PGE Polska Grupa Energetyczna S.A. Semi-annual financial report for the 6-month period

ended June 30, 2021 in accordance with IFRS EU (in PLN million)

I.	PGE GROUP CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE 6-MONTH PERIOD ENDED JUNE 30, 2021, IN ACCORDANCE WITH IFRS EU4
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME4
CONSOLIDATED STATEMENT OF FINANCIAL POSITION5
	CONSOLIDATED STATEMENT OF CHANGES IN EQUITY6
	CONSOLIDATED STATEMENT OF CASH FLOWS7
	GENERAL INFORMATION, BASIS FOR PREPARATION OF FINANCIAL STATEMENTS AND OTHER EXPLANATORY INFORMATION8
1.	General information8
1.1	Information on the parent8
1.2	Information on PGE Group8
1.3	PGE Group's consolidated companies9
2.	Basis for preparation of financial statements13
2.1	Statement of compliance13
2.2 2.3	Presentation and functional currency 13 New standards and interpretations published, not yet effective13
2.4	Professional judgement of management and estimates14
3.	Impairment tests on property, plant and equipment, intangible assets, right-of-use assets and goodwill14
3.1	Description of assumptions for the Conventional Generation segment15
3.2	Analysis of impairment indications in the District Heating segment16
3.3	Description of assumptions for the Renewables segment16
4.	Changes in accounting principles and data presentation18
5.	Fair value hierarchy19
	EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS20
	EXPLANATORY NOTES TO OPERATING SEGMENTS 20

6.	Information on operating segments20
6.1	Information on business segments21
	EXPLANATORY NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 23
7.	Revenue and costs23
7.1	Sales revenue23
7.2 7.3	Costs by nature and function24 Other operating income and expenses25
7.4	Finance income and finance costs25
7.5	Share of profit of equity-accounted entities26
8.	Impairment losses on assets26
9.	Income tax27
9.1	Tax in the statement of comprehensive income27
9.2	Effective tax rate27
	EXPLANATORY NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 28
10.	Material transactions to purchase and sell property, plant and equipment, intangible assets and right-of-use assets28
11.	Future investment commitments28
12.	Shares accounted for using the equity method28
13.	Joint operations29
14.	Deferred tax in statement of financial position30
14.1	Deferred income tax assets30
14.2	Deferred tax liabilities30
15.	Inventories30
16.	CO2 emission allowances for captive use31
17.	Other current and non-current assets31
17.1	Other non-current assets31
17.2	Other current assets31
18.	Selected financial assets32
18.1	Trade and other financial receivables32
18.2	Cash and cash equivalents32
19.	Derivatives and other assets measured at fair value through profit or loss33
20.	Equity 34
20.1 20.2	Share capital34 Hedging reserve35
20.3	Dividends paid and recommended for payment35

21.	Provisions35
21.1	Provision for employee benefits36
21.2	Rehabilitation provision 36
21.3	Provision for cost of CO2 emissions37
21.4 21.5	Provision for energy origin rights held for redemption37 Provision for claims concerning non-contractual use of property37
21.6	Settlements with prosumers37
22.	Financial liabilities37
22.1	Loans, borrowings, bonds and leases37
22.2	Trade and other financial liabilities39
23.	Other non-financial liabilities39
23.1	Other non-current non-financial liabilities39
23.2	Other current non-financial liabilities39
	OTHER EXPLANATORY NOTES40
24.	Contingent liabilities and receivables. Legal claims40
24.1	Contingent liabilities40
24.2	Other significant issues related to contingent liabilities40
24.3	Contingent receivables41
24.4	Other court cases and disputes41
25.	Tax settlements42
26.	Information on related parties44
26.1 26.2	Associates and jointly controlled entities44 State Treasury-controlled companies44
26.3	Management Board and Supervisory Board remuneration 45
27.	Significant events during and after the reporting period45
27.1	Impact of COVID-19 on PGE Group's business45
27.2	Preliminary proposal to purchase stake in Fortum's assets46
27.3	Investment agreement with Ørsted for offshore wind farm projects46
27.4	Czechia's complaint against Poland regarding prolongation of mining concession for KWB Turów 47
27.5	Planned disposal of coal assets to National Energy Security Agency 48
II.	PGE Polska Grupa Energetyczna S.A. Condensed separate interim financial statements for the 6-month period ended June
	30, 2021, in accordance with IFRS EU (in PLNm)49

	SEPARATE STATEMENT OF COMPREHENSIVE INCOME49

	SEPARATE STATEMENT OF FINANCIAL POSITION50
	SEPARATE STATEMENT OF CHANGES IN EQUITY51
	SEPARATE STATEMENT OF CASH FLOWS52

1.	General information53
2.	Professional judgement of management and estimates53
3.	Impact of new regulations on the Company's future financial statements54
4.	Changes in accounting principles and data presentation54
5.	Fair value hierarchy54
6.	Sales revenue54
7.	Costs by nature and function55

8.	Finance income and finance costs55
9.	Shares in subsidiaries56
10.	Selected financial assets58
11.	Derivatives and other receivables at fair value through profit or loss60
12.	Other current assets60
13.	Loans, borrowings, bonds, cash pooling, leases61
14.	Contingent liabilities 62
15.	Information on related parties62
16.	PGE Group subsidiaries62
17.	State Treasury subsidiaries63
18.	Management Board and Supervisory Board remuneration64
19.	Significant events during and after the reporting period64
III.	Approval of the semi-annual financial report65 Glossary of terms and abbreviations66

I. PGEGROUPCONDENSEDCONSOLIDATEDINTERIMFINANCIALSTATEMENTSFORTHE 6-MONTHPERIODENDEDJUNE 30, 2021, INACCORDANCEWITHIFRS EU

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Period ended	Period ended
	Note	June 30, 2021	June 30, 2020
		(unaudited)	(unaudited)
STATEMENTOF PROFITOR LOSS

SALES REVENUE	7.1	21,908	22,776
Cost of goodssold	7.2	(18,792)	(20,893)
GROSS PROFITONSALES		3,116	1,883
Distribution and selling expenses	7.2	(759)	(738)
General and administrative expenses	7.2	(501)	(535)
Net other operating income / expenses	7.3	1,302	(339)
OPERATING PROFIT		3,158	271
Netfinance income / costs, including:	7.4	53	(270)
Interestincome calculated using		15	17
effective interestrate method	7.5
Share of profit/(loss) of entities accounted for using the equitymethod		(1)	(545)
GROSS PROFIT/(LOSS)		3,210	(544)
Income tax	9	(491)	(93)
NET PROFIT/(LOSS) FOR THE REPORTING PERIOD		2,719	(637)
OTHER COMPREHENSIVE INCOME
Itemsthat may be reclassified to profit orlossin the future:
Valuation of debtfinancial instruments		7	(3)
Valuation of hedging instruments		(161)	(55)
Foreign exchange differencesfrom translation of foreign entities		(2)	4
Deferred tax	9	29	11
Itemsthat may not be reclassified to profit orlossin the future:
Actuarial gains and lossesfrom valuation of provisionsfor employee benefits		82	(207)
Deferred tax	9	(15)	39
Share of profit of equity-accounted entities		-	(3)
OTHER COMPREHENSIVE INCOME FOR THE REPORTINGPERIOD,NET		(60)	(214)

TOTAL COMPREHENSIVE INCOME		2,659	(851)

NET PROFIT/(LOSS)ATTRIBUTABLE TO:
– shareholders of the parent company		2,690	(688)
– non-controlling interests		29	51
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
– shareholders of the parent company		2,629	(902)
– non-controlling interests		30	51

EARNINGS AND DILUTEDEARNINGS PER SHARE ATTRIBUTABLE TOEQUITY HOLDERSOF THE PARENT COMPANY (INPLN)		1.44	(0.37)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		As at	As at
	Note	June 30, 2021	31 December 2020
		(unaudited)	(audited)
NON-CURRENTASSETS
Property, plant and equipment Investment property		60,938 40	61,741 41

Intangible assets Right-of-use assets		714 1,271	646 1,309
Financialreceivables	18.1	205	191
Derivatives and other assets measured atfair value through profit orloss	19	90	132
Shares and other equity instruments		87	57
Shares accounted for using the equitymethod	12	161	152
Other non-current assets		776	839
CO2 emission allowancesfor captive use	16	3	39
Deferred income tax assets	14.2	897	1,351
		65,182	66,498
CURRENTASSETS
Inventories	15	2,568	3,123
CO2 emission allowancesfor captive use	16	38	1,735
Income tax receivables		203	8
Derivatives and other assets measured atfair value through profit orloss	19	364	423
Trade and otherfinancialreceivables	18.1	5,199	4,812
Other current assets		603	799
Cash and cash equivalents	18.2	5,396	4,189
		14,371	15,089
ASSETS CLASSIFIEDAS HELDFOR SALE		2	7
TOTAL ASSETS		79,555	81,594

EQUITY
Share capital	20.1	19,165	19,165
Reserve capital		20,154	18,410
Hedging reserve	20.2	(138)	(13)
Foreign exchange differencesfrom translation		1	5
Retained earnings		5,943	4,951
EQUITYATTRIBUTABLE TOSHAREHOLDERS OF THE PARENT COMPANY		45,125	42,518

Equity attributable to non-controlling interests		856	983
TOTAL EQUITY		45,981	43,501
NON-CURRENT LIABILITIES
Non-current provisions	21	9,725	11,207
Loans, borrowings, bonds and lease	22.1	9,201	10,025
Derivatives	19	193	385
Deferred income tax liabilities	14.2	329	345
Deferred income and government grants		590	600
Otherfinancial liabilities	22.2	439	448
Other non-financial liabilities	23.1	86	65
		20,563	23,075
CURRENT LIABILITIES
Current provisions	21	4,942	7,311
Loans, borrowings, bonds and leases	22.1	2,039	1,384
Derivatives	19	136	63
Trade and otherfinancial liabilities	22.2	3,794	3,504
Income tax liabilities		8	476
Deferred income and government grants		77	77
Other non-financial liabilities	23.2	2,015	2,203
		13,011	15,018
TOTAL LIABILITIES		33,574	38,093
TOTAL EQUITYAND LIABILITIES		79,555	81,594

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital	Reserve capital	Hedging reserve	Foreign exchange differences from translation	Retained earnings	Total	Non-controlling interests	Total equity
Note	20.1		20.2
JANUARY 1, 2021	19,165	18,410	(13)	5	4,951	42,518	983	43,501
Net profit for the reporting period	-	-	-	-	2,690	2,690	29	2,719
Other comprehensive income	-	-	(125)	(2)	66	(61)	1	(60)
COMPREHENSIVE INCOME	-	-	(125)	(2)	2,756	2,629	30	2,659
Retained earnings distribution	-	1,744	-	-	(1,744)	-	-	-
Dividend	-	-	-	-	-	-	(2)	(2)
Changes in PGE Group	-	-	-	(2)	(18)	(20)	(155)	(175)
Other changes	-	-	-	-	(2)	(2)	-	(2)
JUNE 30, 2021	19,165	20,154	(138)	1	5,943	45,125	856	45,981

	Share capital	Reserve capital	Hedging reserve	Foreign exchange differences from translation	Retained earnings	Total	Non-controlling interests	Total equity
Note	20.1		20.2
JANUARY 1, 2020	19,165	19,669	(323)	(1)	3,779	42,289	848	43,137
Net profit/(loss) for the reporting period	-	-	-	-	(688)	(688)	51	(637)
Other comprehensive income	-	-	(47)	4	(171)	(214)	-	(214)
COMPREHENSIVE INCOME	-	-	(47)	4	(859)	(902)	51	(851)
Coverage of losses from previous years	-	(1,259)	-	-	1,259	-	-	-
Dividend	-	-	-	-	-	-	(1)	(1)
Settlement of purchase of additional shares in subsidiaries	-	-	-	-	(6)	(6)	(5)	(11)
Other changes	-	-	-	-	(1)	(1)	(1)	(2)
JUNE 30, 2020	19,165	18,410	(370)	3	4,172	41,380	892	42,272

CONSOLIDATED STATEMENT OF CASH FLOWS

	Note	Period ended June 30, 2021 (unaudited)	Period ended June 30, 2020 (unaudited)
CASHFLOWS FROM OPERATINGACTIVITIES
Gross profit / loss		3,210	(544)
Income tax paid		(709)	(174)
Adjustmentsfor:
Share of (profit)/ loss of entities accounted for using the equity method		1	545
Depreciation, amortisation, disposal and impairmentlosses		2,096	2,534
Interest and dividend, net		151	150
(Profit)/loss on investing activities		(563)	240
Change in receivables		(436)	765
Change in inventories		541	1,490
Change in CO2 emission allowancesfor captive use		1,733	964
Change in liabilities, excluding loans and borrowings		362	(598)
Change in other non-financial assets, prepayments		176	(179)
Change in provisions		(3,268)	109
Other		(4)	7
NET CASH FROM OPERATINGACTIVITIES		3,290	5,309

CASHFLOWS FROM INVESTINGACTIVITIES
Purchase of property, plant and equipment and intangible assets Sale of property, plant and equipment and intangible assets		(2,360) 30	(3,454) -
Recognition of deposits with maturity over 3 months		(93)	(43)
Termination of deposits with maturity over 3 months		84	33
Purchase of financial assets		(41)	(1)
Sale ofsubsidiary after offsetting cash received		368	-
Sale of otherfinancial assets		50	-
Loss of control		(118)	-
Other		4	16
NET CASH FROM INVESTINGACTIVITIES		(2,076)	(3,449)

CASHFLOWS FROM FINANCINGACTIVITIES
Proceedsfrom issue of equity		347	-
Proceedsfrom loans, borrowings		139	3,634
Repayment of loans, borrowings, leases		(304)	(4,602)
Interest paid		(183)	(186)
Increase in stake in Group companies		-	(11)
Other		13	12
NET CASH FROM FINANCINGACTIVITIES		12	(1,153)
NET CHANGE INCASHAND CASHEQUIVALENTS		1,226	707
Net exchange differences		(19)	12
CASHAND CASHEQUIVALENTS AT THE BEGINNING OF PERIOD	18.2	4,173	1,311
CASHAND CASHEQUIVALENTS AT THE ENDOF PERIOD	18.2	5,399	2,018

GENERAL INFORMATION, BASIS FOR PREPARATIONOF FINANCIAL STATEMENTS AND OTHER EXPLANATORY INFORMATION

1. Generalinformation

1.1 Informationontheparent

PGE Polska Grupa Energetyczna S.A. wasfounded on the basis of the Notary Deed of August 2, 1990 and registered in the District Court in Warsaw, XVI Commercial Department on September 28, 1990. The Company was registered in the National Court Register of the District Court forthe capital city of Warsaw, XII Commercial Department, under no. KRS 0000059307. The Company'sregistered office is in Warsaw, ul. Mysia 2.

As at January 1, 2021 the composition of the Company's Management Board was asfollows:

Wojciech Dąbrowski President of the Management Board,
Wanda Buk Vice-President of the Management Board,
Paweł Cioch Vice-President of the Management Board,
Paweł Strączyński Vice-President of the Management Board,
Paweł Śliwa Vice-President of the Management Board,
Ryszard Wasiłek Vice-President of the Management Board.

On March 31, 2021 Mr. Paweł Strączyński resigned as Vice-President of the Management Board, effective March 31, 2021. On June 8, 2021, PGE's Supervisory Board adopted a resolution to appoint Mr. Lechosław Rojewski to the Management Board from June 9, 2021.

AtJune 30, 2021 and on the dateonwhich these financialstatementswere published,the Company's Management Board was asfollows:

Wojciech Dąbrowski President of the Management Board,
Wanda Buk Vice-President of the Management Board,
Paweł Cioch Vice-President of the Management Board,
Lechosław Rojewski Vice-President of the Management Board,
Paweł Śliwa Vice-President of the Management Board,
Ryszard Wasiłek Vice-President of the Management Board.

Ownership structure

The parent's ownership structure is asfollows:

	State Treasury	Othershareholders	Total
As at December 31, 2020	57.39%	42.61%	100.00%
As atJune 30, 2021	57.39%	42.61%	100.00%

The ownership structure as at each reporting date was prepared on the basis of information available to the Company.

According to information known to the Company as of the date on which these financial statements were prepared, the State Treasury wasthe only shareholder with at least 5% of votes at the general meeting of PGE S.A.

1.2 InformationonPGEGroup

PGE Group consists of the parent, PGE Polska Grupa Energetyczna S.A., along with 69 consolidated subsidiaries. Subject to consolidation also are 2 entities constituting a joint operation, 4 associates and 1 jointly controlled entity. For additional information about subsidiary entitiesincluded in the consolidated financialstatements please referto note 1.3.

These consolidated financialstatements of PGE Group cover the period from January 1, 2021 to June 30, 2021 and include comparative data forthe period from January 1, 2020 to June 30, 2020. These condensed consolidated interim financial statements do not include all of the information and disclosures required in annual financial statements and they should be read in conjunction with the Group's consolidated financialstatementsforthe year ended December 31, 2020, approved for publication on March 22, 2021.

The financialstatementsof allsubordinated entitieswerepreparedforthe same reportingperiodasthe financialstatementsoftheparent company, using consistent accounting principles. Companies acquired in the course of the financial year were the exception, preparing financial data forthe period from the moment when PGE Group obtained control.

PGE Group companies' core activities are asfollows:

production of electricity,
distribution of electricity,
wholesale and retail trade in electricity, energy origin rights, CO² emission allowances and natural gas,
production and distribution of heat,
provision of other services related to these activities

Business activities are conducted under appropriate concessions granted to specific Group companies.

Going concern

These financialstatementswereprepared underthe assumptionthatthe keyGroupcompanieswill continueoperating as a going concern for at least 12 months from the reporting date. Subsidiary PGE Obrót S.A. reported negative equity as at June 30, 2021, largely due to negativechangesontheretail electricity tradingmarket.PGEObrót S.A.-likeotherPGEGroupcompanies-hasaccesstofinancingthrough PGE S.A., in connection with which this company's going concern assumption isjustified.

Aside fromPGEObrót S.A., atthedateofthe approvalofthese financialstatements,there isno evidence indicating thatthe going concern ofsignificant Group companiesis endangered.

Changesin accounting policies

The same accounting principles(policy) and calculation methods were applied in these financialstatements asin the most recent annual financial statements. These financial statements should be read in conjunction with PGE Group's consolidated financial statements for the year ended December 31, 2020, published on March 22, 2021.

1.3 PGEGroup's consolidatedcompanies

During the reporting period, PGE Group consisted of the following subsidiaries, fully consolidated directly and indirectly:

	Entity	Entity holding stake	Stake held by Group entities as at June 30, 2021	Stake held by Group entities as at 31 December 2020
	SEGMENT: SUPPLY
1.	PGE Polska Grupa Energetyczna S.A. Warsaw	Parent
2.	PGE Dom Maklerski S.A. Warsaw	PGE S.A.	100.00%	100.00%
	PGE Trading GmbH (in liquidation) Berlin	PGE S.A.	-	100.00%
3.	PGE Obrót S.A. Rzeszów	PGE S.A.	100.00%	100.00%
4.	ENESTA sp.z o.o. Stalowa Wola	PGE Obrót S.A.	87.33%	87.33%
5.	PGE Centrum sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
6.	PGE Paliwa sp.z o.o. Kraków	PGE EC S.A.	100.00%	100.00%
	SEGMENT: CONVENTIONALGENERATION
7.	PGE GiEK S.A. Bełchatów	PGE S.A.	100.00%	100.00%
8.	ELBIS sp.z o.o. Rogowiec	PGE S.A.	100.00%	100.00%
9.	MegaSerwissp.z o.o. Bogatynia	PGE S.A.	100.00%	100.00%
10.	ELMENsp.z o.o. Rogowiec	PGE S.A.	100.00%	100.00%
11.	ELTUR-SERWIS sp.z o.o. Bogatynia"	PGE S.A.	100.00%	100.00%
12.	BETRANS sp.z o.o. Bełchatów	PGE S.A.	100.00%	100.00%
13.	BESTGUM POLSKA sp.z o.o. Rogowiec	PGE S.A.	100.00%	100.00%
14.	RAMB sp.z o.o. Piaski	PGE S.A.	100.00%	100.00%
15.	"Energoserwis – Kleszczów" sp.z o.o. Rogowiec	PGE GiEK S.A.	51.00%	51.00%
	SEGMENT:DISTRICT HEATING
16.	PGE Energia Ciepła S.A. Warsaw	PGE S.A.	100.00%	100.00%
17.	PGE Toruń S.A. Toruń	PGE EC S.A.	95.22%	95.22%
18.	PGE Gaz Toruń sp.z o.o. Warsaw	PGE EC S.A.	100.00%	100.00%
19.	Zespół Elektrociepłowni Wrocławskich KOGENERACJA S.A. Wrocław	PGE EC S.A.	58.07%	58.07%
20.	Elektrociepłownia Zielona Góra S.A. Zielona Góra	KOGENERACJA S.A.	98.40%	98.40%

	Entity	Entity holding stake	Stake held by Group entities as at June 30, 2021	Stake held by Group entities as at 31 December 2020
21.	MEGAZEC sp.z o.o.	PGE S.A.	100.00%	100.00%
	Bydgoszcz Przedsiębiorstwo Energetyki Cieplnejsp.z o.o.
22.	Zgierz	PGE EC S.A.	100.00%	100,00%
	SEGMENT: CIRCULAR ECONOMY PGE Ekoserwis S.A.
23.	Wrocław	PGE S.A.	95.08%	95.08%
24.	EPORE S.A. Bogatynia	PGE GiEK S.A.	100.00%	100,00%
25.	ZOWER sp.z o.o. Rybnik	PGE EC S.A.	100.00%	100.00%
	SEGMENT:RENEWABLES
26.	PGE EnergiaOdnawialna S.A. Warsaw	PGE S.A.	100.00%	100.00%
27.	Elektrownia Wiatrowa Baltica-1 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
28.	Elektrownia Wiatrowa Baltica-4 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
29.	Elektrownia Wiatrowa Baltica-5 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
30.	Elektrownia Wiatrowa Baltica-6 sp.z o.o.	PGE S.A.	100.00%	100.00%
31.	Warsaw PGE Baltica 1 sp.z o.o.	PGE S.A.	100.00%	100.00%
32.	Warsaw PGE Baltica 2 sp.z o.o.	PGE S.A.	100.00%	100.00%
33.	Warsaw PGE Baltica 3 sp.z o.o.	PGE S.A.	100.00%	100.00%
34.	Warsaw PGE Baltica 4 sp.z o.o.	PGE S.A.	100.00%	100.00%
35.	Warsaw PGE Baltica 5 sp.z o.o.	PGE S.A.	100.00%	100.00%
36.	Warsaw PGE Baltica 6 sp.z o.o.	PGE S.A.	100.00%	100.00%
	Warsaw PGE Baltica sp.z o.o.
37.	Warsaw PGE Klastersp.z o.o.	PGE S.A.	100.00%	100.00%
38.	Warsaw PGE Soleo 1 sp.z o.o.	PGE EOS.A.	100.00%	100.00%
39.	Warsaw	PGE EOS.A.	100.00%	100.00%
40.	PGE Soleo 2 sp.z o.o. Warsaw	PGE EOS.A.	100.00%	100.00%
41.	PGE Soleo 3 sp.z o.o. Warsaw	PGE EOS.A.	100.00%	100.00%
42.	PGE Soleo 4 sp.z o.o. Warsaw	PGE EOS.A.	100.00%	100.00%
43.	PGE Soleo 5 sp.z o.o. Warsaw	PGE EOS.A.	100.00%	100.00%
44.	PGE Soleo 6 sp.z o.o. Warsaw	PGE EOS.A.	100.00%	100.00%
45.	PGE Soleo 7 sp.z o.o. Warsaw	PGE EOS.A.	100.00%	100.00%
	ECO-POWER sp.z o.o. Warsaw	PGE EOS.A.	-	100.00%
	SEGMENT:DISTRIBUTION
46.	PGE Dystrybucja S.A. Lublin	PGE S.A.	100.00%	100.00%
	SEGMENT:OTHER ACTIVITY
	PGE EJ 1 sp.z o.o. Warsaw	PGE S.A.	-	70.00%
47.	PGE Systemy S.A. Warsaw	PGE S.A.	100.00%	100.00%
48.	PGE Sweden AB (publ) Stockholm	PGE S.A.	100.00%	100.00%

	Entity	Entity holding stake	Stake held by Group entities as at June 30, 2021	Stake held by Group entities as at 31 December 2020
49.	PGE Synergia sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
50.	"Elbest" sp.z o.o. Bełchatów	PGE S.A.	100.00%	100.00%
51.	Elbest Security sp.z o.o. Bełchatów	PGE S.A.	100.00%	100.00%
52.	PGE Inwest 2 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
53.	PGE Venturessp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
54.	PGE Inwest 8 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
55.	PGE Inwest 9 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
56.	PGE Inwest 10 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
57.	PGE Inwest 11 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
58.	PGE Inwest 12 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
59.	PGE Inwest 13 S.A. Warsaw	PGE S.A.	100.00%	100.00%
60.	PGE Inwest 14 sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
61.	PGE Nowa Energia sp.z o.o. Warsaw	PGE S.A.	100.00%	100.00%
62.	Towarzystwo Funduszy Inwestycyjnych Energia S.A. Warsaw	PGE S.A.	100.00%	100.00%
63.	Rybnik 2050 sp.z o.o. w organizacji Warsaw	PGE S.A.	100.00%	-
64.	BIO-ENERGIA sp.z o.o. Warsaw	PGE EOS.A.	100.00%	100.00%
65.	Przedsiębiorstwo Transportowo-Usługowe "ETRA" sp.z o.o. Białystok	PGE Dystrybucja S.A.	100.00%	100.00%
66.	Energetyczne Systemy Pomiarowe sp.z o.o. Białystok	PGE Dystrybucja S.A.	100.00%	100.00%
67.	PrzedsiębiorstwoUsługowo-Handlowe TOREC sp.z o.o. Toruń	PGE Toruń S.A.	51.05%	51.05%
68.	4Mobility S.A. Warsaw	PGE Nowa Energia sp.z o.o.	51.47%	51.47%
69.	PIMERGE S.A. Wrocław	PGE Venturessp.z o.o.	89.87%	89.87%

The table above includes the following changes in the structure of PGE Group companies subject to full consolidation which took place during the period ended June 30, 2021.

Rybnik 2050 sp.z o.o. w organizacji wasformed on February 1, 2021. The company was not yet registered at the National Court Register as of the date on which this report was prepared.
On March 1, 2021, an Extraordinary General Meeting of PGE Trading GmbH adopted a resolution to dissolve PGE Trading GmbH and appoint a liquidator to carry out liquidation. Due to the loss of control related to the liquidation, as of April 1, 2021 PGE Trading GmbH is no longer a part of PGE Group and is not subject to consolidation.
An agreement to sell allsharesin PGE EJ1 sp.z o.o. to the State Treasury wassigned on March 26, 2021.Ownership of the shares was transferred on March 31, 2021. In connection with this sale, PGE Group recorded a gross loss of PLN 19 million in its consolidated financialstatements.
On March 31, 2021 an Extraordinary General Meeting of PGE EO S.A. (acquiring company) and Extraordinary General Meeting of ECO - POWER sp. z o.o. (acquired company) adopted resolutions to merge the companies by transferring the entire assets of the acquired company to the acquiring company without issuing new shares by the acquiring company in exchange forsharesin the acquired company. The merger was registered at the National Court Register on April 30, 2021. The merger had no impact on these consolidated financialstatements.

The following joint ventures are subject to consolidation as regards the assets, equity and liabilities, revenues and costs attributable to PGE Group:

	Entity	Entity holding stake	Stake held by Group entities as at June 30, 2021	Stake held by Group entities as at 31 December 2020
	SEGMENT:RENEWABLES
1.	Elektrownia Wiatrowa Baltica-2 sp.z o.o. Warsaw	PGE Baltica 6 sp.z o.o.	50.00%	100.00%
2.	Elektrownia Wiatrowa Baltica-3 sp.z o.o. Warsaw	PGE Baltica 5 sp.z o.o.	50.00%	100.00%

In May this year, Ørsted Group entities acquired stakes in the increased capital of Elektrownia Wiatrowa Baltica - 2 sp. z o.o. and Elektrownia Wiatrowa Baltica - 3 sp. z o.o. Following this transaction, Ørsted Group became a 50% shareholder in EWB2 and EWB3. In effect, PGE Group lost control overthese two companies.

As a result of the transaction and signed agreements, the shareholders have joint control over EWB2 and EWB3. Decisions regarding all major activities require unanimous consent from the shareholders. At the same time, based on professional judgement, PGE Group assessed that as a result of the agreements signed the shareholders have the right to generally all of the economic benefits that will be generated by the companies' assets and will generally be their only source ofrevenue. According to PGEGroup,starting from the date on which the stakes were acquired by Ørsted (as mentioned above), EWB2 and EWB3 constitute a joint operation in the meaning of IFRS Joint Arrangements, in connection with which in these financial statements PGE Group recognises its 50% stake in the assets, liabilities, revenues and costs of the jointly controlled entities.

The following table presentsthe way in which the loss of control over EWB2 and EWB3 was accounted for:

	EWB2	EWB3	Total

Fair value of contractual joint operation attributable to PGE Group (50%)	233	297	530
Net carrying amount of assets priorto loss of control	90	116	206
GAINONLOSSOF CONTROL	143	181	324

Fair value of contractual joint operation attributable to PGE Group (50%)	233	297	530
Net assets atthe date joint control began	197	252	449
GOODWILL	36	45	81

The following associates and jointly controlled entities are subject to consolidation using the equity method:

	Entity	Entity holding stake	Stake held by Group entities as at June 30, 2021	Stake held by Group entities as at 31 December 2020
1.	Polska Grupa Górnicza S.A. Katowice	PGE GiEK S.A.	15.32%	15.32%
2.	Polimex Mostostal S.A. Warsaw	PGE S.A.	16.48%	16.48%
3	ElectroMobility Poland S.A. Warsaw	PGE S.A.	25.00%	25.00%
4.	PEC Bogatynia Bogatynia	PGE GiEK S.A.	34.93%	34.93%
5.	Energopomiarsp.z o.o. Gliwice	PGE Group companies	49.79%	49.79%

On August 19, 2021 an Extraordinary General Meeting of ElectroMobility Poland S.A. adopted a resolution to decrease the company's share capital from PLN 70,000,000 to PLN 52,300,500, by reducing the nominal value of allsharesfrom PLN 7,000 to PLN 5,230.05 each. The goal of the share capital decrease is to transfer funds from share capital to supplementary capital, in connection with which the proceedsfromthe share capitaldecreasewill go to the company'ssupplementary capital.Moreover, onAugust 19, 2021 anExtraordinary General Meeting of ElectroMobility Poland S.A. adopted a resolution to increase the company'sshare capitalfromPLN52,300,500 to PLN 302,296,890. The company's Extraordinary General Meeting decided to waive the existing shareholders' pre-emption right completely and offer all of the new shares to the State Treasury in exchange for a cash contribution. As a result of the State Treasury becoming a shareholder of ElectroMobility Poland S.A., PGE S.A.'sstake in this company'sshare capital will decline from 25% to 4.33%. Atthe date on which these financialstatements were approved for publication, these changes were not yetregistered at the National Court Register.

2. Basisforpreparationoffinancialstatements

2.1 Statementof compliance

These consolidated financialstatements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and in the scope required under the Regulation of the Minister of Finance of March 29, 2018 on current and periodic information provided by issuers of securities and conditions of recognition as equivalent information required by the law of a non-Member State (Polish Journal of Laws 2018, items 512 and 685).

IFRS comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee.

2.2 Presentationandfunctional currency

The parent's functional currency and the presentation currency of these consolidated financial statements is the Polish zloty (PLN). All amounts are in PLN millions(PLNm), unlessindicated otherwise.

For the purpose of translation of items denominated in currency other than PLN as at the reporting date the following exchange rates were applied:

	June 30, 2021	31 December 2020	June 30, 2020
USD	3.8035	3.7584	3.9806
EUR	4.5208	4.6148	4.4660

2.3 Newstandardsandinterpretationspublished,notyeteffective

The following standards, amendmentsto existing standards and interpretations are not yet endorsed by the European Union or are not effective as at January 1, 2021:

Standard	Description of changes	Effective date
IFRS 14 Regulatory Deferral Accounts	Accounting and disclosure principlesfor regulatory deferral accounts.	In accordance with a decision by the European Commission, the approval process for the standard in its preliminary version will not begin before the final version is published.
Amendmentsto IFRS 10 and IAS 28	Contains guidelines on the sale or contribution of assets between an investor and itsjoint venture or associate.	Postponed indefinitely
IFRS 17 Insurance contracts	Defines a new approach to recognising revenue and profit/lossin the period in which insurance services are provided	January 1, 2023
Amendmentsto IAS 1	The changes concern presentation of financialstatements Classification of Liabilities as Current or Non-current	January 1, 2023
Amendmentsto IAS 1	The amendments concern the presentation of financialstatements disclosures regarding the applied accounting policy	January 1, 2023
Amendmentsto IAS 8	The amendments concerning disclosuresregarding the applied accounting policy, including changesin estimated values and correcting errors	January 1, 2023
Amendmentsresulting from IFRS annual improvement cycle 2018-2020	Amendmentsto IFRS 1, IFRS 9, IFRS 16 and IAS 41 mainly concern the resolution of inconsistencies and clarification of terminology.	January 1, 2022
Amendmentsto IFRS 3	Amendmentsto Referencesto the Conceptual Framework	January 1, 2022
Amendmentsto IAS 16	Proceedsfrom property, plant and equipment before intended use	January 1, 2022
Amendmentsto IAS 37	Onerous Contracts — Cost of Fulfilling a Contract	January 1, 2022
Amendmentsto IFRS 16	Covid-19-Related Rent Concessions	April 1, 2021
Amendmentsto IAS 12	Deferred Tax related to Assets and Liabilities arising from a Single Transaction	January 1, 2023

PGE Group intends to adopt the above new standards, amendments to standards and interpretations published by the International Accounting Standards Board but not yet effective at the reporting date, when they enter into force. These regulations will not have a material impact on PGE Group'sfuture financialstatements.

2.4 Professionaljudgementofmanagementandestimates

In the process of applying accounting rulesin the mattersreferred to below, ofthe mostimportance, aside from accounting estimates, is the professional judgement of management, which has an impact on the amounts presented in the consolidated financial statements, including in additional explanatory notes. The estimates are based on the best knowledge of the Management Board relating to current and future operations and events in specific areas. Detailed information on the assumptions made is presented below or in respective explanatory notes.

During the reporting period, PGE Group updated itsimpairment losses on assets, in particular of property, plant and equipment. These changes are described in note 3 to these financialstatements.
Estimates of the recoverable amount of property, plant and equipment are based on a number of significant assumptions, the appearance of which is uncertain and mostly beyond PGE Group's control. The Group believes that it has assumed the most accurate volumes and values. Nevertheless, realisation of the particular assumptions may diverge from the ones established by the Group.
Provisions are liabilities of uncertain amount or timing. During the reporting period, the Group changed estimates regarding the validity or amounts of some provisions.
In particular, during the reporting period a provision for land rehabilitation and a provision for employee benefits were updated due to an increase in the discount rate. Details are presented in note 21 to these financialstatements.
Uncertainties concerning tax settlements are described in note 25 to these consolidated financialstatements.
No significant extensions in the payment of receivables or problems with liquidity resulting from the COVID-19 pandemic were observed as of the reporting date. Following the pandemic's outbreak, in 2020 the Group updated its models for estimating expected credit losses. For the purposes of estimating the expected credit losses, counterparties were split into two groups: strategic counterparties, which have been internally assigned ratings based on a scoring model, and other counterparties, for which expected credit losses are estimated based on a provisions matrix. For the first group of counterparties, the basis for calculating expected credit losses was changed. Losses are currently calculated on the basis of Credit Default Swap (CDS) prices, while for the other group of counterparties percentage coefficients in each time interval of the provisions matrix were updated to a level corresponding to the current recovery rate for receivables. In effect of these two changes, the amount of provisions for expected credit losses at June 30, 2021 was PLN 13 million higher than it would have been had the previous rules been applied. A more extensive description of the impact of the pandemic on PGE Group's businessis presented in note 27.1 to these financialstatements.

3. Impairmenttestsonproperty,plant andequipment,intangibleassets,right-of-use assetsandgoodwill

Property, plant and equipment is PGE Group's most significant group of assets. Due to variable macroeconomic conditions PGE Group regularly verifies indications of impairment for its assets. When assessing the market situation PGE Group uses both its own analytical tools and independent think tanks' support. In previous reporting periods, PGE Group recognised substantial impairment allowances of property, plant and equipment of Conventional Generation segment, District Heating segment and the Renewables segment. An impairment lossrecognised in the Renewablessegment was also in major part reversed in previousreporting periods.

In the currentreporting period,theGroup analysed impairmentindications and identified factorsthat could resultin changesto the asset values in the Conventional Generation and Renewables segments. The tests showed no need to recognise an impairment loss for the Conventional Generation segment and the necessity to reverse the impairment loss for the Renewables segment. An analysis of the indicationsfor conducting impairment testsin the District Heating segment did notshow the need to conduct these tests.

Macroeconomic and other assumptions

The key price assumptions, i.e. the price of electricity, CO² emission allowances, hard coal, natural gas, and assumptions related to production at most of the Group's installations were derived from a study prepared by an independent expert, taking into account own estimates based on the current marketsituation forthe first two years of the forecast.

The forecastsfor electricity prices expect a decline in price in 2022 in reference to 2021 prices, a major price hike in 2023 in comparison with 2022, a decline in 2024 in reference to 2023, and subsequently an annual increase of 6% on average in 2025-2029.

The price forecastsfor CO² emission allowances expect amajorincrease in 2023 in comparisonwith 2022, an annual decline in 2024-2025 of 6.5% on average and an annual increase in 2026-2029 of 12.7% on average. A slight decrease is expected in 2030, in comparison with 2029, followed by stable growth at approx. 4% annually until 2040.

The forecastsfor hard coal prices expect a majorincrease in 2023 in reference to 2022, followed by an average annual growth of 2.8 until 2030.

The forecastsfornatural gasprices expect anincrease inprice in2022 in reference to 2021 prices, amajor pricehike in2023 incomparison with 2022, followed by an average annual growth of approx. 4.1% in subsequent years.

The price forecasts for certificates of origin for energy expect an increase in the first two years of the forecasts, followed by an average annual decline of approx. 9% in 2023-2031, which isrelated to the decreasing obligation to redeem these certificates.

The forecast for revenue from the capacity market for 2021-2025 is based on the results of completed main and additional auctions for these delivery periods, taking into account the joint balancing mechanism at PGE Group companies. From 2026, the forecast was developed by a teamof experts at PGE S.A. on the basis of assumptions concerning estimated future flowsfor generating units, based on, inter alia,results of a completed auction and forecastsfroman external expert. For one-year contractswith delivery fromJuly 1, 2025 and for multiannual contracts executed as part of the auction for 2025 and subsequent, the 550g CO2/kWH (EPS 550) emission criterion isin place, which in practice rules out all coal unitsfrom Capacity Market auctions.

Unit availability was estimated based on repair plans, taking into accountstatistical failure rates.

On February 2, 2021 the Council of Ministers approved "Poland's Energy Policy 2040." The Policy constitutes a vision for Poland in the area of energy transition, indicating, inter alia, the expected structure of electricity generating units. According to the Policy, the share of low- and zero-emission units will grow, while the share of coal-based units will decline.

However, the pace of the energy transition and trends expected in the PEP 2040 recently considerably accelerated and strengthened. In July 2021,the European Commission published the Fitfor 55 legislative package, which intendsto, inter alia,reduceGHG emissionsin the EU by 55% (previously 40%) by 2030, in comparison with 1990. In line with the expectations of market participants, the EU ETS reform included in the package should result in a considerable increase in the prices of CO² emission allowances, which in practice already took place in thisfirst half ofthe year. In effect,the currentlevel of pricesfor CO² emission allowancessignificantly divergesfromthat assumed in the PEP 2040. Another important element that vastly divergesfrom the Policy's assumptions is the dynamic increase in PV capacities as a result of numerous grant programs, a discountsystem for prosumers and renewable energy auctions. In effect, the level of installed capacities expected for 2030 has already been achieved.

In connection with the above, for the purposes of impairment tests on tangible assets, PGE Group uses assumptions developed by an independent analytical centre, which take into account the current regulatory and market situation. Future changes on the electricity market may differ from the current assumptions, which may lead to substantial changes in PGE Group's financial situation and results. They will be recognised in future financialstatements.

3.1 DescriptionofassumptionsfortheConventionalGenerationsegment

Impairmenttestswere conductedonJune 30, 2021, oncashgenerating unit basis by establishing theirrecoverable amounts.Determining fair value for very large groups of assetsfor which there is no active market and there are few comparable transactionsis very difficult in practice. In the case of complete power plants and mines for which a value on the local market should be determined there are no observable fair values. Given the above, the recoverable value of the analysed assets was estimated on the basis of discounted net cash flow method which relied on financial projections prepared for the period from July 2021 to the end of the use period. According to the Group, financial projections longer than five years are justified due to significant and long-term effects of projected changes in the regulatory environment. Using longer projections, recoverable amounts may be determined more reliably.

Detailed segment assumptions

Presented below are the key assumptions having impact on estimates of the useful value of CGU:

classify the following as one CGU due to technological links:
- Branch KWB Bełchatów and Branch Elektrownia Bełchatów ("Bełchatów complex").
- Branch KWB Turów and Branch Elektrownia Turów ("Turów complex").
classify Elektrownia Dolna Odra, Elektrownia Szczecin and Elektrownia Pomorzany, which are part of Branch Zespół Elektrowni Dolna Odra, asthree separate CGUs,
adopt the going concern assumption:
- until 2036 for the Bełchatów complex based on a trade union-approved date for shutting down all units, adopted for the purposes of the Just Transition Plan for the Łódzkie Voivodship,
- until 2044 for the Turów complex based on a decision to prolong the mining concession validity period to 2044 of April 28, 2021.
adopt the assumption that in the period after June 2025 there will be support from the capacity market or equivalent for units complying with the emission criterion of 550 g CO2/kWh of produced electricity, althoughmultiannual contracts executed as part of auctions for 2021-2024 are performed in accordance with their validity periods; for units that do not meet the emission criterion, there isthe possibility of balancing multiannual contracts executed by 2019,
take into account work cost optimisation resulting from current work plans, among other things,
maintain production capacities as a result of replacement-type investments,
adopt WACC after tax for the projection period at 6.06%-7.56%, depending on the CGU, in accordance with an individually estimated level of risk.

PGE Group's surroundings are characterised by high volatility and dependence on macroeconomic, market and regulatory conditions, and any changes in this regard may have a substantial impact on PGE Group's financial situation and results. This is why the above and other assumptions adopted in estimates of the useful value of assets are subject to periodic analysis and verification. Potential changes will be recognised in future financialstatements.

As at June 30, 2021, the value of tested property, plant and equipment and intangible assets at PGE GiEK S.A. amounted to PLN 25,910 million. This value does not include CGUs for which the useful value of tested assets is negative. As a result of an asset impairment test, the Group estimated the useful value ofthe assets being tested at PLN31,368million, in connection with which it concluded thatthere is no need to recognise orreverse impairment losses on these assets.

Sensitivity analysis

In accordance with IAS 36 Impairment, the Group carried out a sensitivity analysis for generating units in the Conventional Generation segment.

Presented below isthe impact of changesin key assumptions on the useful value of assetsin the Conventional Generation segment as at June 30, 2021.

		Impact on useful value in PLNbn
Parameter	Change	Increase	Decrease
	1%	1.8	-
Change in electricity prices throughout the forecast period	-1%	-	1.8

A decline in electricity price by 1% would have caused a PLN 1.8 billion decrease in useful value.

			Impact on useful value in PLNbn
Parameter	Change	Increase	Decrease
		+0.5pp	-	0.9
Change in WACC		-0.5pp	1.0	-

An increase in WACC by 0.5 points would have caused a PLN 0.9 billion decrease in useful value.

			Impact on useful value in PLNbn
Parameter	Change	Increase	Decrease
	1%	-	1.0
Changes in prices for CO2 emission allowances	-1%	1.0	-

An increase in the price of CO² emission allowances by 1% would have caused a PLN 1 billion decrease in useful value.

3.2 AnalysisofimpairmentindicationsintheDistrictHeatingsegment

In previous reporting periods, PGE Group recognised substantial impairment losses on the non-current assets in the District Heating segment. The key assumptions used in the impairment tests carried out as at November 30, 2020 are described in PGE Group's consolidated financialstatementsfor 2020.

In the currentreporting period, the Group performed an analysis of indicationsin orderto determine whetherthese assets are impaired orthe earlierimpairment losses may be reversed.

The most important factors analysed include:

financial plan analysis,
confirmation that the investment plan is up-to-date,
analysis of prices for energy, hard coal, CO² emission allowances and natural gas
analysis of heat prices,
analysis of assumptionsregarding the capacity market, support for cogeneration
analysis of estimated margins on the production and sale of electricity in future periodsin the light of price forecastsfor energy, hard coal, gas and CO² emission allowances.

The analysis of indications performed forthe District Heating segmentshowed that the generating units are implementing theirfinancial plan in accordance with assumptions. Price forecasts for natural gas, electricity, hard coal, gas and CO² emission allowances that are available to PGE Group mean that margin forecasts are favourable for both the sale of electricity and heat. The cogeneration support system for gas units has been reduced, howeverit has been replaced with supportin the formofthe capacity market,therefore this gives no rise to the risk of significant changes in useful values. Assumptions concerning the capacity market, in comparison to 2020, have a positive impact on forecastrevenue from the program, having been updated to include completed auctions. Given the above, according to PGE, atthe end ofthe reporting period there were no indicationsthat would warrantthe recognition ofimpairmentlosses on the noncurrent assetsin the District Heating segment orthe reversal of impairment lossesrecognised in previous periods.

3.3 DescriptionofassumptionsfortheRenewablessegment

In the presentreporting period, PGE Group conducted asset impairment tests as of June 30, 2021.

The following cash generating units are identified and analysed in the Renewablessegment:

Considered as separate CGU belonging to PGE EO S.A.
- total pumped-storage power plants
- total other hydropower plants
- individual wind farms owned by PGE EO S.A.
- individual wind farms owned by PGE Klaster sp.z o.o.

Impairment tests on the non-current assets of CGU PGE EO S.A.

Impairment tests were conducted as at June 30, 2021, on cash generating unit basis by establishing their recoverable amounts. The recoverable value of the analysed assets was estimated on the basis of discounted net cash flow method which relied on the financial projections prepared for the assumed useful life of the particular CGU in the case of wind farms or for 2021-2030 in the case of other

CGUs. For CGUs with expected periods of economic useful lives in excess of 2030, a residual value was determined for the remaining service time. According to the Group, financial projectionslongerthan five years are justified because the property, plant and equipment used by the Group have significantly longer useful lives and also due to considerable and long-term effects of projected changes in the regulatory environment included in the detailed forecast.

Detailed assumptions

Presented below are the key assumptions having impact on estimates of the useful value of CGU:

classification as a separate CGU of the following:
- pumped-storage plants(one CGU for all plants due to their shared economic nature);
- other hydropower plants(one CGU for all plants due to their shared economic nature);
- individual wind farms(separate CGU for each wind farm due to different operational periods);
production of electricity and property rights were estimated based on historic data, adjusted by the availability of units;
unit availability was estimated based on repair plans, taking into account statistical failure rates;
revenue from regulatory system services until mid-2023 were estimated based on the currently functioning system of remuneration for these services, from mid-2023 it is expected that the market mechanism for contracting regulatory services will start functioning, the revenuesfrom which have been estimated based on PGE Group'sinternal analyses;
maintain production capacities as a result of replacement-type investments;
adopt WACC after tax for the projection period at 6.56%.

As a result of the non-current asset impairment test, the Group identified the need to release (reverse) impairment lossesrecognised in previousreporting periods on wind farms as of the reporting date.

The following table presentsthe value of impairmentreversal as of June 30, 2021 asregards wind farms.

As atJune 30, 2021	Discountrate	Tested value	Reversal of impairment	Value after impairment
Wind farms(PLNm)	6.56%	1.906	4	1.910

Sensitivity analysis

A sensitivity analysisshowed that factorssuch as WACC and electricity prices have a considerable impact on estimated useful value. The results of thissensitivity analysis concern all CGUs owned by PGE EO S.A.

Presented below isthe impact of factorsthat have considerable influence throughout the entire projection period on forecast cash flows and thus also on estimated useful values.

			Impact on useful value in PLNm
Parameter	Change	Increase	Decrease
	1%	67	-
Change in electricity prices throughout the forecast period	-1%	-	67

A decline in electricity price by 1% would have caused a PLN 67 million decrease in useful value.

Parameter		Change	Impact on useful value in PLNm
			Increase	Decrease
		+0.5pp	-	1,077
Change in WACC	-0.5pp	1,375	-

An increase in WACC by 0.5 points would have caused a PLN 1.077 million decrease in useful value. A change in WACC by 0.5 points has no impact on the amount of impairment orreversal.

Impairment tests on the non-current assets of CGU PGE Klastersp.z o.o.

Detailed assumptions

production of electricity is assumed on the basis of assumptionsfor the investment model,
adopt WACC in the period ofsupport in the form of auction price at 5.06% and in the remainder of the projection at 6.56%.

The following table presentsthe value of impairmentreversal as of June 30, 2021 asregards wind farms owned by PGE Klastersp.z o.o.

As atJune 30, 2021	Discountrate	Tested value	Reversal of impairment	Value after impairment
Wind farms(PLNm)	5.06% / 6.56%	687	36	723

Sensitivity analysis

InaccordancewithIAS 36,theGroupperformed a sensitivity analysisfor PGE Klastersp.z o.o.'swindfarms. Presented belowisthe impact of changesin WACC on the useful value of assets as at June 30, 2021:

Parameter		Impact on useful value in PLNm
	Change	Increase	Decrease
	+0.5pp	-	50
Change in WACC	-0.5pp	54	-

An increase in WACC by 0.5 points would have caused a PLN 50 million decrease in useful value. A change in WACC by 0.5 points has no impact on the amount of impairment orreversal.

4. Changesinaccountingprinciplesanddatapresentation

New standards and interpretationsthat went into force on January 1, 2021

The accounting principles (policy) applied in preparing these financial statements are consistent with those applied in preparing the financial statements for 2020. The following amendments to IFRSs are applied in these financial statements in line with their effective dates. The following amendments did not have a material impact on the presented and disclosed financial information or were not applicable to the Group'stransactions:

Amendmentsto IFRS 4 Extension of the Temporary Exemption from Applying IFRS 9;
Amendmentsto IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform Phase II.

The Group decided not to apply early any standard, interpretation or amendment that was published but is not yet effective in the light of EU regulations.

5. Fair valuehierarchy

Derivatives

The Groupmeasures derivatives at fair value using valuationmodelsforfinancial instruments based on publicly available exchange rates, interestrates, discount curvesin particular currencies(applicable also for commodities which prices are denominated in these currencies) derived from active markets. The fair value of derivatives is determined based on discounted future cash flows from transactions, calculated based on the difference between the forward rate and transaction price. Forward exchange rates are not modelled as a separate risk factor, but are derived from the spotrate and appropriate forward interestrate forforeign currenciesin relation to PLN.

In the category of financial assets and financial liabilities at fair value through profit or loss, the Group presents financial instruments related to greenhouse gas emissionstrading – currency and commodity forwards, contractsto buy and sell coal, commodity swaps(Level 2).

In addition, the Group presents a CIRRUS derivative instrument that hedges foreign exchange rate and interest rate and IFRS hedging transactions exchanging a variable interest in PLN for a fixed interestrate in PLN (Level 2).

	Assets as of		Liabilities as of
	June 30, 2021		June 30, 2021
FAIR VALUE HIERARCHY	Level 1	Level 2	Level 1	Level 2
CO2 emission allowancesin trading activities	1	-	-	-
Hard coal in trading activities	137	-	-	-
INVENTORIES	138	-	-	-
Currency forwards		1	-	-
Commodity forwards		264	-	1
Commodity SWAP		21	-	60
Contractsfor purchase/sale of coal		15	-	7
Options		20	-	-
DERIVATIVES AT FAIR VALUE THROUGH PROFITOR
LOSS	-	321		68
CCIRS hedges	-	25	-	-
IRS hedges	-	-	-	193
Currency forward - USD	-	-	-	-
Currency forward - EUR	-	65	-	68
HEDGING DERIVATIVES	-	90	-	261
Investmentfund participation units	-	43	-	-
OTHER ASSETS / LIABILITIES MEASURED AT FAIR VALUE
THROUGH PROFITOR LOSS	-	43	-	-

	Assets at		Liabilities at
	December 31, 2020		December 31, 2020
FAIR VALUE HIERARCHY	Level 1	Level 2	Level 1	Level 2
CO2 emission allowancesin trading activities	1	-	-	-
Hard coal in trading activities	144	-	-	-
INVENTORIES	145	-	-	-
Currency forwards		3	-	4
Commodity forwards		11	-	4
Commodity SWAP		11	-	13
Contractsfor purchase/sale of coal		17	-	18
Options		16	-	-
DERIVATIVES AT FAIR VALUE THROUGH PROFITOR	-	58		39
LOSS
CCIRS hedges	-	64	-	-
IRS hedges	-	-	-	385
Currency forward - USD	-	-	-	1
Currency forward - EUR	-	381	-	23
HEDGING DERIVATIVES	-	445	-	409
Investmentfund participation units OTHER ASSETS / LIABILITIES MEASURED AT FAIR VALUE	- -	52 52	- -	- -

Derivative instruments are presented in note 18 to these financial statements. During the current and comparative reporting periods, there were no transfers of financial instruments between the first and second level of the fair value hierarchy.

EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS EXPLANATORY NOTES TO OPERATING SEGMENTS

6. Informationonoperating segments

PGE Group companies conduct their business activities based on relevant concessions, including primarily concession on: production, trading and distribution of electricity, generation, transmission and distribution of heat, granted by the President of Energy Regulatory Office and concessionsforthe extraction oflignite deposits, granted by the Minister ofthe Environment. Concessions, as a rule, are being issued forthe period between 10 and 50 years.

Relevant assets are assigned to concessions for lignite mining and generation and distribution of electricity and heat, as presented in detailed information on operating segments. For its concessions concerning electricity and heat, the Group pays annual fees dependent on the level of turnover, while lignite mining operations under concessions are subject to extraction fees depending on the current rate and volume of output as well as mining use fees.

PGE Group presents information on operating segments in the current and comparative reporting period in accordance with IFRS 8 Operating Segments. PGE Group'ssegment reporting is based on the following businesssegments:

Conventional Generation, comprising exploration and production of lignite, conventional generation of electricity and ancillary services.
District Heating, comprising the generation of electricity from cogeneration sources and the transmission and distribution of heating.
Renewables, comprising the generation of electricity in pumped-storage power plants and from renewable sources.
Supply, comprising selling and buying electricity and natural gas on wholesale markets, emissions trading, buying and supplying fuels as well as selling electricity and providing services to end users.
Distribution, comprising management over local distribution networks and transmission of electricity.
Circular Economy, comprising management of the by-products of combustion.
Other operations, comprising services provided by subsidiariesfor the Group, e.g. capital raising, IT services, accounting and HR, and transportservices and investments in startups.

PGEGroup is organised andmanaged in segmentsthat are distinctin terms of products and services. Each segmentrepresents a strategic business unit that offers distinct goods and serves different markets. Entities assigned to operating segments are described in note 1.3 of these consolidated financialstatements. PGE Group accountsfor inter-segment transactions asif they concerned unrelated entities- on market terms. When analysing the results of businesssegmentsthe management of PGE Group focuses mainly on EBITDA.

Starting in 2021, PGE Group reports a new operating segment - Circular Economy - the assets and results of which were recognised and analysed within the following segments: Conventional Generation, District Heating and Other Operations. The data for the comparative period was notrestated.

Seasonality of businesssegments

Key factorsaffectingthedemandforelectricity andheatingare:weather conditions–airtemperature,windforce,rainfall;socio-economic factors – number of energy consumers, prices of energy sources, GDP growth; and technological factors – technological progress, manufacturing technologies. Each of these factors has an impact on technical and economic conditions of production, distribution and transmission of energy carriers, thusinfluence the results obtained by PGE Group.

The level of electricity sales variesthroughout the year, depending especially on weather conditions- airtemperature, length of the day. Growth in electricity demand is particularly evident in winter periods, while lower demand is observed during the summer months. Moreover,seasonal changes are evident among selectedgroupsof end users. Seasonality effects aremore significantfor householdsthan forthe industrialsector.

In the Renewables segment, electricity is generated from natural resources such as water, wind and sun. Weather conditions are an important factor affecting electricity generation in thissegment.

Sales of heat depend in particular on air temperature and are higherin winter and lowerin summer.

6.1 Informationonbusinesssegments

Information on businesssegmentsfor the period ended June 30, 2021

	Conventional Generation	DistrictHeating	Renewables	Supply	Distribution	Circular Economy	Other activity	Adjustments	Total
STATEMENT OF PROFITOR LOSS
Salesto external customers	8,577	2,098	396	7,543	3,186	68	36	4	21,908
Inter-segmentsales	2,162	851	245	6,384	39	70	178	(9,929)	-
TOTAL SEGMENT REVENUE	10,739	2,949	641	13,927	3,225	138	214	(9,925)	21,908
Cost of goodssold	(10,343)	(2,405)	(367)	(12,458)	(2,345)	(103)	(184)	9,413	(18,792)
EBIT	1,073	396	237	690	767	19	8	(32)	3,158
Depreciation, amortisation, liquidation and impairment recognised in profit orloss	976	319	145	16	615	5	31	(11)	2,096
EBITDA	2,049	715	382	706	1,382	24	39	(43)	5,254
GROSS PROFIT	-	-	-	-	-	-	-	-	3,210
Income tax NET PROFIT FOR THE REPORTING PERIOD	- -	- -	- -	- -	- -	- -	- -	- -	(491) 2,719
ASSETSAND LIABILITIES
Segment assets excluding trade receivables	34,277	7,689	4,264	2,983	19,468	70	342	(2,142)	66,951
Trade receivables	659	199	178	3,326	915	53	59	(1,958)	3,431
Equity-accounted interests	-	-	-	-	-	-	-	-	161
Unallocated assets	-	-	-	-	-	-	-	-	9,012
TOTAL ASSETS	-	-	-	-	-	-	-	-	79,555
Segmentliabilities excluding trade liabilities	13,218	2,068	676	3,664	2,856	48	97	(2,167)	20,460
Trade liabilities	722	259	44	2,745	336	35	26	(2,959)	1,208
Unallocated liabilities	-	-	-	-	-	-	-	-	11,906
TOTAL LIABILITIES	-	-	-	-	-	-	-	-	33,574
OTHER INFORMATIONON BUSINESS SEGMENT
Capital expenditures	1,385	199	72	3	604	4	19	(57)	2,229
Increasesin right-of-use assets	2	5	5	2	2	-	2	-	18
TOTAL INVESTMENT EXPENDITURES	1,387	204	77	5	606	4	21	(57)	2,247
Acquisition of property, plant and equipment, intangible assets,right of-use assets and investment properties as part of acquisition of new companies	-	-	81	-	-	-	-	-	81
Impairmentlosses on financial and non-financial assets	106	(3)	(41)	(18)	5	-	(1)	-	48
Other non-monetary expenses *)	2,817	582	15	531	33	2	13	-	3,993

*) Non-monetary expensesinclude mainly changesin provisionssuch as:rehabilitation provision, provision for CO² emission rights, provision forseniority bonuses, employee tariff and non-financial liabilities concerning employee benefitsthat are recognised in profit orloss and other comprehensive income.

Information on businesssegmentsfor the period ended June 30, 2020

	Conventional Generation	DistrictHeating	Renewables	Supply	Distribution	Other activity	Adjustments	Total
STATEMENT OF PROFITOR LOSS
Salesto external customers	9,276	1,556	382	9,987	3,091	38	(1,554)	22,776
Inter-segmentsales	3,291	1,061	139	5,699	44	199	(10,433)	-
TOTAL SEGMENT REVENUE	12,567	2,617	521	15,686	3,135	237	(11,987)	22,776
Cost of goods sold	(12,288)	(2,234)	(335)	(14,843)	(2,493)	(232)	11,532	(20,893)
EBIT	(667)	193	152	169	502	(39)	(39)	271
Depreciation, amortisation, liquidation and impairment recognised in profit or loss	1,441	300	149	18	625	44	(43)	2,534
EBITDA	774	493	301	187	1,127	5	(82)	2,805
GROSS LOSS	-	-	-	-	-	-	-	(544)
Income tax	-	-	-	-	-	-	-	(93)
NET LOSS FOR THE REPORTINGPERIOD	-	-	-	-	-	-	-	(637)
ASSETSAND LIABILITIES
Segment assets excluding trade receivables	34,164	7,833	4,118	3,251	19,203	854	(2,054)	67,369
Trade receivables	603	220	145	3,645	812	67	(2,304)	3,188
Shares accounted for using the equitymethod	-	-	-	-	-	-	-	157
Unallocated assets	-	-	-	-	-	-	-	4,411
TOTAL ASSETS	-	-	-	-	-	-	-	75,125
Segmentliabilities, exceptfortrade liabilities	14,712	2,127	1,015	2,538	2,812	138	(4,022)	19,320
Trade liabilities	889	213	30	1,891	221	30	(2,258)	1,016
Unallocated liabilities	-	-	-	-	-	-	-	12,517
TOTAL LIABILITIES	-	-	-	-	-	-	-	32,853
OTHER INFORMATIONONBUSINESS SEGMENT
Capital expenditures	811	175	647	5	819	85	(51)	2,491
Increasesin right-of-use assets	2	3	2	1	6	2	(3)	13
TOTAL INVESTMENT EXPENDITURES	813	178	649	6	825	87	(54)	2,504
Impairmentlosses on financial and non-financial assets	622	2	-	34	8	-	-	666
Other non-monetary expenses *)	3,385	497	20	362	180	26	174	4,644

EXPLANATORY NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

7. Revenueandcosts

7.1 Salesrevenue

Salesrevenue forthe period ended June 30, 2021, by category

The following tablepresents a reconciliationbetweenrevenue disclosed by category andinformationonrevenue thattheGroupdiscloses for each reporting period.

	Conventional Generation	DistrictHeating	Renewables	Supply	Distribution	Circular Economy	Other activity	Adjustments	Total
Revenue fromcontracts with customers	10,733	2,927	638	13,924	3,195	138	213	(9,912)	21,856
RevenuesfromLTC compensations	-	4	-	-	-	-	-	-	4
Revenue fromsupportfor high efficiency cogeneration	-	5	-	-	-	-	-	-	5
Revenue from leases	6	13	3	3	30	-	1	(13)	43
TOTAL SALES REVENUE	10,739	2,949	641	13,927	3,225	138	214	(9,925)	21,908

The following table presents revenue from contracts with customers by category to reflect the manner in which economic factors influence the type, amount, payment deadline and uncertainty of revenue and cash flows.

Type of goods orservices	Conventional Generation	DistrictHeating	Renewables	Supply	Distribution	Circular Economy	Other activity	Adjustments	Total
Revenue fromsale of goods and products, without excluding taxes and fees	10,716	2,901	632	13,564	3,827	56	23	(9,232)	22,487
Taxes and fees collected on behalf ofthird parties	(5)	(2)	-	(73)	(657)	-	-	-	(737)
Revenue from sale of goods and products, including:	10,711	2,899	632	13,491	3,170	56	23	(9,232)	21,750
Sale of electricity	8,282	1,340	390	6,411	1			(2,307)	14,117
Capacity market	1,046	138	145	16	-	-	-	-	1,345
Sale of distribution services	10	5	-	25	3,071	-	-	(37)	3,074
Sale of heat	116	1,373	-	7	-	-	-	-	1,496
Sale of energy origin rights	35	9	82	-	-	-	-	5	131
Regulatory systemservices	161	-	18	-	-	-	-	-	179
Sale of natural gas	-	-	-	177	-	-	-	(90)	87
Sale of fuel	-	-	-	215	-	-	-	(114)	101
Sale of CO2 emission allowances	1,019	28	-	6,640	-	-	-	(6,666)	1,021
Othersale of goods and materials	42	6	(3)	-	98	56	23	(23)	199
Revenue from sale ofservices	22	28	6	433	25	82	190	(680)	106
REVENUE FROM CONTRACTSWITH CUSTOMERS	10,733	2,927	638	13,924	3,195	138	213	(9,912)	21,856

Salesrevenue forthe period ended June 30, 2020, by category

The following tablepresents a reconciliationbetweenrevenue disclosed by category andinformationonrevenue thattheGroupdiscloses for each reporting period.

	Conventional Generation	DistrictHeating	Renewables	Supply	Distribution	Other activity	Adjustments	Total
Revenue fromcontracts with customers	12,560	2,560	415	15,683	3,109	237	(11,981)	22,583
RevenuesfromLTC compensations	-	41	-	-	-	-	-	41
Revenue fromsupportfor high efficiency cogeneration	-	7	-	-	-	-	-	7
Revenue from leases	7	9	106	3	26	-	(6)	145
TOTAL SALES REVENUE	12,567	2,617	521	15,686	3,135	237	(11,987)	22,776

Type of goods orservices	Conventional Generation	DistrictHeating	Renewables	Supply	Distribution	Other activity	Adjustments	Total
Revenue fromsale of goods and products, without excluding taxes and fees	12,539	2,511	414	15,289	3,117	37	(11,310)	22,597
Taxes and fees collected on behalf ofthird parties	(2)	(2)	-	(61)	(36)	-	-	(101)
Revenue from sale of goods and products, including:	12,537	2,509	414	15,228	3,081	37	(11,310)	22,496
Sale of electricity	10,595	1,200	268	7,573	1	-	(4,012)	15,625
Sale of distribution services	7	7	-	23	2,972	-	(42)	2,967
Sale of heat	85	1,066	-	5	-	-	-	1,156
Sale of energy origin rights	27	6	120	-	-	-	31	184
Regulatory systemservices	221	-	24	-	-	-	-	245
Sale of natural gas	-	-	-	154	-	-	(77)	77
Sale of fuel	-	-	-	384	-	-	(215)	169
Sale of CO2 emission allowances	1,535	202	-	7,086	-	-	(6,993)	1,830
Othersale of goods and materials	67	28	2	3	108	37	(2)	243
Revenue from sale ofservices	23	51	1	455	28	200	(671)	87
REVENUE FROM CONTRACTSWITH CUSTOMERS	12,560	2,560	415	15,683	3,109	237	(11,981)	22,583

7.2 Costsbynatureandfunction

	Period ended June 30, 2021	Period ended June 30, 2020 restated data
COSTS BY NATURE
Depreciation, amortisation and impairmentlosses	2,098	2,545
Materials and energy	2,780	2,582
Externalservices	1,142	1,230
Taxes and fees	5,257	4,103
Employee benefits expenses	2,633	2,835
Other costs by nature	165	138
TOTAL COST BYNATURE	14,075	13,433
Change in productinventories	9	(5)
Cost of products and servicesforinternal purposes	(301)	(421)
Distribution and selling expenses	(759)	(738)
General and administrative expenses	(501)	(535)
Cost of goods andmaterialssold	6,269	9,159
COSTOFGOODS SOLD	18,792	20,893

7.2.1 Depreciation,amortisation,liquidationandimpairmentlosses

The following presents depreciation, amortisation, liquidation and impairment of property, plant and equipment, intangible assets,rightof-use assets and investment propertiesin the statement of comprehensive income.

Period ended	Depreciation, amortisation, disposal					Impairment
June 30, 2021	Property, plant and equipment	Intangible assets	Right of-use assets	Investment property	TOTAL	Property, plant and equipment	Intangible assets	Right-of use assets	TOTAL
Cost of goodssold	1,929	29	25	1	1,984	68	(1)	1	68
Distribution and selling expenses	5	1	-	-	6	-	-	-	-
General and administrative expenses	18	14	5	-	37	1	-	-	1
RECOGNISED INPROFITOR LOSS	1,952	44	30	1	2,027	69	(1)	1	69
Change in productinventories	(1)	-	-	-	(1)	-	-	-	-
Cost of products and servicesfor internal purposes	3	-	-	-	3	-	-	-	-
TOTAL	1,954	44	30	1	2,029	69	(1)	1	69

Period ended				Depreciation, amortisation, disposal	Impairment
June 30, 2020	Property, plant and equipment	Intangible assets	Right-of use assets	Investment property	TOTAL	Property, plant and equipment	TOTAL
Cost of goodssold	1,804	37	27	1	1,869	623	623
Distribution and selling expenses	7	2	1	-	10	-	-
General and administrative expenses	17	9	5	-	31	1	1
RECOGNISED INPROFITOR LOSS	1,828	48	33	1	1,910	624	624
Change in productinventories	(4)	-	-	-	(4)	-	-
Cost of products and servicesfor internal purposes	14	-	1	-	15	-	-
TOTAL	1,838	48	34	1	1,921	624	624

In the present period, the Group performed a non-current asset impairment test, which led to the release of impairment lossestotalling PLN 40 million. A detailed description is presented in note 3.3 to these financialstatements.

Other impairment losses recognised in the reporting period concern investment expenditures at units for which impairment had been recognised in previous periods.

In the item 'Depreciation/amortisation and liquidation' the Group recognised in the current and comparative period PLN 18 million and PLN 17 million net asliquidation of property, plant and equipment and intangible assets.

7.3 Otheroperatingincomeandexpenses

	Period ended	Period ended
	June 30, 2021	June 30, 2020
NETOTHEROPERATING INCOME/(EXPENSES)
Effect of change in rehabilitation provision	932	(434)
Measurement and exercise of derivatives, including:	268	70
- CO2	264	66
- Coal	4	4
Penalties, fines and compensationsreceived	46	40
Gain on sale of property, plant and equipment/intangible assets	21	4
Grantsreceived	16	17
Reversal/(recognition) of other provisions	13	(7)
Reversal/(recognition) of impairmentlosses on receivables	8	(40)
Other	(2)	11
TOTALNETOTHEROPERATINGINCOME/(EXPENSES)	1,302	(339)

7.4 Financeincomeandfinancecosts

	Period ended	Period ended
	June 30, 2021	June 30, 2020
NET FINANCE INCOME/(COSTS) FROM FINANCIAL INSTRUMENTS
Dividends	2	2
Interest, including	(142)	(133)
Interestincome calculated using the effective interestrate method	15	17
Impairment	(27)	3
Reversal/(recognition) of impairment	(3)	(2)
Exchange differences	8	(17)
Loss on sale of investment	(7)	-
Settlement of loss of control	324	-
TOTALNET FINANCE INCOME/(COSTS) FROM FINANCIAL INSTRUMENTS	155	(147)
NETOTHER FINANCE INCOME/(COSTS)
Interest cost on non-financial items	(97)	(117)
Interest on statutory receivables/(liabilities)	2	(1)
Recognition of provisions	(1)	-
Other	(6)	(5)
TOTALNETOTHER FINANCE INCOME/(COSTS)	(102)	(123)
TOTALNET FINANCE INCOME/(COSTS)	53	(270)

Result on the loss of control isrelated toØrsted's acquisition of a 50% stake in the increased share capital of Elektrownia Wiatrowa Baltica 2 sp. z o.o. and Elektrownia Wiatrowa Baltica 3 sp. z o.o. The transaction is described in greater detail in notes 1.3 and 27.3 to these financialstatements.

Interest costs mainly relate to outstanding bonds, credit facilities, loans, settled IRS transactions and leases. The interest cost on lease liabilitiesreached PLN 20 million in the current report (PLN 21 million in the comparative period).

The interest cost on non-financial items concernsland rehabilitation provisions and employee benefit provisions.

7.5 Shareofprofitofequity-accountedentities

49.79%
34
5
3
-
-
3

Period ended June 30, 2020	PolskaGrupa Górnicza	Polimex Mostostal	ElectroMobility Poland	PEC Bogatynia	Energopomiar
SHARE INVOTES	15.32%	16.48%	25.00%	34.93%	49.79%
Revenue	3,524	644	-	5	33
Result on continuing operations	(547)	64	(2)	1	4
Share of profit of equity-accounted entities before consolidation adjustments	(84)	11	(1)	-	2
Elimination of unrealised gains and losses	9	-	-	-	-
Impairment	(482)	-	-	-	-
SHAREOF PROFITOF EQUITY-ACCOUNTED ENTITIES	(557)	11	(1)	-	2
Other comprehensive income	(21)	-	-	-	-
Share ofthe result of equity-accounted entitiesin other comprehensive income	(3)	-	-	-	-

TheGroupmakes consolidationadjustmentsrelatedtomarginonsale of coalbetweenPGGandPGEGroupandonthemargin onPolimex Mostostal's contracts being performed for PGE Group.

8. Impairmentlossesonassets

	Period ended	Period ended
















Reversal of impairment loss	4	16

AnimpairmentlossrecognisedonthestakeinassociatePGGwaspartiallyreversedinthecurrentreportingperiod.TheimpairmentlosswaspartialyusedduetolossesincurredbyPGG.TheamountofimpairmentlosswasadjustedtothevalueofnetassetsattributabletoPGEGroup.

9. Incometax

9.1 Taxinthestatementof comprehensiveincome

The main elements of the tax burden forthe period ended June 30, 2021 and June 30, 2020, were asfollows:

	Period ended	Period ended
	June 30, 2021	June 30, 2020
INCOME TAX RECOGNISED INSTATEMENTOF PROFITOR LOSS
Currentincome tax	14	458
Adjustments concerning currentincome tax from prior years	28	1
Deferred income tax	448	(369)
Adjustments of deferred income tax	1	3
INCOME TAX EXPENSE RECOGNISEDINSTATEMENTOF PROFITOR LOSS	491	93
INCOME TAX EXPENSE RECOGNISEDINOTHER COMPREHENSIVE INCOME
From actuarial gains and lossesfrom valuation of provisionsfor employee benefits	15	(39)
Frommeasurement of hedging instruments	(29)	(11)
(Tax benefit) / tax burden recognised in other comprehensive income (equity)	(14)	(50)

9.2 Effectivetaxrate

A reconciliation of the calculation of income tax on profit before tax at the statutory tax rate and income tax calculated according to the effective tax rate of the Group is asfollows:

	Period ended June 30, 2021	Period ended June 30, 2020
PROFIT/(LOSS) BEFORE TAX	3,210	(544)
Income tax according to Polish statutory tax rate of 19%	610	(103)
ITEMS ADJUSTINGINCOME TAX
Result on settlement of loss of control	(62)	-
Adjustments concerning currentincome tax from prior years	28	-
Recognition of impairmentlossesfor which no deferred tax wasrecognised	(1)	111
Recognition of land rehabilitation provisionsfor which no deferred tax wasrecognised	-	74
Release of land rehabilitation provisionsfor which no deferred tax wasrecognised	(67)	-
Other costs notrecognised astax-deductible costs	20	26
Other adjustments	(37)	(15)
TAXAT EFFECTIVE TAX RATE
Income tax (expense) as presented in the consolidated financialstatements	491	93
EFFECTIVE TAX RATE	15%	-17%

EXPLANATORY NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

10. Materialtransactionstopurchaseandsellproperty,plant andequipment,intangible assetsandright-of-useassets

In the present period, PGEGroup purchased property, plant and equipment and intangible assetsworth PLN2,229million, alongwith the right-of-use for underlying assets worth PLN 18 million. The largest expenditures were incurred in the Conventional Generation segment (PLN 1,387 million) and the Distribution segment (PLN 606 million). The key expenditure items were asfollows: construction of new unit (no. 7) at Elektrownia Turów (PLN590million), construction oftwo new gas-and-steam units at Elektrownia DolnaOdra (PLN331million) and connection of new customersto DSO grid (PLN 280million). These valuesinclude borrowing costs.

In the current period, the Group sold its stake in PGE EJ1 sp. z o.o. As a result of this transaction, the net value of property, plant and equipment, intangible assets and right-of-use assets decreased by PLN 415 million.

11. Futureinvestment commitments

As at June 30, 2021, PGE Group committed to incur capital expenditures on property, plant and equipment of approximately PLN 7,436 million. These amountsrelate mainly to the construction of new gas-and-steam units, modernisation of Group's assets and the purchase of machinery and equipment.

	As at	As at
	June 30, 2021	31 December 2020
ConventionalGeneration	4,776	5,790
Distribution	1,040	1,346
Renewables	329	185
District Heating	1,288	190
Supply	2	3
Other activity	1	175
TOTAL FUTURE INVESTMENT COMMITMENTS	7,436	7,689

The mostsignificant future investment commitments concern:

Conventional Generation:
- Branch Zespół ElektrowniDolnaOdra construction oftwo gas-and-steamunits and contractforservice fortwo gasturbines - approx. PLN 3,945 million,
- Branch Elektrownia Bełchatów modernisation of flue gas desulphurisation system approx. PLN 117 million,
District Heating construction of gas-and-steam CHP Nowa EC Czechnica in Siechnice approx. PLN 1,159 million,
Distribution investment commitments mainly related to network distribution assets with the total value of approximately PLN 1,040 million,

The decrease in future investment commitmentsin the Other Activity segmentisrelated to the sale of PGE EJ1 sp.z o.o., which had been responsible for these commitments. The increase in future investment commitments in the Renewables segment results from the start of the joint offshore project, as described in note 27.3.

12. Sharesaccountedforusingtheequitymethod

	As at	As at
	June 30, 2021	31 December 2020
Polska Grupa Górnicza S.A., Katowice	-	-
Polimex - Mostostal S.A., Warsaw	135	127
ElectroMobility Poland S.A., Warsaw	13	14
PEC Bogatynia Sp.z o.o., Bogatynia	-	-
Energopomiar Sp.z o.o., Gliwice	13	11
EQUITY-ACCOUNTED INTERESTS	161	152

	PolskaGrupa Górnicza	Polimex Mostostal	ElectroMobility Poland	PEC Bogatynia	Energopomiar
SHARE INVOTES	15.32%	16.48%	25.00%	34.93%	49.79%
AS AT JUNE 30, 2021
Current assets	1,853	1,528	11	4	32
Non-current assets	8,157	693	42	20	19
Currentliabilities	6,439	1,274	1	1	10
Non-currentliabilities	3,480	225	-	-	15
NET ASSETS	91	722	52	23	26
Share in net assets	14	119	13	8	13
Goodwill	1	16	-	-	-
Impairment of investment	(15)	-	-	(8)	-
EQUITY-ACCOUNTED INTERESTS	-	135	13	-	13

	PolskaGrupa Górnicza	Polimex Mostostal	ElectroMobility Poland	PEC Bogatynia	Energopomiar
SHARE INVOTES	15.32%	16.48%	25.00%	34.93%	49.79%
AT DECEMBER 31, 2020
Current assets	1,770	1,390	18	4	33
Non-current assets	9,423	674	39	21	18
Currentliabilities	6,626	1,175	3	2	18
Non-currentliabilities	2,704	214	-	-	10
NET ASSETS	1,863	675	54	23	23
Share in net assets	285	111	14	7	11
Goodwill	1	16	-	-	-
Impairment of investment	(286)	-	-	(7)	-
EQUITY-ACCOUNTED INTERESTS	-	127	14	-	11

An impairmentloss wasrecognised on the investmentin PGGin the previous period, which amounted to PLN286million as at December 31, 2020. Following the recognition ofthisimpairmentloss, PGG's book value in PGEGroup's consolidated financialstatements waszero.

In the current period,the impairmentloss was partially used due to lossesincurred by PGG. The amount ofimpairmentloss was adjusted to the value of net assets attributable to PGE Group.

13. Jointoperations

In May this year, Ørsted Group entities acquired stakes in the increased capital of Elektrownia Wiatrowa Baltica - 2 sp. z o.o. and Elektrownia Wiatrowa Baltica - 3 sp.z o.o. Following thistransaction, Ørsted Group became a 50% shareholderin EWB2 and EWB3.

PGE Group lost control overthese two companies as a result of the transaction in the meaning of IFRS.

Based on an analysis of the agreements executed between PGE Group and Ørsted Group companies, PGE Group assessed that Elektrownia Wiatrowa Baltica - 2 sp. z o.o. and Elektrownia Wiatrowa Baltica - 3 sp. z o.o. constitute a joint operation in the meaning of IFRS 11 Joint Arrangements.

As a resulting of accounting for the loss of control, finance income of PLN 324 million and goodwill of PLN 81 million were recognised in the consolidated financialstatements.

14. Deferredtax instatementoffinancialposition

14.1 Deferredincometaxassets

	As at	As at
	June 30, 2021	31 December 2020
Difference between tax value and carrying amount of property, plant and equipment	2,629	2,776
Rehabilitation provision	1,049	1,242
Provision for cost of CO2 emissions	771	1,206
Provisionsfor employee benefits	716	723
Difference between tax value and carrying amount of liabilities	324	316
Difference between tax value and carrying amount of financial assets	472	395
Difference between carrying amount and tax value ofright-of-use assets	168	171
Tax losses	267	111
Other provisions	141	157
LTC compensations	78	79
Energy infrastructure acquired free of charge and connection paymentsreceived	27	28
Difference between tax value and carrying amount of inventories	12	11
Other	4	4
TOTAL DEFERRED INCOME TAXASSETS	6,658	7,219

14.2 Deferredtaxliabilities

	As at	As at
	June 30, 2021	31 December 2020
Difference between tax value and carrying amount of property, plant and equipment	4,930	5,000
Difference between tax value and present carrying amount of financial assets	843	713
Difference between carrying amount and tax value of lease liabilities	185	181
CO2 emission allowances	7	199
Difference between tax value and carrying amount of energy origin units	20	31
Receivablesfrom recognised compensation - Act on electricity prices	16	16
Difference between tax value and present carrying amount of financial liabilities	13	8
Other	76	65
TOTAL DEFERRED TAX LIABILITIES	6,090	6,213

Deferred income tax assets	897	1,351
Deferred income tax liabilities	(329)	(345)

15. Inventories

	As at	As at
	June 30, 2021	31 December 2020
Hard coal	579	963
Repair and maintenancematerials	701	676
Mazut	37	29
Othermaterials	67	70
TOTALMATERIALS	1,384	1,738
Green energy origin rights	965	1,140
Other energy origin rights	2	3
TOTAL ENERGYORIGINRIGHTS	967	1,143
CO2 emission allowances held forsale	1	1
Hard coal held forsale	137	144
Other goods	19	25
TOTALGOODS	157	170
OTHER INVENTORIES	60	72
TOTAL INVENTORIES	2,568	3,123

16. CO² emissionallowancesfor captiveuse

Pursuantto the provisions ofthe Regulation ofthe Council of Ministers datedApril 8, 2014 on the list of electricity generation installations in the greenhouse gas emissions trading scheme, PGE Group's installations are not eligible to receive free emission allowances, starting from 2020.

In the case of EUAsfor CO² emissions related to district heating, the allocation schedule for 2021 has not yet been approved, and EUAs were allocated in February 2020 to cover CO² emissionsfor 2020 (1 million EUAs).

	AtJune 30, 2021		At December 31, 2020
EUA	Non-current	Current	Non-current	Current
Quantity (Mg million)	-	1	1	20
Value (PLNmillion)	3	38	39	1.735
EUA	Quantity (Mg million)		Value (PLN million)
AT JANUARY 1, 2020		21		1,205
Purchase		78		6,629
Granted free of charge		13		-
Redemption		(61)		(3,414)
Sale		(30)		(2,646)
AT DECEMBER 31, 2020		21		1,774
Purchase		49		5,620
Redemption		(59)		(6,318)
Sale		(10)		(1,035)
AS AT JUNE 30, 2021		1		41

17. Other currentandnon-currentassets

17.1 Othernon-currentassets

	As at	As at
	June 30, 2021	31 December 2020
Advancesfor property, plant and equipment	651	711
Costto acquire customers	105	105
Other non-current assets	20	23
TOTALOTHER ASSETS	776	839

Advancesfor construction in progressrelatemainly to investment projects conducted by the ConventionalGeneration segment. The cost to acquire customers concern co-financing by PGE Energia Ciepła S.A. ofinvestmentsin the development of district heating networks and agent commissions at PGE Obrót S.A.

17.2 Other currentassets

	As at	As at
	June 30, 2021	31 December 2020
PREPAYMENTS
Costto acquire customers	48	50
Long-term contracts	50	43
Property and tortinsurance	15	14
Logistics costsrelated to coal purchases	12	17
IT services	13	16
Social Fund	72	10
Feesfor exclusion of land from agricultural production /forestry	26	-
Feesforinstalling equipment and taking up a road lane	15	-
Other prepayments	38	20
OTHER CURRENTASSETS
VAT receivables	243	519
Excise tax receivables	17	17
Advancesfor deliveries	9	11
Other current assets	45	82
TOTALOTHER ASSETS	603	799

The amount of VAT receivables is related mainly to an estimate of electricity sales, unread on metering equipment as of the reporting date.

18. Selectedfinancialassets

The value of financialreceivables at amortised cost is a rational approximation of theirfair value.

18.1 Tradeandotherfinancialreceivables

	AtJune 30, 2021		At December 31, 2020
	Non-current	Current	Non-current	Current
Trade receivables	-	3,431	-	3,602
Deposits and loans	194	-	185	6
Loans granted	-	77	-	-
Bonds	-	-	-	40
Receivablesfrom recognised compensation - Act on electricity prices	-	85	-	85
Deposits,security and collateral	3	1,415	2	788
Damages and penalties	-	135	-	102
Otherfinancialreceivables	8	56	4	189
FINANCIAL RECEIVABLES	205	5,199	191	4,812

Deposits,security and collateral mainly concern transaction and hedging depositsfortransactions on the electricity and CO2markets.

PGE Obrót S.A. has recognised a receivable from the Settlements Manager concerning applications adjusting the amount of price difference and financial compensation received for the period from January 1 to December 31, 2019, amounting to PLN 85 million. The amount was paid in August of this year.

18.2 Cashandcashequivalents

Short-term deposits have different maturities, typically from one day up to one month, depending on the Group's needsfor cash.

The balance of cash and cash equivalents comprise the following positions:

	As at	As at
	June 30, 2021	31 December 2020
Cash on hand and cash at bank	4,989	1,415
Overnight deposits	-	309
Short-term deposits	331	1,423
Cash in VAT accounts	76	1,042
TOTAL	5,396	4,189
Exchange differences on cash in foreign currencies	3	(16)
Cash and cash equivalents presented in the statement of cash flows	5,399	4,173

Unused creditfacilities atthe reporting date	6,495	6,556
including overdraftfacilities	1,861	1,811

A detailed description of credit agreementsis presented in note 22.1 to these financialstatements.

The value of cash includesrestricted cash amounting to PLN 181 million (PLN 93 million in the comparative period) in customer accounts at PGE Dom Maklerski S.A., which constitute collateral forsettlements with clearinghouse IRGiT.

19. Derivativesandother assetsmeasuredatfair valuethroughprofitorloss

	AtJune 30, 2021
	Assets	Liabilities
DERIVATIVES AT FAIR VALUE THROUGH PROFITOR LOSS
Currency forwards	1	-
Commodity forwards	264	1
Commodity SWAP	21	60
Contractsfor purchase/sale of coal	15	7
Options	20	-
HEDGING DERIVATIVES
CCIRS hedges	25	-
IRS hedges	-	193
Currency forward - USD	-	-
Currency forward - EUR	65	68
Other assets carried atfair value through profit orloss
Investmentfund participation units	43	-
TOTAL	454	329
current	364	136
non-current	90	193

	At December 31, 2020
	Assets	Liabilities
DERIVATIVES AT FAIR VALUE THROUGH PROFITOR LOSS
Currency forwards	3	4
Commodity forwards	11	4
Commodity SWAP	11	13
Contractsfor purchase/sale of coal	17	18
Options	16	-
HEDGING DERIVATIVES
CCIRS hedges	64	-
IRS hedges	-	385
Currency forward - USD	-	1
Currency forward - EUR	381	23
Other assets carried atfair value through profit orloss
Investmentfund participation units	52	-
TOTAL	555	448
current	423	63
non-current	132	385

Commodity and currency forwards

Commodity and currency forward transactions mainly relate to trade in CO² emission allowances and coal sales. The Group uses hedge accounting to account for currency forwardsrelated to the purchase of CO2 allowances.

Options

On January 20, 2017 PGE S.A. bought a call option to purchase shares of Polimex-Mostostal S.A. from Towarzystwo Finansowe Silesia Sp. z o.o. The option was valued using the Black-Scholes method.

Coalswaps

In the current period, PGE Paliwa sp.z o.o. executed a number of transactionsto hedge thisrisk using commodity swapsfor coal in order to secure commodity risk related to the price of coal. The volume and value of these transactions is correlated to the volume and value of imported coal. Changesin fair value are recognised in profit orloss.

Purchase and sale contracts with physical delivery of coal

PGE Paliwa Sp. z o.o. measures all of its sales and purchase contracts with physical delivery of coal at fair value using the trader-broker model.

IRS transactions

PGE S.A. executed IRS transactions to hedge interest rates on credit facilities and outstanding bonds with a total nominal value of PLN 7,030 million (PLN5,630million for creditfacilities and PLN1,400million for bonds). Priorto the start ofrepayment of principal on certain credit facilities, the current nominal amount of credit-hedging IRS transactions is PLN 5,380 million. To recognise these IRS transactions, the Group uses hedge accounting.

The impact of hedge accounting on the revaluation reserve is presented in note 20.2 to these consolidated financialstatements.

CCIRS hedges

In connection with loans received from PGE Sweden AB (publ), PGE S.A. concluded CCIRS transactions, hedging the exchange rate for principal and interest. In these transactions, banks-counterparties pay PGE S.A. interest based on a fixed rate in EUR and PGE S.A. pays interest based on a fixed rate in PLN. In the consolidated financial statements, a relevant part of the CCIRS transaction is treated as a hedge of bondsissued by PGE Sweden AB (publ).

Investment fund participation units

At the reporting date, the Company held participation unitsin three sub-funds managed by TFI Energia S.A.

20. Equity

The basic assumption of the Group's policy regarding equity management is to maintain an optimal equity structure over the long-term perspective in order to assure a good financial standing and secure equity structure ratios that would support the operating activity of PGE Group. It is also crucial to maintain a sound equity base that would be the basisto win confidence of future investors, creditors and the market and ensure the Group'sfurther development.

20.1 Sharecapital

	As at	As at
	June 30, 2021	31 December 2020
1,470,576,500 Series A ordinary Shares with a nominal value of PLN10.25 each	15,073	15,073
259,513,500 Series B ordinary Shares with a nominal value of PLN10.25 each	2,660	2,660
73,228,888 Series C ordinary Shares with a nominal value of PLN10.25 each	751	751
66,441,941 Series D ordinary Shares with a nominal value of PLN10.25 each	681	681
Totalshare capital	19,165	19,165

All of the Company'sshares are paid up.

Afterthe reporting date and untilthe date of preparation ofthe foregoing financialstatementsthere were no changesin the value ofthe Company'sshare capital.

Shareholder rights- State Treasury rights concerning the Company's activities

The Company is a part of PGE Group, where the State Treasury holdsspecialrights aslong asitremains a shareholder.

The State Treasury's special right applicable to PGE Group entities derive from the Act of March 18, 2010 on the special rights of the Minister of Energy and their exercise at certain companies and groups operating in the electricity, oil and gas sectors (Polish Journal of Lawsof2020,item2173).TheActspecifiesthe specialrightsavailable to theMinister ofEnergy relatedtocompaniesandgroupsoperating in the electricity, oil and gas sectors whose assets are disclosed in the register of buildings, installations, equipment and services considered as critical infrastructure.

Based on this acttheMinister of Energy hasthe rightto objectto any resolution adopted orlegal activity undertaken by the Management Board involving assets that would endanger the functioning, operational continuity and integrity of critical infrastructure. The objection can also be applied to any resolution pertaining to:

dissolution of the Company,
changesin use or retirement of an asset being a component of critical infrastructure,
change in the scope of the Company's activities,
sale or lease of enterprise or its organised part or establishment of legal restrictions,
approval of operational and financial plan, investment plan or long-term strategic plan,
transfer of the Company'sregistered office abroad,

if the performance of such a resolution would cause an actual threat to the functioning, operational continuity and integrity of critical infrastructure. The objection is expressed in the form of an administrative decision.

20.2 Hedgingreserve

	Period ended	Year ended
	June 30, 2021	31 December 2020
AS AT JANUARY 1	(13)	(323)
Change in hedging reserve:	(154)	383
Measurement of hedging instruments, including:	(161)	387
Recognition ofthe effective part of change in fair value of hedging instrumentsin the part considered as effective hedge	(174)	420
Accrued interest on derivativestransferred from hedging reserve and recognised in interest expense	-	17
Currency revaluation of CCIRS transaction transferred from hedging reserve and recognised in the result on foreign exchange differences	13	(51)
Ineffective portion of changesin fair value of hedging derivativesrecognised in profit orloss	-	1
Measurement of otherfinancial assets	7	(4)
Deferred tax	29	(73)
HEDGINGRESERVE AFTER DEFERRED TAX	(138)	(13)

The hedging reserve mainly includesthe measurement of cash flow hedges.

20.3 Dividendspaidandrecommendedforpayment

The Company did not pay a dividend in the current or comparative reporting period.

21. Provisions

The carrying amount of provisionsis asfollows:

	AtJune 30, 2021		At December 31, 2020
	Non-current	Current	Non-current	Current
Employee benefits	2,905	269	3,007	276
Rehabilitation provision	6,737	-	8,110	1
Provision for cost of CO2 emissions	-	4,030	-	6,318
Provision for energy origin units held forredemption	-	491	-	589
Provision for non-contractual use of property	46	5	58	5
Other provisions	37	147	32	122
TOTAL PROVISIONS	9,725	4,942	11,207	7,311

Due to changesinmarketinterestrates, PGEGroupupdatedthediscountrateuse tomeasure landrehabilitationprovisions andemployee benefit provisions.

The discountrate forthe mine excavation rehabilitation provision as at June 30, 2021 is:

for expenses expected to be incurred within 15 yearsfrom the balance sheet date 1.6% (compared to 1.3% as at December 31, 2020);
for expenses expected to be incurred 16-25 years from the balance sheet date 2.39%, PGE's extrapolation in accordance with the adopted method (compared to 1.6% as at December 31, 2020);
for expenses expected to be incurredmore than 25 yearsfrom the balance sheet date 2.72%, PGE's extrapolation in accordance with the adopted method (compared to 1.9% as at December 31, 2020).

The discount rate for employee benefit provisions and other provisionsfor land rehabilitation as at June 30, 2021 is 1.6% (vs. 1.3% as at December 31, 2020).

These changesin discountrates caused:

a decrease in the land rehabilitation recognised correspondingly in other operating revenue of PLN 932 million;
a decrease in the land rehabilitation recognised correspondingly as a decrease in property, plant and equipment of PLN 576 million;
a decrease in the post-employment benefit provisionsrecognised correspondingly as a decrease in other comprehensive income of PLN 82 million;
a decrease in provisionsfor long service recognised correspondingly as a decrease in operating costs of PLN 17 million.

Changesin provisions

	Employee benefits	Rehabilitation provision	Provision for cost of CO2 emissions	Provisionsfor energy origin rights held for redemption	Provision for non contractual use of property	Other	Total
JANUARY 1, 2021	3,283	8,111	6,318	589	63	154	18,518
Actuarial gains and losses	-	-	-	-	-	-	-
Current employment costs	58	-	-	-	-	-	58
Past employment costs	1	-	-	-	-	-	1
Interest costs	21	76	-	-	-	-	97
Adjustment of discountrate and other assumptions	(99)	(1,508)	-	-	-	-	(1,607)
Benefits paid / Provisions used	(90)	-	(6,317)	(571)	(1)	(32)	(7,011)
Provisionsreversed	-	(3)	(3)	(11)	(13)	(20)	(50)
Provisionsrecognised - costs	-	38	4,032	484	2	72	4,628
Provisionsrecognised - expenditures	-	24	-	-	-	-	24
Changesin PGE Group	(1)	-	-	-	-	(2)	(3)
Other changes	1	(1)	-	-	-	12	12
30 CZERWCA 2021	3,174	6,737	4,030	491	51	184	14,667

	Employee benefits	Rehabilitation provision	Provision for cost of CO2 emissions	Provisionsfor energy origin rights held for redemption	Provision for non contractual use of property	Other	Total
JANUARY 1, 2020	3,066	6,649	3,532	572	72	127	14,018
Actuarial gains and losses	40	-	-	-	-	-	40
Current employment costs	121	-	-	-	-	-	121
Past employment costs	(10)	-	-	-	-	-	(10)
Interest costs	61	168	-	-	-	-	229
Adjustment of discountrate and other assumptions	231	1,173	-	-	-	-	1,404
Benefits paid / Provisions used	(228)	(1)	(3,411)	(947)	-	(32)	(4,619)
Provisionsreversed	-	-	(121)	(2)	(16)	(15)	(154)
Provisionsrecognised - costs	-	55	6,318	966	7	80	7,426
Provisionsrecognised - expenditures	-	43	-	-	-	-	43
Acquisition of companies within the Group	-	14	-	-	-	-	14
Other changes	2	10	-	-	-	(6)	6
DECEMBER 31, 2020	3,283	8,111	6,318	589	63	154	18,518

21.1 Provisionforemployeebenefits

Provisionsfor employee benefits mainly include:

post-employment benefits PLN 2,288 million (PLN 2,379 million as at December 31, 2020),
seniority bonuses PLN 886 million (PLN 904 million as at December 31, 2020),

21.2 Rehabilitationprovision

Provision for rehabilitation of post-mining properties

PGE Group creates provisions for the rehabilitation of post-mining properties. The amount of the provision recognised in the financial statementsincludesthe value of the Mine Liquidation Fund created in accordance with the Geological and Mining Law. The value of the provision as at June 30, 2021 amounted to PLN 6,134 million and as at December 31, 2020 to PLN 7,463million.

Provision for rehabilitation of ash landfills

PGE Group's generating assets create provisionsforthe rehabilitation of ash landfills. As atJune 30, 2021,this provision amounted to PLN 298 million (PLN 318 million at the end of the comparative period).

Provisionsfor wind farm decommissioning and restoration

Wind farmowners create provisionsfor decommissioning and restoration. As atJune 30, 2021,this provision amounted to PLN30million (PLN 71 million atthe end of the comparative period).

Liquidation of property, plant and equipment

As at the reporting date, the provision amounted to PLN 275 million (PLN 259 million as at the end of the comparative period) and refers to certain assetsin the Conventional Generation and Renewablessegments.

21.3 Provisionfor costofCO² emissions

As described in note 15 to these financial statements, the Group no longer receives free emission allowances for electricity generation from 2020. The Group is only eligible to receive free allowances for heating generation. As at June 30, 2021, this provision amounted to PLN 4,030million (PLN 6,318 million at the end of the comparative period).

21.4 Provisionforenergyoriginrightsheldforredemption

PGE Group companies create a provision for energy origin rights concerning sales generated in the reporting period or previous periods, in the part yet to be redeemed as of the reporting date. The total value of provision as at June 30, 2021 was PLN 491 million (PLN 589 million in the comparative period) and was created mainly by PGE Obrót S.A.

21.5 Provisionfor claims concerningnon-contractualuseofproperty

PGE Group companies recognise a provision for claims related to the non-contractual use of property. This issue mainly concerns the distribution company that owns distribution networks. As at the reporting date the provision amounted to approximately PLN 51 million (ofwhichPLN27millionrelate to litigations). Inthe comparativeperiod,theprovisionamountedto PLN63million(ofwhich PLN32million related to litigations).

21.6 Settlementswithprosumers

2020 saw a considerable increase in the number of prosumer installations, mainly due to the assistance available in the "My electricity" program. According to the Energy Market Agency, installed PV capacity in Poland grew by 117% to 5.36 GW in H1 2021 vs. 2.46 GW in the same period of last year. The act on renewable energy sources of February 20, 2015 introduced a settlement system for prosumers and energy cooperatives that generates losses for the obligated vendor (i.e. PGE Obrót S.A.); the higher the percentage of electricity introduced to the grid that is compensated by the prosumer's or energy cooperative's own use, the higher these losses are.

Therefore,theprosumer doesnotincur any variable costsofdistribution servicesfor energy drawnfromthegrid. Companiesinthe Supply segment, which aremerely intermediariesin the sale of distribution services, have to pay the fullfee for electricity drawn by the prosumer to the Distribution System Operator. Companies in the Supply segment, despite the fact that they do not provide distribution services, have to bearthe costsrelated to these services because they are a party to a comprehensive contract with the customer.

PGE Obrót S.A.'s growing losses due to feesfor distribution services are giving rise to deliberations on recognising provisionsfor onerous contracts. However, due to the difficulty in estimating the number of prosumer installations being built, their capacity and consumption as well as their operational period and potential new regulations, calculating credible results may be subject to significant errors. Moreover, taking into account the fact that losses on contracts with prosumersresult from systemic regulations, these contractsshould be analysed together with contractsthat PGE Obrót S.A. isrequired to perform as an obligated vendor, according to the Group.

In connection with the above, the conditionsto create provisionsfor onerous contractsin the meaning of IAS 37 were not met as of the reporting date.

22. Financialliabilities

The value of financial liabilities measured at amortised cost is a rational approximation of theirfair value, except for bondsissued by PGE Sweden AB (publ).

Bondsissued by PGE Sweden AB (publ) are based on a fixed interestrate. Their amortised cost presented in these financialstatements as at June 30, 2021 amounted to PLN641 million and theirfair value amounted to PLN 711 million.

22.1 Loans,borrowings,bondsandleases

	AtJune 30, 2021		At December 31, 2020
	Non-current	Current	Non-current	Current
Loans and borrowings	6,308	1,983	7,105	1,318
Bondsissued	2,022	20	2,035	10
Leases	871	36	885	56
TOTAL LOANS, BORROWINGS, BONDS AND LEASES	9,201	2,039	10,025	1,384

Loans and borrowings

Among loans and borrowings presented above as at June 30, 2021, and December 31, 2020, PGE Group presents mainly the following facilities:

Lender	Security instrument	Maturity	Limit in currency	Currency	Interest rate	Liability at 30-06-2021	Liability at 31-12-2020
Bank consortium	IRS	2023-09-30	3,630	PLN	Variable	3.637	3.636
European Investment Bank	-	2034-08-25	1,500	PLN	Fixed	1.505	1.505
Bank Gospodarstwa Krajowego	IRS	2027-12-31	1,000	PLN	Variable	813	876
European Investment Bank	-	2034-08-25	490	PLN	Fixed	493	493
European Bank for Reconstruction and Development	IRS	2028-06-07	500	PLN	Variable	469	501
Bank Gospodarstwa Krajowego	IRS	2028-12-31	500	PLN	Variable	469	500
Nordic Investment Bank	-	2024-06-20	150	EUR	Variable	167	219
Bank Pekao S.A.	-	2021-09-21	40	USD	Variable	100	149
Bank Pekao S.A.	-	2021-12-31	9	PLN	Variable	1	-
Millennium S.A.	-	2021-06-16	7	PLN	Fixed	-	1
PKO BP S.A.	-	2022-04-29	300	PLN	Variable	-	-
Revolving credit facility (bank consortium)	-	2022-12-16	4,100	PLN	Variable	-	-
Bank Gospodarstwa Krajowego	-	2023-05-31	1,000	PLN	Variable	-	-
Bank Pekao S.A.	-	2024-12-22	500	PLN	Variable	-	-
European Investment Bank	-	2038-10-16	273	PLN	Fixed	-	-
NFOŚiGW	-	March 2023 - December 2029	215	PLN	Fixed	136	157
NFOŚiGW	-	September 2021 - June 2035	697	PLN	Variable	374	279
Voivodship Fund for Environmental Protection and Water Management (WFOŚiGW)	-	September 2026	70	PLN	Fixed	8	6
WFOŚiGW	-	September 2021 - September 2028	207	PLN	Variable	116	101
Loan from PFR	-	June 2024	3	PLN	Fixed	3	-
TOTAL LOANS AND BORROWINGS						8,291	8,423

As atJune 30, 2021,the value ofthe available overdrafts atsignificant PGEGroup companies was PLN1,861million. The repayment dates forthe available overdraft facilities of PGE Group's key companies are in 2021-2024.

In the period ended on June 30, 2021 and afterthe reporting period no failuresto make payment or other breaches of credit agreement terms were recorded.

Bondsissued

Issuer	Security instrument	Program maturity date	Program limit in currency		Currency Interest rate	Tranche issue date	Tranche buy-back date	Liability at 30-06-2021	Liability at 31-12-2020
PGE S.A.	IRS	indefinite	5.000	PLN	Variable	2019-05-21 2019-05-21	2029-05-21 2026-05-21	1,001 400	1,001 400
PGE Sweden AB (publ)	CCIRS	indefinite	2.000	EUR	Fixed	2014-08-01	2029-08-01	641	644
	TOTAL OUTSTANDING BONDS							2,042	2,045

The Group is continuously monitoring worksrelated to the IBOR reform, which may have an impact on financial instruments based on a variable interest rate. At June 30, 2021 the value of credit facilities, loans and bonds exposed to interest rate risk was PLN 7,547 million (PLN7,280million based on WIBOR, PLN167million on EURIBOR and PLN100million on LIBOR). To hedge the interestrate on a financial liability,PGE S.A. appliesIFRShedginginstruments andhedgeaccounting.Thevalueof creditfacilities,loans andbonds coveredbyhedging instruments and hedge accounting as at June 30, 2021 was PLN 6,789million.

22.2 Tradeandotherfinancialliabilities

	AtJune 30, 2021		At December 31, 2020
	Non-current	Current	Non-current	Current
Trade liabilities	-	1,208	-	1,357
Settlementsrelated to transactions on exchange	-	1,499	-	856
Purchase of property, plant and equipment and intangible assets	7	771	6	1,050
Security depositsreceived	26	96	30	96
Liabilitiesrelated to LTC	392	21	395	22
Insurance	-	2	-	8
Other	14	197	17	115
TRADE ANDOTHER FINANCIAL LIABILITIES	439	3,794	448	3,504

The item 'Other' includes PGE Dom Maklerski S.A.'sliabilitiestowards clients on account of funds deposited.

23. Othernon-financialliabilities

The main components of non-financial liabilities as at the respective reporting dates are asfollows:

23.1 Othernon-currentnon-financialliabilities

	As at	As at
	June 30, 2021	31 December 2020
OTHER NON-CURRENT LIABILITIES
Liabilitiesrelated to a contract	84	64
Estimated liabilities due to Voluntary Leave Programs	1	1
Estimated liabilities concerning other employee benefits	1	-
TOTALOTHER NON-CURRENT LIABILITIES	86	65

23.2 Other currentnon-financialliabilities

	As at	As at
	June 30, 2021	31 December 2020
OTHER CURRENT LIABILITIES
VAT liabilities	490	540
Excise tax liabilities	29	33
Environmental fees	154	202
Payroll liabilities	197	284
Bonusesfor employees	223	272
Unused annual holiday leave	166	113
Estimated liability related to Miner's Day and Energy Technician's Day	54	1
Liabilities due to Voluntary Leave Programs	1	1
Bonusesforthe Management Board	25	20
Estimated liabilities concerning other employee benefits	30	5
Personal income tax	60	95
Liabilitiesfrom social insurances	203	269
Liabilitiesrelated to a contract	310	296
Liabilitiesrelated to dividends	7	7
Other	66	65
TOTALOTHER CURRENT LIABILITIES	2,015	2,203

Theitem'Other' largely includesliabilitiesrelatedtocontributionstothe EmployeePensionsProgram, amountswithheldfromemployees' salaries and contributionsto the State Fund for Rehabilitation of Disabled People.

Liabilitiesrelated to a contract

Contract liabilities mainly include advances for deliveries and prepayments by customers for connections to the distribution grid and electricity consumption forecastsforfuture periods.

OTHER EXPLANATORY NOTES

24. Contingentliabilitiesandreceivables. Legal claims

24.1 Contingentliabilities

	As at	As at
	June 30, 2021	31 December 2020
Contingentreturn of grantsfrom environmental funds	392	461
Legal claims	107	186
Liabilitiesrelated to bank guarantees and suretiessecuring exchange transactions	95	75
Usufruct of land	67	67
Contractual fines and penalties	-	70
Other contingentliabilities	10	37
Total contingentliabilities	671	896

Contingentreturn of grantsfrom environmental funds

The liabilities represent the value of possible future returns of funds received by PGE Group companies from environmental funds for selected investments. The funds will be returned if the investments for which they were granted do not achieve the expected environmental outcomes.

Legal claims

In connection with the sale of shares in PGE EJ1 sp. z o.o. to the State Treasury and in accordance with an agreement determining the responsibility of the former shareholders as regards the costs of a dispute with Worley Parsons, if the dispute is lost, PGE S.A. may be required to coverthe cost ofthe dispute of up to PLN98million. The probability oflosing the dispute was estimated in orderto determine the fair value of the payment received. In effect, PLN 59 million was recognised under contingent liabilities and PLN 39 million in noncurrent provisions. The amount of the provision adjusted the result on the sale ofshares as presented in these financialstatements.

Bank guarantee liabilities

These liabilities represent bank guarantees provided as security for exchange transactions resulting from membership in the clearinghouse IRGiT.

Usufruct of land

Contingent liabilities pertaining to the usufruct of land are related to an update of annual fees for the usufruct of land. PGE GiEK S.A.'s branches have appealed the decisions in Local Appeals Courts. The contingent liability is measured as the difference between the discounted sum of the updated feesfor usufruct of land throughout the entire period of the usufruct and the perpetual usufruct of land liability recognised in accounts based on previousfees.

24.2 Othersignificantissuesrelatedtocontingentliabilities

Non-contractual use of property

Asdescribedinnote21.5tothese financialstatements,PGEGrouprecognises aprovisionfordisputesunder courtproceedings concerning non-contractual use of propertiesfor distribution activities. In addition, PGEGroup is a party to disputes at an earlierstage of proceedings, and it cannot be ruled out that the volume and value ofsimilar disputes will increase in the future.

Contractual liabilitiesrelated to purchase of fuels

In accordance with fuel purchase agreements (mainly coal and gas), PGE Group is required to collect a minimum volume of fuel and to not exceed the maximum gas uptake levels in specific periods. Failure to uptake the contractual minimum volume of fuel may result in the necessity to pay fees (in case of gas fuel, volumes that have been paid for but not collected can be collected in the next three contractual years).

According to PGE Group, the terms of fuel delivery to its generating assets as described above do not diverge from the terms of delivery to other powerstationsin Poland.

24.3 Contingentreceivables

As at the reporting date, PGE Group held PLN 72 million in contingentreceivablesrelated to a potentialrefund of excess excise duty. The Group is waiting for a ruling by the Supreme Administrative Court on what excise duty rate should be applied in settling the excise duty relief related to the redemption of property rights created in renewable energy sources priorto January 1, 2019.

According toPGEGroup,thisreliefshould be settledusing the rate applicable atthe time the electricity generatedfromrenewable sources issoldto the endcustomer,i.e. 20PLN/MWh. Thiswas confirmedina rulingby theVoivodshipAdministrativeCourtinRzeszówofOctober 8, 2019.

The tax authority issued a cassation appeal against thisruling by the Voivodship Administrative Court on November 20, 2019.

24.4 Other court casesanddisputes

Compensation for conversion ofshares

Former shareholders of PGE GiEK S.A. petitioned the courts to summon PGE S.A. to conciliatory hearings concerning payment of compensation forincorrect(in theiropinion) determination ofthe exchange ratio ofshares of PGEGórnictwo i Energetyka S.A. into shares of PGE S.A. during a consolidation processthattook place in 2010. The total value of claimsresulting from these summonsto conciliatory hearingslodged by formershareholders of PGE Górnictwo i Energetyka S.A. exceeds PLN 10 million.

Regardless ofthe above, onNovember 12, 2014 SocratesInvestment S.A. (an entity which purchased claimsfrom former PGE Górnictwo i Energetyka S.A.shareholders) filed a lawsuitseeking more than PLN 493 million in compensation (plusinterest) for damagesincurred in respect of incorrect(in their opinion) determination ofthe exchange ratio ofsharesin themerger of PGE Górnictwo i Energetyka S.A. and PGE S.A. The Company filed a response to the lawsuit, and first-instance proceedings are in progress. A hearing to appoint a court expert was held on November 20, 2018. A first-instance court proceeding is currently under-way. In a ruling dated April 19, 2019 the court appointed experts to draft an opinion on this matter. The experts' opinion was not yet drafted as of the date on which these financial statements were prepared. The date of the next hearing will be set ex officio.

Furthermore, a similar claim was raised by Pozwy sp. z o.o., an entity that purchased claims from former PGE Elektrownia Opole S.A. shareholders. Pozwy sp.z o.o. filed a claim atthe District Courtin Warsaw against PGE Górnictwo i Energetyka Konwencjonalna S.A., PGE S.A. and PwC Polska sp.z o.o.("Defendants"), demanded fromtheDefendants, in solidum, orjointly damagesfor Pozwy sp.z o.o.totalling over PLN 260 million with interest for allegedly incorrect (in its opinion) determination of the exchange ratio for PGE Elektrownia Opole S.A. shares for PGE Górnictwo i Energetyka Konwencjonalna S.A. shares in a merger of these companies. This lawsuit was delivered to PGE S.A. on March 9, 2017, and the deadline for responding to it wasset by the court as July 9, 2017. PGE S.A. and PGE GiEK S.A. filed a response to the suit on July 8 2017.On September 28, 2018,the District Courtin Warsaw ruled in the firstinstance -the lawsuit by Pozwy sp. z o.o. against PGE S.A., PGE GiEK S.A. and PWC Polska sp. z o.o. was rejected. On April 8, 2019 PGE S.A. received a copy of an appeal lodged by the claimant on December 7, 2018. A response to the appeal was drafted on April 23, 2019. A hearing was held on December 21, 2020. The Appeals Court ruled to repeal the District Court's ruling in its entirety and referred the case to the District Court for reexamination. On January 22, 2021 PGE S.A. and PGE GiEK S.A. appealed the ruling to the Supreme Court, requesting that the appealed ruling be repealed entirely and the case referred to the Appeals Court forre-examination. At a closed-door hearing on April 27, 2021 the Supreme Courtreversed the judgement. The case wasreturned to be re-examined by the Appeals Court. A justification forthe Supreme Courtruling wasreceived by PGE S.A. and PGE GiEK S.A. on June 24, 2021. The Appeals Court meeting date is September 30, 2021.

PGE Group companies do not accept the claims being raised by Socrates Investment S.A., Pozwy sp. z o.o. and the rest of shareholders requesting conciliatory settlements. According to PGE S.A., these claims are groundless and the entire consolidation process was conducted fairly and correctly. The value ofsharessubject to the process of consolidation was established by an independent firm, PwC Polska sp. z o.o. Additionally, the merger plans of these companies, including the exchange ratios, were examined for accuracy and reliability by an expert appointed by the registration court; no irregularities were found. Then, the court registered the mergers of the aforementioned companies.

PGE Group did not create a provision forthis claim.

Termination by Enea S.A. of long-term energy origin rightssale contracts

In 2016, PGE GiEK S.A., PGE EO S.A. and PGE Energia Natury PEW sp.z o.o. (acquired by PGE EO S.A.) received statementsfrom Enea S.A. regarding the terminationoflong-termcontractsforthe saleofrenewable energy originrights,the so-called"greencertificates." Justifying the termination, Enea S.A. claimed that the companiessignificantly breached the provisions of these contracts, i.e. failed to re-negotiate contractual provisionsinaccordancewith the adaptive clause, asrequested by Enea S.A. in July 2015 inconnectionwith anallegedchange in legalregulations having impact on performance of these contracts.

According to PGEGroup,the noticesterminating the contractssent by Enea S.A. were submitted in breach of contractual obligations. The companies took appropriate steps to enforce their rights. With Enea S.A. refusing to perform these long-term contracts to purchase property rights resulting from certificates of origin received by PGE Group companies in connection with the production of renewable energy, PGE GiEK S.A. and PGE Energia Natury PEW sp.z o.o. demanded from Enea S.A. the payment of contractual penalties, while PGE EO S.A. demanded payment of compensation for damages. In October 2020, at the request of the parties, the court proceedings were suspended in connection with the intention to hold mediation sessions as an alternative dispute resolution. In 2021, the parties to the disputessubmitted them for conciliation by the General Prosecutor's Office of the Republic of Poland.

Due to the factthat according to PGE Group the declarationsterminating the contracts presented by Enea S.A. were submitted in breach of contractual terms, as at June 30, 2021 the Group recognised contractual penalty receivables of PLN 164million (recognised entirely as revenue in previous reporting periods). According to PGE Group companies, based on available legal analysis, a favourable resolution in the above disputesis more probable than a negative resolution.

In addition, PGE GiEK S.A., PGE Energia Natury, PEW sp.z o.o. (acquired by PGE EO S.A.) and PGE EO S.A. filed lawsuits against Enea S.A. for the payment of receivables totalling PLN 47 million concerning invoices issued to Enea S.A. for the sale of property rights based on these contracts. Enea S.A. refused to pay these receivables, claiming that they were offset by receivables from the Group's companies relatedto compensationfor allegeddamages arising as a resultofthe companies'failure to re-negotiate the contracts.According toGroup companies,such offsets are groundless because Enea S.A.'sreceivables concerning the payment of compensation never arose and there are no groundsfor acknowledging Enea S.A.'s claim that the companies breached contractual provisions. InOctober 2020, at the request oftheparties,the court proceedingswere suspendedinconnectionwiththe intentionto holdmediationsessions as analternative dispute resolution. In 2021, the parties to the disputes submitted them for conciliation by the General Prosecutor's Office of the Republic of Poland.

25. Tax settlements

Taxobligations andrights are specifiedin theConstitutionoftheRepublic of Poland,tax regulations andratifiedinternational agreements. According tothetax code,tax isdefinedas public,unpaid,obligatory andnon-returnablecashliability towardthe StateTreasury,provincial or other regional authorities resulting from the tax regulation. Taking into account the subject criterion, the current taxes in Poland can be divided into five groups: income tax, turnovertax, asset tax, activity tax and otherfees not classified elsewhere.

From the point of view of business entities, the most important is the taxation of incomes (corporate income tax), taxation of turnover (value added tax, excise tax) followed by taxation of assets (real estate tax and vehicle tax). Other payments classified as quasi – taxes must also be mentioned Among these there are socialsecurity charges.

Basic tax rates were asfollowsin 2021: corporate income tax rate – 19%, forsmaller enterprises a 9% rate is possible; basic value added tax rate – 23%, reduced: 8%, 5%, 0%, furthermore some goods and products are subject to a VAT tax exemption.

The tax system in Poland is characterised by significant volatility and complexity of tax regulations, steep potential penalties for tax offences or crimes. Tax settlements and other activity areas subject to regulations (customs or currency controls) may be the subject of inspections by relevant authorities authorised to issue fines and penalties with interest. These inspections may cover tax settlementsfor a five-year period afterthe end of calendar yearin which the tax was due.

Tax group

An agreement for a tax group named PGK PGE 2015, represented by PGE S.A., was signed on September 18, 2014, for a period of 25 years. An annex to the tax group agreement wassigned on July 28, 2021, which reduced the agreement validity period from25 to 7 years.

Companies included in the tax group must meet a number of requirements covering: appropriate level of equity, parent's stake in taxgroup companies of atleast 75%, lack of capitalties between subsidiaries, no tax arrears, an earnings-to-salesratio of atleast 2% (counted at tax group level), and execution of transactions with related parties from outside the tax group only on market terms. Violating these requirements would mean the dissolution of the tax group and loss of its taxpayer status. When the tax group is dissolved, each of its member companies becomes an individual payer of corporate incometax.Due to the introduction oflawsintended to combatthe effects of COVID-19, the requirement to have an earnings-to-salesratio of at least 2% was waived for 2020.

VAT split payment mechanism,requirement to make paymentsto accountsregistered with tax offices

The Group intends to effectively use the funds received from counterparties in VAT accounts to pay its liabilities that contain VAT. The level of funds in these VAT accounts on any given day depends mainly on how many of PGE Group's counterparties decide to use this mechanism and the relation between the payment deadlinesforreceivables and liabilities. As of June 30, 2021 the cash balance in these VAT accountstotalled PLN 76 million.

Reporting of tax arrangements(MDR)

In 2019, new regulationsintroduced mandatory reporting of tax arrangements(Mandatory Disclosure Rules- MDR). A tax arrangement should be understood as any activity of which the main or one of the main benefitsisis the obtaining of a tax advantage. Moreover, tax arrangements include eventsthat have general hallmarks or various specific hallmarks, as defined in regulations. Three types of entities are subject to the reporting obligation: promoter, supporter and beneficiary. MDR regulations are complex and imprecise in numerous areas, which givesrise to interpretation doubts asto their practical application.

Excise tax

In connection with an incorrect implementation of EU regulationsin the Polish legal system, PGE GiEK S.A. in 2009 initiated proceedings regarding reimbursement of improperly paid excise tax for the period January 2006 - February 2009. The irregularity consisted of taxing electricity at the firststage ofsale, i.e. by producers, whereassalesto end usersshould have been taxed.

Examining the company's complaints with regard to the restitution claims against decisionsissued by tax authoritiesrefusing to confirm overpayment of excise tax, administrative courtsruled that the company did not bearthe economic burden of the improperly calculated excise tax (which in the context ofthe resolution by the Supreme Administrative Court of June 22, 2011, file no. I GPS 1/11, precludesthe return of overpaid amounts). According to the Supreme Administrative Court, the claims that the company sought, especially using economic analyses, are of an offsetting nature and therefore may be sought only in civil courts. Given the above, PGE GiEK S.A. decided to withdraw from the proceedings asregardsrestitution claims. Activities concerning the excess excise tax are currently being conducted in civil courts. On January 10, 2020 the District Court in Warsaw issued a ruling in a case brought by PGE GiEK against the State Treasury - Minister of Finance. The court dismissed the case.On February 3, 2020 the company filed an appeal with the Court of Appealsin Warsaw against the first-instance ruling. The session was held on December 2, 2020, after which the Court of Appeals in Warsaw rejected PGE GiEK's appeal in a ruling dated December 17, 2020. On April 23, 2021, PGE GiEK S.A. submitted a cassation complaint to the Supreme Court.On May 20, 2021 PGE GiEK received a response from the general prosecutor's office regarding the company's cassation complaint.

Given the significant uncertainty over the final ruling in this issue, the Group does not recognise in its financial statements any effects related to potential compensation in civil courtsin connection with the improperly paid excise tax.

Real estate tax

Real estate tax constitutes a considerable burden for certain PGEGroupcompanies. Regulations on the real estate tax are unclearin some areas and give rise to a range of interpretation doubts. Tax authorities such as municipality head, city mayor or president, often issue inconsistent tax interpretations in substantively similar cases. This means that PGE Group companies were and can be parties in proceedings relating to real estate tax. If the Group concludes that an adjustment of settlements is probable as a result of such a proceeding, it creates an appropriate provision.

Uncertainty concerning tax settlements

Regulations concerning tax on goods and services, corporate income tax and burdensrelated to social insurance are subject to changes. These frequent changes result in a lack of reference points, inconsistent interpretations and few precedents that can be applied. The existing regulations also contain uncertainties that result in differing opinions as to legal interpretation of tax regulations both between state organs and between state organs and companies.

Tax settlements and other activity areas are conditioned by regulations (customs or currency controls) and can be subject to controls of respective authoritiesthat are authorised to issue fines and penalties, and all additional tax liabilities resulting from such audits must be paid with high interest. This meansthat tax risk in Poland is higherthan in countries with more stable tax systems.

As a consequence,the amounts presented and disclosed in financialstatementsmay change in the future as a result of a final decision by a tax control organ.

The Tax Ordinance Act contains provisions from the General Anti-Abuse Clause (GAAR). GAAR is intended to prevent the formation and use of artificial legal structures created in order to avoid paying tax in Poland. GAAR defines tax avoidance as an activity performed primarily to obtain a tax benefit contrary under the circumstances to the subject and aim of the tax law. According to GAAR, such an activity does notresultin a tax benefitif itis artificial. All proceedingsregarding unjustified division of operations, involving intermediaries despite a lack of economic justification, mutually offsetting elements or other similar activities may be treated as a condition for the existence of artificial activitiessubject to GAAR. These new regulations willrequire a much greaterjudgement in assessing the tax effects of transactions.

TheGAAR clause isto be applied in relation to transactions executed afterits entry into force and to transactionsthat were executed prior to its entry into force but in the case of which tax benefits were or continue to be obtained after GAAR went into force. The implementation of these regulations will make it possible for Polish tax inspection authorities to question legal arrangements and agreements made by taxpayerssuch as group restructuring and reorganisation.

The Group recognises and measures current and deferred income tax assets and liabilities using IAS 12 Income tax based on profit (tax loss), tax base, unsettled tax losses, unused tax exemptions and tax rates, taking into account assessment of uncertainties related to tax settlements. If there is uncertainty over where or not and in whatscope the tax authority will accept tax accounting fortransactions, the Group recognisesthese settlementstaking into account an uncertainty assessment.

26. Informationonrelatedparties

PGE Group's transactions with related entities are concluded based on market prices for provided goods, products and services or are based on the cost of manufacturing.

26.1 Associatesandjointlycontrolledentities

The total value of transactions with associates and jointly controlled entitiesis presented in the table below.

	Period ended June 30, 2021	Period ended June 30, 2020*
Salesto associates and jointly controlled entities	94	152
Purchasesfrom associates and jointly controlled entities	1,030	984

	As at	As at

	June 30, 2021	31 December 2020
Trade receivablesfrom associates and jointly controlled entities	40	93

*Restated data

Thisturnover and balancesresult from transactions with Polska Grupa Górnicza S.A. and Polimex-Mostostal S.A.

26.2 StateTreasury-controlledcompanies

The State Treasury isthe dominantshareholder of PGE Polska Grupa Energetyczna S.A. and as a result in accordance with IAS 24 Related Party Disclosures, State Treasury companies are treated as related entities. PGE Group entities identify in detail transactions with approximately 40 of the biggest State Treasury subsidiaries.

The total value of transactions with such entitiesis presented in the table below:

	Period ended June 30, 2021	Period ended June 30, 2020
Salesto related parties	2,025	1,192
Purchasesfrom related parties	3,028	2,509


	As at	As at
	June 30, 2021	31 December 2020
Trade receivablesfrom related parties	392	254

Largesttransactions with the State Treasury's concern the following companies: Polskie Sieci Elektroenergetyczne S.A., PolskieGórnictwo Naftowe iGazownictwo S.A.,Jastrzębska SpółkaWęglowa S.A., ENERGA-OPERATOR S.A., PKP Cargo S.A., PKNOrlen S.A., ZakładyAzotowe PUŁAWY S.A., Grupa LOTOS S.A., TAURON Dystrybucja S.A., PKOBank Polski S.A.

Moreover, PGE Group executesmaterialtransactions on the energy market via power exchange TowarowaGiełda Energii S.A. Due to the fact that this entity only manages exchange trading, purchases and sales transacted through this entity are not treated as transactions with related parties.

26.3 ManagementBoardandSupervisoryBoardremuneration

The key management includesthe Management Boards and Supervisory Boards of the parent company and significant Group entities.

	Period ended	Period ended
PLN 000s	June 30, 2021	June 30, 2020
Short-term employee benefits(salaries and salary related costs)	18,750	18,349
Post-employment benefits	(645)	1,863
TOTAL REMUNERATIONOF KEY MANAGEMENT PERSONNEL	18,105	20,212
Remuneration of keymanagement personnel of entities of non-core operations	12,561	12,024
TOTAL REMUNERATIONOF MANAGEMENT PERSONNEL	30,666	32,236

	Period ended	Period ended
PLN 000s	June 30, 2021	June 30, 2020
Management Board ofthe parent company	2,901	3,357
including post-employment benefits	(935)	(143)
Supervisory Board ofthe parent company	422	407
Management Boards – subsidiaries	13,049	14,669
Supervisory Boards – subsidiaries	1,733	1,779
TOTAL	18,105	20,212
Remuneration of keymanagement personnel of entities of non-core operations	12,561	12,024
TOTAL REMUNERATIONOF KEY MANAGEMENT PERSONNEL	30,666	32,236

PGE Group companies(direct and indirectsubsidiaries) apply a rule whereby management boardmembers are employed on the basis of management services contracts. The cost of this remuneration is presented, by nature and function, in note 7.2 Costs by nature and function.

27. Significanteventsduringandafterthereportingperiod

27.1 ImpactofCOVID-19onPGEGroup'sbusiness

PGE is identifying risk factors related to the COVID-19 pandemic that affect the Group's results on an on-going basis. The pandemic's impact on financialresultsremained limited in the first half of 2021. Further potential events and theirscale are difficult to estimate. The duration, intensity and reach of the pandemic will be ofsignificance, as well asthe pandemic'simpact on economic growth in Poland. At the same time, preparing precise estimate is difficult due to a variety of otherfactors having an impact on the electricitymarket, including demand for electricity.

The onset of the pandemic caused an economic slowdown in 2020 globally and in Poland. Currently, following a lockdown of the Polish economy, the economic situation isimproving. This can be seen in the major increase in GDP and industrial production in Q2 2021 on a year-on-year basis.

Nonetheless, the re-introduction of restrictions could result in reduced economic activity, which would give rise to a temporarily lower domestic consumption of electricity, which in turn would reduce revenue and margins on the generation, distribution and sale of energy intheConventional Energy,Distribution, Supply andDistrictHeating segments.Most oftheproductionin2021was contractedinprevious years, which is why the potential negative impact of lower volumesin the Conventional Energy segment would largely be limited.

If the pandemic intensifies, the Supply segment is at risk of falling demand for electricity, which could translate into lower sales to end customers and a higher cost of electricity balancing. In the Distribution segment, a lower volume ofsuppliesto end customers could also directly lead to lowerrevenue.

On June 30, 2021, the impact of a predicted increase in payment backlogs, especially in receivables from SMEs, was not material. As described innote 2.4 to these consolidated financialstatements,theGrouphasrecognisedadditional impairmentlossesof PLN13million. Depending on the further development of the pandemic and economic situation, liquidity risk and the risk of higher impairment of overdue receivables at PGE Group still exist and are being monitored on an on-going basis. The Group currently does not expect thisrisk to become material and has not identified liquidity risk.

PGE Group owns facilities of strategic importance from the viewpoint of uninterrupted generation and supply of electricity and heat in Poland. TheCOVID-19 pandemic has changed thewaywork isorganised, especiallywith regard to PGEGroup's generating assets. Inmany instances,this givesrise to additional costs, including for example the purchase of protective equipmentfor employees. Since the start of the pandemic, the Group has work rules in place that are aimed at reducing the risk of infection for employees as much as possible. As one of the largest employers in Poland, with more than 40 000 employees, PGE Group is undertaking a range of corporate and work organisation efforts intended to ensure operational continuity, protection of employee health and life, including remote and rotational work, raising awareness of the basic rulesfor protecting against COVID-19, prevention and quarantine.

PGE Group is constantly performing communication activities for employees, intended to build awareness of the positive impact of vaccinations - both individual and societal. Furthermore, internal communication is maintained in connection with the course of the pandemic and encouraging to minimise the risk ofinfection -thismeans keeping distance, frequently washing hands or using office space in a safe manner. PGE has appointed a crisis team, which collects information from all Group companies, monitors the situation at the companies and undertakes appropriate activities.

Production units also have operational plans, drafted and approved on an on-going basis, in the event of elevated absences- asthey are ofstrategic importance fromthe viewpoint ofmaintaining the continuity of productionandsupply of electricity andheat,they also remain in continuous contact with localservicesresponsible for monitoring the situation in the country across all PGE Group sites.

In the retail customer area, PGE Group has been primarily focusing on expanding itsremote service channels.

Having implemented appropriate remedial measures at an early stage of the pandemic, PGE Group has been producing and supplying electricity and heat with no interruptions.

PGE Group ismonitoring the furtherimpact of COVID-19 on itsfinancial position and is preparing for variousscenarios. The pandemic has accelerated the roll-out of measures intended to prepare the entire organisation for changes in order to take on the challenges that energy companies are facing in connection with decarbonisation. They willrequire financial expenditures. All potentialsavingsscenarios, in both investment expenditures and operational costs, have been analysed in orderto focus on flagship development projectsrelated to PGE Group's core business.

27.2 PreliminaryproposaltopurchasestakeinFortum'sassets

OnOctober 27, 2020, an investor consortium thatincluded PGE submitted a preliminary, non-binding proposalto purchase from Fortum Holding B.V. its district heating and cooling businessin Estonia, Lithuania, Latvia and Poland. Consortium membersincluded: PGE, Polskie Górnictwo Naftowe i Gazownictwo S.A., PFR Inwestycje FIZ, whose investment portfolio is managed in part by Polski Fundusz Rozwoju S.A., and IFM Investors Pty Ltd.

On November 16, 2021, a consortium consisting of: PGE and Polskie Górnictwo Naftowe i Gazownictwo S.A. (Partners) submitted a modified preliminary non-binding offerto purchase shares belonging to Fortum Holding B.V.

The modified proposal entails the acquisition of Fortum Holding B.V.'s district heating business in Poland only. At the same time, the Partners withdrew from the intended acquisition of Fortum's assets in Estonia, Lithuania, Latvia and from participating in the investor consortium with PFR Inwestycje FIZ and IFM Investors Pty Ltd.

Joint work is currently in progressto submit a binding proposal.

Fortum Holding B.V.'s Polish subsidiary isinvolved in the generation, distribution and sale of heat and the generation of electricity.

The purchase of Fortum's assetsisin line with PGE Group's Strategy 2030, announced on October 19, 2020.

27.3 InvestmentagreementwithØrstedforoffshorewindfarmprojects

On February 10, 2021 PGE Group entities and Ørsted signed an agreement to form a 50%/50% joint venture to develop two offshore wind farmprojects. These arePGE'son-going projectsBaltica 2 through SPVEWB2 (witha plannedcapacity of approx. 1.5GW) andBaltica 3 through SPV EWB3 (with a planned capacity of approx. 1 GW).

PGE Baltica 6 sp. z o.o., PGE Baltica 5 sp. z o.o. (PGE's subsidiaries) ("Existing Shareholders"), Orsted Baltica 2 Holding sp. z o.o., Orsted Baltica 3 Holding sp.z o.o.,(subsidiaries ofØrsted Wind Power A/S ("OWPAS"), hereinafterjointly referred to as "Investors"), Elektrownia Wiatrowa Baltica – 2 sp. z o.o. and Elektrownia Wiatrowa Baltica – 3 sp. z o.o. signed an investment agreement concerning the development by the Investors of projects Baltica 2 and Baltica 3.

The investment agreement establishes the legal framework for the formation of a joint venture between PGE and OWPAS for the development, construction and operation of offshore wind projects Baltica 2 and Baltica 3.

Underthe investment agreement, the Investors undertake to acquire newly-issued sharesin EWB2 and EWB3 constituting 50% ofshare capital and granting the Investors 50% of votes at each of the companies.

On March 10, 2021 the President ofthe Polish Office of Competition and Consumer Protection approved the concentration.

On May 6, 2021, after the fulfilment of the conditions precedent, relevant PGE Group entities and Ørsted completed the transaction in which Ørsted entities acquired shares representing a 50% stake in EWB2 and EWB3. Once the share capital increase was registered, Ørsted and PGE (acting through subsidiaries) became 50/50 partnersin thisjoint operation.

The total price for the 50% stake in EWB2 and EWB3 constitutesthe equivalent of approx. PLN 686 million. The increased price includes in particular contributions made by PGE to the companies afterthe investment agreement wassigned.

Once the relevant assumptions are met, Ørsted entities will be required to make additional contributionsto EWB2 and EWB3, which can amount to a total of PLN 1,024 million.

In closing the transactions, Ørsted and PGE entities signed a number of documents, separately for Baltica 2 and Baltica 3, including in particular:

shareholder agreements, regulating the companies' corporate governance, operational rules for integrated project teams, commitments by the partiesregarding financing and the provision of otherservicesto the companies,restrictions on the disposal of shares in the companies constituting the joint operation as well as the consequences of contractual breaches and change of control;
agreements concerning the provision of development services for the companies constituting the joint operation by relevant subsidiaries from both sides;
agreementsregarding accessto resources, based on which both of the parties will delegate personnel to the companies;
shareholder loan agreements, pursuant to which the shareholders will provide debt financing (aside from equity financing) to the companies; and
corporate guarantees issued by PGE and Ørsted Wind Power A/S, pursuant to which both of the parties guarantee due performance of liabilities at the development stage of the projects by their respective subsidiaries.

27.4 Czechia's complaintagainstPolandregardingprolongationofminingconcessionforKWBTurów

OnSeptember 30, 2020 theCzechRepublic sent a letterto the EuropeanCommissionpursuantto art. 259ofthe Treaty on the Functioning ofthe EU, initiating a procedure against Poland for alleged violations of EUlaw in connectionwith the extension ofthe termof concession forlignite mining for 6 yearsfor KWB Turów.

OnDecember 17, 2020,the European Commission issued a reasoned opinion, in which itshared some ofthe objections ofthe Czech side, while pointing out that the extension of the operation of KWB Turów did not violate the provisions of the Water Framework Directive. The European Commission also stressed thatsome of the remaining allegationsfrom the Czech side turned out to be wrong.

On February 26, 2021 the Czech government lodged a complaint against Poland with the Court of Justice of the EU. A summary of the complaint and key arguments were published in the EU Official Journal on April 19, 2021. The parties in this proceeding are member states, which precludesthe participation of natural and legal persons even if the case directly concernstheir activities.

On May 21, 2021, the Vice-President of the Court of Justice issued an order for an interim measure as follows: "The Republic of Poland will cease immediately and until the ruling in case C-121/21 lignite mining at the Turów mine (Poland)." An interim measure does not decide the merits of the case.

On June 9, 2021, the European Commission joined the main proceedings as an intervener supporting some of the claims of the Czech side.Inthe interimmeasureprocedure,theCzechRepublic additionally demanded a fine foreachdayofnon-compliancewiththedecision to immediately cease lignitemining. Atthe same time,the Republic of Poland applied for annulment ofthe decision on interim measures due to a change in circumstances within the meaning of art. 163 of the Rules of the Court of Justice. In accordance with the decision of September 20, 2021, the Vice-President of the Court of Justice dismissed the request to revoke the interim measure and ordered Poland to pay the European Commission a fine in the amount of EUR 500,000 per day,starting from delivery of the ruling to Poland and ending when the member states abides by the ruling of May 21, 2021. In the opinion of the Company, it is not possible to transfer the abovementioned penalties onto PGE Group companies.

PGE Group does not plan to stop coal mining activities at KWB Turów and electricity generation activities at the Turów plant. Mining at KWB Turów complies with domestic laws and European environmental norms, based on a legally obtained concession. The government ofthe Republic of Poland takesthe same position in thisrespect, additionally pointing outthatthe suspension of worksin themine would endanger the stability of the Polish power system and would have negative consequences for energy security. Government representatives also point to the lack of legal groundsto orderthe suspension of work at KWB Turów.

At the same time, the main proceedings concerning allegations of a breach of EU law are pending.

According to PGEGroup,the dispute in question has no impact on these financialstatements as ofthe date onwhich they were prepared. At the same time, PGE Group will be monitoring the case on an on-going basis, and any potential eventsthat materialise will be reflected appropriately in future financialstatements.

27.5 Planneddisposalof coalassetstoNationalEnergySecurityAgency

On 21 May 2021, the following draft was published in the list of legislative and program works of the Council of Ministers: "Transition of Poland's energy sector. Carve out of coal-based generation assetsfrom companies with a State Treasury shareholding." According to the draft, the carve out process will consist of purchase by the State Treasury all assets related to electricity generation in hard coal- and lignite-based power plants, including related service companies, from PGE S.A., ENEA S.A., TAURON Polska Energia S.A. and ENERGA S.A. (which was not included in the published draft but joined the transition process in June of this year). In connection with the indivisibility of lignite-based energy complexes, the acquired assets will also include lignite mines. Assetsrelated to hard coal mining will not become a part of the entity operating coal-based energy generation units. Asregards heating assets, because of their planned modernisationsin the low- and zero-carbon direction, they will not be included in the transaction. The State Treasury will subsequently integrate the acquired assetsinto one entity. PGE GiEK S.A. will be the integrator. The integration will consist ofmerging the companies acquired by the State Treasury or contributing them to PGE GiEK S.A. via a capital increase. PGE GiEK S.A. will be re-named as Narodowa Agencja Bezpieczeństwa Energetycznego S.A. (NABE). NABE will be a self-sufficient entity that will carry out maintenance and modernisation investments that are necessary to maintain the efficiency of its coal units. The transaction will follow relevant business and economic analyses, including due diligence and valuation ofselected assets covered by the transaction. Because ofthe generating companies' debts toward their parent entities, the settlement of this transaction will be the subject of detailed arrangements between the State Treasury and the existing owners.

According to the draft, once the coal assets are carved out, the energy groups will focus on implementing low- and zero-carbon investments, while NABE, operating as an entity wholly owned by the State Treasury, will be the owner of coal-based generating assets. NABE's role will be to ensure the essential balance of capacity in the energy system and will be limited to essential replacement investments and a gradual phase-out of coal units as low- and zero-emission capacities gradually grow, thus ensuring the state's energy security. Public consultations on the published draft were conducted. An updated version ofthe document "Transition of Poland's energy sector. Carve out of coal-based generation assets from companies with a State Treasury shareholding." has not yet been published. On July 23, 2021,PGE S.A., ENEAS.A., TAURONPolskaEnergia S.A. andENERGAS.A. executedanagreementwiththe State Treasury regarding cooperation on the carve out of coal-based energy generation assets and theirintegration into NABE.

A precise date forthe disposal ofthe coal assets,their valuation andmeans ofsettling debt and otherliabilitiesrelated to these assets has not yet been set. In connection with this, it is currently not possible to determine the impact of this division on the future financial statements of PGE and PGE Group.

The Company expectsthe processto sell these assetsto NABE to take place in 2022.

II.PGE PolskaGrupa Energetyczna S.A. Condensed separate interimfinancialstatements forthe 6-month periodended June 30, 2021, in accordancewith IFRS EU(in PLNm)

SEPARATE STATEMENT OF COMPREHENSIVE INCOME

		Period ended	Period ended
	Note	June 30, 2021	June 30, 2020
		(unaudited)	(unaudited)
STATEMENTOF PROFITOR LOSS

SALESREVENUE	6	12,829	15,100
Cost of goodssold	7	(12,353)	(14,571)
GROSS PROFITONSALES		476	529
Distribution and selling expenses	7	(9)	(10)
General and administrative expenses	7	(98)	(107)
Other operating income /(expenses)		(5)	(8)
OPERATINGPROFIT		364	404
Finance income /(costs), including	8	1,264	1,200
Interestincome calculated using the effective interestrate method		74	82
GROSS PROFIT		1,628	1,604
Income tax		(27)	(57)
NET PROFIT FOR THE REPORTINGPERIOD		1,601	1,547

OTHER COMPREHENSIVE INCOME
Itemsthat may be reclassified to profit orloss:
Measurement of hedging instruments		199	(356)
Actuarial gains and lossesfrom valuation of provisionsfor employee benefits		1	-
Deferred tax		(38)	68
OTHER COMPREHENSIVE INCOME FOR THE REPORTINGPERIOD,NET		162	(288)

TOTAL COMPREHENSIVE INCOME		1,763	1,259

NET PROFITAND DILUTEDNET PROFIT PER SHARE		0.86	0.83
(INPLN)

SEPARATE STATEMENT OF FINANCIAL POSITION

	Note	As at June 30, 2021	As at 31 December 2020
		(unaudited)	(audited)
NON-CURRENTASSETS
Property, plant and equipment		150	155
Right-of-use assets		20	20
Financialreceivables	10.1	7,591	9,139
Derivatives and other assets measured atfair value through profit orloss	11	87	132
Sharesin subsidiaries	9	29,492	29,401
Sharesin subsidiaries, jointly controlled entities and associates		101	101
Deferred income tax assets		79	119
Other non-current assets		3	-
		37,523	39,067
CURRENTASSETS
Inventories		1	1
Income tax receivables		191	-
Trade and otherreceivables	10.1	12,459	9,762
Derivatives	11	1,576	1,244
Sharesin subsidiaries	9	-	369
Other current assets	12	1,349	54
Cash and cash equivalents	10.2	4,221	3,507
		19,797	14,937
TOTAL ASSETS		57,320	54,004
EQUITY
Share capital		19,165	19,165
Reserve capital		20,154	18,410
Hedging reserve		(127)	(288)
Retained earnings		1,600	1,742
		40,792	39,029
NON-CURRENT LIABILITIES
Non-current provisions		19	19
Loans, borrowings, bonds and leases	13	7,740	8,602
Derivatives	11	192	385
Otherliabilities		14	17
		7,965	9,023
CURRENT LIABILITIES
Current provisions		39	21
Loans, borrowings, bonds, cash pooling, leases	13	3,713	2,150
Derivatives	11	1,564	1,243
Trade and otherliabilities		2,885	1,583
Income tax liabilities		-	456
Other non-financial liabilities		362	499
		8,563	5,952
TOTAL LIABILITIES		16,528	14,975
TOTAL EQUITY ANDLIABILITIES		57,320	54,004

SEPARATE STATEMENT OF CHANGES IN EQUITY

	Share capital	Supplementary capital	Hedging reserve	Retained earnings	Total equity

AS AT JANUARY 1, 2021	19,165	18,410	(288)	1,742	39,029
Net profitforthe reporting period	-	-	-	1,601	1,601
Other comprehensive income	-	-	161	1	162
COMPREHENSIVE INCOME FOR THE PERIOD	-	-	161	1,602	1,763
Allocation of profitfrom previous years	-	1,744	-	(1,744)	-
AS AT JUNE 30, 2021	19,165	20,154	(127)	1,600	40,792

	Share capital	Supplementary capital	Hedging reserve	Retained earnings	Total equity
AS AT JANUARY 1, 2020	19,165	19,669	(72)	(1,258)	37,504
Net profitforthe reporting period	-	-	-	1,547	1,547
Other comprehensive income	-	-	(286)	(2)	(288)
COMPREHENSIVE INCOME FOR THE PERIOD	-	-	(286)	1,545	1,259
Coverage of loss	-	(1,259)	-	1,259	-
Other changes	-	-	-	1	1
AS AT JUNE 30, 2020	19,165	18,410	(358)	1,547	38,764

SEPARATE STATEMENT OF CASH FLOWS

	Period ended	Period ended
	June 30, 2021	June 30, 2020
	(unaudited)	(unaudited)
CASHFLOWS FROM OPERATINGACTIVITIES
Gross profit	1,628	1,604
Income tax paid	(499)	191
Adjustmentsfor:
Depreciation, amortisation and impairmentlosses	6	6
Interest and dividend, net	(1,325)	(1,542)
(Gain)/loss on investing activities	54	440
Change in receivables	(384)	54
Change in inventories	-	2
Change in liabilities, excluding loans and borrowings	994	(138)
Change in other non-financial assets	(47)	(160)
Change in provisions	(21)	-
Exchange differences	15	(3)
NET CASH FROM OPERATINGACTIVITIES	421	454

CASHFLOWS FROM INVESTINGACTIVITIES
Purchase of property, plant and equipment and intangible assets	(2)	(3)
(Purchase)/ buy-back of bondsissued by PGE Group companies	-	910
Sale of otherfinancial assets	378	-
Expenditure on purchase ofsharesin subsidiaries	(93)	(18)
Origination /(repayment) of loans granted under cash pooling agreement	757	683
Loans granted	(6,469)	(2,088)
Interestreceived	232	279
Loansrepaid	5,787	1,724
NET CASH FROM INVESTINGACTIVITIES	590	1,487

CASHFLOWS FROM FINANCINGACTIVITIES
Proceedsfrom loans, borrowings	-	3,603
Repayment of loans, borrowings, leases	(125)	(4,463)
Interest paid	(158)	(180)
NET CASH FROM FINANCINGACTIVITIES	(283)	(1,040)

NET CHANGE INCASHAND CASHEQUIVALENTS	728	901
Net exchange differences	(14)	-
CASHAND CASHEQUIVALENTS AT THE BEGINNING OF PERIOD	3,493	219
CASHAND CASHEQUIVALENTS AT THE ENDOF PERIOD	4,221	1,120

1. Generalinformation

PGE S.A. is the parent company for PGE Group and prepares separate and consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union.

The State Treasury isthe Company's principalshareholder.

The Company's core activities are asfollows:

trade in electricity and other energy market products
oversight of head offices and holding companies
provision of financialservices to PGE Group companies
provision of other services related to these activities

PGE S.A.'s business activities are conducted under appropriate concessions, including concession for electricity trading granted by the Energy Regulatory Office. The concession is valid until 2025. No significant assets or liabilities are assigned to the concession. According to the concession the annual fees are paid depending on the level of trading.

Revenue from the sale of electricity and other energy market productsisthe only significant itemsin operating revenue. Thisrevenue is generated on the domestic market. The Company does notreport business or geographicalsegments.

PGE S.A.'s accounting books are maintained by subsidiary PGE Synergia sp.z o.o.

Statement of compliance

These financialstatements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and in the scope required under the Minister of Finance Regulation of March 29, 2018 on current and periodic information provided by issuers of securities and conditionsofrecognitionas equivalentinformationrequiredby the lawof a non-Member State (OfficialJournal 2018, items 512 and 685).

IFRS comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretation Committee (IFRIC).

Going concern

These condensed interim financialstatements were prepared underthe assumption thatthe Company will continue operating as a going concern for at least 12 months from the reporting date. As at the date of approval of these separate financial statements, there is no evidence indicating that the Company will not be able to continue its operations as a going concern.

These financialstatements comprise financial data forthe period fromJanuary 1, 2021 to June 30, 2021 ("separate financialstatements") and include comparative data forthe period from January 1, 2020 to June 30, 2020 and as at December 31, 2020.

The same accounting rules (policies) and calculation methods are applied in these financial statements as in the most recent annual financialstatements and they should be read in conjunctionwith PGE S.A.'s audited separate financialstatements prepared in accordance with EU IFRS forthe year ended December 31, 2020.

Seasonality

Main factors affecting the demand for electricity and heat are: weather conditions – airtemperature, wind force,rainfall,socio-economic factors – number of energy consumers, energy sources prices, growth ofGDP and technologicalfactors – advancesin technology, product manufacturing technology. Each of these factors has an impact on technical and economic conditions of production and distribution of energy products, thusinfluence the results obtained by the Company.

PGE S.A.'ssalesseasonality resultsfrom the fact that the Company sold 90% of its electricity to PGE Obrót S.A. and PGE Dystrybucja S.A., whose demand for electricity issubject to seasonality.

2. Professionaljudgementofmanagementandestimates

In the period ended June 30, 2021, no other significant changes of estimates took place that would have an impact on the amounts presented in the financial statements. As described in note 9 to these financial statements, impairment tests on stakes held were performed in the current period. The tests did not provide groundsforrecognising orreleasing impairment losses.

3. ImpactofnewregulationsontheCompany'sfuturefinancialstatements

New standards and interpretations that were published but are not yet in force are described in note 2.3 to the consolidated financial statements.

4. Changesinaccountingprinciplesanddatapresentation

In the present period, the Company did not change accounting rules or data presentation.

New standards and interpretations that went into force on January 1, 2021 and had no impact on the Company's separate financial statements are described in note 4 to the consolidated financialstatements.

5. Fair valuehierarchy

The principlesfor valuation ofinventories, derivatives,shares and instruments not quoted on activemarkets, for which fair valuemay not be determined reliably, are the same as presented in the financialstatementsforthe year ended December 31, 2020.

The Company measures derivatives at fair value using valuation models for financial instruments based on publicly available exchange rates, interest rates, discount curves for currencies (valid also for commodities, prices of which are denominated in those currencies) derived from active markets. The fair value of derivatives is determined based on discounted future cash flows from transactions, calculated on the difference between the forward rate and transaction price. Forward exchange rates are not modelled as separate risk factors, but are derived from the spotrate and appropriate forward interestrate forforeign currenciesin relation to PLN.

During the current and comparative reporting periods, there have been no transfers of financial instruments between the first and the second level of fair value hierarchy.

6. Salesrevenue

Type of goods orservices	Period ended June 30, 2021	Period ended June 30, 2020
REVENUE FROM CONTRACTS WITH CUSTOMERS	12,827	15,097
Revenue from sale of goods, including:	12,332	14,568
Sale of electricity	5,499	7,333
Sale of gas	177	149
Sale of CO2 emission allowances	6,640	7,086
Revenue fromCapacity Market	16	-
Revenue from sale ofservices	495	529
Revenue from leases	2	3
TOTAL REVENUE FROM SALE	12,829	15,100

The Company operates predominately in Poland.

The decline in revenue from the sale of electricity in the first half of 2021 in comparison with the same period last year resulted from lower supply volumes and a decline in sales prices. The decline in supply volume mainly concerns electricity sales to PGE Obrót S.A. in orderto cover demand from retail customers and a decline in re-sale of electricity to PGE GiEK as producer. The decline in volume sold to retail customers at PGE Obrót S.A. islargely the result of lower demand for electricity from large customersin the professionalsegment.

Growth in revenue from the sale of natural gas in the first half of 2021 is the effect of higher gas supply volume and higher sales prices. The increase in gas volume wasrecorded mainly on the exchange and in gassalesto PGE Group's CHPs.

The decline in revenue from the sale of CO² emission allowances during the present period mainly resulted from:

no proceedsin 2021 from the sale of free CO² emission allowances(received in 2019 and 2020),
decline in revenue from the sale ofsurplus CO² emission allowances bought back from PGE Group companies and sold to external entities,

alongside a simultaneous increase in revenue from sale to PGE Group companies as a result of higher sales prices and volumes of CO² emissionallowances.Theincreaseinsales volumeresultedfroma lower volumeofCO2emissionallowancesallocatedfor2020(redeemed in 2021).

Revenue from the Capacity Market - in connection with the launch of the Capacity Market on January 1, 2021, PGE Group companies being suppliers of capacity to PSE S.A. generate revenue related to the capacity obligation. This revenue is settled by individual Group companies according to an algorithm described in the Capacity Market Management Agreement. PGE S.A., which according to the Agreementserves as Manager, recognisesrevenue from activitiesit undertakes.

Revenue from the sale ofservicesmainly concernsservices performed for PGEGroup subsidiaries and includes, inter alia,servicesrelated to electricity trade and supply, supply of fuel, licenses and so-called support services. The decline in revenue mainly stems from lower revenue from servicesrelated to electricity trade provided on behalf of PGE Group companies as a result of both a decline in volume and lower electricity prices.

Information concerning key clients

The Company's main counterparties are PGE Group subsidiaries. In the first half of 2021, sales to PGE Obrót S.A. accounted for 38% of revenue from sales, while salesto PGE GiEK S.A. accounted for 40%. In the first half of 2020,salesto these companies accounted for 38% and 30%, respectively.

7. Costsbynatureandfunction

	Period ended	Period ended
	June 30, 2021	June 30, 2020
COSTS BY NATURE
Depreciation, amortisation	6	6
Externalservices	31	36
Employee benefits expenses	71	83
Other costs by nature	29	25
TOTAL COSTS BY NATURE	137	150
Distribution and selling expenses	(9)	(10)
General and administrative expenses	(98)	(107)
Cost of goods andmaterialssold	12,323	14,538
COSTOFGOODS SOLD	12,353	14,571

The decline inthe valueof goods andmaterialssoldinH12021comparedtoH1 2020resultedmainly fromthe above-mentioned decrease in revenue from sales.

8. Financeincomeandfinancecosts

	Period ended June 30, 2021	Period ended June 30, 2020
NET FINANCE INCOME/(COSTS) FROM FINANCIAL INSTRUMENTS
Dividends	1,252	1,464
Interest calculated using the effective interestratemethod	70	80
Revaluation of financial instruments	(27)	(10)
Reversal/(recognition) of impairment	-	(337)
Exchange differences	8	3
Loss on disposal of investment	(39)	-
TOTALNET FINANCE INCOME/(COSTS) FROM FINANCIAL INSTRUMENTS	1,264	1,200
NETOTHER FINANCE INCOME/(COSTS)	-	-
TOTALNET FINANCE INCOME/(COSTS)	1,264	1,200

In the period ended June 30, 2021, the Company reported dividend income mainly from PGE Dystrybucja S.A. (PLN 784 million), PGE Energia Ciepła S.A. (PLN 277 million) and PGE Energia Odnawialna S.A. (PLN 166 million), and in the comparative period PLN 792 million from PGE Dystrybucja S.A., PLN 467million from PGE Energia Odnawialna S.A., and PLN 186 million from PGE Energia Ciepła S.A.

In the comparative period, in the itemrelease/(recognition) ofimpairmentthe Company presented the recognition of an impairmentloss on the stake in PGE Obrót S.A. (PLN 278 million), Elbest sp. z o.o. (PLN 31 million), PGE Nowa Energia sp. z o.o. (PLN 16 million) and PGE Trading GmbH (PLN 12 million).

The Company reports interest income mainly from financing granted to subsidiaries. Interest costs mainly relate to bonds issued and credit facilities and loanstaken out, as described in note 13 to these financialstatements.

The item 'impairment of financial statements' mainly includes measurements of hedging transactions in the part considered as the ineffective part of a hedge forinstruments designated as hedging instrumentsin cash flow hedge accounting and in full when it comesto otherinstruments.

An agreementto sell allsharesin PGE EJ1 sp.z o.o.to the State Treasury wassigned on March 26, 2021. The ownership ofthe shares was transferred on March 31, 2021. In connection with the sale, PGE incurred a grossloss of PLN 39million.

The additional notes constitute an integral part of the separate financialstatements.

9. Sharesinsubsidiaries

9.1 Analysisofthe valueofstakesinPGEGórnictwoi EnergetykaKonwencjonalna S.A.,PGE EnergiaCiepła S.A.andPGEEnergiaOdnawialnaS.A.

In the first half of 2021, the Company analysed indications and identified factors that may contribute to a change in the value of its generating assets and as a result influence the value of PGE S.A.'sstakesin PGE GiEK S.A. and PGE EO S.A. As a result of the analysis, PGE S.A. performed impairment tests on its stakes in PGE GiEK S.A. and PGE EO S.A. The tests did not show the need to recognise an impairment loss. In the case of PGE EC S.A., there were no indications warranting an impairment test.

The key changesin surroundingsinclude:

Market capitalisation of PGE S.A. remaining below net asset book value;
Depletion of lignite resources approaching. The operational time for lignite-fired plants is limited by the quantity of lignite available. Thus, as time passes, the remaining operational time is reduced, as are the benefits obtained and the useful value.
Lingering high prices for property rights (index TGEozea). In the first half of 2021, the average price of green certificates (index TGEozea) reached 151.21 PLN/MWh and was 9% higher than in the same period of last year.
High prices for CO2 emission allowances. After a slump caused by the pandemic outbreak in mid-March 2020, the prices of CO2 emission allowances began to rebound. In the first half of 2021, the average weighted price for EUA DEC 21 was 44.57 EUR/t, which represented a 105% increase on the same period last year.

Macroeconomic and market assumptions

The forecastsfor hard coal prices expect a majorincrease in 2023 in reference to 2022, followed by an average annual growth of 2.8 until 2030.

The forecast for revenue from the capacity market for 2021-2025 is based on the results of completed main and additional auctions for these delivery periods, taking into account the joint balancing mechanism at PGE Group companies. From 2026, the forecast was developed by a teamof experts at PGE S.A. on the basis of assumptions concerning estimated future flowsfor generating units, based on, inter alia,results of a completed auction and forecastsfroman external expert. For one-year contractswith delivery fromJuly 1, 2025 and for multiannual contracts executed as part of the auction for 2025 and subsequent, the 550g CO2/kWh (EPS 550) emission criterion isin place, which in practice rules out all coal unitsfrom Capacity Market auctions.

Unit availability was estimated based on repair plans, taking into accountstatistical failure rates.

However,the pace of the energy transition and trends expected in the Policy recently considerably accelerated and strengthened. In July 2021, the European Commission published the Fit for 55 legislative package, which intendsto, inter alia, reduce GHG emissionsin the EU by 55% (previously 40%) by 2030, in comparison with 1990. In line with the expectations of market participants, the EU ETS reform included in the package should result in a considerable increase in the prices of CO² emission allowances, which in practice already took place in thisfirst half ofthe year. In effect,the currentlevel of pricesfor CO² emission allowancessignificantly divergesfromthat assumed in the Policy. Another important element that vastly divergesfrom the Policy's assumptionsisthe dynamic increase in PV capacities as a result of numerous grant programs, a discount system for prosumers and renewable energy auctions. In effect, the level of installed capacities expected for 2030 has already been achieved.

The surroundingsin which PGE S.A.'s companies operate is characterised by high volatility and is dependent on macroeconomic, market and regulatory conditions, and all changes in this regard may have a substantial impact on their financial situation and results, and in consequence on the value of stakes held by PGE S.A. This is why the above and other assumptions adopted in estimating the value of these stakes are subject to periodic analysis and verification. Potential changes will be recognised in future financialstatements.

Impairment tests on stake in PGE GiEK S.A.

In previousreporting periods, PGE S.A.recognised substantial impairment losses on itsstake in PGE GiEK S.A.

In the present reporting period, the Company performed impairment tests in order to verify whether the value of its stake in PGE GiEK S.A. decreased orincreased.

Presented below are the key assumptions having impact on estimates of the useful value of PGE GiEK S.A.:

adopt the assumption that in the period after June 2025 there will be support from the capacity market or equivalent for units complying with the emission criterion of 550 g CO2/kWh of produced electricity, althoughmultiannual contracts executed as part of auctions for 2021-2024 are performed in accordance with their validity periods; for units that do not meet the emission criterion, there isthe possibility of balancing multiannual contracts executed by 2019,
take into account work cost optimisation resulting from current work plans, among other things,
maintain production capacities as a result of replacement-type investments,
take into account development investments for which construction work has begun,
adopt WACC after tax for the projection period at 6.06%-7.56%, depending on the CGU, in accordance with an individually estimated level of risk.

The tests did not indicate the necessity to recognise an impairment loss on the shares of PGE GiEK S.A. The recoverable value of these stakes exceedstheir book value indicated in these financialstatements.

Impairment tests on stake in PGE EO S.A.

In the presentreporting period,the Company performed impairment testsin orderto verify whetherthe value of itsstake in PGE EOS.A. decreased orincreased.

Presented below are the key assumptions having impact on estimates of the useful value of PGE EO S.A.:

production of electricity and property rights were estimated based on historic data, adjusted by the availability of units;
unit availability was estimated based on repair plans, taking into account statistical failure rates;
revenue from regulatory system services until mid-2023 were estimated based on the currently functioning system of remuneration for these services, from mid-2023 it is expected that the market mechanism for contracting regulatory services will start functioning, the revenuesfrom which have been estimated based on PGE Group'sinternal analyses;
maintain production capacities as a result of replacement-type investments;
adopt WACC after tax for the projection period at 6.56%.

Analysis of indicationsfor PGE EC S.A.

In the present reporting period, the Company analysed indications in order to verify whether there are grounds for conducting an impairment test on itsstake in PGE EC S.A.

The analysisincluded:

financial plan analysis,
confirmation that the investment plan is up-to-date,
analysis of prices for energy, hard coal, CO² emission allowances and natural gas
analysis of heat prices,
analysis of assumptionsregarding the capacity market, support for cogeneration
analysis of estimated margins on the production and sale of electricity in future periodsin the light of price forecastsfor energy, hard coal, gas and CO² emission allowances.

The additional notes constitute an integral part of the separate financialstatements.

to PGE, atthe end ofthe reporting period therewere no indicationsthat wouldwarrantthe recognition ofimpairmentlosses on the stake in PGE EC S.A.

9.2 AnalysisofthevalueofstakeinPGEObrótS.A.

In previousreporting periods, PGE S.A. recognised an impairment loss on itsstake in PGE Obrót S.A. The key assumptions applied in the impairmenttests performed as ofMay 31 2020 are described in PGE S.A.'sseparate financialstatements, which are part of PGE S.A.'s halfyearly financialreport for H1 2020.

In the currentreporting period, PGE S.A. performed an analysis of indicationsin orderto determine whetherthese assets are impaired or the earlierimpairment losses may be reversed.

The most important factors analysed include:

analysis of the current marketsituation, including impact of the COVID-19 pandemic on the energy market,
analysis of prices for energy and certificates of origin,
analysis of estimated margins on the production and sale of electricity in future periodsin the light of price forecastsfor energy,
analysis of economic effectsrelated to prices approved by the President of the Energy Regulatory Office for households,
analysis of the dynamic development of PV micro-installations and settlement of prosumers in the context of impact on the Company'sfinancial results.

The analysis of indications showed that the planned cash flows generated by PGE Obrót S.A. throughout the entire forecast period did not substantially change, in connection with which as at the reporting date there are no indications to recognise additional impairment losses on the stake in PGE Obrót S.A. norto reverse impairment lossesrecognised in previous periods.

10. Selectedfinancialassets

The carrying amount of financial assets measured at amortised cost is a reasonable estimate of theirfair value.

10.1 Tradeandotherfinancialreceivables

	AtJune 30, 2021		At December 31, 2020
	Non-current	Current	Non-current	Current
Trade receivables	-	851	-	1,239
Bonds acquired	5,830	4,112	9,130	813
Cash pooling receivables	-	414	-	330
Loans granted	1,761	5,581	9	6,499
Otherfinancialreceivables	-	1,501	-	881
TOTAL FINANCIAL RECEIVABLES	7,591	12,459	9,139	9,762

Trade receivables

Trade receivables of PLN 851 million relate mainly to the sale of electricity and servicesto subsidiariesin PGE Group. The balances ofthe three largest customers, i.e. PGEObrót S.A., PGEGiEK S.A. andPGE Energia Ciepła S.A. constituted94%ofthebalanceoftrade receivables. The decline in receivables by PLN 388 million concerns mainly in 85% the three aforementioned customers are results largely due to a decline in the sale of electricity.

Bonds acquired

	AtJune 30, 2021		At December 31, 2020
	Non-current	Current	Non-current	Current
BONDS ACQUIRED- ISSUER	5,830	4,112	9,130	813
PGE GiEK S.A.	5,830	4,112	9,130	813

PGE S.A. acquires bonds issued by entities belonging to PGE Group. Cash obtained from the issue of bonds is used for financing investments, repayment of financial liabilities as well asforfinancing current operations.

Bonds with maturities not exceeding 12 months from the reporting date are classified as current assets, while bonds with maturities exceeding12monthsfromthereportingdate areclassifiedasnon-currentassets, howeverthis classificationdependsnotonlyonmaturity but also on the Company'sintentions with regard to roll-over.

Cash pooling receivables

In order to centralise the management of financial liquidity in PGE Group, agreements for real cash pooling services were executed between 33 companies of PGEGroup and each bank separately, i.e. with Powszechna KasaOszczędności Bank Polski S.A. and Polska Kasa Opieki S.A. PGE S.A. coordinates the cash pooling service in PGE Group. This means, among others, that certain entities settle with the Company and the Company settles with banks. In connection to the above, balances with related parties participating in cash pooling are reported in financialreceivables and financial liabilities of PGE S.A.

Loans granted

	AtJune 30, 2021		At December 31, 2020
	Non-current	Current	Non-current	Current
LOANSGRANTED- BORROWER
PGE Energia Ciepła S.A.	-	1,314	-	1,809
PGE Obrót S.A.	-	1,157	-	1,614
PGE EnergiaOdnawialna S.A.	-	1,086		1,316
PGE Dystrybucja S.A.	-	647	-	1,047
PGE GiEK S.A.	1,751	1,015		500
PGE Systemy S.A.	-	197	-	197
PGE Trading GmbH	-	-	-	9
Betranssp.z o.o.	10	2	9	2
EW Baltica 2 sp.z o.o.	-	90	-	-
EW Baltica 3 sp.z o.o.	-	63	-	-
Elbest Sp. o.o.	-	10	-	5
TOTAL LOANSGRANTED	1,761	5,581	9	6,499

The loan repayment deadline isin 2021-2025.

Other financialreceivables

Inthe item"Other" theCompanymainly presentssettlementswithexchanges, largely relatedto thepurchaseofCO² emission allowances.

10.2 Cashandcashequivalents

Short-term deposits aremade for different periods, fromone day up to onemonth, depending on the Company's needsfor cash, and are deposited at individually agreed interest rates.

Cash in bank accounts accrues interest based on variable interest rates the level of which depends on the interest on overnight bank deposits

The balance of cash and cash equivalents comprise the following positions:

	As at June 30, 2021	As at 31 December 2020
Cash at bank	3,914	849
Overnight deposits	-	300
Short-term deposits	300	1,399
Cash in VAT accounts	7	959
TOTAL	4,221	3,507
Exchange differences on cash in foreign currencies	-	(14)
Cash and cash equivalents presented in the statement of cash flows	4,221	3,493

Available borrowing facilities	4,373	6,173
including overdraftfacilities	1,800	1,800

A detailed description of credit agreementsis presented in note 13 to these financialstatements.

11. Derivativesandotherreceivables atfair valuethroughprofitorloss

All derivatives are recognised in the Company'sfinancialstatements at fair value.

	AtJune 30, 2021		At December 31, 2020
	Assets	Liabilities	Assets	Liabilities
DERIVATIVES AT FAIR VALUE THROUGH PROFITOR LOSS
Commodity forwards	-	1,496	-	1,219
Futures	1,510	-	862	-
Currency forwards	65	68	382	24
Options	20	-	16	-
HEDGING DERIVATIVES
CCIRS hedges	25	-	64	-
IRS hedges	-	192	-	385
OTHER assets carried atfair value through profit orloss
Investmentfund participation units	43	-	52	-
TOTAL	1,663	1,756	1,376	1,628
non-current	87	192	132	385
current	1,576	1,564	1,244	1,243

Commodity and currency forwards

Commodity and currency forward transactions mainly relate to trade in CO² emission allowances.

IRS transactions

The Company executed IRS transactions to hedge interest rates on credit facilities and outstanding bonds. The initial nominal value of these transactionsis PLN 7,030 (PLN 5,630 million for credit facilities and PLN 1,400 million for bonds). Prior to the start of repayment of principal on certain creditfacilities,the current nominal amount of credit-hedging IRS transactionsis PLN5,380million. To recognise these IRS transactions, the Company uses hedge accounting.

CCIRS hedges

In connection with loansreceived from PGE Sweden AB (publ) disclosed in note 13 to these financialstatements, in August 2014 PGE S.A. concluded CCIRS transactions, hedging both the exchange rate and interest rate. In these transactions, banks - counterparties pay PGE S.A. interest based on a fixed rate in EUR and PGE S.A. paysinterest based on a fixed rate in PLN. The nominal value, payment of interest and repayment of nominal value in CCIRS transactions are correlated with the relevant conditions arising from loan agreements.

To recognise these CCIRS transactions, the Company uses hedge accounting.

Options

PGE S.A. bought a call option to purchase shares of Polimex-Mostostal S.A. from Towarzystwo Finansowe Silesia Sp.z o.o. The option was valued using the Black-Scholes method.

Investment fund participation units

In previous years, the Company purchased participation unitsfrom TFI Energia S.A. in three sub-fundsthe value of which atthe reporting date was PLN 43 million.

12. Other currentassets

	As at June 30, 2021	As at 31 December 2020
Dividend receivables	1,252	-
Receivablesfrom tax group	-	10
Advance payments	42	41
VAT receivables	45	-
Other	10	3
TOTAL	1,349	54

Dividend receivables mainly concern receivablesfrom PGE Dystrybucja S.A., PGE Energia Ciepła S.A. and PGE Energia Odnawialna S.A.

Advance payments consistmainly of fundstransferred to the subsidiary PGE Dom Maklerski S.A. forthe purchase of electricity and gas of PLN 42 million in the currentreporting period as compared to PLN 41 million in the comparative period.

VAT receivables amounting to PLN45 million are largely the result of transactionsin supply of electricity.

13. Loans,borrowings,bonds, cashpooling,leases

		At December 31, 2020
Non-current	Current	Non-current	Current
5,673	1,713	6,522	989
649	8	662	9
1,399	2	1,399	2
-	1,990	-	1,149
19	-	19	1

7,740	3,713	8,602	2,150
		AtJune 30, 2021

Bank credit

Lender	Security instrument	Execution date	Maturity	Limitin currency		Currency Interestrate	Liability at 30-06-2021	Liability at 31-12-2020
Bank consortium	IRS	2015-09-07	2023-09-30	3,630	PLN	Variable	3.637	3.636
European
Investment Bank	-	2015-10-27	2034-08-25	1,500	PLN	Fixed	1.505	1.505
BankGospodarstwa
Krajowego	IRS	2014-12-17	2027-12-31	1,000	PLN	Variable	813	876
European Bank for
Reconstruction and
Development	IRS	2017-06-07	2028-06-07	500	PLN	Variable	469	501
BankGospodarstwa
Krajowego	IRS	2015-12-04	2028-12-31	500	PLN	Variable	469	500
European
Investment Bank	-	2015-10-27	2034-08-25	490	PLN	Fixed	493	493
BankGospodarstwa
Krajowego	-	2018-06-01	2023-05-31	1,000	PLN	Variable	-	-
Revolving credit
facility	-	2018-09-17	2022-12-16	4,100	PLN	Variable	-	-
Bank Pekao S.A.	-	2018-07-05	2024-12-22	500	PLN	Variable	-	-
PKOBP S.A.	-	2018-04-30	2022-04-29	300	PLN	Variable	-	-
European
Investment Bank	-	2019-12-16	2038-10-16	273	PLN	Fixed	-	-
TOTAL BANK CREDIT							7,386	7,511

In the first half of 2021 and after the reporting period there were no cases of default of repayment or violation of other terms of credit agreements.

Loansreceived

Lender	Security instrument	Execution date	Maturity	Limitin currency		Currency Interestrate	Liability at 30-06-2021	Liability at 31-12-2020
PGE SwedenAB	CCIRS	2014-08-27	2029-07-31	100	EUR	Fixed	458	468
PGE SwedenAB	CCIRS	2014-08-27	2029-07-31	43	EUR	Fixed	199	203
TOTAL LOANS RECEIVED							657	671

In 2014, PGE S.A. and PGE Sweden AB (publ) established a Euro Medium Term Note Program, in which PGE Sweden AB (publ) may issue Eurobonds up to EUR 2 billion with a minimum maturity of 1 year. In 2014, PGE Sweden AB (publ) issued Eurobondsin the total amount of EUR 638 million. EUR 138 million is currently still outstanding. The subsidiary allocated the fundsraised under this program to grant a loan to its parent company.

Domestic market bond issues

Execution	Maturity	Limitin	Security			Tranche issue	Tranche buy-back	Liability at	Liability at
date	date	currency	instrument	Currency	Interestrate	date	date	30-06-2021	31-12-2020
						2019-05-21	2029-05-21	1.001	1.001
2013-06-27	indefinite	5,000	IRS	PLN Variable		2019-05-21	2026-05-21	400	400
	TOTALOUTSTANDINGBONDS							1.401	1,401

Cash pooling liabilities

The launch of real cash pooling is described in note 10.1 these financialstatements.

14. Contingentliabilities

	As at	As at
	June 30, 2021	31 December 2020
Bank guarantee liabilities	12,845	13,120
Surety	678	692
Collateral for exchange transactions	1,996	450
Other contingentliabilities	59	-
Total contingentliabilities	15,578	14,262

Guarantee for PGE Sweden AB (publ) liabilities

Due to establishment of the Eurobonds program in 2014, an agreement was concluded for the issue of guarantee by PGE S.A. for the liabilities of PGE Sweden AB (publ). The guarantee was granted to the amount of EUR 2,500 million (PLN 11,302 million) and will be valid until December 31, 2041. As at June 30, 2021, PGE Sweden AB (publ)'sliabilities due to bondsissued amounted to EUR 142 million (PLN 641 million (PLN 2,798 million), as at December 31, 2020 liabilities amounted to EUR 140 million (PLN 644million).

Surety

Thisliability presents a surety issued by PGE S.A. for PGE Dom Maklerski S.A.'sliabilitiesto the benefit of CitigroupGlobal Markets Europe AG in orderto put up collateral forsettling exchange transactions on CO2. As at June 30, 2021,the total amount ofsuretiesissued by PGE S.A. was PLN 150 million, i.e. the equivalent of PLN 678 million.

Collateral for exchange transactions

These liabilities represent bank guarantees provided as security for exchange transactions resulting from membership in the clearinghouse IRGiT. As atJune 30, 2021,the total amount of bank guarantees was PLN1,996million (PLN450million in the comparative period). The increase in deposit under compensation agreement between PGE Group companies results from higher electricity sales prices vs. the average purchase price.

Standby commitmentsto ensure financing of new investmentsfor PGE Group companies

Due to planned strategic investmentsin PGE Group, the Company committed to itssubsidiaries, in the form ofstandby commitments, to ensure financing of the planned investments. The standby commitments relate to specific investments and may be used only for such purposes. As atthe reporting date approximate value offuture investment commitmentsrelated to these projects amountsto about PLN 272 million.

Other court cases and disputes

Compensation for share conversions and lawsuits seeking annulment of General Meeting resolutions are described in note 23.4 to the consolidated financialstatements.

15. Informationonrelatedparties

Transactions with related entities are concluded based on market prices for provided goods, products and services or are based on the cost of manufacturing. Tax lossessettlements within the tax group were an exception from thisrule.

Benefitsresulting from on-going settlement of tax losses are attributable to PGE S.A.

16. PGEGroupsubsidiaries

	Period ended	Period ended
	June 30, 2021	June 30, 2020
Sales to related parties	11,111	11,210
Purchases from related parties	3,003	6,100
Net finance income / (costs)	1,471	1,421

The Company recognisesrevenuesfrom salesto PGE Group subsidiaries mainly related to sales of electricity.

	As at	As at December 31, 2020
	June 30, 2021
Receivables from related parties
Bonds issued by subsidiaries	9,942	9,943
Dividend receivables	1,252	-
Trade receivables from subsidiaries	833	1,195
Loans to subsidiaries	7,342	6,508
Cash pooling receivables	414	330
Tax group settlement receivables	-	10
Total receivables from related parties	19,783	17,986

	As at	As at December 31, 2020
	June 30, 2021
Liabilities to related parties
Loans from subsidiaries	657	671
Trade liabilities to related parties	1,335	681
Cash pooling liabilities	1,990	1,149
Tax group settlement liabilities	302	139
TOTAL LIABILITIES TO SUBSIDIARIES	4,284	2,640

Standby commitments and sureties granted to PGE S.A.'ssubsidiaries are described in note 14 to these separate financialstatements.

17. StateTreasurysubsidiaries

The State Treasury isthe principalshareholder in PGE Group and as a result State Treasury companies are recognised asrelated entities. The Company closely monitors transactions with key State Treasury subsidiaries. The total value of transactions with such entities is presented in the tables below.

	Period ended June 30, 2021	Period ended June 30, 2020
Sales to related parties	483	68
Purchases from related parties	127	101

	As at June 30, 2021	As at December 31, 2020
Trade receivables from related parties	13	18
Trade liabilities to related parties	29	21

The Company concludessignificant transactions on the energy market via Towarowa Giełda Energii S.A. (Polish Power Exchange). Due to the fact that this entity only deals with the organisation of trading, purchases and salestransacted through this entity are notrecognised astransactions with related parties.

18. ManagementBoardandSupervisoryBoardremuneration

The key management personnel comprise the Management Board and the Supervisory Board.

PLN 000s	Period ended June 30, 2021	Period ended June 30, 2020
Short-term employee benefits(salaries and salary related costs)	4,258	3,907
Post-employment and termination benefits	(935)	(143)
TOTAL REMUNERATIONOF MANAGEMENT PERSONNEL	3,323	3,764

PLN 000s	Period ended June 30, 2021	Period ended June 30, 2020
Management Board	2,901	3,357
Supervisory Board	422	407
TOTAL REMUNERATIONOF MANAGEMENT PERSONNEL	3,323	3,764

Members ofthe Company'sManagement Board are employedon thebasis of civil lawcontractsformanagement(so calledmanagement contracts). In note 7. Costs by nature and type, thisremuneration is presented in the item other costs by type.

The amount of post-employment benefits and benefitsrelated to employmenttermination was negative in the present and comparative periods due to the release of unused provisionsfrom previous years.

19. Significanteventsduringandafterthereportingperiod

Significant events in the period are presented in note 27 to the consolidated financial statements. No significant events took place between the end of the reporting period and the date on which these separate financialstatements were approved.

III. Approval ofthe semi-annualfinancialreport

This half-yearly financialreport was approved for publication by the Parent's Management Board on September 28, 2021.

Warsaw, September 28, 2021

Signatures of members of the Management Board of PGE Polska Grupa Energetyczna S.A.

President of the Management Board	Wojciech Dąbrowski
Vice-President of the Management Board	Wanda Buk
Vice-President of the Management Board	Paweł Cioch
Vice-President of the Management Board	Lechosław Rojewski
Vice-President of the Management Board	Paweł Śliwa
Vice-President of the Management Board	Ryszard Wasiłek
Signature of person

responsible for drafting these financial statements Michał Skiba Director, Reporting and Tax Department

Glossaryoftermsandabbreviations

Presented below is a set of the most frequently used terms and abbreviationsin these consolidated financialstatements.

Abbreviation	Full term
CCIRS	Cross Currency Interest Rate Swap
CGU	Cash Generating Unit
EBIT	Earnings Before Interest and Taxes
EBITDA	Earnings Before Interest, Taxes, Depreciation and Amortization
EWB2	Elektrownia Wiatrowa Baltica – 2 sp. z o.o o
EWB3	Elektrownia Wiatrowa Baltica – 3 sp. z o.o o
EUA	European Union Allowances
PGE Group, Group	PGE Polska Grupa Energetyczna S.A. Group
IRGiT	Izba Rozliczeniowa Giełd Towarowych S.A.
IRS	Interest Rate Swap
LTC	Long-term capacity and electricity sale contracts
KOGENERACJA S.A.	Zespół Elektrociepłowni Wrocławskich KOGENERACJA S.A.
IFRS	International Financial Reporting Standards
IFRS EU	International Financial Reporting Standards approved by the European Union
NABE	Narodowa Agencja Bezpieczeństwa Energetycznego S.A.
NFOŚiGW	National Fund for Environmental Protection and Water Management
Investment property	Investment property
Right-of-use assets	Right-of-use assets
PEP 2040	Poland's energy policy 2040
PGE S.A., PGE, Company, parent	PGE Polska Grupa Energetyczna S.A.
PGE EC S.A.	PGE Energia Ciepła S.A.
PGE EO S.A.	PGE Energia Odnawialna S.A.
PGE GiEK S.A.	PGE GiEK S.A.
PGG	Polska Grupa Górnicza S.A.
PGE PGK	PGE's tax group
Property, plant and equipment	Property, plant and equipment
Financial statements, consolidated financial statements	PGE Group's consolidated financial statements
Act on electricity prices	Act on amendment of the excise tax act and certain other acts
WACC	Weighted Average Cost of Capital
Voivodship Fund for Environmental Protection and Water Management (WFOŚiGW)	Voivodship Fund for Environmental Protection and Water Management
Intangible assets	Intangible assets

AI Terminal

PGE Polska Grupa Energetyczna S.A.

5758_rns_2021-09-28_ab31f3a3-386f-4429-b156-5002210bf235.pdf

I. PGEGROUPCONDENSEDCONSOLIDATEDINTERIMFINANCIALSTATEMENTSFORTHE 6-MONTHPERIODENDEDJUNE 30, 2021, INACCORDANCEWITHIFRS EU

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

GENERAL INFORMATION, BASIS FOR PREPARATIONOF FINANCIAL STATEMENTS AND OTHER EXPLANATORY INFORMATION

1. Generalinformation

1.1 Informationontheparent

Ownership structure

1.2 InformationonPGEGroup

Going concern

Changesin accounting policies

1.3 PGEGroup's consolidatedcompanies

2. Basisforpreparationoffinancialstatements

2.1 Statementof compliance

2.2 Presentationandfunctional currency

2.3 Newstandardsandinterpretationspublished,notyeteffective

2.4 Professionaljudgementofmanagementandestimates

3. Impairmenttestsonproperty,plant andequipment,intangibleassets,right-of-use assetsandgoodwill

Macroeconomic and other assumptions

3.1 DescriptionofassumptionsfortheConventionalGenerationsegment

Detailed segment assumptions

Sensitivity analysis

3.2 AnalysisofimpairmentindicationsintheDistrictHeatingsegment

3.3 DescriptionofassumptionsfortheRenewablessegment

Impairment tests on the non-current assets of CGU PGE EO S.A.

Detailed assumptions

Sensitivity analysis

Impairment tests on the non-current assets of CGU PGE Klastersp.z o.o.

Detailed assumptions

Sensitivity analysis

4. Changesinaccountingprinciplesanddatapresentation

New standards and interpretationsthat went into force on January 1, 2021

5. Fair valuehierarchy

Derivatives

EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS EXPLANATORY NOTES TO OPERATING SEGMENTS

6. Informationonoperating segments

Seasonality of businesssegments

6.1 Informationonbusinesssegments

Information on businesssegmentsfor the period ended June 30, 2021

Information on businesssegmentsfor the period ended June 30, 2020

EXPLANATORY NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

7. Revenueandcosts

7.1 Salesrevenue

Salesrevenue forthe period ended June 30, 2021, by category

Salesrevenue forthe period ended June 30, 2020, by category

7.2 Costsbynatureandfunction

7.2.1 Depreciation,amortisation,liquidationandimpairmentlosses

7.3 Otheroperatingincomeandexpenses

7.4 Financeincomeandfinancecosts

7.5 Shareofprofitofequity-accountedentities

8. Impairmentlossesonassets

9. Incometax

9.1 Taxinthestatementof comprehensiveincome

9.2 Effectivetaxrate

EXPLANATORY NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

10. Materialtransactionstopurchaseandsellproperty,plant andequipment,intangible assetsandright-of-useassets

11. Futureinvestment commitments

12. Sharesaccountedforusingtheequitymethod

13. Jointoperations

14. Deferredtax instatementoffinancialposition

14.1 Deferredincometaxassets

14.2 Deferredtaxliabilities

15. Inventories

16. CO2 emissionallowancesfor captiveuse

17. Other currentandnon-currentassets

17.1 Othernon-currentassets

17.2 Other currentassets

18. Selectedfinancialassets

18.1 Tradeandotherfinancialreceivables

18.2 Cashandcashequivalents

19. Derivativesandother assetsmeasuredatfair valuethroughprofitorloss

Commodity and currency forwards

Options

Coalswaps

Purchase and sale contracts with physical delivery of coal

IRS transactions

16. CO² emissionallowancesfor captiveuse

21.3 Provisionfor costofCO² emissions