Audit Report / Information • Mar 31, 2020
Audit Report / Information
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Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. al. Jana Pawła II 22 00-133 Warszawa Polska
Tel.: +48 22 511 08 11 Fax: +48 22 511 08 13 www.deloitte.com/pl
We have audited the annual consolidated financial statements of the group (the "Group") with PGE Polska Grupa Energetyczna S.A. as the parent (the "Parent"), which comprise the consolidated statement of financial position as at December 31, 2019, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including general information, basis for preparation of financial statements and other explanatory information (the "financial statements").
In our opinion, the accompanying consolidated financial statements:
Our opinion is consistent with the Additional Report to the Audit Committee, which we issued on March 31, 2020.
We conducted our audit in accordance with International Standards on Auditing ("ISAs") in a version adopted by the National Council of Statutory Auditors as the Polish Standards on Auditing ("PSAs") and in compliance with the Act on Statutory Auditors, Audit Firms and Public Oversight of 11 May 2017 (the "Act on Statutory Auditors", Journal of Laws of 2019, item 1421, as amended) as well as Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities ("EU Regulation", Official Journal of the European Union L158). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report.
We are independent of the Group in accordance with the International Federation of Accountants' Code of Ethics for Professional Accountants ("IFAC Code"), adopted by resolution of the National Council of Statutory Auditors, together with the ethical requirements that are relevant to the audit of the financial statements in Poland, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IFAC Code. Throughout the audit, both the key statutory auditor and the audit firm remained independent of the Group in accordance with the independence requirements set out in the Act on Statutory Auditors and in the EU Regulation.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/pl/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
Member of Deloitte Touche Tohmatsu Limited
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
The Group's consolidated financial statements for the year ended December 31, 2018 were audited by another auditor who expressed an unqualified opinion on those statements on March 11, 2019.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. They encompass the most significant assessed risks of material misstatement, including assessed risks of material misstatement due to fraud. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon. We summarized our response to those risks and, where appropriate, we presented the key findings related to those risks. We do not provide a separate opinion on these matters.
Recoverability of the carrying amount of property, plant and equipment
The value of property, plant and equipment presented in the Group's consolidated financial statements as at 31 December 2019 was PLN 59,690 million.
In Note 9 to the consolidated financial statements as at 31 December 2019, the Group presented information concerning impairment of its property, plant and equipment. At the same time, according to the information presented in Note 3 to the consolidated financial statements, in the current reporting period the Group analyzed the indications and identified the factors which could have contributed significantly to a change in the value of its assets depending on external developments, including market parameters and internal strategic decisions.
Having analyzed the above-mentioned indications, the Group tested its assets for impairment.
In effect, based on up-to-date projections as to the use potential of the assets as well as current discount rates, the Management Board recognized in particular an impairment loss on the assets of PGE Górnictwo i Energetyka Konwencjonalna S.A. in the amount of PLN 7,514 million and reversed an impairment loss on the assets of PGE Energia Odnawialna S.A. of PLN 385 million.
In particular, our audit procedures included:
Key audit matter How we addressed the matter
During the reporting period, the total net impairment loss on property, plant and equipment was PLN 7,524 million.
The assessment of the value in use of the assets is what we consider to be the key area of audit risk due to significant judgment involved, including as regards the effect of changes in each key assumption used in the DCF models on the determination of the assets' value in use.
The Parent's Management Board is responsible for the preparation of consolidated financial statements which give a true and fair view of the economic and financial position of the Group and of its financial performance in accordance with the applicable International Financial Reporting Standards, as endorsed by the European Union, the adopted accounting policies as well as the applicable laws and articles of association of the Parent, and for such internal control as the Parent's Management Board determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Parent's Management Board is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Parent's Management Board either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The Management Board and members of the Supervisory Board of the Parent are obliged to ensure that the consolidated financial statements meet the requirements of the Accounting Act of 29 September 1994 (the "Accounting Act", Journal of Laws of 2019, item 351, as amended). Members of the Parent's Supervisory Board are responsible for overseeing the financial reporting process.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with PSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
The scope of an audit does not include an assurance about the future profitability of the Group or the effectiveness or efficiency of the Parent's Management Board in managing the Group's affairs at present or in the future.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
We communicate with the Parent's Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Parent's Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and that we will communicate with it all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Parent's Supervisory Board, we determined those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other information includes a report on the Group's activities in the financial year ended December 31, 2019 (the "Report on the Activities"), together with a statement of compliance with corporate governance principles and a non-financial information statement, as referred to in Article 49b.1 of the Accounting Act, which constitute separate parts of the Report (together: the "Other Information").
Report on the Company's activities of PGE Polska Grupa Energetyczna S.A. and the PGE Group for 2019, was prepared in accordance with Article 55.2 of the Accounting Act as combined.
The Parent's Management Board is responsible for the preparation of the Other Information in accordance with the applicable laws.
The Management Board and members of the Supervisory Board of the Parent are obliged to ensure that the Report on the Activities, along with the separate parts, meet the requirements of the Accounting Act.
Our opinion on the consolidated financial statements does not cover the Other Information. In connection with our audit of the consolidated financial statements, our responsibility is to read the Other Information and, in doing so, consider whether the Other Information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this Other Information, we are required to report that fact in our auditor's report. Additionally, under the Act on Statutory Auditors we are obliged to express an opinion on whether the Report on the Activities has been prepared in accordance with the applicable laws and whether it is consistent with the information contained in the consolidated financial statements. Furthermore, we are obliged to state whether a non-financial information statement has been prepared by the Group and to express an opinion on whether the Group has included the necessary information in the statement of compliance with corporate governance principles.
Based on our work performed during the audit, we are of the opinion that the Report on the Activities:
Furthermore, in the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have not identified any material misstatements of the Report on the Activities.
In our opinion, the statement of compliance with corporate governance principles contains the information referred to in par. 70.6.5 of the Current Information Regulation. We are also of the opinion that the information referred to in par. 70.6.5(c)-(f), (h) and (i) of the Regulation, as contained in the statement of compliance with corporate governance principles, is in accordance with the applicable laws and consistent with the information included in the consolidated financial statements.
In accordance with the requirements of the Act on Statutory Auditors, we confirm that the Group has prepared a non-financial information statement, as referred to in Article 49b.1 of the Accounting Act, as a separate part of the Report on the Activities.
We have not performed any assurance services relating to the non-financial information statement and we do not express any form of assurance conclusion thereon.
To the best of our knowledge and belief, we represent that non-audit services which we have provided to the Parent and to its subsidiaries are in accordance with the laws and regulations applicable in Poland and that we have not provided any non-audit services which are prohibited under Article 5.1 of the EU Regulation and Article 136 of the Act on Statutory Auditors. The non-audit services which we provided to the Parent and to its subsidiaries in the audited period have been listed in Note 32 in the consolidated financial statements.
We were appointed as the auditor of the Group's consolidated financial statements by resolution 50/XI/2018 of the Parent's Supervisory Board of December 11, 2018. This is our first year as auditor of the Group.
The key statutory auditor on the audit resulting in this independent auditor's report is Piotr Sokołowski.
Acting on behalf of Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. with its registered seat in Warsaw, entered under number 73 on the list of audit firms, in the name of which the consolidated financial statements have been audited by the key statutory auditor:
Piotr Sokołowski Registered under number 9752
Warsaw, March 31, 2020
This document is a foreign language version of the original Independent Auditor's Report issued in Polish version and only the original version is binding. This document has been prepared for information purposes and could be used only for company's internal purposes. In case of any discrepancies between the Polish and English version, the Polish version shall prevail.
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