEC Sp. z o.o. in Białystok for the amount of PLN 7 688 thousand, and as at the end of the year it owned 91.02% of shares in share capital. In the first quarter of 2017 Enea Wytwarzanie Sp. z o.o. purchased 1 603 shares of MPEC sp. z o.o. in Białystok for the amount of PLN 193 thousand and on 31 March 2017 it owned 91.12% of shares in share capital.

2 – an indirect subsidiary held through shares in Lubelski Węgiel BOGDANKA S.A.

3– an indirect subsidiary held through shares in Enea Operator Sp. z o.o.

4– an indirect subsidiary held through shares in Enea Elektrownia Połaniec S.A.

5 – on 30 March 2015, the Extraordinary General Meeting of Shareholders of the company adopted a resolution concerning the dissolution of the company, after conducting a liquidation proceeding. The resolution entered into force on 1 April 2015. An application for removing the company from the register was submitted to the National Court Register on 5 November 2015. As of the date of these condensed interim consolidated financial statements procedural steps relating to the deletion of the company from the National Court Register are ongoing.

6 – on 10 April 2017, the company's name was changed from ENGIE Energia Polska S.A. to Enea Elektrownia Połaniec S.A. in the National Court Register.

6. Segment reporting

The management of the Group's activities is conducted by division of operations into segments, which are separated

based on types of products and services offered. The Group has five operating segments:

  • trade purchase and sale of electricity and gas,
  • distribution electricity transmission services,
  • production electricity and heat production,
  • mining production and sale of coal, companies supporting the activities of the mine,
  • other activities maintenance and modernization of road lighting equipment, transport, construction services, travel services, health care services.

Segment revenue is generated from sales to external clients and transactions with other segments, which are directly attributable to a given segment.

Segment costs include costs of goods sold to external clients and costs of transactions with other Group segments, which result from operations of a given segment and may be directly allocated to a given segment.

The Group measures operating segment's financial results and assesses segment performance with EBITDA which is defined as operating profit/loss adjusted by depreciation and impairment loss of non-financial non-current assets.

Market prices are used in inter-segment transactions, which allow individual units to earn a margin sufficient to carry out independent operations in the market.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Financial Results by Segments:

(a)Segment reporting for the period from 1 January to 31 March 2017:

de
Tra		 ist
i
bu
ion
D
t
r		 du
ion
Pro
ct		 M
in
ing		 A
l
l o
he
t
r
iv
it
ies
act		 l
im
ina
ion
E
t
s		 l
To
ta
les
Ne
t s
a
re
ve
nu
e		 1 3
33
95
7		 83
4 9
49		 33
1 3
45		 17
4 8
37		 34
60
2		 - 2 7
09
69
0
les
Int
nt
er-
seg
me
sa		 11
3 1
56		 4 8
35		 55
8 4
18		 29
0 4
00		 94
97
4		 (
)
1 0
61
78
3		 -
l n
les
To
ta
et
sa
re
ve
nu
e		 1 4
47
11
3		 83
9 7
84		 88
9 7
63		 46
5 2
37		 12
9 5
76		 (
)
1 0
61
78
3		 2 7
09
69
0
l ex
To
ta
p
en
ses		 (
)
1 3
96
50
8		 (
)
69
7 2
46		 (
)
75
5 2
20		 (
)
37
5
64
4		 (
)
13
3 6
41		 1 0
38
34
0		 (
)
2 3
19
91
9
/
Se
f
it
los
nt
g
me
p
ro
s		 50
60
5		 14
2 5
38		 13
4 5
43		 89
59
3		 (
)
4
06
5		 (
)
23
44
3		 38
9 7
71
De
iat
ion
p
rec		 (
)
21
7		 (
)
11
9 8
35		 (
)
67
70
4		 (
)
88
67
6		 (
)
10
13
0
EB
ITD
A		 50
82
2		 26
2 3
73		 20
2 2
47		 17
8 2
69		 6 0
65
%
f n
les
et
o
sa
re
ve
nu
e
(g
d
Gro
l a
d a
dm
Un
ig
sts
ini
str
ati
ass
ne
up
co
en
era
n
ve		 %
3.5		 %
31
.2		 %
22
.7		 %
38
.3		 %
4.7
)
ex
p
en
ses		 (
)
7 1
92
f
Op
ing
it
t
era
p
ro		 38
2 5
79
Fin
t
an
ce
cos		 (
)
45
95
7
Fin
inc
an
ce
om
e		 66
18
3
Inc
e t
om
ax		 (
)
81
61
5
f
Ne
it
t p
ro		 32
1 1
90
ha
f n
l
lin
S
ntr
int
sts
re
o
on
-co
o
g
ere		 25
96
0

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

(b)Segment reporting for the period from 1 January to 31 March 2016:

de
Tra		 ist
i
bu
ion
D
t
r		 du
ion
Pro
ct		 M
in
ing		 l
l o
he
A
t
r
iv
it
ies
act		 l
im
ina
ion
E
t
s		 l
To
ta
les
Ne
t s
a
re
ve
nu
e		 1 6
31
99
7		 78
2 5
66		 24
5 4
08		 23
3 7
80		 43
00
0		 - 2 9
36
75
1
les
Int
nt
er-
seg
me
sa		 16
4 7
09		 5 7
83		 63
1 4
20		 18
6 5
06		 95
97
4		 (
)
1 0
84
39
2		 -
l n
les
To
ta
et
sa
re
ve
nu
e		 1 7
96
70
6		 78
8 3
49		 87
6 8
28		 42
0 2
86		 13
8 9
74		 (
)
1 0
84
39
2		 2 9
36
75
1
l ex
To
ta
p
en
ses		 (
)
1 7
79
06
2		 (
)
61
5 3
50		 (
)
73
3 9
52		 (
)
35
2
85
3		 (
)
13
1 4
16		 1 0
75
32
6		 (
)
2 5
37
30
7
/
Se
f
it
los
nt
g
me
p
ro
s		 17
64
4		 17
2 9
99		 14
2 8
76		 67
43
3		 7 5
58		 (
)
9
06
6		 39
9 4
44
De
iat
ion
p
rec		 (
)
16
5		 (
)
13
2 1
31		 (
)
60
68
0		 (
)
82
88
4		 (
)
6 0
24
EB
ITD
A		 17
80
9		 30
5 1
30		 20
3 5
56		 15
0 3
17		 13
58
2
f n
les
%
et
o
sa
re
ve
nu
e
(g
d
Gro
l a
d a
dm
Un
ig
sts
ini
str
ati
ass
ne
up
co
en
era
n
ve		 1.0
%		 38
.7
%		 23
.2
%		 35
.8
%		 9.8
%
)
ex
p
en
ses		 (
)
10
80
7
f
Op
ing
it
t
era
p
ro		 38
8 6
37
Fin
t
an
ce
cos		 (
)
35
73
6
Fin
inc
an
ce
om
e		 14
06
4
Inc
e t
om
ax		 (
)
76
56
0
f
Ne
it
t p
ro		 29
0 4
05
ha
f n
l
lin
S
int
ntr
sts
re
o
on
-co
o
g
ere		 17
46
4

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Segment reporting information (continued)

(a)Other segment reporting information as at 31 March 2017:

de
Tra		 bu
D
ist
i
ion
t
r		 du
Pro
ion
ct		 M
in
ing		 l
l o
he
A
t
r
iv
it
ies
act		 l
E
im
ina
ion
t
s		 l
To
ta
lan
d e
Pro
uip
ert
t a
nt
p
y,
p
n
q
me		 15
79
2		 7 9
15
40
0		 8 8
58
54
1		 2 7
32
98
6		 30
9 4
73		 (
)
41
3 5
55		 19
41
8 6
37
de
d o
he
b
les
Tra
t
cei
an
r re
va		 1 0
70
21
4		 48
0 4
45		 57
9 2
30		 23
2 2
07		 98
89
3		 (
)
57
9 1
48		 1 8
81
84
1
l
To
ta		 1 0
86
00
6		 8 3
95
84
5		 9 4
37
77
1		 2 9
65
19
3		 40
8 3
66		 (
)
99
2 7
03		 21
30
0 4
78
lu
de
d
fro
A
S
SE
TS
tio
nta
ex
c
m s
eg
me
n		 3 6
82
40
3
lu
din
lan
d e
- in
ert
t a
uip
nt
c
g
p
rop
y,
p
n
q
me		 13
19
8
lu
din
de
d o
he
b
les
- in
cei
tra
t
c
g
an
r re
va		 12
2 8
64
T
OT
AL
: A
S
SE
T
S		 24
98
2 8
81
de
d o
he
lia
bi
liti
Tra
t
an
r
es		 33
7 3
19		 28
8 0
15		 41
2 2
64		 24
5 5
25		 27
7 2
88		 (
)
47
8 8
04		 1 0
81
60
7
d
lia
bi
liti
lu
de
d
fro
Eq
uit
nta
tio
y
an
es
exc
m s
eg
me
n		 23
90
1 2
74
lu
din
de
d o
he
lia
bi
liti
- in
tra
t
c
g
an
r
es		 85
06
6
T
OT
AL
: E
Q
U
ITY
AN
D L
IAB
ILI
TIE
S		 24
98
2 8
81
for
he
h p
io
d e
de
d 3
h 2
t
3-m
t
1 M
01
7
on
er
n
arc
l ex
dit
for
b
le a
d i
b
le
fix
d a
Ca
ita
i
i
ta
nta
ts
p
p
en
ure
ng
n
ng
e
sse
l ex
dit
for
b
le a
d i
b
le
fix
d a
lu
de
d
Ca
ita
ta
i
nta
i
ts
p
p
en
ure
ng
n
ng
e
sse
exc
fro
nta
tio
m s
me
n		 10
6		 15
0 4
39		 32
2 9
58		 65
46
7		 2 3
66		 (
)
6 7
13		 53
4 6
23
-
eg
d a
De
iat
ion
rtiz
ati
p
rec
an
mo
on		 21
7		 11
9 8
35		 67
70
4		 88
67
6		 10
13
0		 (
)
2 9
79		 28
3 5
83
d a
lu
de
d
fro
De
iat
ion
rtiz
ati
nta
tio
p
rec
an
mo
on
ex
c
m s
eg
me
n		 26
4
(
) o
/
de
/u
liza
f re
b
les
l
low
Re
nit
ion
nit
ion
ti
tio
cei
cog
rec
og
n
va
a
an
ce		 91
3		 60
9
13		 6 0
94		 14 (
)
90
4		 (
)
4		 19
72
2

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

(b)Other segment reporting information as at 31 December 2016:

de
Tra		 bu
D
ist
i
ion
t
r		 du
Pro
ion
ct		 M
in
ing		 l
l o
he
A
t
r
iv
it
ies
act		 l
E
im
ina
ion
t
s		 l
To
ta
lan
d e
Pro
uip
ert
t a
nt
p
p
n
q
me
y,		 15
76
2		 7
88
6 6
76		 7
80
2 6
43		 2
76
0 1
96		 31
3 4
04		 (
)
40
9
96
6		 18
36
8 7
15
de
d o
he
b
les
Tra
t
cei
an
r re
va		 98
3 0
72		 50
5 9
57		 48
6 9
50		 24
2 2
58		 11
5 6
28		 (
)
54
8
53
8		 1
78
5 3
27
l
To
ta		 99
8 8
34		 8
39
2 6
33		 8
28
9 5
93		 3
00
2 4
54		 42
9 0
32		 (
)
95
8
50
4		 20
15
4 0
42
lu
de
d
fro
A
S
SE
TS
tio
nta
ex
c
m s
eg
me
n		 4
38
2 4
77
lu
din
lan
d e
- in
uip
ert
t a
nt
c
g
p
rop
y,
p
n
q
me
lu
din
de
d o
he
b
les
- in
cei
tra
t
c
g
an
r re
va		 13
78
3
69
85
1
T
OT
AL
: A
S
SE
T
S		 7 9
41
54
8		 24
53
6 5
19
de
d o
he
lia
bi
liti
Tra
t
an
r
es		 39
0 4
17		 34
7 0
56		 34
6 7
44		 27
3 0
16		 20
6 9
56		 (
)
45
8
73
9		 1
10
5 4
50
d
lia
bi
liti
lu
de
d
fro
Eq
uit
tio
nta
y
an
es
exc
m s
eg
me
n		 23
43
1 0
69
lu
din
de
d o
he
lia
bi
liti
- in
tra
t
c
g
an
r
es		 84
52
3
OT
Q
S
T
AL
: E
U
ITY
AN
D L
IAB
ILI
TIE		 22
9 2
34		 43
1 5
21		 47
3 7
37		 197
42
0		 21
1 2
79		 (
)
43
0
55
9		 24
6 5
19
53
for
he
h p
d e
de
d 3
h 2
io
1 M
01
6
t
3-m
t
on
er
n
arc
l ex
dit
for
b
le a
d i
b
le
fix
d a
Ca
ita
i
i
ta
nta
ts
p
p
en
ure
ng
ng
e
sse
n
l ex
dit
for
b
le a
d i
b
le
fix
d a
lu
de
d
Ca
ita
i
i
ta
nta
ts
p
p
en
ure
ng
n
ng
e
sse
exc
fro
nta
tio
m s
eg
me
n		 17
4		 17
4 8
67		 13
5 6
75		 61
72
9		 4 6
19		 (
)
10
97
9		 36
6
08
5
-
d a
De
iat
ion
rtiz
ati
p
rec
an
mo
on		 16
5		 13
2 1
31		 60
68
0		 82
88
4		 6 0
24		 (
)
2
70
1		 27
9 1
83
d a
lu
de
d
fro
De
iat
ion
rtiz
ati
tio
nta
p
rec
an
mo
on
ex
c
m s
eg
me
n		 52
5
(
) o
/
de
/u
liza
f re
b
les
l
low
Re
nit
ion
nit
ion
ti
tio
cei
cog
rec
og
n
va
a
an
ce		 1 9
46		 68
8		 (
)
24
3		 1 9
71		 (
)
38
0		 74
5		 4 7
27

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

7. Property, plant and equipment

During the 3-month period ended 31 March 2017 the Group acquired property, plant and equipment for the total amount of PLN 529 050 thousand (during the period of 3 months ended 31 March 2016 it was PLN 358 544 thousand). The mentioned above amounts relate mainly to production segment (PLN 321 038 thousand) and distribution segment (PLN 136 835 thousand). Expenditures in the production segment relate primarily to the construction of a new power unit. As a result of acquisition of ENGIE Group amount of property, plant and equipment increased by PLN 878 909 thousand.

During the 3-month period ended 31 March 2017 the Group completed the sale and liquidation of property, plant and equipment in the total net book value of PLN 4 039 thousand (during the 3 months ended 31 March 2016 respectively: PLN 2 941 thousand).

During the 3-month period ended 31 March 2017 r. impairment loss on the book amount of property, plant and equipment decreased by the net amount of PLN 204 thousand (during the 3 months ended 31 March 2016 impairment loss on the book amount of property, plant and equipment decreased by the net amount of PLN 931 thousand).

As at 31 March 2017 the value of the impairment on the carrying amount of property, plant and equipment amounted to PLN 1 629 823 thousand (as at 31 December 2016 respectively: 1 630 027 thousand).

8. Intangible assets

During the 3-month period ended 31 March 2017 the Group acquired intangible assets for the total amount of PLN 5 573 thousand (during the period of 3 months ended 31 March 2016 the Group acquired intangible assets for the total amount of PLN 7 541 thousand).

During the 3-month period ended 31 March 2017 the Group has brought into use intangible assets under construction in the amount of PLN 9 294 thousand (during the period of 3 months ended 31 March 2016 respectively: PLN 21 384 thousand).

During the 3-month period ended 31 March 2017 the Group did not complete significant sales and liquidations of intangible assets (during the period of 3 months ended 31 March 2016 the Group also did not complete significant sales and liquidations of intangible assets).

9. Acquisition of new subsidiaries, associates and jointly controlled entities

9.1. Acquisition of shares of ENGIE Energia Polska S.A.(currently Enea Elektrownia Połaniec S.A.)

On 30 September 2016 Enea S.A. submitted an offer for the purchase of 100% of shares in ENGIE Energia Polska S.A. (EEP, currently Enea Elektrownia Połaniec S.A.). The offer was submitted according to the description in the process initiated by ENGIE, the owner of 100% of the shares in EEP. On 2 December 2016 the Company obtained exclusivity

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

rights to further negotiations of the purchase of 100% of shares in EEP. On 23 December 2016, the Company signed with ENGIE International Holdings B.V. a conditional agreement on sale of 100% of shares of EEP (Agreement), and indirectly also on sale of 100% of shares of ENGIE Bioenergia Sp. z o.o.

The closure of the transaction was subject to the fulfilment of the following significant conditions precedent:

  • obtaining consent of the Minister of Energy, pursuant to the Act on Control of Certain Investments,
  • obtaining consent of the President of UOKiK for the concentration,
  • waiving of the pre-emption right by the President of the Agricultural Market Agency, and
  • performing the conversion of debt of EEP. towards entities of the ENGIE group into equity in EEP.

On 28 February 2017, the Company received the information on the satisfaction of the last of the said conditions, which means that all the conditions precedent have been satisfied. On 2 March 2017 the Company received the calculation of the initial selling price of 100% of shares in EEP in the amount of PLN 1 264 159 355 from ENGIE International Holdings B.V.

On 14 March 2017 Enea S.A. acquired 100% of shares in EEP i.e. 7 135 000 shares entitled to the same amount of votes for the initial price of PLN 1 264 159 355. The estimated costs related to the purchase of the shares amounted to PLN 3.4 million.

Transaction is consistent with Enea Capital Group's Development Strategy until 2030 approved in September 2016. With this transaction the Company will increase its share in domestic electricity production and will be vice-leader of Polish market of electricity producers. As at the date of preparation of these condensed interim consolidated financial statements, the process of allocation of the cost of purchase to the acquired identifiable net assets has not yet been completed. Therefore, the Group decided to make the preliminary, initially agreed settlement. The cost of purchase is PLN 1 264 159 thousand, whereas the book value of the net assets taken from the financial information of the Połaniec Group as at the acquisition date amounts to PLN 1 294 181 thousand. The Group assumed that the difference between the cost of purchase and the book value of the net assets relates mainly to property, plant and equipment.

If the business combination had taken place on 1 January 2017, according to the Management Board's estimates the consolidated net sales revenue for the period of three months ended 31 March 2017 would have amounted to PLN 3 053 186 thousand, and the consolidated net profit would have amounted to PLN 332 881 thousand.

9.2. Acquisition of shares of Polimex-Mostostal S.A.

On 6 December 2016, negotiations were commenced between Enea S.A. and the following companies: Energa S.A., PGE Polska Grupa Energetyczna S.A., PGNiG S.A. (Investors) and between the Investors and Polimex-Mostostal S.A. (Polimex). The aim of the negotiations was to develop the structure of a possible capital involvement of the Investor in Polimex (Investment) and develop a possible model of co-operation between the Investors when carrying out the Investment.

On 27 December 2016, Enea S.A. concluded a letter of intent with the Investors and Polimex, in which the Investors expressed their intention to consider a possible investment in Polimex and based on which they commenced talks with Polimex, aimed at developing detailed parameters of the transaction. At the same time, on that day, the Company along with the Investors submitted a request to the Office of Competition and Consumer Protection (UOKiK) for the consent of the President of the UOKiK to concentration consisting in the acquisition, by the Investors, of joint control of Polimex.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

The consent to the concentration consisting in the acquisition, by the Investors, of the joint control of Polimex referred to above was issued on 18 January 2017.

At the same time, also on 18 January 2017, the Company entered into an investment agreement with the Investors and Polimex, under which the Investors undertook to invest in Polimex. The investment consisted in the Investors' subscribing, in total, for 150 million shares issued by Polimex. The Company undertook to subscribe for 37.5 million shares of the new issue for the total issue price of PLN 75 million. The agreement was concluded under conditions precedent described in detail in Current Report 2/2017. Along with the above mentioned agreement, agreements specifying the principles of co-operation as well as mutual rights and obligations of the Investors when carrying out the above mentioned investment were concluded, as well as additional agreements related to the implementation of the investments, concluded with the creditors and hitherto shareholders of Polimex.

On 20 January 2017, due to the fulfilment of the conditions precedent contained in the investment agreement referred to above the Company accepted the offer, submitted by the management board of Polimex, of private subscription for 37.5 million shares at the issue price of PLN 2 per share, i.e. for the total issue price of PLN 75 million. In addition, as a result under one of the above additional agreements, on 20 January 2017, the Company acquired 1.5 million shares of Polimex from its hitherto shareholder. The purchase price of all shares amounted of PLN 80.6 million. Enea S.A. taken up a 16.48% interest in the company's share capital.

The investment agreement enables Investors to affect the financial and operating policies of Polimex. These rights are exercised by the Supervisory Board. The Supervisory Board includes three members designated by the Investors. Moreover, the Investors have signed an agreement concerning investments in Polimex ("the Arrangement"). The aim of the conclusion of the Arrangement is to ensure increased control over Polimex for the Investors which collectively hold the majority of the votes at the Shareholders' Meeting of Polimex. The Arrangement provides, among other things, for adopting, by way of voting, a common position when making key decisions to be taken by the Shareholders' Meeting and the Supervisory Board of Polimex, including determining the composition of the Management Board of Polimex. Due to the aforementioned rights of the Investors, which translate into having a significant effect, the share in Polimex has been classified as an associate recognized under the equity accounting method.

Polimex is an engineering and construction company which offers a wide range of services provided on a general contracting basis. The registered office of Polimex is in Warsaw. Polimex is a company listed on the Warsaw Stock Exchange. As at 31 March 2017, the average market price of one Polimex share amounted to PLN 8.03, which translates into the fair value of the block of shares held by the Group of PLN 313 million.

The Group is currently working on purchase price allocation of Polimex.

On 21 March 2017 Investors announced a tender offer for shares of Polimex as a result of exceeding the 33% threshold of the total number of votes at the general meeting of Polimex. Tender offer is of secondary nature and Investors intend to aquire in tender offer shares in excess of number of shares currently held by Investors (i.e. in total 65.93% of the total number of votes in Polimex) and get no more than 66% of total votes at the general meeting of Polimex. As a result of tender offer each of Investors (including Enea) intended to get no more than approximately 0.018% of total votes at the general meeting of Polimex. The call was settled on 28 April 2017 and, as a result, each Investor purchased 24 shares in Polimex. At present, the Company holds 39 000 024 shares in Polimex, representing a 16.48% interest in the share capital of Polimex. In total, the Investors hold 156 000 097 shares, representing a 65.9% interest in the share capital of Polimex.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

9.3. Realization of the Investment Agreement with Energa S.A. and Elektrownia Ostrołęka S.A. on the construction and operation of a power unit in Ostrołęka Power Plant

On 19 September 2016 Enea S.A. signed a letter of intent with Energa S.A. on engaging in cooperation in preparing, completing and utilizing a modern 1 000 MW coal-fired unit in Elektrownia Ostrołęka (the Investment, Ostrołęka C). The Parties' intention is to jointly develop an effective business model for Ostrołęka C, verify its documentation and optimize the technical and economic parameters of the new power generation unit. Cooperation also includes conducting a tender to appoint a general contractor for the Project.

The Parties have agreed that the completion of the Project will have a positive impact on Poland's energy security, will meet the highest environmental standards and will ensure yet another stable, highly efficient and low-emission source of energy within the National Grid.

On 8 December 2016, the Company concluded the Investment Agreement on the implementation of the project Ostrołęka C. The subject of the Agreement is to prepare, construct, and operate the power unit referred to above. Pursuant to the Agreement signed, the co-operation will proceed, as a rule, as part of three stages: Development Stage – until the general contractor is instructed to commence the work; Construction Stage – until Ostrołęka C is commissioned for the purposes of commercial operation, and Operation Stage – commercial operation of Ostrołęka C. After the Development Stage is completed, Enea S.A. is obliged to participate in the Construction Stage, provided, however, that the condition of profitability of the Project is met, and financing the Project does not infringe bank covenants of the Company. It is estimated that the total investment outlays of Enea S.A. until the completion of the Development Stage will total approx. PLN 128 million. For the purposes of the implementation of the investment, Energa S.A. shall dispose of shares of Elektrownia Ostrołęka S.A., constituting 50% in the share capital, in favour of Enea S.A., in price PLN 101 million. The condition precedent for the entry into force of the Investment Agreement was obtaining the consent of the President of UOKiK for the concentration consisting in the acquisition of shares of the special purpose vehicle established to implement the Project. The condition was fulfilled on 11 January 2017.

On 19 December 2016, the special purpose vehicle announced a tender procedure to select the general contractor for the construction of the Ostrołęka C power plant with capacity of approx. 1000 MW and net fuel efficiency of at least 45 per cent, operating on supercritical steam parameters. Elektrownia Ostrołęka S.A., if certain assumptions are implemented (including an adequate share of Enea S.A., Energa S.A. and possible Financial Investors), and assuming that Capacity Market or other assistance mechanisms are introduced, will be able to undertake the comprehensive implementation of the Project.

On 1 February 2017, Enea S.A. concluded an Agreement on the Purchase of 24 980 926 Shares in Elektrownia Ostrołęka S.A. with ENERGA S.A. for a total of PLN 24 million and thereby acquiring an 11.89% interest in the Company's share capital.

Under the above agreements ENERGA S.A. and Enea S.A. assumed joint control over Elektrownia Ostrołęka SA, with its registered office in Ostrołęka, whose activities are aimed at constructing and operating a new coal unit. Both parties will hold 50% of shares in Elektrownia Ostrołęka SA each and the same number of votes at the General Meeting. The Management Board and the Supervisory Board will consist of the same number of representatives of both investors. Decisions concerning important activities will require the unanimous consent of both shareholders which have rights to the net assets of Elektrownia Ostrołęka SA. Bearing the above in mind, the investment has been classified as a joint venture and is recognized under the equity accounting method.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Elektrownia Ostrołęka SA is a non-public company. Therefore, there are no listed market prices for its shares. On 13 April 2017, the Extraordinary General Shareholders' Meeting of Elektrownia Ostrołęka S.A. adopted a resolution on increasing the company's share capital from PLN 210 100 thousand to PLN 229 100 thousand by issuing new shares. In a private subscription, Enea S.A. acquired 9 500 000 shares in consideration for the contribution in cash which was made on 28 April 2017. The capital increase is awaiting registration with the registration court.

10. Assets held for sale

31.03.2017 31.12.2016
Property, plant and equipment 1 821 4 330
Total gross amount of assets held for sale 1 821 4 330

The amount of PLN 1 821 thousand in the statement of financial position is related to railway cars and assets of Zakład Ceramiki Budowlanej (the Brick and Tile Shop) which are owned by Lubelski Węgiel "Bogdanka" S.A. They are planned to be sold in 2017.

11. Allowance on trade and other receivables

31.03.2017 31.12.2016
Opening balance of receivables allowance 129 483 116 161
Acquisition of subsidiaries 5 537 -
Addition 17 366 25 977
Reversed (592) (1 744)
Utilized (2 589) (10 911)
Closing balance of receivables allowance 149 205 129 483

During the 3-month period ended 31 March 2017 the allowance on the carrying amount of trade and other receivables increased by PLN 19 722 thousand (during the period of 3 months ended 31 March 2016 the impairment allowance increased by PLN 4 727 thousand).

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

12. Inventories

31.03.2017 31.12.2016
Materials 448 483 262 506
Semi-finished products and work in progress 465 245
Finished products 24 243 22 374
Certificates of energy origin 144 849 163 801
Merchandise 9 150 9 042
Gross carrying amount 627 190 457 968
Impairment loss on inventories (5 729) (9 027)
Net carrying amount 621 461 448 941

During the 3-month period ended 31 March 2017 the inventory allowance decreased by PLN 3 298 thousand (during the period of 3 months ended 31 March 2016 the inventory allowance decreased by PLN 240 thousand).

13. Certificates of energy origin

31.03.2017 31.12.2016
Net carrying amount opening balance 161 459 196 077
Acquisition of subsidiaries 40 642 -
Self-production 6 557 57 307
Acquisition 17 252 308 543
Redemption of emission rights (83 400) (397 934)
Change of impairment loss 2 388 (2 534)
Other changes - -
Net carrying amount closing balance 144 898 161 459

14. Restricted cash

As at 31 March 2017 the total restricted cash amounted to PLN 58 242 thousand. he total restricted cash of the Group comprised transaction deposits related to trading in energy and CO2 emission rights, deposits received from suppliers and blockade of cash to secure proper execution of works.

As at 31 December 2016 the restricted cash amounted to PLN 50 668 thousand.

15. Financial assets measured at fair value through profit or loss

As at 31 March 2017, in "Financial assets measured at fair value through profit or loss" the Group presented call options on shares in Polimex-Mostostal S.A. On the basis of the agreement on call options on shares in Polimex-Mostostal S.A. dated 18 January 2017, Enea S.A. purchased call options from Towarzystwo Finansowe Silesia Sp. z o.o. This agreement provides for the purchase (in three tranches) of a total of 9 125 thousand shares, at a nominal price of PLN 2 per share,

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

on specific dates, i.e.: 30 July 2020, 30 July 2021 and 30 July 2022. The call options were measured at fair value using the Black-Scholes model. The book value of the options amounted to PLN 59 741 thousand as at 31 March 2017. Moreover, in financial assets measured at fair value through profit or loss the Group shows the valuation of forward

contracts on the purchase of CO2 emission rights of PLN 7 541 thousand (PLN 4 964 thousand as at 31 December 2016).

16. Loans, borrowings and debt securities

31.03.2017 31.12.2016
Bank loans 1 802 890 1 561 382
Borrowings 43 882 48 594
Bonds 4 694 903 4 665 668
Long-term 6 541 675 6 275 644
Bank loans 87 382 72 586
Borrowings 12 648 10 797
Bonds 185 352 365 519
Short-term 285 382 448 902
Total 6 827 057 6 724 546

During the 3-month period ended 31 March 2017 the carrying amount of loans, borrowings and debt securities increased by net amount of PLN 102 511 thousand (during the period of 3 months ended 31 March 2016 the carrying amount of loans, borrowings and debt securities increased by net amount of PLN 101 960 thousand).

Loans and borrowings

A brief description of significant loan agreements and borrowings of Enea Group is presented below:

Enea S.A.

At present Enea S.A. has loan agreements concluded with EIB for a total amount of PLN 2 371 000 thousand (agreement A for PLN 950 000 thousand, agreement B for PLN 475 000 thousand and agreement C for PLN 946 000 thousand).

The funds from EIB are designated for financing of long-term investment plan for the modernization and extension of the power grids of Enea Operator Sp. z o.o. Funds from Agreement A and B are fully utilized. The availability period for Agreement C expired is December 2017 (Enea S.A. obtained the consent of the EIB to extend the availability period concluded an appropriate annex). Interest rate on loans can be fixed or floating.

In January 2017 Enea S.A. has drawn third tranche from EIB under agreement C in the amount of PLN 250 000 thousand. The loan is denominated in PLN, with a floating rate based on WIBOR 6-month plus the Bank's margin. Tranche will be repaid in equal instalments, and the final loan repayment is planned for December 2031.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Enea Wytwarzanie Sp. z o.o.

Investment loan from NFOŚiGW - the loan agreement concluded with NFOŚiGW on 6 June 2012 for the period from 1 October 2013 to 30 September 2018. The amount of used loan is PLN 17 850 thousand. The annual interest rate of the loan is WIBOR 3M+50 bps.

Investment loan from NFOŚiGW - the loan agreement concluded with NFOŚiGW on 22 December 2015 for the period from 1 April 2016 to 20 December 2026 with limit of PLN 60 075 thousand. The amount of used loan bears interest rate on the basis of WIBOR 3M - but not less than 2% per annum. The grace period ends on 29 September 2018.

The total loans of Enea Wytwarzanie Sp. z o.o. at 31 March 2017 amount to PLN 26 205 thousand (31 December 2016: PLN 27 375 thousand).

Lubelski Węgiel Bogdanka S.A.

On 16 December 2016 the company concluded with mBank loan agreement in the current account up to the amount of PLN 100 000 thousand. It bears interest at a variable rate. The maturity date is on 30 November 2018. As at the reporting date the company did not use the limit.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

The table of loans and borrowings of Enea Group is presented below:

No. Entity Lender Date of
agreement		 Total amount Outstanding as
at 31.03.2017		 Outstanding as
at 31.12.2016		 Term of the
agreement
1. Enea S.A. EBI 18 October
2012 and 19
June 2013 (A
and B)		 1 425 000 1 425 000 1 425 000 31
December
2030
2. Enea S.A. EBI 29 May 2015 (C) 946 000 450 000 200 000 31 March
2032
3. Enea S.A. PKO BP
S.A.		 28 January
2014 (Annex no 1
from 25 January
2017)		 300 000 - - 31
December
2019
4. Enea S.A. Pekao S.A. 28 January
2014 (Annex no 1
from 25 January
2017)		 150 000 - - 31
December
2019
5. Enea Wytwarzanie
Sp. z o.o.		 NFOŚiGW 6 June
2012		 17 850 7 099 8 269 30
September
2018
6. Enea Wytwarzanie
Sp. z o.o.		 NFOŚiGW 22 December
2015		 60 075 19 106 19 106 20
December
2026
7. LWB mBank 16 December
2016		 100 000 - - 30
November
2018
8. Other - - - 40 417 42 563 -
TOTAL 2 998 925 1 941 622 1 694 938
Transaction costs and the valuation effect
according to the effective interest rate		 5 180 (1 579)
TOTAL 2 998 925 1 946 802 1 693 359

Bond issue programmes

Enea S.A. concludes agreements for the bond issue programmes to finance current operations and investments needs of Enea S.A. and its subsidiaries.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

The summary of the bonds issued by Enea S.A. and Lubelski Węgiel Bogdanka S.A. is presented below:

No. Name of bonds issue
programme		 Date of the
conclusion of
programme		 Amount of
the
programme		 Amount issued
as at 31.03.2017		 Amount issued
as at 31.12.2016		 Redemption
date
1. Bonds Issue Programme
Agreement with
PKO BP S.A., Bank Pekao
S.A., BZ WBK S.A.
and Bank Handlowy w
Warszawie S.A
(Enea S.A.)		 21 June 2012 r. 3 000 000 1 951 000 1 951 000 Redemption
from June
2020 till June
2022.
2. Bonds Issue Programme
Agreement with
Bank Gospodarstwa
Krajowego
(Enea S.A.)		 15 May 2014 1 000 000 1 000 000 1 000 000 Redemption
in
instalments,
final maturity
is December
2026.
3. Bonds Issue Programme
Agreement with
ING Bank Śląski S.A.,
PKO BP S.A.,
Bank PEKAO S.A. and
mBank S.A. (Enea S.A.)		 30 June 2014 5 000 000 1 500 000 1 500 000 Redemption
of a given
series in
February
2020 and
September
2021.
4. Bonds Issue Programme
Agreement with
Bank Gospodarstwa
Krajowego
(Enea S.A.)		 3 December
2015		 700 000 150 000 - Redemption
in
installments,
final maturity
is September
2027.
5. Bonds Issue Programme
Agreement with Bank
PEKAO S.A. (LWB)		 23 September
2013		 300 000 300 041 300 041 Redemption
in
instalments,
final maturity
is December
2018.
6. Bonds Issue Programme
Agreement with Bank
PEKAO S.A. and
Bank Gospodarstwa
Krajowego (LWB)		 30 June 2014 300 000 - 300 039 Redemption
in March
2017.
TOTAL 10 300 000 4 901 041 5 051 080
interest rate Transaction costs and the valuation
effect according to the effective		 (20 786) (19 893)
TOTAL 10 300 000 4 880 255 5 031 187

In the first quarter of 2017 Enea S.A. did not amend the program agreements, and did not enter into new agreements.

Bonds Issue Programme Agreement up to PLN 700 000 thousand

In March 2017 Enea S.A. under the Programme issued first series of bonds of PLN 150 000 thousand.

The notes presented on pages 13 – 43 constitute an integral part of the condensed interim consolidated financial statements.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Lubelski Węgiel Bogdanka S.A. - financial obligations arising from bonds issued by LWB concern currently one programme agreement. Under the Programme Agreement, concluded by the company on 23 September 2013 with Bank Polska Kasa Opieki S.A., 3 000 bonds of total value of PLN 300 000 thousand with maturity till 31 December 2018 were issued. The maturity date of the portion of the bonds worth PLN 75 000 thousand is 30 March 2018, the maturity date of another portion of the bonds worth PLN 75 000 thousand is 30 June 2018, the maturity date of another portion of the bonds worth PLN 75 000 thousand is 30 September 2018 and the maturity date of the remaining bonds worth PLN 75 000 thousand is 30 December 2018. Bonds interest rate is based on WIBOR 3M increased by fixed margin.

Until 30 March 2017 LWB held bonds under the second Programme Agreement concluded on 30 June 2014 with Bank Polska Kasa Opieki S.A. and Bank Gospodarstwa Krajowego. On 10 March 2017, the Management Board of LWB concluded an annex to this agreement with Bank Polska Kasa Opieki S.A. and Bank Gospodarstwa Krajowego. According to the provisions of the annex, the expiry date of the Programme for Tranche 1 was changed from 31 December 2019 to 30 March 2017. Therefore, on 30 March 2017 LWB repurchased the registered LWB01C300617 series bonds. The repurchased Tranche 1 comprised 300 bonds with a nominal value of PLN 1 000 thousand each and with a total nominal value of PLN 300 000 thousand. Consequently, the Programme Agreement expired.

Transactions hedging interest rate risk

During the 3-month period ended 31 March 2017 Enea S.A. not concluded transactions to hedge interest rate risk (Interest Rate Swap). As at 31 March 2017 the total value of IRS transactions amounted to of PLN 4 435 000 thousand. The transactions are connected with realization of an interest rate risk management policy adopted for Enea Group companies. Concluded transactions will substantially affect the predictability of cash flows and financial costs. The valuation of these financial instruments is presented in "Derivatives". As at 31 March 2017 the valuation of derivatives amounted to PLN 33 703 thousand (on 31 December 2016 of PLN 40 267 thousand).

Financing conditions – covenants

Financing agreements assume compliance by the Company and Enea Group with certain financial ratios. As at 31 March 2017 and the date of these consolidated condensed interim financial statements, the Group did not breach the regulations of loan agreements, on the basis of which the Group would be required to early repayment of long-term debt.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

17. Financial instruments

The table below presents fair values as compared to carrying amounts:

31.03.2017 31.12.2016
Carrying
amount		 Fair
value		 Carrying
amount		 Fair
value
Non-current financial assets available for sale
(shares in unrelated parties)		 43 039 43 039 42 482 42 482
Non-current financial assets measured
at fair value through profit or loss		 60 927 60 927 112 112
Derivatives 33 703 33 703 40 267 40 267
Current financial assets held to maturity 480 480 478 478
Current financial assets measured at fair value
through profit or loss		 6 355 6 355 4 852 4 852
Trade and other receivables 1 548 315 (*) 1 435 353 (*)
Cash and cash equivalents 1 234 662 1 234 662 2 340 217 2 340 217
Cash deposits at Mine Closure Fund 111 244 111 244 111 218 111 218
Loans, borrowings and debt securities 6 827 057 6 879 341 6 724 546 6 778 513
Finance lease liabilities 4 449 4 449 5 138 5 138
Trade and other liabilities 949 510 (*) 985 504 (*)
Financial liabilities measured at fair value
through profit or loss		 15 595 15 595 2 502 2 502

(*) The carrying amounts of trade and other receivables, trade and other liabilities approximates their fair value.

Financial assets available for sale include shares in unrelated parties for which the ratio of interest in equity is lower than 20%. The positions comprises also shares in PGE EJ1 Sp. o.o. in the amount of PLN 26 902 thousand for which there is no quoted market price in an active market and whose fair value - because of the initial phase of the company's activity – is based on incurred cost.

Derivatives comprise the valuation of interest rate hedging transactions (Interest Rate Swap). The fair value of derivatives is determined by calculating the net present value based on two yield curves, i.e. the curve to determine the discount factor and curve used to estimate future rates of variable reference rates.

Non-current financial assets measured at fair value through profit or loss is share call options of company Polimex-Mostostal S.A.

The table below presents the analysis of financial instruments measured at fair value and classified into the following three levels:

Level 1 – fair value based on stock exchange prices (unadjusted) offered for identical assets or liabilities in active markets,

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Level 2 – fair value determined based on market observations instead of market quotations (e.g. direct or indirect reference to similar instruments traded in the market),

Level 3 – fair value determined using various valuation methods, but not based on observable market information.

31.03.2017
Level 1 Level 2 Level 3 Total
Derivatives
Interest Rate Swap used for hedging
Financial assets measured at fair value
through profit or loss		 - 33 703 - 33 703
Forward contracts - 7 541 - 7 541
Call options - 59 741 - 59 741
Financial assets available for sale
Not listed equity instruments - - 1 137 1 137
Total - 100 985 1 137 102 122
Financial liabilities measured at fair value
through profit or loss
Total - (15 595) - (15 595)
Forward contracts - (15 595) - (15 595)
31.12.2016
Level 1 Level 2 Level 3 Total
Derivatives
Interest Rate Swap used for hedging - 40 267 - 40 267
Financial assets measured at fair value
through profit or loss
Forward contracts - 4 964 - 4 964
Financial assets available for sale
Not listed equity instruments - - 580 580
Total - 45 231 580 45 811
Financial liabilities measured at fair value
through profit and loss
Forward contracts - (2 502) - (2 502)
Total - (2 502) - (2 502)

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

18. Deferred income due to subsidies, connection fees and other

31.03.2017 31.12.2016
Long-term
Deferred income due to subsidies 207 332 206 198
Deferred income due to connection fees 412 813 416 906
Deferred income due to street lighting modernization services 39 030 36 928
659 175 660 032
Short-term
Deferred income due to subsidies 15 152 15 115
Deferred income due to connection fees 68 825 67 879
Deferred income due to street lighting modernization services 1 115 1 033
Valuation of building contracts 231 123
85 323 84 150
Deferred income schedule
31.03.2017 31.12.2016
Up to 1 year
1 to 5 years 85 323 84 150

Over 5 years 141 082 142 411 Long-term 518 093 517 621 744 498 744 182

In the 3-month period ended 31 March 2017, the net increase in the book value of settlements with respect to income from subsidies and connection and other fees amounted to PLN 316 thousand (in the 3-month period ended 31 March 2016, the book value of settlements with respect to income from subsidies and connection and other fees decreased by PLN 999 thousand).

19. Deferred income tax

Changes in assets and deferred tax liability (considering the net-off of assets and liability) are as follows:

31.03.2017 31.12.2016
Opening balance of deferred tax assets 403 257 616 795
Opening balance of deferred tax liability 191 798 388 117
Opening balance of net deferred tax (assets)/liability (211 459) (228 678)
Acquisition of subsidiaries (12 789) -
(Charge) / appreciation of the financial result 22 114 8 425
(Charge) / appreciation in other comprehensive income (1 180) 8 794
Closing balance of net deferred tax assets, including: (203 314) (211 459)
Closing balance of deferred tax assets 396 832 403 257
Closing balance of deferred tax liability 193 518 191 798

The notes presented on pages 13 – 43 constitute an integral part of the condensed interim consolidated financial statements.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

During the 3-month period ended 31 March 2017, the Group's profit before tax was debited with PLN 22 114 thousand as a result of the decrease in net deferred tax asset (during the period of 3 months ended 31 March 2016 the Group's profit before tax was debited with PLN 22 196 thousand as a result of the decrease in net deferred tax asset).

20. Provisions for liabilities and other charges

Provision for liabilities and other charges divided into current and non-current portion

31.03.2017 31.12.2016
Non-current 650 974 635 488
Current 846 545 789 718
Closing balance 1 497 519 1 425 206

During the 3-month period ended 31 March 2017 the provisions for other liabilities and charges increased by the net amount of PLN 72 313 thousand (during the period of 3 months ended 31 March 2016 the provisions for other liabilities and charges increased by the net amount of PLN 60 525 thousand).

Enea Group Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Change in provisions for liabilities and other charges

for the period ended 31 March 2017

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As at 31 March 2017 Enea S.A. raised a provision in the amount of PLN 22 301 thousand for potential claims related with termination by Enea S.A. of the contracts for the purchase of the certificates of energy origin from renewable energy sources.

Other provisions relate mainly:

  • wind farm Skoczykłody: PLN 129000 thousand (as at 31 December 2016 - PLN 129 000 thousand),
  • potential liabilities related to network assets resulting from differences in law interpretation PLN 152779 thousand (as at 31 December 2016 PLN 148 259 thousand),
  • costs of using forest lands managed by State Forests PLN 108243 thousand (as at 31 December 2016 PLN 108 245 thousand),
  • real property tax in Lubelski Węgiel Bogdanka S.A. PLN 35 223 thousand ( as at 31 December 2016 PLN 32456 thousand),
  • ZUS claims regarding accident contribution in Lubelski Węgiel Bogdanka S.A. PLN 20 358 thousand (as at 31 December 2016 PLN 20042 thousand),
  • restoration of mining damages PLN 4 337 thousand (as at 31 December 2016 PLN 4440 thousand).

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

Description of significant claims and liabilities in this regard are described in note 23.

21.Related party transactions

The companies of the Group conclude the following related party transactions:

  • The Group's constituent entities transactions are eliminated at the consolidation stage;
  • transactions concluded between the Group and Members of its governing bodies fall within two categories:
  • those resulting from employment contracts with Members of the Supervisory Board;
  • resulting from other agreements under civil law.
  • Transactions with entities whose shares are held by the State Treasury of the Republic of Poland.

Transactions with members of the Group's governing bodies:

Management Board
of the Company		 Supervisory Board
of the Company
Title 01.01.2017 -
31.03.2017		 01.01.2016 -
31.03.2016		 01.01.2017 -
31.03.2017		 01.01.2016 -
31.03.2016
Remuneration under managerial
contracts and consultancy agreements		 675 6 694* - -
Remuneration relating to appointment of
members of management and
supervisory bodies		 - - 201 112
TOTAL 675 6 694 201 112

* remuneration includes bonuses for 2015 and compensation resulting from non-competition agreements for former members of the Management Board in the amount of PLN 5 960 thousand.

During the 3-month period ended 31 March 2017 there were no loans granted from the Company's Social Benefits Fund to the members of the Supervisory Board (PLN 0 thousand during the 3-month period ended 31 March 2016). During this period repayments of the loans amounted to PLN 1 thousand (PLN 2 thousand during the 3-month period ended 31 March 2016).

Other transactions resulting from agreements under civil law concluded between the Parent and Members of the Parent's Bodies relate only to private use of company's cars by Members of the Management Board of Enea S.A.

The Group also concludes business transactions with entities of the central and local administration and entities controlled by the State Treasury of the Republic of Poland.

The transactions concern mainly:

• purchase of coal, electricity and property rights resulting from certificates of origin as regards renewable energy and energy cogenerated with heat, transmission and distribution services provided by the Group to companies whose shares are held by the State Treasury;

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

• sale of electricity, distribution services, connection to the grid and other related fees and coal, provided both to central and local administration bodies (sale to end users) and entities whose shares are held by the State Treasury (wholesale and retail sale to end users).

Such transactions are concluded under arm's length terms and their conditions do not differ from those applied in transactions with other entities. The Group does not keep a register which would allow it to aggregate the values of all transactions with state institutions and entities whose shares are held by the State Treasury.

22. Future liabilities under contracts concluded as at the end of the reporting period

Contractual obligations related to acquisition of property, plant and equipment and intangible assets assumed as at the end of the reporting period, not yet recognized in the statement of financial position:

31.03.2017 31.12.2016
Acquisition of property, plant and equipment 1 277 938 1 644 896
Acquisition of intangible assets 14 476 38 134
1 292 414 1 683 030

23. Contingent liabilities and proceedings before courts, arbitration or public administration bodies

23.1. Sureties and guarantees

The table below presents actual relevant bank guarantees under the agreement concluded with BZ WBK S.A. as at 31 March 2017 to the limit specified therein:

Date of
guarantee		 Guarantee
period		 Guarantee for Bank - issuer Guarantee
value in PLN
thousand
01.01.2016 11.08.2018 Górecka Projekt
Sp. z o.o.		 BZ WBK S.A. 1 662
21.12.2016 30.01.2018 Urząd Marszałkowski
Województwa
Zachodniopomorskiego
in Szczecin		 BZ WBK S.A. 1 325
Total of guarantees issued 2 987

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

23.2. Pending proceedings before courts of general jurisdiction

Actions brought by the Group

Actions which Enea S.A. and Enea Operator Sp. z o.o. brought to courts of general jurisdiction refer to claims for receivables due to sale of electricity (the so–called electricity cases) and claims for other receivables – illegal consumption of electricity, connections to the grid and other specialized services (the so-called non-electricity cases).

Actions brought to courts of general jurisdiction by Enea Wytwarzanie Sp. z o.o. are connected mainly with claims for outstanding invoice payments and contractual penalties from the company vendors.

As at 31 March 2017 there were 17 610 cases pending before common courts which have been brought by the Group for the total amount of PLN 241 986 thousand (as at 31 December 2016: 16 487 cases for the total amount of PLN 161 308 thousand).

None of these cases can significantly affect the Group's net profit.

Actions brought against the Group

Actions against the Group are brought both by natural and legal entities. They mainly refer to issues such as compensation for interrupted delivery of electricity, identification of illegal electricity consumption and compensation for use by the Group of real property where electrical devices are located. The Group considers actions concerning noncontractual use of real property as particularly important

The court proceedings against Enea Wytwarzanie Sp. z o.o. are related to claims lodged by former employees, compensation and the payment of contractual penalties.

As at 31 March 2017 there were 2 311 cases pending before common courts which have been brought against the Group for the total amount of PLN 368 518 thousand (as at 31 December 2016: 2 314 cases for the total amount of PLN 368 702 thousand). Provisions related to the court cases are presented in note 20.

23.3. Motions for settlement of not balanced energy trading in 2012

On 30 and 31 December 2014 Enea S.A. submitted motions for settlement to:

Claimed amounts
in PLN thousand
PGE Polska Grupa Energetyczna S.A. 7 410
PKP Energetyka S.A. 1 272
TAURON Polska Energia S.A. 17 086
TAURON Sprzedaż GZE Sp. z o.o. 1 826
FITEN S.A. 207
Total 27 801

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

The subject of motions was claim for the payment for electric energy incorrectly settled under the system of energy balancing in 2012. Claimed companies earned unjustified benefits by refusing Enea S.A. to issue invoice corrections for 2012.

In the absence of amicable settlement of the above case, Enea S.A. filed the following lawsuits against above mentioned entities:

  • FITEN S.A. lawsuit of 24 November 2015,
  • TAURON Polska Energia S.A. lawsuit of 10 December 2015,
  • TAURON Sprzedaż GZE Sp. z o. o. lawsuit of 10 December 2015,
  • PKP Energetyka S.A. lawsuit of 28 December 2015,
  • PGE Polska Grupa Energetyczna S.A. lawsuit of 29 December 2015.

Two entities i.e. PKP Energetyka S.A. and PGE Polish Energy Group S.A. have agreed for mediation, however no settlement of the dispute was reached. In the case against FITEN S.A. the court in the first instance issued a judgment dismissing the complaint of Enea S.A., from which the appeal was filed. In other proceedings, there have been no settlement of disputes.

23.4. Dispute concerning energy origin certificate prices

Before the District Court in Poznań the proceeding brought by PGE Górnictwo i Energetyka Konwencjonalna S.A. is pending against the Company for the payment of PLN 42 351 thousand concerning the payment for purchased certificates of origin (lawsuit of 30 May 2016). Enea SA made a deduction from the payment part of the liabilities (resulting from sales invoices for certificates of origin) with compensation claim of PGE GiEK S.A. to Enea S.A. The damage caused to Enea S.A. resulted from the fact that PGE GiEK S.A. did not fulfil the contractual obligation to accede in good faith to renegotiate long-term contracts for certificates of origin in accordance with the adaptive clause applicable to both parties.

A reply to the action brought by PGE GIEK S.A. was made on 11 August 2016. In response Enea S.A. filed to dismiss the lawsuit. Currently the parties are participating in mediation proceedings.

Before the District Court in Poznan, roll four more cases of identical nature.

24. The participation on the construction of the atomic power plant programme

On 3 September 2014, a Shareholders' Agreement was concluded by and between PGE Polska Grupa Energetyczna, Tauron Polska Energia, Enea and KGHM Polska Miedź (the Business Partners). On 15 April 2015, in accordance with the Shareholders' Agreement, an agreement on the sale of shares in PGE EJ 1 Sp. z o.o. was concluded, as a result of which each Business Partner purchased 10% of shares in PGE EJ 1. As a result of the sale of the shares in PGE EJ 1 by PGE Polska Grupa Energetyczna to the Business Partners, PGE Polska Grupa Energetyczna holds a 70% interest in the share capital of PGE EJ 1, and the other Business Partners (Tauron Polska Energia, Enea and KGHM Polska Miedź) hold 30% thereof, i.e. each of them holds 10%.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

According to the assumptions, PGE Polska Grupa Energetyczna performs the role of the leader of the project to construct and operate the first Polish atomic power plant, and PGE EJ 1 is to perform the function of the operator of the power plant in the future.

According to the Shareholders' Agreement, the Parties undertake to finance the activities as part of the initial phase of the Project (the Development Stage) jointly, in proportion to the interests they hold. Enea's financial commitment during the Development Stage will not exceed approx. PLN 107 million.

In the first quarter of 2017, Company PGE EJ 1 continued their work on the preparation to the construction of the atomic power plant in Poland project.

The Shareholders Agreement parties predict that subsequent decision on the declaration of further participation of the Parties in the next phase of the project will be taken after the completion of the Initial Phase immediately prior to the decision of the Integrated proceeding.

25. Recapitalization in Polska Grupa Górnicza Sp. z o.o.

In relation to the process of acquiring capital investors by Katowicki Holding Węglowy S.A., in July 2016 Enea S.A. started talks with possible investors on implementation of the Investment and its possible parameters.

On 28 October 2016 the Company and Węglokoks S.A. and Towarzystwo Finansowe Silesia Sp. z o.o. (Investors) signed a Letter of Intent expressing the preliminary interest in the financial participation in Katowicki Holding Węglowy S.A. seated in Katowice or in selected KHW's assets.

Due to the interest of Polska Grupa Górnicza Sp. z o.o. (PGG) in acquiring selected assets of Katowicki Holding Węglowy S.A. and the commencement of the process of capital injections of PGG, Enea S.A. conducted the necessary analyses of the Business Plan presented by PGG with the existing PGG Shareholders and expressed its interest in capital commitment in Polska Grupa Górnicza Sp. z o.o.

On 30 March 2017, the Supervisory Board of Enea S.A. approved the Company's entering into Polska Grupa Górnicza Sp. z o.o. and taking up new shares in PGG's capital with a nominal value of PLN 300 million in consideration for the contribution in cash of PLN 300 million.

On 31 March 2017, the Company concluded:

  • an investment agreement specifying the conditions for the financial investment in PGG (Investment Agreement);
  • an arrangement relating to the exercise of a joint control over PGG (the Investors' Arrangement).

Investment Agreement

The Parties to the Investment Agreements are: Enea S.A., ENERGA Kogeneracja Sp. z o.o., PGE Górnictwo i Energetyka Konwencjonalna S.A., PGNiG TERMIKA S.A., Węglokoks S.A., Towarzystwo Finansowe Silesia Sp. z o.o., Fundusz Inwestycji Polskich Przedsiębiorstw Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych (the Investors) and PGG. The Investment Agreement provided that PGG would acquire selected mining assets from Katowicki Holding Węglowy S.A. on the basis of the final agreement which was concluded on 1 April 2017.

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

The Investment Agreement regulates the course of the Investment and the Company's entering into PGG, principles of operation of PGG and its authorities, and also the terms under which the parties may exit from the investment in PGG.

As part of PGG recapitalisation the Company undertook to subscribe for new shares in PGG with the total nominal value of PLN 300 million in consideration for the contribution in cash amounting to PLN 300 million, in three stages:

  • a) as the first stage the Company subscribed for the new shares in PGG totalling to PLN 150 million in consideration for the contribution in cash amounting to PLN 150 million. After taking up the shares the Company holds a 4.39% share in PGG's share capital. The first recapitalisation was performed in April 2017;
  • b) as the second stage the Company will subscribe for the new shares in PGG totalling to PLN 60 million in consideration for the contribution in cash amounting to PLN 60 million. After taking up the shares the Company will hold a 5.81% share in PGG's share capital. The second recapitalisation is to be performed in June 2017;
  • c) as the third stage the Company will subscribe for the new shares in PGG totalling to PLN 90 million in consideration for the contribution in cash amounting to PLN 90 million. After taking up the shares the Company will hold a 7.66% share in PGG's share capital. The third recapitalisation is to be performed in the first quarter 2018.

The Agreement regulates the principles of appointing members of the Supervisory Board, according to which each of the Investors and the State Treasury will be entitled to nominate one member of the Supervisory Board composed of eight members maximally.

The Investment is in line with Enea Capital Group's Development Strategy whose one element is securing the base of commodities for the conventional power engineering.

Investors' Arrangement

According to the Investors' Arrangement, the Company together with ENERGA Kogeneracja Sp. z o.o., PGE Górnictwo i Energetyka Konwencjonalna S.A., PGNiG TERMIKA S.A. and Fundusz Inwestycji Polskich Przedsiębiorstw Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych (the Controlling Shareholders) took over control over PGG. The Investors' Arrangement regulates the principles of determining a common position of the Controlling Shareholders as regards the decisions relating to PGG.

Furthermore, on 31 March 2017 a letter of intent signed on 16 October 2016 by Enea S.A., Węglokoks S.A. and Towarzystwo Finansowe Silesia Sp. z o.o., concerning the previously analysed capital investment in Katowicki Holding Węglowy S.A. was terminated.

26. Agreement for the purchase of the company Eco-Power Sp. z o.o.

Fen Wind Farm B.V. with its registered office in Amsterdam and Wento Holdings S.à r.l. with its registered office in Luxembourg ("Claimants") sued Enea Wytwarzanie Sp. z o.o. for concluding an agreement for the sale of shares in Eco-Power Sp. z o.o. for a price which included the base amount of PLN 286 500 000.00.

Enea Wytwarzanie Sp. z o.o. did not acknowledge the grounds for the above claim and in its response to the claim (and in other pleadings and in the preparatory document dated 7 January 2017) it filed a motion to dismiss the claim in its entirety and for adjudging the costs of the proceedings from the Claimants on its behalf. According to valuation of the

Condensed interim consolidated financial statements of the Enea Group for the period from 1 January to 31 March 2017 (all amounts in PLN '000, unless specified otherwise)

shares of Eco-Power Sp. z o.o., the Group created provision in the amount of PLN 129 million, which results from the difference between agreement price considering base amount PLN 286 500 000.00 and the value calculated according to the Enea SA model.

27. Initial offer for acquisition of EDF's assets in Poland

On 16 September 2016 Enea S.A. and PGE S.A., Energa S.A. and PGNiG Termika S.A. ("Business Partners") jointly submitted a preliminary, nonbinding offer to EDF International SAS ("EDF") for the purchase of shares in companies belonging to EDF in Poland, holding conventional generating assets and pursuing a service activity.

On 30 November 2016 the Company and Business Partners submitted a new offer to EDF) for the purchase of shares in companies belonging to EDF in Poland, holding conventional generating assets and pursuing a service activity. The submission of the new offer by Business Partners was made in relation to the upcoming expiry of the offer submitted on 16 September 2016.

On 27 January 2017, the Company and Business Partners signed an agreement with EDF Investment SAS on negotiations related to the purchase of EDF assets in Poland as well as due diligence process in this scope. The Transaction includes acquisition of all EDF shares in EDF Polska S.A., which, in particular, is the owner of 4 combined heat and power plants, namely Kraków, Gdańsk, Gdynia and Toruń and heat distribution networks in Toruń, Rybnik Power Plant, and acquisition of all EDF shares in ZEC "Kogeneracja" S.A., which is the owner of 4 combined heat and power plants, namely Wrocław, Zielona Góra, Czechnica and Zawidawie and heat distribution networks in Zielona Góra, Siechnice and Zawidawie.

On 15 March 2017 Business Partners amended the structure of the transaction in the following way:

  • withdrawal of PGNiG Termika S.A. from the transaction;
  • takeover of the so far declared share of PGNiG Termika S.A. in the transaction by PGE S.A., which results in the growth in PGE S.A.'s share in the transaction to 60%,
  • maintaining the shares of Enea S.A. and Energa S.A. in the transaction on the same level of 20% for each of the Companies.

The aforementioned amendments in the transaction structure required confirmation of filing no objections by EDF.

On 11 May 2017 the Management Board of Enea S.A. adopted a resolution regarding the Company's resignation from participation in the transaction of acquiring Polish assets belonging to EDF International SAS and EDF Investment II B.V.

Selected separate financial data

in PLN '000 in EUR '000
3 months ended
31.03.2017		 3 months ended
31.03.2016		 3 months ended
31.03.2017		 3 months ended
31.03.2016
Net sales revenue 1 490 101 1 477 944 347 416 339 297
Operating profit 41 426 7 097 9 658 1 629
Profit before tax 98 777 20 462 23 030 4 698
Net profit for the reporting period 79 703 15 150 18 583 3 478
Net cash flows from operating activities 218 016 66 573 50 830 15 283
Net cash flows from investing activities (1 617 801) (290 321) (377 189) (66 650)
Net cash flows from financing activities 361 879 63 128 84 372 14 493
Total net cash flows (1 037 906) (160 620) (241 987) (36 874)
Weighted average number of shares (in units) 441 442 578 441 442 578 441 442 578 441 442 578
Net earnings per share (in PLN/EUR per
share) 0.18 0.03 0.04 0.01
Diluted earnings per share (in PLN/EUR) 0.18 0.03 0.04 0.01
Balance as at
31.03.2017		 Balance as at
31.12.2016		 Balance as at
31.03.2017		 Balance as at
31.12.2016
Total assets 18 785 194 18 217 925 4 451 679 4 117 976
Total liabilities 7 770 041 7 277 446 1 841 329 1 644 992
Non-current liabilities 6 315 720 5 972 038 1 496 687 1 349 918
Current liabilities 1 454 321 1 305 408 344 642 295 074
Equity 11 015 153 10 940 479 2 610 350 2 472 983
Share capital 588 018 588 018 139 347 132 915
Book value per share (in PLN/EUR) 24.95 24.78 5.91 5.60
Diluted book value per share (in PLN/EUR) 24.95 24.78 5.91 5.60

The above financial data for 1st quarter of 2017 and 2016 were translated into EUR in line with the following principles:

  • individual assets and liabilities at the average exchange rate as of 31 March 2017 PLN/EUR 4.2198 (as at 31 December 2016 – PLN/EUR 4.4240),
  • individual items from the statement of profit or loss and other comprehensive income and the statement of cash flows as per the arithmetic mean of the average exchange rates determined by the National Bank of Poland as at the last day of each month of the financial period from 1 January to 31 March 2017 – PLN/EUR 4.2891 ( for the period from 1 January to 31 March 2016 – PLN/EUR 4.3559).

Poznań, 23 May 2017

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Index to the condensed interim separate financial statements

Separate statement of financial position 48
Separate statement of profit or loss and other comprehensive income 50
Separate statement of changes in equity 51
Separate statement of cash flow 52
Notes to the separate financial statements 53
1. General information about Enea S.A. 53
2. Statement of compliance 53
3. Accounting principles 54
4. Material estimates and assumptions 54
5. Composition of the Group - list of subsidiaries, associates and jointly-controlled entities 55
6. Property, plant and equipment 56
7. Intangible assets 56
8. Investments in subsidiaries, associates and jointly controlled entities 56
9. Intercompany bonds 57
10. Allowance on trade and other receivables 59
11. Inventories 59
12. Cash and cash equivalents 59
13. Financial assets measured at fair value through profit or loss 59
14. Financial instruments 60
15. Loans, borrowings and debt securities 61
16. Other financial liabilities 64
17. Deferred income tax 64
18. Provisions for liabilities and other charges 64
19. Related party transactions 65
20. Future liabilities under contract concluded at the end of the reporting period 67
21. Contingent liabilities and proceedings before court, bodies competent to conduct arbitration
proceedings or public administration bodies 67
21.1 Sureties and guaranties 67
21.2 Pending proceedings before courts of general jurisdiction 67
21.3 Motions for settlement of not balanced energy trading in 2012 68
21.4 Dispute concerning energy origin certificate prices 69
22. The participation in the construction of the atomic power plant programme 69
23. Acquisition of shares of Polimex–Mostostal S.A. 70
24. Acquisition of shares of ENGIE Energia Polska S.A. (currently Enea Elektrownia Połaniec S.A.) 71
25. Realization of the Investment Agreement with Energa S.A. and Elektrownia Ostrołęka S.A. on the
construction and operation of a power unit in Ostrołęka Power Plant 71
26. Recapitalization in Polska Grupa Górnicza Sp. z o.o. 72
27. Initial offer for acquisition of EDF's assets in Poland 74

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

These condensed interim separate financial statements have been prepared in accordance with the International Financial Reporting Standards IAS 34 Interim Financial Reporting, as endorsed by the European Union and approved by the Management Board of ENEA S.A.

Members of the Management Board

President of the Management Board Mirosław Kowalik ………………………………….
Member of the Management Board Piotr Adamczak ………………………………….
Member of the Management Board Mikołaj Franzkowiak ………………………………….
Member of the Management Board Wiesław Piosik ………………………………

Enea Centrum Sp. z o.o. The entity responsible for keeping the accounting records and the preparation of financial statements ……..…………………………… Enea Centrum Sp. z o.o., ul. Górecka 1, 60-201 Poznań KRS 0000477231, NIP 777-000-28-43, REGON 630770227

Poznań, 23 May 2017

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Separate statement of financial position

Balance as at
Note 31.03.2017 31.12.2016
ASSETS
Non-current assets
Property, plant and equipment 7 28 423 29 063
Perpetual usufruct of land 1 963 1 970
Intangible assets 7 4 735 4 814
Investment properties 15 269 15 405
Investments in subsidiaries, associates
and jointly-controlled entities 8 10 823 369 9 448 433
Deferred tax assets 17 27 300 48 562
Financial assets available for sale 41 902 41 902
Intercompany bonds 9 5 363 570 5 136 547
Financial assets measured at fair value through profit or loss 13 59 741 -
Derivatives 33 703 40 267
Trade and other receivables 10 169 162 145 111
16 569 137 14 912 074
Current assets
Inventories 11 27 944 84 984
Trade and other receivables 10 1 081 282 1 119 479
Current income tax receivables 14 459 -
Intercompany bonds 9 515 456 486 566
Cash and cash equivalents 12 576 916 1 614 822
2 216 057 3 305 851
TOTAL ASSETS 18 785 194 18 217 925

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Balance as at
EQUITY AND LIABILITIES Note 31.03.2017 31.12.2016
EQUITY
Share capital 588 018 588 018
Share premium 4 627 673 4 627 673
Reserve capital from valuation of hedging instruments 28 797 33 826
Reserve capital 2 640 358 2 640 358
Retained earnings 3 130 307 3 050 604
Total equity 11 015 153 10 940 479
LIABILITIES
Non-current liabilities
Loans, borrowings and debt securities 15 6 264 520 5 918 322
Finance lease liabilities 442 510
Liabilities due to employee benefits 48 614 49 060
Provisions for other liabilities and charges 18 2 144 4 146
6 315 720 5 972 038
Current liabilities
Loans, borrowings and debt securities 15 195 874 136 206
Trade and other liabilities 677 662 667 226
Finance lease liabilities 251 262
Current income tax liabilities - 31 564
Liabilities due to employee benefits 19 432 20 050
Liabilities due to an equivalent of the right to acquire shares
free of charge
Other financial liabilities		 16 281 281
Provisions for other liabilities and charges 333 565 166 653
18 227 256 283 166
Total liabilities 1 454 321
7 770 041		 1 305 408
7 277 446
TOTAL EQUITY AND LIABILITIES 18 785 194 18 217 925

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Separate statement of profit or loss and other comprehensive income

For the period
3 months
ended
31.03.2017		 3 months
ended
31.03.2016
Sales revenue 1 558 581 1 546 406
Excise tax (68 480) (68 462)
Net sales revenue 1 490 101 1 477 944
Other operating revenue 3 147 2 591
Depreciation (754) (924)
Costs of employee benefits (12 947) (14 650)
Consumption of materials and supplies and costs of goods sold (522) (470)
Energy and gas purchase for sale (938 257) (1 007 020)
Transmission and distribution services (420 499) (403 924)
Other external services (40 559) (37 681)
Taxes and charges (1 592) (1 548)
(Loss)/profit on sale and liquidation of property, plant and equipment 66 (8)
Other operating expenses (36 758) (7 213)
Operating profit 41 426 7 097
Financial expenses (45 282) (35 301)
Financial revenue 102 633 48 666
Profit before tax 98 777 20 462
Income tax (19 074) (5 312)
Net profit for the reporting period 79 703 15 150
Other comprehensive income
Items that are or may be reclassified to profit or loss
- valuation of hedging instruments (6 209) (28 799)
- income tax 1 180 5 472
Net other comprehensive income (5 029) (23 327)
Total comprehensive income for the reporting period 74 674 (8 177)
Earnings attributable to the Company's shareholders 79 703 15 150
Weighted average number of ordinary shares 441 442 578 441 442 578
Net earnings per share (in PLN per share) 0.18 0.03
Diluted earnings per share (in PLN per share) 0.18 0.03

The separate statement of profit or loss and other comprehensive income should be analyzed together with the notes which constitute an integral part of these condensed separate interim financial statements

(all amounts in PLN '000, unless specified otherwise)

Separate statement of changes in equity

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The separate statement of changes in equity should be analyzed together with the notes which constitute an integral part of these condensed separate interim financial statements

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Separate statement of cash flow

3 months
ended
31.03.2017		 3 months
ended
31.03.2016
Cash flows from operating activities
Net profit for the reporting period
Adjustments:		 79 703 15 150
Income tax in the profit or loss and other comprehensive income 19 074 5 312
Depreciation 754 924
(Gain)/loss on sale and liquidation of property, plant and equipment (66) 8
Gain on disposal of financial assets (52 832) (2 225)
Interest income (38 988) (39 815)
Interest expense 42 185 35 272
(29 873) (524)
Income tax paid (90 935) (117 775)
Tax of the Group 84 401 101 795
Changes in working capital
Inventories 57 040 (14 779)
Trade and other receivables (206) (42 114)
Trade and other liabilities 176 862 154 955
Liabilities due to employee benefits (1 064) (5 598)
Provisions for other liabilities and charges (57 912) (24 537)
174 720 67 927
Net cash flows from operating activities 218 016 66 573
Cash flows from investing activities
Acquisition of property, plant and equipment and intangible assets (170) (1 466)
Proceeds from disposal of property, plant and equipment 71 9
and intangible assets
Proceeds from disposal of financial assets
Acquisition of financial assets 11 821 9 993
Acquisition of subsidiaries, associates and jointly controlled entities (286 500) (132 173)
Additional paid-in capital (redistributable) to the share capital of the (1 371 409) -
subsidiary - (199 899)
Proceeds related to the future acquisition of financial assets 173 119
Interests received 28 213 33 096
Net cash flows from investing activities (1 617 801) (290 321)
Cash flows from financing activities
Loans and borrowings received 250 000 100 000
Bonds issue 150 000 -
Payment of finance lease liabilities (79) -
Expenses related to future issue of bonds (422) (124)
Interest paid (37 620) (36 748)
Net cash flows from financing activities 361 879 63 128
Net increase/ (decrease) in cash
Opening balance of cash (1 037 906)
1 614 822		 (160 620)
1 397 632
Closing balance of cash 576 916 1 237 012

The separate statement of cash flows should be analyzed together with the notes which constitute an integral part of these condensed interim separate financial statements

(all amounts in PLN '000, unless specified otherwise)

Notes to the separate financial statements

1. General information about Enea S.A.

Name (business name): Enea Spółka Akcyjna
Legal form: joint-stock company
Country: Poland
Registered office: Poznań
Address: Górecka 1, 60-201 Poznań
National Court Register - District Court in Poznań KRS 0000012483
Telephone: (+48 61) 884 55 44
Fax: (+48 61) 884 59 59
E-mail: [email protected]
Website: www.Enea.pl
Statistical number (REGON): 630139960
Tax identification number (NIP): 777-00-20-640

Enea S.A., operating previously under the company name Energetyka Poznańska S.A., was registered in the National Court Register at the District Court in Poznań under KRS number 0000012483 on 21 May 2001.

As at 31 March 2017 the shareholding structure of Enea S.A. was as follows: the State Treasury of the Republic of Poland - 51.5% of shares, PZU TFI 10.1% of shares and other shareholders – 38.4%.

As at 31 March 2017 the statutory share capital of Enea S.A. equalled to PLN 441 443 thousand (PLN 588 018 thousand upon adoption of IFRS-EU and considering hyperinflation and other adjustments) and was divided into 441 442 578 shares.

Trade in electricity is the core business of Enea S.A. (Enea, the Company).

Enea S.A. is the parent company in the Enea Group (the Group). As at 31 March 2017 the Group comprised of 13 subsidiaries, 10 indirect subsidiaries, 1 associates and 2 jointly controlled entities.

The condensed interim separate financial statements have been prepared on the going concern basis. There are no circumstances indicating that the ability of Enea S.A. to continue as a going concern might be at risk.

2. Statement of compliance

These condensed interim separate financial statements have been prepared in accordance with the International Financial Reporting Standards IAS 34 Interim Financial Reporting, as endorsed by the European Union ("IFRS-EU") and approved by the Management Board of Enea S.A.

(all amounts in PLN '000, unless specified otherwise)

The Management Board of the Parent Entity has used its best knowledge as to the application of standards and interpretations as well as measurement methods and principles applicable to the individual items of the condensed interim separate financial statements of Enea S.A. in accordance with IFRS-EU as at 31 March 2017. The presented statements and explanations have been prepared using due diligence. These condensed interim separate financial statements have not been reviewed by a certified auditor.

The Company prepares the condensed interim consolidated financial statements of the Enea Group in accordance with the IFRS EU as at and for the period of three months ended 31 March 2017. These condensed separate interim financial statements should be read together with the condensed interim consolidated financial statements of the Enea Group and annual separate financial statements of the Enea S.A. for the financial year ended 31 December 2016.

3. Accounting principles

These condensed interim separate financial statements have been prepared in accordance with accounting policies consistent with those applied during the preparation of the most recent annual separate financial statements for the financial year ended 31 December 2016.

The Polish zloty has been used as the reporting currency of these condensed interim separate financial statements. The data in the condensed interim separate financial statements have been presented in PLN thousand (PLN '000), unless specified otherwise.

4. Material estimates and assumptions

The preparation of condensed interim separate financial statements in accordance with IAS 34 requires that the Management Board makes certain estimates and assumptions that affect the adopted accounting policies and the amounts disclosed in condensed interim separate financial statements and notes thereto. The adopted assumptions and estimates are based on the Management Board's best knowledge of the current and future activities and events. The actual figures, however, can be different from those assumed. The estimates adopted for the needs of preparation of these condensed interim separate financial statements are consistent with the estimates adopted during preparation of the separate financial statements for the previous financial year. The estimates presented in the previous financial years do not exert any significant influence on the current interim period.

(all amounts in PLN '000, unless specified otherwise)

5. Composition of the Group - list of subsidiaries, associates and jointly-controlled entities

Name and address of the Company Share of
Enea S.A. in the
total number
of votes in %
31.03.2017		 Share of
Enea S.A. in the
total number
of votes in
31.12.2016
1. Enea Operator Sp. z o.o.
Poznań, Strzeszyńska 58		 100 100
2. Enea Wytwarzanie Sp. z o.o. 100 100
3. Świerże Górne, Kozienice, Kozienice 1
Enea Elektrownia Połaniec S.A. 6		 100 -
Połaniec, Zawada 26
Enea Oświetlenie Sp. z o.o.
4. Szczecin, Ku Słońcu 34 100 100
5. Enea Trading Sp. z o.o.
Świerże Górne, gmina Kozienice, Kozienice 1		 100 100
6. Enea Logistyka Sp. z o.o.
Poznań, Strzeszyńska 58		 100 100
7. Enea Serwis Sp. z o.o.
Lipno, Gronówko 30 100 100
8. Enea Centrum Sp. z o.o.
Poznań, Górecka 1		 100 100
9. Enea Pomiary Sp. z o.o.
Poznań, Strzeszyńska 58		 100 100
10. ENERGO-TOUR Sp. z o.o. w likwidacji
Poznań, Marcinkowskiego 27		 1005 1005
11. Enea Innovation Sp. z o.o. 100 100
12. Warszawa, Aleja Jana Pawła II 25
Lubelski Węgiel BOGDANKA S. A.		 65.99 65.99
Bogdanka, Puchaczów
13. Annacond Enterprises Sp. z o.o.
Warszawa, Jana Pawła II 25		 61 61
14. Polimex – Mostostal S.A.
Warszawa, Aleja Jana Pawła II 12		 16.48 -
15. Elektrownia Ostrołęka S.A.
Ostrołęka, Elektryczna 5		 11.89 -
16. ENGIE Bioenergia Sp. z o.o.
Połaniec, Zawada 26		 1004 -
17. Przedsiębiorstwo Energetyki Cieplnej Zachód Sp. z o.o.
Białystok, Starosielce 2/1		 1001 1001
18. Centralny System Wymiany Informacji Sp. z o.o.
Poznań, Strzeszyńska 58		 1003 1003
19. Przedsiębiorstwo Energetyki Cieplnej Sp. z o.o.
Oborniki, Wybudowanie 56		 99.931 99.931
20. Miejskie Przedsiębiorstwo Energetyki Cieplnej Sp. z o.o.
Białystok, Warszawska 27		 91.121 91.021
21. Miejska Energetyka Cieplna Piła Sp. z o.o.
Piła, Kaczorska 20		 71.111 71.111
22. EkoTRANS Bogdanka Sp. z o.o.
Bogdanka, Puchaczów		 65.992 65.992
23. RG Bogdanka Sp. z o.o.
Bogdanka, Puchaczów		 65.992 65.992
24. MR Bogdanka Sp. z o.o. 65.992 65.992
25. Bogdanka, Puchaczów
Łęczyńska Energetyka Sp. z o.o.		 58.532 58.532
Bogdanka, Puchaczów
26. ElectroMobility Poland S.A.
Warszawa, Mysia 2		 25 25

(all amounts in PLN '000, unless specified otherwise)

1 – an indirect subsidiary held through shares in Enea Wytwarzanie Sp. z o.o.

On 17 September 2015, by Resolution no. 547/2015 adopted by the Management Board of Enea Wytwarzanie Sp. z o.o., a project titled "Purchase of employee shares of MPEC sp. z o.o. in Białystok" was launched. On 17 November 2015, by Resolution no. 661/2015 powers of attorney were granted in terms of concluding the preliminary agreements and final agreements. The number of shares available for purchase is 75 thousand. The concluding of the Preliminary Agreements was planned for the period between 7 December 2015 and 27 January 2016. The Final Agreements shall be concluded after 16 September 2016. By the end of December 2015, Preliminary Agreements on Sale of Shares worth in total PLN 747 thousand were concluded. In 2016, Enea Wytwarzanie sp. z o.o. purchased 67 209 shares of MPEC Sp. z o.o. in Białystok for the amount of PLN 7 688 thousand and as at the end of the year, it owns 91.02% of shares in the share capital. In the first quarter of 2017, Enea Wytwarzanie Sp. z o.o. purchased 1 603 shares in MPEC Sp. z o.o. in Białystok for PLN 193 thousand and held a 91.12% interest in its share capital as at 31 March 2017.

2 – an indirect subsidiary held through shares in Lubelski Węgiel BOGDANKA S.A.

3– an indirect subsidiary held through shares in Enea Operator Sp. z o.o.

4– an indirect subsidiary held through shares in Enea Elektrownia Połaniec S.A.

5 – on 30 March 2015, the Extraordinary General Meeting of Shareholders of the company adopted a resolution concerning the dissolution of the company, after conducting a liquidation proceeding. The resolution entered into force on 1 April 2015. An application for removing the company from the register was submitted to the National Court Register on November 5, 2015. As of the date of these condensed interim separate financial statements procedural steps relating to the deletion of the company from the National Court Register are ongoing.

6 – on 10 April 2017, the company's name was changed from ENGIE Energia Polska S.A. to Enea Elektrownia Połaniec S.A. in the National Court Register.

6. Property, plant and equipment

During the 3-month period ended 31 March 2017 the Company did not acquire property, plant and equipment (during the period of 3 months ended 31 March 2016 it was PLN respectively: 172 thousand).

During the 3-month period ended 31 March 2017 the Company completed the sale and liquidation of property, plant and equipment in the total net book value of PLN 5 thousand (during the 3 months ended 31 March 2016 respectively: PLN 17 thousand).

7. Intangible assets

During the 3-month period ended 31 March 2017 the Company did not acquire intangible assets (during the period of 3 months ended 31 March 2016 respectively: PLN 0 thousand).

During the 3-month period ended 31 March 2017 the Company did not complete sales and liquidations of intangible assets (during the period of 3 months ended 31 March 2016 respectively: PLN 0 thousand).

8. Investments in subsidiaries, associates and jointly controlled entities

31.03.2017 31.12.2016
Opening balance 9 448 433 8 323 493
Acquisition of investments 1 371 324 9 412
Additional paid-in capital (redistributable) - 1 138 227
Other 3 612 19 301
Change in impairment loss - (42 000)
Closing balance 10 823 369 9 448 433

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Impairment loss on investments

31.03.2017 31.12.2016
Opening balance 2 159 775 2 117 775
Addition - 42 000
Closing balance 2 159 775 2 159 775

On 20 January 2017, Enea S.A. accepted the offer submitted by Polimex-Mostostal S.A. of private subscription for 37,500,000 shares at the issue price of PLN 2 per share, i.e. for the total issue price of PLN 75 000 thousand and acquired 1 500 000 shares in Polimex-Mostostal S.A. from its existing shareholder. The purchase price of all shares amounted to PLN 80 640 thousand. Having taken up the shares Enea S.A. holds a 16.48% interest in the company's share capital.

On 1 February 2017, Enea S.A. acquired 24 980 926 shares in Elektrownia Ostrołęka S.A. from ENERGA S.A. The purchase price of all shares amounted to PLN 24 000 thousand. Having taken up the shares Enea S.A. holds an 11.89% interest in the company's share capital.

On 14 March 2017, Enea S.A. acquired 100% of shares in ENGIE Energia Polska S.A. from ENGIE International Holdings B.V., i.e. 7 135 000 shares for a total price of PLN 1 264 159 thousand.

9. Intercompany bonds

Enea Group adopted a model of intra-group financing of investments conducted by subsidiaries. Enea S.A. raises on a financial market long-term funds through borrowing or issuing bonds, and then distributes them within the Group. The table below presents currently ongoing programs of intra-group bonds issue pending as at 31 March 2017 and as at 31 December 2016:

(all amounts in PLN '000, unless specified otherwise)

Date of contracts Issuer Final
redemption		 Credit
limit
PLN '000		 Amount
used in
PLN '000		 Bonds issued
as at
31.03.2017
(principal)
in PLN '000		 Bonds
issued as at
31.12.2016
(principal)
in PLN '000
10 March 2011 Enea Wytwarzanie Sp. z o.o. 31 March 2023 26 000 26 000 26 000 26 000
29 September 2011 Enea Wytwarzanie Sp. z o.o. 29 September 2019 14 500 14 500 6 000 6 000
23 July 2012 Enea Wytwarzanie Sp. z o.o. 22 July 2019 158 500 158 500 52 300 57 850
8 September 2012,
agreement for the amount
of PLN 4 000 000
thousand reduced by
annex No. 2 dated
21 January 2015 to the
amount
of PLN 3 000 000
thousand		 Enea Wytwarzanie Sp. z o.o. From 15 June 2020
to 15 December
2020 depending on
dates of bond series
issue, the remaining
amounts at the
latest 15 June 2022		 3 000 000 1 951 000 1 951 000 1 951 000
20 June 2013 as amended
by Annex No. 1 dated 9
October 2014 and Annex
No.2 dated 7 July 2015		 Enea Operator Sp. z o.o. Depending on dates
of bond series issue,
but not later than
17 June 2030		 1 425 000 1 425 000 1 425 000 1 425 000
12 August 2014 in the
amount of PLN 260 000
thousand, increased to
PLN 1 000 000 thousand
by Annex No. 1 dated 11
February 2015 and
reduced by Annex No. 2
dated 30 December 2015
to the amount of
PLN 260 000 thousand		 Enea Wytwarzanie Sp. z o.o. Redemption in
instalments
– final maturity
15 December 2026		 260 000 260 000 260 000 260 000
17 November 2014 Enea Wytwarzanie Sp. z o.o. 31 March 2020 740 000 350 000 350 000 350 000
17 February 2015 in the
amount of PLN 760 000
thousand, increased by
Annex No. 1 dated 3 June
2015 to amount of PLN 1
000 000 thousand.		 Enea Wytwarzanie Sp. z o.o. 10 February 2020 1 000 000 1 000 000 1 000 000 1 000 000
7 July 2015 Enea Operator Sp. z o.o. Redemption in
instalments
– final maturity
17 June 2030		 946 000 200 000 450 000 200 000
30 October 2015 Miejskie Przedsiębiorstwo
Energetyki Cieplnej Sp. z o.o.		 Redemption in
instalments
– final maturity
31 March 2020		 18 000 18 000 12 000 13 000
18 July 2016 Enea Operator Sp. z o.o. Final maturity
December 2017		 360 000 360 000 360 000 360 000
Total 5 892 300 5 648 850
rate measurement Transaction costs and the result of the effective interest (13 274) (25 737)
Total 5 879 026 5 623 113

In January 2017 Enea S.A. acquired the series III of bonds amounting to PLN 250 000 thousand issued by Enea Operator Sp. z o.o. under the Bond Issue Programme Agreement of 7 July 2015. The interest of the bonds is based on a floating interest rate plus margin. The bonds will be redeemed in equal instalments, and the final date of redemption is planned for December 2031.

(all amounts in PLN '000, unless specified otherwise)

10. Allowance on trade and other receivables

31.03.2017 31.12.2016
Opening balance of receivables allowance 56 111 52 697
Addition 2 251 13 353
Utilized (1 860) (9 939)
Closing balance of receivables allowance 56 502 56 111

During the 3-month period ended 31 March 2017 the allowance on the carrying amount of trade and other receivables increased by PLN 391 thousand (during the period of 3 months ended 31 March 2016 the impairment allowance increased by 1 930 thousand).

11. Inventories

Certificates of energy origin

31.03.2017 31.12.2016
Opening balance 84 984 152 318
Acquisition 26 302 330 497
Redemption (83 342) (397 544)
Sale - (287)
Closing balance 27 944 84 984

The costs of certificates of energy origin' redemption are presented in profit or loss in energy and gas purchase for sale.

12. Cash and cash equivalents

31.03.2017 31.12.2016
Cash at bank 30 231 56 020
Other cash 546 685 1 558 802
- bank deposits 545 801 1 554 631
- other 884 4 171
Total cash and cash equivalents 576 916 1 614 822
Cash disclosed in the statement of cash flows 576 916 1 614 822

As at 31 March 2017 and as at 31 December 2016 Enea S.A. had no restricted cash.

13. Financial assets measured at fair value through profit or loss

As at 31 March 2017, in "Financial assets measured at fair value through profit or loss" the Company presented call options on shares in Polimex-Mostostal S.A. On the basis of the agreement on call options on shares in Polimex-Mostostal S.A. dated 18 January 2017, Enea S.A. acquired call options from Towarzystwo Finansowe Silesia Sp. z o.o. This agreement provides for the purchase (in three tranches) of a total of 9 125 thousand of shares, at a nominal price of PLN 2 per share, on specific dates, i.e.: 30 July 2020, 30 July 2021 and 30 July 2022. The call options were measured at fair value using the Black-Scholes model. The book value of the options amounted to PLN 59 741 thousand as at 31 March 2017.

(all amounts in PLN '000, unless specified otherwise)

14. Financial instruments

The table below presents fair values as compared to carrying amounts:

31.03.2017 31.12.2016
Carrying
amount		 Fair
value		 Carrying
amount		 Fair
value
Non-current financial assets available for sale 41 902 41 902 41 902 41 902
Long-term intercompany bonds 5 363 570 5 420 176 5 136 547 5 206 010
Non-current financial assets measured
at fair value through profit or loss		 59 741 59 741 - -
Derivatives 33 703 33 703 40 267 40 267
Short-term intercompany bonds 515 456 515 456 486 566 486 566
Trade and other receivables 1 160 747 (*) 1 143 424 (*)
Cash and cash equivalents 576 916 576 916 1 614 822 1 614 822
Long-term loans, borrowings and debt securities 6 264 520 6 316 804 5 918 322 5 972 289
Short-term loans, borrowings and debt securities 195 874 195 874 136 206 136 206
Finance lease liabilities 693 693 772 772
Other financial liabilities 333 565 333 565 166 653 166 653
Trade and other liabilities 518 053 (*) 521 535 (*)

(*) - The carrying amount of trade and other receivables, trade and other liabilities approximates their fair value.

Financial assets available for sale include shares in unrelated parties for which the ratio of interest in equity is lower than 20%. The positions comprises also shares in PGE EJ1 Sp. o.o. in the amount of PLN 26 902 thousand for which there is no quoted market price in an active market and whose fair value - because of the initial phase of the company's activity – is based on incurred cost.

Long-term intercompany bonds include acquired debt instruments – bonds with an original maturity exceeding 1 year.

Non-current financial assets held to maturity measured at fair value through profit or loss is share call options of Polimex-Mostostal S.A.

Derivatives comprise the valuation of interest rate hedging transactions (Interest Rate Swap). The fair value of derivatives is determined by calculating the net present value based on two yield curves, i.e. the curve to determine the discount factor and curve used to estimate future rates of variable reference rates.

Short-term intercompany bonds include acquired debt instruments – bonds with an original maturity not exceeding 1 year.

(all amounts in PLN '000, unless specified otherwise)

The table below presents the analysis of financial instruments measured at fair value and classified into the following three levels:

Level 1 – fair value based on stock exchange prices (unadjusted) offered for identical assets or liabilities in active markets,

Level 2 – fair value determined based on market observations instead of market quotations (e.g. direct or indirect reference to similar instruments traded in the market),

Level 3 – fair value determined using various valuation methods, but not based on any observable market information.

31.03.2017
Level 1 Level 2 Level 3 Total
Financial assets measured at fair value through profit or
loss
Call options - 59 741 - 59 741
Interest Rate Swap used for hedging - 33 703 - 33 703
Total - 93 444 - 93 444
31.12.2016
Level 1 Level 2 Level 3 Total
Financial assets measured at fair value through profit or
loss
Interest Rate Swap used for hedging - 40 267 - 40 267
Total - 40 267 - 40 267

15. Loans, borrowings and debt securities

31.03.2017 31.12.2016
Long-term
Bank loans 1 794 617 1 552 654
Bonds 4 469 903 4 365 668
Total 6 264 520 5 918 322
Short-term
Bank loans 85 563 70 767
Bonds 110 311 65 439
Total 195 874 136 206
Total loans, borrowings and debt securities 6 460 394 6 054 528

Loans

At present Enea S.A. has loan agreements concluded with EIB for a total amount of PLN 2 371 000 thousand (agreement A for PLN 950 000 thousand, agreement B for PLN 475 000 thousand and agreement C for PLN 946 000 thousand).

The funds from EIB are designated for financing of long-term investment plan for the modernization and extension of the power grids of Enea Operator Sp. z o.o. Funds from Agreement A and B are fully utilized and the availability period for Agreement C is December 2017. (Enea S.A. obtained the consent of the EIB to extend the availability period and concluded an appropriate annex). Interest rate on loans can be fixed or floating.

(all amounts in PLN '000, unless specified otherwise)

In January 2017, Enea S.A. drawn the third tranche of a loan under C Agreement with the European Investment Bank in the amount of PLN 250 000 thousand. The loan is denominated in PLN with a floating interest rate based on the WIBOR 6-month plus the Bank's margin. The tranche will be repaid in installments, and the final loan repayment is planned for December 2031.

No. Lender Date of
agreement		 Total amount Outstanding
as at
31.03.2017		 Outstanding
as at
31.12.2016		 Term of the
agreement
1. European Investment Bank 18 October 2012
and 19 June
2013 (A and B)		 1 425 000 1 425 000 1 425 000 31 December
2030
2. European Investment Bank 29 May 2015 (C) 946 000 450 000 200 000 31 March
2032
3. Bank PKO BP S.A. 28 January
2014 (Annex no 1
from 25 January
2017)		 300 000 - - 31 December
2019
4. Bank PEKAO S.A. 28 January
2014 (Annex no 1
from 25 January
2017)		 150 000 - 31 December
2019
TOTAL 2 821 000 1 875 000 1 625 000
interest rate Transaction costs and the valuation
effect according to the effective		 5 180 (1 579)
TOTAL 2 821 000 1 880 180 1 623 421

Bond issue programmes

Enea S.A. concludes agreements for bonds issue programs to finance current operations and investments of Enea S.A. and its subsidiaries.

(all amounts in PLN '000, unless specified otherwise)

No. Name of bonds issue
programme		 Date of the
conclusion of
programme		 Amount of
the programme*		 Amount
issued
as at
31.03.2017		 Amount
issued
as at
31.12.2016		 Redemption
date
1. Bonds Issue Programme
Agreement with
PKO BP S.A., Bank Pekao
S.A., BZ WBK S.A.
and Bank Handlowy w
Warszawie S.A.		 21 June 2012 3 000 000 1 951 000 1 951 000 Redemption
from June 2020
till June 2022
2. Bonds Issue Programme
Agreements with
Bank Gospodarstwa
Krajowego		 15 May 2014 1 000 000 1 000 000 1 000 000 Redemption in
instalments,
final maturity is
December 2026
3. Bonds Issue Programme
Agreements with
ING Bank Śląski S.A., PKO
BP S.A., Bank PEKAO S.A.
and mBank S.A.		 30 June 2014 5 000 000 1 500 000 1 500 000 Redemption of
a given series
in February
2020 and
September
2021
4. Bonds Issue Programme
Agreement with
Bank Gospodarstwa
Krajowego		 3 December
2015		 700 000 150 000 - Redemption in
instalments,
final maturity is
September
2027
TOTAL 9 700 000 4 601 000 4 451 000
measurement Transaction costs and the result of
the effective interest rate		 (20 786) (19 893)
TOTAL 9 700 000 4 580 214 4 431 107

During the first quarter of 2017 Enea S.A. did not amend the program agreements, and did not enter into new agreements.

Bonds Issue Programme Agreement up to PLN 700 000 thousand

In March 2017, Enea S.A. issued the first tranche of bonds of PLN 150 000 thousand under this Programme.

Interest rate risk hedging transactions

During the 3-month period ended 31 March 2017 Enea S.A. did not conclude any transactions to hedge interest rate risk (Interest Rate Swap). The total value of the IRS's transactions on 31 March 2017 amounted to PLN 4 435 000 thousand. Concluded transactions will substantially affect the predictability of the cash flows and financial costs. The valuation of these financial instruments is presented in "Derivatives".

As at 31 March 2017 the valuation of derivatives amounted to PLN 33 703 thousand (as at 31 December 2016: PLN 40 267 thousand).

(all amounts in PLN '000, unless specified otherwise)

Financing conditions – covenants

Financing agreements assume compliance by the Company and the Group with certain financial ratios. As at 31 March 2017 and the date of these condensed separate interim financial statements, the Company did not breach the regulations of loan agreements, on the basis of which the Company would be required to early repayment of long-term debt.

16. Other financial liabilities

Cash management in Enea Group is performed by Enea S.A., allowing efficient cash surplus management (economies of scale) and reduction of external financing costs. Cash management covers Subsidiaries which constitute Enea Tax Group and is based on "Cash management system between groups of bank accounts" – cash pooling.

Under this service at the end of each day cash surplus from a bank accounts of a participant is transferred to a bank account of the Pool Leader – Enea S.A. On the next day account balances are reversed and cash transferred back to the bank account of the Participants.

17. Deferred income tax

Changes in the deferred tax asset (after the net-off of the asset and liability):

31.03.2017 31.12.2016
Opening balance 48 562 63 316
Change recognized in profit or loss (22 442) (7 193)
Change recognized in other comprehensive income 1 180 (7 561)
Closing balance 27 300 48 562

In the 3-month period ended 31 March 2017, as a result of decrease in the deferred tax asset the negative impact on the Company's profit before tax amounted to PLN 22 442 thousand (in the 3-month period ended 31 March 2016, as a result of decrease in the deferred tax asset the charge on the Company's profit before tax amounted to PLN 17 118 thousand).

18. Provisions for liabilities and other charges

Non-current and current provisions for liabilities and other charges:

31.03.2017 31.12.2016
Non-current 2 144 4 146
Current 227 256 283 166
Total 229 400 287 312

(all amounts in PLN '000, unless specified otherwise)

Provision for non
contractual use of
property		 Provision for other
lodged claims		 Provisions for
certificates of
origins		 Total
Balance as at 01.01.2017 9 220 6 872 271 220 287 312
Provisions applied 252 24 745 80 692 105 689
Provisions used (9) (8) (161 476) (161 493)
Reversal of provisions (2 012) (96) - (2 108)
Balance as at 31.03.2017 7 451 31 513 190 436 229 400

A description of material claims and the related contingent liabilities are presented in Note 21. In the 3-month period ended 31 March 2017, the net decrease in provisions for liabilities and other charges amounted to PLN 57 912 thousand, mainly due to the fulfilment of the obligation with respect to sales of electricity from renewable sources of energy and cogeneration to end customers (in the 3-month period ended 31 March 2016, provisions for liabilities and other charges decreased by PLN 24 537 thousand).

As at 31 March 2017, the Company recognized a provision of PLN 22 301 thousand for potential claims related to the termination of agreements on the purchase of certificates of origin for energy from renewable sources by Enea S.A.

19. Related party transactions

The Company concludes transactions with the following related parties:

1. Companies of the Enea Group

01.01.2017 - 31.03.2017 01.01.2016 - 31.03.2016
Purchases, including: 1 203 072 1 152 487
materials 134 -
services 448 984 415 192
other (including energy and gas) 753 954 737 295
Sales, including: 80 625 75 435
energy 70 502 66 969
services 406 320
other 9 717 8 146
Interest income, including: 41 264 37 646
bonds 41 210 37 591
loans 54 55
31.03.2017 31.12.2016
Receivables 97 419 201 837
Financial assets - bonds 5 879 026 5 623 113
Loans granted 175 791 150 827
Liabilities 723 898 672 334
Other financial liabilities 333 565 166 653

In accordance with Corporate Income Tax Act regulations concerning conclusion on transactions under arm's length do not apply to legal entities comprising tax group. Transactions with the Group entities which are not the part of the Tax

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

Group are conducted on an arm's length basis, and their terms and conditions do not differ from those applied in transactions with other entities.

2. Transactions concluded between the Company and members of its governing bodies fall within two categories:

  • those related to the appointment of Members of Supervisory Boards,
  • resulting from other civil law agreements.

The value of the above transactions has been presented below:

Management Board of the Company Supervisory Board of the Company
Item 01.01.2017 -
31.03.2017		 01.01.2016 -
31.03.2016		 01.01.2017 -
31.03.2017		 01.01.2016 -
31.03.2016
Remuneration under managerial and
consultancy agreements		 675 6 694* - -
Remuneration relating to appointment
of members of management or
supervisory bodies		 - - 201 112
TOTAL 675 6 694 201 112

* remuneration includes bonuses for 2015 and compensation resulting from non-competition agreements for former members of the Management Board in the amount of PLN 5 960 thousand

During the 3-month period ended 31 March 2017 there were no loans granted from the Company's Social Benefits Fund to the members of the Supervisory Board (PLN 0 thousand during the 3-month period ended 31 March 2016). During this period repayments of the loans amounted to PLN 1 thousand (PLN 2 thousand during the 3-month period ended 31 March 2016).

Other transactions resulting from civil law agreements concluded between Enea S.A. and Members of its governing bodies relate only to private use of company cars by Members of Enea S.A. Management Board.

3. Transactions with entities controlled by the State Treasury

Enea S.A. also concludes business transactions with entities of the central and local administration and entities whose shares are held by the State Treasury of the Republic of Poland.

The transactions concern mainly:

  • purchase of electricity and property rights resulting from certificates of origin as regards renewable energy and energy cogenerated with heat from companies whose shares are held by the State Treasury and;
  • sale of electricity, distribution services and other related fees, provided by the Company both to central and local administration bodies (sale to end users) and entities whose shares are held by the State Treasury (wholesale and retail sale to end users).

Such transactions are concluded under arm's length terms and their conditions do not differ from those applied in transactions with other entities. As the Company does not keep a record of the aggregate value of all transactions concluded with all state institutions and entities controlled by the State Treasury, the turnover and balances of

(all amounts in PLN '000, unless specified otherwise)

transactions with related parties disclosed in these condensed separate interim financial statements do not include data related to transactions with entities controlled by the State Treasury.

20. Future liabilities under contract concluded at the end of the reporting period

As at 31 March 2017 and as at 31 December 2016, the Company did not have any contractual obligations related to the purchase of tangible or intangible non-current assets which were not recognized in the statement of financial position.

21. Contingent liabilities and proceedings before court, bodies competent to conduct arbitration proceedings or public administration bodies

21.1 Sureties and guaranties

In the first quarter of 2017, Enea S.A. did not conclude any surety agreement as the Guarantor.

The table below presents actual relevant bank guarantees issued by Enea S.A. under the agreement concluded with BZ WBK S.A. up to the limit specified therein as at 31 March 2017.

Date of
guarantee		 Guarantee
period		 Company from Enea
Group		 Guarantee for Bank - issuer Guarantee value
in PLN thousand
12.06.2015 31.05.2018 Enea Wytwarzanie
Sp. z o.o.		 Izba Rozliczeniowa Giełd
Towarowych S.A.		 BZ WBK S.A. 4 000
29.06.2015 31.05.2018 Enea Trading
Sp. z o.o.		 Izba Rozliczeniowa Giełd
Towarowych S.A.		 BZ WBK S.A. 5 000
01.01.2016 11.08.2018 Enea S.A. Górecka Projekt
Sp. z o.o.		 BZ WBK S.A. 1 662
21.12.2016 30.01.2018 Enea S.A. Urząd Marszałkowski
Województwa
Zachodniopomorskiego
w Szczecinie		 BZ WBK S.A. 1 325
Total of guarantees issued 11 987

The value of remaining guarantees granted by Enea S.A as at 31 March 2017 amounted to PLN 3 294 thousand.

21.2 Pending proceedings before courts of general jurisdiction

Actions brought by the Company

Actions which Enea S.A. brought to common courts of law refer to claims for receivables due to supply of electricity and claims for other receivables – illegal consumption of electricity, connections to the power grid and other specialist services rendered by the Company.

As at 31 March 2017, the total of 13 624 cases brought by the Company were pending before common courts for the total amount of PLN 56 278 thousand (12 350 cases for the total amount of PLN 55 196 thousand as at 31 December 2016).

None of these cases can significantly affect the Company's net profit.

(all amounts in PLN '000, unless specified otherwise)

Actions brought against the Company

Actions against the Company are brought both by natural and legal persons. They mainly refer to such issues as compensation for interrupted delivery of electricity, identification of illegal electricity consumption and compensation for the Company's use of real property where electrical devices are located. The Company considers actions concerning non-contractual use of real property not owned by the Company as particularly important.

As at 31 March 2017 the total of 122 cases against the Company were pending before common courts for the total amount of PLN 79 116 thousand (190 cases for the total amount of PLN 54 218 thousand as at 31 December 2016). ). Provisions related to these court cases are presented in Note 18.

None of these cases can significantly affect the Company's net profit.

21.3 Motions for settlement of not balanced energy trading in 2012

On 30 and 31 December 2014 ENEA S.A. submitted motions for settlement to:

Claimed amounts
in PLN thousand
PGE Polska Grupa Energetyczna S.A. 7 410
PKP Energetyka S.A. 1 272
TAURON Polska Energia S.A. 17 086
TAURON Sprzedaż GZE Sp. z o.o. 1 826
FITEN S.A. 207
Total 27 801

The subject of motions was claim for the payment of electric energy consumed under the system of energy balancing. Claimed companies earned unjustified benefits by refusing Enea S.A. to issue invoice corrections for 2012.

In the absence of amicable settlement of the above case, Enea S.A. filed the following lawsuits against entities mentioned above:

  • FITEN S.A. lawsuit of 24 November 2015,
  • TAURON Polska Energia S.A. lawsuit of 10 December 2015,
  • TAURON Sprzedaż GZE Sp. z o. o. lawsuit of 10 December 2015,
  • PKP Energetyka S.A. lawsuit of 28 December 2015,
  • PGE Polska Grupa Energetyczna S.A. lawsuit of 29 December 2015.

Two entities i.e. PKP Energetyka S.A. and PGE Polish Energy Group S.A. have agreed for mediation, however no settlement of the dispute was reached. In the case against FITEN S.A. the court in the first instance issued a judgment dismissing the complaint of Enea S.A., from which the appealed was filed. In other proceedings, there have been no settlement of disputes.

(all amounts in PLN '000, unless specified otherwise)

21.4 Dispute concerning energy origin certificate prices

Before the District Court in Poznań the proceeding brought by PGE Górnictwo i Energetyka Konwencjonalna S.A. is pending against the Company for the payment of PLN 42 351 thousand concerning the payment for purchased certificates of origin (lawsuit of 30 May 2016). Enea SA made a deduction from the payment part of the liabilities (resulting from sales invoices for certificates of origin) with compensation claim of PGE GiEK S.A. to Enea S.A. The damage caused to Enea S.A. resulted from the fact that PGE GiEK S.A. did not fulfil the contractual obligation to accede in good faith to renegotiate long-term contracts for certificates of origin in accordance with the adaptive clause applicable to both parties.

A reply to the action brought by PGE GIEK S.A. was made on 11 August 2016. In response Enea S.A. filed to dismiss the lawsuit. Currently the parties are participating in mediation proceedings.

Before the District Court in Poznan, roll four more cases of identical nature.

22. The participation in the construction of the atomic power plant programme

On 3 September 2014, a Shareholders' Agreement was concluded by and between PGE Polska Grupa Energetyczna, Tauron Polska Energia, Enea and KGHM Polska Miedź (the Business Partners). On 15 April 2015, in accordance with the Shareholders' Agreement, an agreement on the sale of shares in PGE EJ 1 Sp. z o.o. was concluded, as a result of which each Business Partner purchased 10% of shares in PGE EJ 1. As a result of the sale of the shares in PGE EJ 1 by PGE Polska Grupa Energetyczna to the Business Partners, PGE Polska Grupa Energetyczna holds a 70% interest in the share capital of PGE EJ 1, and the other Business Partners (Tauron Polska Energia, Enea and KGHM Polska Miedź) hold 30% thereof, i.e. each of them holds 10%.

According to the assumptions, PGE Polska Grupa Energetyczna performs the role of the leader of the project to construct and operate the first Polish atomic power plant, and PGE EJ 1 is to perform the function of the operator of the power plant in the future.

According to the Shareholders' Agreement, the Parties undertake to finance the activities as part of the initial phase of the Project (the Development Stage) jointly, in proportion to the interests they hold. Enea's financial commitment during the Development Stage will not exceed approx. PLN 107 million.

During the first quarter of 2017, PGE EJ 1 continued the work as part of the programme of preparation for the construction of the atomic power plant in Poland.

The Parties to the Shareholders' Agreement expect that a decision concerning the declaration of further participation of the individual Parties in the next stage of the Project will be made after the Development Stage has been completed, directly before the settlement of the integrated procedure.

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

23. Acquisition of shares of Polimex–Mostostal S.A.

On 6 December 2016, negotiations were commenced between Enea S.A. and the following companies: Energa S.A., PGE Polska Grupa Energetyczna S.A., PGNiG S.A. (Investors) and between the Investors and Polimex-Mostostal S.A. (Polimex). The aim of the negotiations was to develop the structure of a possible capital involvement of the Investor in Polimex (Investment) and develop a possible model of co-operation between the Investors when carrying out the Investment.

On 27 December 2016, Enea S.A. concluded a letter of intent with the Investors and Polimex, in which the Investors expressed their intention to consider a possible investment in Polimex and based on which they commenced talks with Polimex, aimed at developing detailed parameters of the transaction. At the same time, on that day, the Company along with the Investors submitted a request to the Office of Competition and Consumer Protection (UOKiK) for the consent of the President of the UOKiK to concentration consisting in the acquisition, by the Investors, of joint control of Polimex. The consent to the concentration consisting in the acquisition, by the Investors, of the joint control of Polimex referred to above was issued on 18 January 2017.

At the same time, also on 18 January 2017, the Company entered into an investment agreement with the Investors and Polimex, under which the Investors undertook to invest in Polimex. The investment consisted in the Investors' subscribing, in total, for 150 million shares issued by Polimex. The company undertook to subscribe for 37.5 million shares of the new issue for the total issue price of PLN 75 million. The agreement was concluded under conditions precedent described in detail in Current Report 2/2017. Along with the above mentioned agreement, agreements specifying the principles of co-operation as well as mutual rights and obligations of the Investors when carrying out the above mentioned investment were concluded, as well as additional agreements related to the implementation of the investments, concluded with the creditors and hitherto shareholders of Polimex.

On 20 January 2017, due to the fulfilment of the conditions precedent contained in the investment agreement referred to above the Company accepted the offer, submitted by the management board of Polimex, of private subscription for 37.5 million shares at the issue price of PLN 2 per share, i.e. for the total issue price of PLN 75 million. In addition, as a result under one of the above additional agreements, on 20 January 2017, the Company acquired 1.5 million shares of Polimex from its hitherto shareholder. The purchase price of all shares amounted of PLN 80.6 million. Enea S.A. taken up a 16.48% interest in the company's share capital.

On 21 March 2017 Investors announced a tender offer for shares of Polimex as a result of exceeding the 33% threshold of the total number of votes at the general meeting of Polimex. Tender offer is of secondary nature and Investors intend to aquire in tender offer shares in excess of number of shares currently held by Investors (i.e. in total 65.93% of the total number of votes in Polimex) and get no more than 66% of total votes at the general meeting of Polimex. As a result of tender offer each of Investors (including Enea) intended to get no more than approximately 0.018% of total votes at the general meeting of Polimex. The call was settled on 28 April 2017 and, as a result, each Investor acquired 24 shares in Polimex. At present, the Company holds 39,000,024 shares in Polimex, representing a 16.48% interest in the share capital of Polimex. In total, the Investors hold 156,000,097 shares representing a 65.9% interest in the share capital of Polimex.

(all amounts in PLN '000, unless specified otherwise)

24. Acquisition of shares of ENGIE Energia Polska S.A. (currently Enea Elektrownia Połaniec S.A.)

On 30 September 2016 Enea S.A. submitted an offer for the purchase of 100% of shares in ENGIE Energia Polska S.A. The offer was submitted according to the description in the process initiated by ENGIE, the owner of 100% of the shares in ENGIE Energia Polska.

On 2 December 2016 the Company obtained exclusivity rights to further negotiations of the purchase of 100% of shares in ENGIE Energia Polska S.A.

On 23 December 2016, the Company signed with ENGIE International Holdings B.V. a conditional agreement on sale of 100% of shares of ENGIE Energia Polska S.A. (Agreement), and indirectly also on sale of 100% of shares of ENGIE Bioenergia Sp. z o.o.

The closure of the transaction was subject to the fulfilment of the following significant conditions precedent:

  • obtaining consent of the Minister of Energy, pursuant to the Act on Control of Certain Investments,
  • obtaining consent of the President of UOKiK for the concentration,
  • waiving of the pre-emption right by the President of the Agricultural Market Agency, and
  • performing the conversion of debt of ENGIE Energia Polska S.A. towards entities of the ENGIE group into equity in ENGIE Energia Polska S.A.

On 28 February 2017, the Company received the information on the satisfaction of the last of the said conditions, which means that all the conditions precedent have been satisfied.

On 2 March 2017 the Company received the calculation of the initial selling price of 100% of shares in ENGIE Energia Polska SA in the amount of PLN 1 264 159 355 from ENGIE International Holdings B.V.

On 14 March 2017 Enea S.A. acquired 100% of shares in ENGIE Energia Polska S.A., i.e. 7 135 000 shares entitled to the same amount of votes for the initial price of PLN 1 264 159 355.

Transaction is consistent with Enea Capital Group's Development Strategy until 2030 approved in September 2016. With this transaction the Company will increase its share in domestic electricity production and will be vice-leader of Polish market of electricity producers.

25. Realization of the Investment Agreement with Energa S.A. and Elektrownia Ostrołęka S.A. on the construction and operation of a power unit in Ostrołęka Power Plant

On 19 September 2016 Enea S.A. signed a letter of intent with Energa S.A. on engaging in cooperation in preparing, completing and utilizing a modern 1 000 MW coal-fired unit in Elektrownia Ostrołęka (the Investment, Ostrołęka C).

The Parties' intention is to jointly develop an effective business model for Ostrołęka C, verify its documentation and optimize the technical and economic parameters of the new power generation unit. Cooperation also includes conducting a tender to appoint a general contractor for the Project.

The Parties have agreed that the completion of the Project will have a positive impact on Poland's energy security, will meet the highest environmental standards and will ensure yet another stable, highly efficient and low-emission source of energy within the National Grid.

On 8 December 2016, the Company concluded the Investment Agreement on the implementation of the project Ostrołęka C. The subject of the Agreement is to prepare, construct, and operate the power unit referred to above. Pursuant to the Agreement signed, the co-operation will proceed, as a rule, as part of three stages: Development Stage

Condensed interim separate financial statements of Enea S.A. for the period from 1 January to 31 March 2017

(all amounts in PLN '000, unless specified otherwise)

– until the general contractor is instructed to commence the work; Construction Stage – until Ostrołęka C is commissioned for the purposes of commercial operation, and Operation Stage – commercial operation of Ostrołęka C. After the Development Stage is completed, Enea S.A. is obliged to participate in the Construction Stage, provided, however, that the condition of profitability of the Project is met, and financing the Project does not infringe bank covenants of the Company. It is estimated that the total investment outlays of Enea S.A. until the completion of the Development Stage will total approx. PLN 128 million. For the purposes of the implementation of the investment, Energa S.A. shall dispose of shares of Elektrownia Ostrołęka S.A., constituting 50% in the share capital, in favour of Enea S.A., in price PLN 101 million. The condition precedent for the entry into force of the Investment Agreement was obtaining the consent of the President of UOKiK for the concentration consisting in the acquisition of shares of the special purpose vehicle established to implement the Project. The condition was fulfilled on 11 January 2017.

On 19 December 2016, the special purpose vehicle announced a tender procedure to select the general contractor for the construction of the Ostrołęka C power plant with capacity of approx. 1000 MW and net fuel efficiency of at least 45 per cent, operating on supercritical steam parameters. Elektrownia Ostrołęka S.A., if certain assumptions are implemented (including an adequate share of Enea S.A., Energa S.A. and possible Financial Investors), and assuming that Capacity Market or other assistance mechanisms are introduced, will be able to undertake the comprehensive implementation of the Project.

On 1 February 2017, Enea S.A. concluded with ENERGA S.A. an Agreement on the Purchase of 24 980 926 Shares in Elektrownia Ostrołęka S.A. for a total of PLN 24 million, thereby acquiring an 11.89% interest in the Company's share capital.

On 13 April 2017, the Extraordinary General Shareholders' Meeting of Elektrownia Ostrołęka S.A. adopted a resolution on increasing the company's share capital from PLN 210 100 thousand to PLN 229 100 thousand by issuing new shares. In a private subscription, Enea S.A. acquired 9 500 000 shares in consideration for the contribution in cash which was made on 28 April 2017. The capital increase is awaiting registration with the registration court.

26. Recapitalization in Polska Grupa Górnicza Sp. z o.o.

In relation to the process of acquiring capital investors by Katowicki Holding Węglowy S.A., in July 2016 the Company started talks with possible investors of implementation of the Investment and its possible parameters.

On 28 October 2016, Enea S.A. signed with Węglokoks S.A. and Towarzystwo Finansowe Silesia Sp. z o.o. a letter of intent expressing preliminary interest in financial involvement in Katowicki Holding Węglowy S.A. or KHW's selected assets.

Due to the interest of Polska Grupa Górnicza Sp. z o.o. (PGG) in acquiring selected assets of Katowicki Holding Węglowy S.A. and the commencement of the process of recapitalization in PGG, Enea S.A. conducted the necessary analyses of the Business Plan presented by PGG with the existing PGG Shareholders and expressed its interest in capital commitment in Polska Grupa Górnicza Sp. z o.o.

On 30 March 2017, the Supervisory Board of Enea S.A. approved the Company's entering into Polska Grupa Górnicza Sp. z o.o. and taking up new shares in PGG's capital with a nominal value of PLN 300 million in consideration for the contribution in cash of PLN 300 million.

On 31 March 2017, the Company concluded:

• an investment agreement specifying the conditions for the financial investment in PGG (Investment Agreement);

(all amounts in PLN '000, unless specified otherwise)

• an arrangement relating to the exercise of a joint control over PGG (the Investors' Arrangement).

Investment Agreement

The Parties to the Investment Agreements are: Enea S.A., ENERGA Kogeneracja Sp. z o.o., PGE Górnictwo i Energetyka Konwencjonalna S.A., PGNiG TERMIKA S.A., Węglokoks S.A., Towarzystwo Finansowe Silesia Sp. z o.o., Fundusz Inwestycji Polskich Przedsiębiorstw Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych) (the Investors) and PGG. The Investment Agreement provided that PGG would acquire selected mining assets from Katowicki Holding Węglowy S.A. on the basis of the final agreement which was concluded on 1 April 2017.

The Investment Agreement regulates the course of the Investment and the Company's entering into PGG, principles of operation of PGG and its authorities, and also the terms under which the parties may exit from the investment in PGG.

As part of PGG recapitalisation the Company undertook to subscribe for new shares in PGG with the total nominal value of PLN 300 million in consideration for the contribution in cash amounting to PLN 300 million, in three stages:

  • d) as the first stage the Company subscribed for the new shares in PGG totalling to PLN 150 million in consideration for the contribution in cash amounting to PLN 150 million. After taking up the shares the Company holds a 4.39% share in PGG's share capital. The first recapitalisation was performed in April 2017;
  • e) as the second stage the Company will subscribe for the new shares in PGG totalling to PLN 60 million in consideration for the contribution in cash amounting to PLN 60 million. After taking up the shares the Company will hold a 5.81% share in PGG's share capital. The second recapitalisation is to be performed in June 2017;
  • f) as the third stage the Company will subscribe for the new shares in PGG totalling to PLN 90 million in consideration for the contribution in cash amounting to PLN 90 million. After taking up the shares the Company will hold a 7.66% share in PGG's share capital. The third recapitalisation is to be performed in the first quarter 2018.

The Agreement regulates the principles of appointing members of the Supervisory Board, according to which each of the Investors and the State Treasury will be entitled to nominate one member of the Supervisory Board composed of eight members maximally.

The Investment is in line with Enea Capital Group's Development Strategy whose one element is securing the base of commodities for the conventional power engineering.

Investors' Arrangement

According to the Investors' Arrangement, the Company jointly with ENERGA Kogeneracja Sp. z o.o., PGE Górnictwo i Energetyka Konwencjonalna S.A., PGNiG TERMIKA S.A. and Fundusz Inwestycji Polskich Przedsiębiorstw Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych (the Controlling Shareholders) took over control over PGG. The Investors' Arrangement regulates the principles of determining a common position of the Controlling Shareholders as regards the decisions relating to PGG.

Furthermore, on 31 March 2017 a letter of intent signed on 16 October 2016 by Enea S.A., Węglokoks S.A. and Towarzystwo Finansowe Silesia Sp. z o.o., concerning the previously analysed capital investment in Katowicki Holding Węglowy S.A. was terminated.

(all amounts in PLN '000, unless specified otherwise)

27. Initial offer for acquisition of EDF's assets in Poland

On 16 September 2016, Enea S.A., together with PGE S.A., Energa S.A., and PGNiG Termika S.A. (Business Partners), jointly submitted to EDF International SAS (EDF) a preliminary non-binding offer for the purchase of shares in companies belonging to EDF in Poland, holding conventional generation assets and carrying out service activities.

On 30 November 2016, the Company along with Business Partners submitted to EDF a new offer for the purchase of shares in companies belonging to EDF in Poland, holding conventional generation assets and carrying out service activities. The Business Partners submitted the new offer in connection with the upcoming end of the period of validity of the offer submitted on 16 September 2016.

On 27 January 2017, the Company along with Business Partners signed an agreement with EDF Investment SAS on negotiations related to the purchase of EDF assets in Poland as well as due diligence process in this scope. The transaction consists of the acquisition of all shares of EDF in EDF Polska S.A. which is, in particular, the owner of 4 combined heat and power plants i.e. Cracow, Gdańsk, Gdynia, and Toruń and heat distribution networks in Toruń, Elektrownia Rybnik, and the acquisition of all shares of EDF in ZEC "Kogeneracja" S.A., which is the owner of 4 combined heat and power plants, i.e. Wrocław, Zielona Góra, Czechnica, and Zawidawie, and heat distribution networks in Zielona Góra, Siechnice, and Zawidawie.

On 15 March 2017 Business Partners amended the structure of the transaction in the following way:

  • withdrawal of PGNiG Termika S.A. from the transaction,
  • takeover of the so far declared share of PGNiG Termika S.A. in the transaction by PGE S.A., which results in the growth in PGE S.A.'s share in the transaction to 60%,
  • maintaining the shares of Enea S.A. and Energa S.A. in the transaction on the same level of 20% for each of the Companies.

The aforementioned amendments in the transaction structure required confirmation of filing no objections by EDF.

On 11 May 2017 the Management Board of Enea S.A. adopted a resolution regarding the Company's resignation from participation in the transaction of acquiring Polish assets belonging to EDF International SAS and EDF Investment II B.V.

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