Basic Information

1. Principal activity of the ORLEN Group

2. Basis of preparation of Consolidated Financial Statements

3. Functional currency and presentation currency of financial statements and methods applied to translation of financial data for consolidation purposes

4. Accounting principles

4.1. Accounting principles

4.2. Restated of comparative data

4.3. Climate changes and their impact on the applied accounting principles

5. Impact of ifrs changes on consolidated financial statements of the ORLEN Group

6. Differences between data reported in these consolidated financial statements and the published consolidated financial statements for the 4th quarter of 2021

7. Structure of the ORLEN Group and its changes

7.1. Group structure

7.2. Changes in shareholder structure of the ORLEN GROUP from 1 January to 31 December 2021

7.3. Settlement of acquisition of shares in accordance with IFRS 3 Business Combinations

7.3.1 Settlement of acquisition of RUCH S.A. shares in accordance with IFRS 3

7.3.2 Settlement of acquisition of Livingstone Sp. z o.o shares in accordance with IFRS 3 Business Combinations

7.3.3 Settlement of acquisition of Polska Press shares in accordance with IFRS 3 Business Combinations

7.3.4 Settlement of acquisition of ORLEN Transport Sp. z o.o. (formerly OTP Sp. z o.o.) shares in accordance with IFRS 3 Business Combinations

7.3.5 Settlement of acquisition of Nowotna Farma Wiatrowa Sp. z o.o. shares in accordance with IFRS 3 Business Combinations

7.3.6 Settlement of acquisition of UAB Mockavos terminalas shares in accordance with IFRS 3 Business Combinations

7.3.7 Change in the shareholding structure in Baltic Power

7.4. Change in the ORLEN Group structure after the end of the reporting period

1. Principal activity of the ORLEN Group

Polski Koncern Naftowy ORLEN Spółka Akcyjna with its headquarters in Płock, 7 Chemików Street (“Company”, “PKN ORLEN”, “Issuer”, “Parent Company”) was founded by incorporation of Petrochemia Płock S.A. with Centrala Produktów Naftowych S.A., on 7 September 1999. PKN ORLEN is not subsidiary of another entity, that would be wholly or partially‑owned.

There is no controlling entity for PKN ORLEN, therefore, PKN ORLEN is the ultimate parent company of the ORLEN Group.

PKN ORLEN along with the entities comprising the Capital Group of Polski Koncern Naftowy ORLEN S.A. (“ORLEN Group”, “Group”) is one of the biggest and most modern multi – power companies in Central Europe, operating on the Polish, Lithuanian, Czech, Slovak, German and Canadian markets. The Group also possesses entities located in Malta, Sweden, the Netherlands, Hungary, Estonia, Latvia and China.

Since 26 November 1999 PKN ORLEN shares are listed on the main market of the Warsaw Stock Exchange (WSE) in the continuous quotations system.

Since the end of the previous reporting period there were no changes in the name of the reporting entity or other identifiers.

2. Basis of preparation of Consolidated Financial Statements

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards adopted for application by the European Union (IFRS EU). The accounting principles applied by the Group are based on standards and interpretations adopted by the European Union and applicable to the period beginning on 1 January 2021 or earlier periods.

The consolidated financial statements have been prepared on a historical cost basis, except derivatives and investment property measured at fair value and financial assets measured at fair value through other comprehensive income. This consolidated financial statements have been prepared using the accrual basis of accounting except from the consolidated financial statement of cash flows.

The scope of consolidated financial statements is also compliant with the Minister of Finance Regulation of 29 March 2018 on current and periodical information to be published by issuers of securities and conditions of consideration of information required by the law of non-member country’s law as equal (Official Journal 2018, item 757) and covers the annual reporting period from 1 January to 31 December 2021 and the comparative period from 1 January to 31 December 2020.

Presented consolidated financial statements present a true and fair view of the ORLEN Group’s financial position as at 31 December 2021, results of its operations and cash flows for the year ended 31 December 2021 .

The consolidated financial statements have been prepared on the assumption that the ORLEN Group will continue to operate as a going concern in the foreseeable future.

As part of the assessment of the Group’s ability to continue as a going concern, the Management Board analysed the existing risks, and in particular assessed the impact of the COVID-19 pandemic as well as the risks related to climate change on the Group’s operations (note 4.3 and 8) and impact of events after the end of the reporting period related to the armed conflict in Ukraine (note 18.2).

As at the date of approval of this consolidated financial statements, there is no evidence indicating that ORLEN Group will not be able to continue its operations as a going concern.

The Parent Company and the entities comprising ORLEN Group have unlimited period of operations.

3. Functional currency and presentation currency of financial statements and methods applied to translation of financial data for consolidation purposes

The functional currency of the Parent Company and presentation currency of this consolidated financial statements is Polish Złoty (PLN). Possible differences in the amount of PLN 1 million when summing up the items presented in the explanatory notes result from the adopted rounding.

Translation into PLN of financial statements of foreign entities, for consolidation purposes:

• particular assets and liabilities – at spot exchange rate as at the end of the reporting period,
• items of the statement of profit or loss and other comprehensive income and the statement of cash flows – at the average exchange rate for the reporting period (arithmetic average of daily average exchange rates published by the National Bank of Poland („NBP”) in a given period).

Foreign exchange differences resulting from the above recalculations are recognised in equity in the line exchange differences on translating foreign operations.

4. Accounting principles

4.1.  Accounting principles

Significant accounting principles and significant values based on judgements and estimates are presented as a part of the specific explanatory notes to the consolidated financial statements. The Group applied the accounting principles consistently to all presented reporting periods, except for below changes, in force from 1 January 2021, which were implemented as a result of the ongoing integration process with ENERGA Group and work on unification of the applied accounting principles throughout the ORLEN Group:

• changing the method of presentation of  grants related to fixed assets,
• changing the method of settlement of granted owned rights (“white”),
• changing the presentation of recognised interest and other similar costs, as well as exchange rate differences related to the provisions created,
• changing in the method of presentation of green energy certificates of origin received free of charge.

So far, the Group had recognised grants related to assets as a reduction of the carrying amount of an asset and, as a result, as a reduction of depreciation expense over the useful life of the asset. Starting from 1 January 2021, the Group decided to change the method of presentation of grants related to assets, which are currently recognised as deferred income and recognised in other operating income on a systematic basis over the useful life of the asset. Retrospective application of this change in relation to data for 2020 resulted in an increase in the total assets and liabilities presented in the statement of financial position by PLN 209 million (by increasing the item of property, plant and equipment and deferred income presented under other non-current and current liabilities by the value of unsettled grants as at 31 December 2020) as well as an increase in depreciation expense and other operating income in the consolidated statement of profit or loss and other comprehensive income by PLN 20 million, representing the value of settled grants during the year.

The impact of the above changes on individual items of the consolidated statement of financial position as at 31 December 2020 and the statement of profit or loss and other comprehensive income for the 2020 is presented in note 4.2.

Additionally, with respect to the granted owned rights (“white”), the Group changed the method of settlement of grants, which from 1 January 2021 are recognised in other operating income on the systematic basis during the depreciation period of the non-current asset, in connection with which these rights were obtained. Until the end of 2020, granted owned rights were recognised on a one-off basis in other operating income. The currently introduced change did not have a significant impact on the comparative data for the 2020.

The Group also decided to change the presentation of recognised interest and other similar costs, as well as exchange rate differences related to the provisions created, which were previously recognised in the same position of the financial statements in which the principal amount of provision was presented. From 1 January 2021, these costs are presented in financial costs. With respect to the presented comparative data for 2020, the above change did not have a significant impact.

Moreover, the Group made a change in accounting policy in accordance to presentation of green energy certificates of origin received free of charge. As from the 1 January 2021 revenue from green energy certificates of origin received free of charge are recognised as a decrease of the cost of sales at the time of production of energy. In previous periods those revenues were presented as other operating income. With respect to the presented comparative data for the 2020, the above change did not have a significant impact. Additionally, in case when granted green energy certificates are sold directly by ORLEN Group entities producing renewable energy sources (RES) to companies outside the Group, in particular under the signed contracts for the sale of property rights, these certificates are presented at the time of registration as inventories (merchandise). With regards to green energy certificates used on own needs within the Group, they are still presented as rights on intangible assets.

Due to the fact that the introduced changes related mainly to presentation and/or did not have a significant impact on the presented data for the previous reporting period, the Group did not restate the comparative data.

In the Group’s opinion, the introduction of the above-mentioned changes to the accounting principles will provide more relevant data and information, which are also the basis for decisions made by the Management Board of PKN ORLEN as part of the implemented plan to create an integrated multi-energy concern, in particular, ongoing analyses of effectiveness measures of conducted activity by the Group, such as EBITDA ratio. Moreover, the unification of the accounting principles as part of the integration processes in the ORLEN Group enables the Parent Entity to carry out internal control and risk management activities in the process of drawing up financial statements in the Group as indicated under the applicable corporate governance more effectively.

4.2. Restated of comparative data

The following events had an impact on the comparative data presented in the Consolidated Financial Statements for 2020:

• in the 2^nd quarter of 2021, the Group completed the process of allocating the purchase price of RUCH Group shares. As a result of this process, some items of assets and liabilities as at 31 December 2020 changed, which required transformation of these data. Detailed information on the acquired assets and assumed liabilities is presented in note 7.3.1.
• as from 1 January 2021, the Group changed the method of presenting the received grants related to assets. Detailed information in note 4.1.

The table below shows the impact of the above changes on the on the comparative data

4.3. Climate changes and their impact on the applied accounting principles

Events and conditions resulting from climate change and related risks have an increasing impact on the Group’s operations, both in terms of business models, processes taking place in the Group and its ability to obtain financing, as well as attract investors and customers.

Climate changes have become the main determinant of sustainable development management at the ORLEN Group in 2021. The existing standards and management systems limiting the direct impact on the environment have evolved towards strategic activities aimed at reducing the impact of the ORLEN Group on climate change, as well as adapting business models to the impact of the physical consequences of these changes on the Group’s assets. Regulatory factors related to climate change are also important, including, in particular, the changing provisions of EU and national law, constantly increasing environmental protection requirements and imposing on enterprises the need to incur additional environmental charges or take adaptive measures to avoid or minimize them.

The Group companies are subject to, inter alia, EU regulation establishing a greenhouse gases Emission Allowance Trading System (EU ETS Directive). In addition, they bear fees for the use of the environment under the Environmental Protection Law and Water Law, as well as are obliged, inter alia, to achieve the National Index Target (NIT) and the National Reduction Target (NCR). The impact of the Group’s CO₂ emission costs and environmental charges incurred by the Group in 2021 is presented in note 13.8.2. PKN ORLEN centrally manages the risk related to the cost of settling CO₂ emissions in the Group. The policy of hedging the market risk related to changes in CO₂ prices is implemented mainly with the use of derivative instruments in order to mitigate the risk of changes in cash flows, as described in more detail in note 16.5.1.2.

The growing climatic and regulatory pressure also affects the general economic conditions in the markets in which the Group companies operate, translating into the availability and prices of selected goods, as well as interest rates, exchange rates, inflation rates, as well as the availability of financing. Environmental regulations are gradually supplemented with guidelines on sustainable finance, under which the funds obtained must be allocated to investments that reduce the risk of climate change and environmental risks. As described in more detail in note 14.7.3

PKN ORLEN issued sustainable development bonds in 2020 and 2021 with a total value of PLN 2 billion, as well as in 2021 it established an issue program of medium-term Eurobonds, under which it issued green Eurobonds in May 2021 with a total nominal value of EUR 500 million and plans further issues of this type of bonds in the future, in order to meet the needs under the developed principles of financing green investments.

Sustainable development plays an important role in building a multi-energy concern and implementing the ORLEN Group’s Strategy 2030 agenda presented in 2020, as well as in striving to achieve emission neutrality in 2050, in order to meet the climate conditions set out in the Paris Agreement and by the European Union in the future. As part of achieving this goal, by 2030 the Company intends to reduce emissions of 20% CO₂ from existing refining and petrochemical assets and by 33% CO₂ / MWh from electricity production. The strategy of achieving emission neutrality announced by PKN ORLEN is based on four pillars: energy efficiency of production, zero-emission energy, fuels of the future and green financing. As part of these activities, in 2021, the Group increased its asset base in the field of renewable energy, including through acquisitions of wind farms and biogas plants, which is described in more detail in  note 7.3. Moreover, as part of CAPEX capital expenditures, the Group implements a number of projects increasing the energy efficiency of the existing production assets, as well as investment projects in the area of ​​Energy, based mainly on renewable energy sources and supported by gas capacities, as well as projects related to the production of biofuels and biogas. The Group implementing a hydrogen strategy supporting the reduction of CO2 emissions, developing the infrastructure for charging electric cars and other projects related to the reduction of GHG emissions. The Group is also successively implementing a program in the area of ​​research, development and innovation, the activities of which are focused on the implementation of new technologies and improvement of existing technological processes. Additionally, the ORLEN Group plans to invest in the most innovative and promising areas and technologies as part of the ORLEN Venture Capital, company established for this purpose.

The impact of significant activities undertaken in this regard, affecting the financial data for 2021, is presented in individual notes to these consolidated financial statements.

When preparing these Consolidated Financial Statements, the Management Board analysed the impact of climate change, on significant judgments and estimates made by the Group, especially in the context of the decarbonisation strategy announced in 2020 with specific commitments to reduce emissions and achieve climate neutrality.

Management considered the impact of climate change on key estimates presented in the consolidated financial statements, including:

• estimates of future cash flows used to assess the impairment of property, plant and equipment, intangible assets (including goodwill) and right-of-use assets (for more information in note 14.4);
• estimates of the economic useful lives of non-current assets as well as the adopted residual values (more information in note 14.1);
• estimates of provisions and selected contingent liabilities (more information in note 14.11 and 17.4.2);

Moreover, based on the analysis of climate-related risks, the Management Board assessed that the climate changes will not have a significant impact on the Group’s assessment of going concern, both in the short and in the long term.

5. Impact of ifrs changes on consolidated financial statements of the ORLEN Group

Interest rate benchmark reform (the IBOR Reform)

On 1 January 2018 came into force the following Regulation (EU) 2016/1011 of the European Parliament and of the Council dated 8 June 2016 concerning indices used as benchmarks in financial instruments and financial contracts („the IBOR Reform”). The amendment of the regulation was issued in February 2021. The regulation established a new standard for the determination and application of reference rates used in the financial market. Consequently, the approach to determine WIBOR and EURIBOR rates was reformed. The LIBOR rates for the British pound, the Swiss franc, the yen and the euro were no longer quoted from 1st January 2022 and were replaced by alternative rates. At the same time, the 1W and 2M LIBOR rates for the US dollar were no longer quoted. In accordance with the current decisions of the entities appointed to implement the reform, the remaining USD LIBOR rates are most likely to exist until 30 June 2023.

The IBOR Reform resulted in amendments to IFRS, which were published in two phases:

• Amendments to IFRS 9 “Financial Instruments”, IAS 39 “Financial Instruments: Recognition and Measurement” and IFRS 7 “Financial Instruments: Disclosures” – Interest Rate Benchmark Reform – Phase 1 (effective for annual periods beginning on or after 1 January 2020),
• Amendments to IFRS 9 “Financial Instruments”, IAS 39 “Financial Instruments: Recognition and Measurement”, IFRS 7 “Financial Instruments: Disclosures”, IFRS 4 “Insurance Contracts” and IFRS 16 “Leases” – Interest Rate Benchmark Reform — Phase 2 (effective for annual periods beginning on or after 1 January 2021).

According to information presented in the Consolidated Financial Statements of 2020 (Note 5), Phase 1 amendments did not have a material impact on the Group as it does not apply hedge accounting for interest rate hedging instruments.

With regard to the changes introduced under Phase 2, the Group intends to adopt the following arrangements with respect to the financial instruments that will change as a consequence of the IBOR Reform:

• in case the contractual terms of bank loans and borrowings are changed as a direct result of the IBOR Reform and the new rate on which the contractual cash flows are based, is the economic equivalent of the existing rate valid directly prior to the change, the Group will change the principle for determining the contractual cash flows prospectively by changing the effective interest rate. For any other changes amended during this period that are not directly related to the reform, the Group will apply the relevant requirements defined by IFRS 9,
• in case the lease agreement is changed as a direct result of the IBOR Reform and the new rate of determination of lease payments is the economic equivalent of the existing rate, the Group will revalue lease liability to reflect changed lease payments using an updated discount rate,
• if the IBOR Reform results a change in the hedging instruments, the hedged item and the hedged risk, the Group will amend the hedge documentation without terminating the hedging relationship.

The Group presents below the information on the nature and scope of the risks to which the Group is exposed in connection with the IBOR Reform, together with an indication of the derivative and non-derivative financial instruments held by the Group affected by the reform, the actions taken by the Group to manage the risks arising from the reform and the assessment of that reform’s impact on the Group’s activities and presented financial data.

Nature and scope of risk

The Group has reviewed the impact of IBOR Reform on its various lines of business in terms of: risk management, including operational, liquidity and systemic risk.

In addition, the Group monitors the market and data from the various industry working groups managing the transition to the new reference rates on an ongoing basis, including in particular communications from the regulators responsible for LIBOR rates (including the Financial Conduct Authority (FCA) and the Commodity Futures Trading Commission).

Operational risk

The Group has reviewed its existing commercial and financial contracts and has not identified a risk of termination of contracts that are material to the continuation of Group’s business, based on benchmarks subject to the IBOR Reform. The Group has neither identified a risk of incurring additional costs or incurring losses or lost benefits due to the lack of adequate provisions in existing commercial and financial contracts specifying the rules for the continuation of these contracts in the event that the benchmark is not published („fallback clauses”).

The Group plans to agree potential amendments to existing contracts to enable the exemptions in IFRS 9 to be applied.

Some commercial and financial contracts require a change in the provisions relating to benchmarks for which termination dates of their publication have been determined.  If bilateral negotiations with Group’s counterparties are not successfully concluded before the termination of publication of the existing benchmarks in the financial contracts, there is uncertainty about the future interest rate. That situation leads to additional interest rate risk that was not considered at the time of contracting and is not addressed in Group’s interest rate risk management strategy. The Group currently assesses this risk as low, as the applicable USD LIBOR ON, 1M and 3M quotes has been assured until 30 June 2023.

In addition, if there is no agreement on the implementation of the IBOR Reform for existing contracts, there is a risk of disputes with counterparties which may result in contract termination and additional costs. The Group works closely with its counterparties and assesses the probability of such risk as low.

With regard to the WIBOR and EURIBOR rates that have been aligned with the requirements of the IBOR Reform, there is still a risk that in the future the administrators of these rates will change them materially or discontinue their development. Nevertheless, the extent of potential changes in this respect and their impact on the Group financial statements are not possible be estimated at present.

Liquidity risk

The current IBOR rates and the alternative benchmarks to be adopted by the Group are significantly different. IBOR rates are forward-looking rates set for a specific period (e.g. three months) at the beginning of such period and take into account the credit spread in the interbank market. Alternative benchmarks are typically risk-free overnight rates published at the end of the day that do not include a credit spread.

These differences will create additional uncertainty regarding interest payments at variable rates, however in Group’s opinion will not have a material impact on liquidity management.

Systemic risk

The Group has identified the need to implement replacements for the currently acquired market data used in the IT system to manage risk in transactions concluded on financial market. The Group has taken activities to perform as soon as possible the necessary system work to ensure amending relevant system updates on time. There is a risk that such implementation will not be fully operational on time, resulting in the need for additional manual procedures involving operational risk.

Transition process to alternative reference rates

Considering its financial liabilities, the Group uses USD LIBOR covered by the IBOR Reform as at 31 December 2021 regarding the loans agreements.

In new trade and financial assets and liabilities where there is a reference to a variable interest rate, the general provisions for an alternative benchmark in reference to USD LIBOR are applied or such benchmarks whose quotes are assured (WIBOR, EURIBOR) are used.

The few existing international trade contracts use penalty interest formulas for late payment based on USD LIBOR. In most cases these relate to one-year forward contracts ending in 2021, work on contracts presume changing the interest formula to available rates and/or introducing provisions for fallback clauses. Where necessary, arrangements with counterparties are processing to amend existing contracts.

PKN ORLEN is in discussions with its counterparties to add provisions for the use of other rates to the loan agreement relating to USD LIBOR.

The IBOR Reform has no material impact in relation to Group’s cash flow and fair value hedge accounting.

Other initial application of new amendments to the existing standards effective for the financial statement for 2021 did not have a material impact on the ORLEN Group’s 2021 financial statements

Standards adopted by International Accounting Standards Board (IASB), approved by the European Union but not yet effective

• Amendments to IAS 16 “Property, Plant and Equipment” – Proceeds before Intended Use adopted by the EU on 28 June 2021 (effective for annual periods beginning on or after 1 January 2022),
• Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” – Onerous Contracts – Cost of Fulfilling a Contract adopted by the EU on 28 June 2021 (effective for annual periods beginning on or after 1 January 2022),
• Amendments to IFRS 3 “Business Combinations” – Reference to the Conceptual Framework with amendments to IFRS 3 adopted by the EU on 28 June 2021 (effective for annual periods beginning on or after 1 January 2022),
• IFRS 17 “Insurance Contracts” including amendments to IFRS 17 – adopted by the EU on 19 November 2021 (effective for annual periods beginning on or after 1 January 2023),
• Amendments to various standards due to “Improvements to IFRSs (cycle 2018 -2020)” resulting from the annual improvement project of IFRS (IFRS 1, IFRS 9, IFRS 16 and IAS 41) primarily with a view to removing inconsistencies and clarifying wording – (The amendments to IFRS 1, IFRS 9 and IAS 41 are effective for annual periods beginning on or after 1 January 2022. The amendment to IFRS 16 only regards an illustrative example, so no effective date is stated.).

Standards adopted by International Accounting Standards Board (IASB), waiting for approval by the European Union

• Amendments to IAS 1 “Presentation of Financial Statements” – Classification of Liabilities as Current or Non-Current (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IAS 1 “Presentation of Financial Statements” – Disclosure of Accounting Policies (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” – Definition of Accounting Estimates (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IAS 12 “Income Taxes” – Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective for annual periods beginning on or after 1 January 2023),
• Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and further amendments (effective date deferred indefinitely until the research project on the equity method has been concluded),
• IFRS 14 “Regulatory Deferral Accounts” (effective for annual periods beginning on or after 1 January 2016) – the European Commission has decided not to launch the endorsement process of this interim standard and to wait for the final standard,
• Amendments to IFRS 17 “Insurance contracts” – Initial Application of IFRS 17 and IFRS 9 – Comparative Information (effective for annual periods beginning on or after 1 January 2023).

The Group expects that the above-mentioned standards will not have a material impact on the consolidated financial statements of ORLEN Group.

The Group intends to adopt new IFRS standards listed above that are published by the International Accounting Standards Board, but not effective as at the date of publication this financial statements, in accordance with their effective date.

6. Differences between data reported in these consolidated financial statements and the published consolidated financial statements for the 4th quarter of 2021

The above changes affecting on assets and liabilities and financial result of Group concerned mainly:

• net reversal of impairment allowances on fixed assets in the net amount of PLN 993 million, mainly in the Upstream segment in the amount of PLN 931 million. Additional information in note 14.4;
• recognition in PKN ORLEN of compensation resulting from the Act on the compensation system for energy-intensive sectors and subsectors in the amount of PLN 40 million;
• reclassification from short-term to long-term investment tax relief recognized in deferred income in the amount of PLN 98 million. Additional information in note 14.10.2.1;
• decreasing of revenues from sales of merchandise and raw materials and cost of merchandise and raw materials sold in ORLEN Deutschland in the amount of PLN 277 million, as a result of the change in presentation of fee collected on behalf of third parties;
• changes in presentation transactional differences connected with settlement of derivatives on the Intercontinental Exchange Inc. (ICE), reclassification between:
  • other operating costs and finance income in the amount of PLN 516 million;
  • other operating income and finance costs in the amount of PLN (471) million;
• valuation of forward contracts for the sale of electricity (commodity forward) in the amount of PLN (99) million. Additional information in note 16.5.1.
• adjustments connected with finalising of works related to the closure of 2021 in companies of Capital Group, mainly related to deferred tax in the net amount in the net amount of PLN 45 million.

7. Structure of the ORLEN Group and its changes

7.1. Group structure

Selected accounting principles

Basis of consolidation

The consolidated financial statements of the Group include assets, liabilities, equity, income, expenses and cash flows of the Parent Company and its subsidiaries that are presented as those of a single economic entity and are prepared as at the same reporting period as separate financial statements of the Parent Company and using uniform accounting principles in relation to similar transactions and other events in similar circumstances.

The subsidiaries are consolidated using full consolidation method, non-controlling interests shall be presented in the consolidated statement of financial position as non-controlling interest, separately from the equity of the owners of the Parent Company.

Joint operations are presented by recognition of respective share in assets, liabilities, revenues and cost.

The joint ventures as well as investments in associates are accounted for under equity method. The Group’s share in net profit or loss of the investee is recognised in the line Share in profit from investments accounted for using the equity method as a part of the result of operating activity. For investments in associates – the Group has a significant influence if it holds, directly or indirectly (i.e. through subsidiaries), from 20% to 49% of the voting rights of an entity, in which the Group invested, unless it can be clearly stated otherwise.

Professional judgement

Investments in subsidiaries and jointly controlled entities

The Group, regardless of the nature of its involvement in the entity (the entity in which it invested) defines its status by assessment, whether it controls the entity in which the investment was made, and whether it has a joint control in a joint venture, after consideration of all the facts and circumstances.

PKN ORLEN as the Parent Company is a multi-segment entity, appropriately allocated to all operating segments and corporate functions.

7.2. Changes in shareholder structure of the ORLEN GROUP from 1 January to 31 December 2021

Changes in the Group structure are an element of the strategy, assuming a focus on core activities and allocating the released capital for development of the Group in the most prospective areas and creating an integrated multi-energy concern.

7.3. Settlement of acquisition of shares in accordance with IFRS 3 Business Combinations

7.3.1. Settlement of acquisition of RUCH S.A. shares in accordance with IFRS 3

On 11 April 2019 PKN ORLEN approached RUCH S.A. (RUCH) with a conditional financing proposal relating to the intended acquisition of a controlling interest in the company. This decision was preceded by a due diligence of the company and a process to work out a framework for future restructuring measures. Since then in RUCH, steps have been taken to adopt and approve restructuring arrangements, which were one of the pre-conditions to PKN ORLEN providing financing to RUCH. In the meantime, a detailed restructuring plan for the company was developed, and an investment agreement was negotiated with the other partners on the project – PZU S.A., PZU Życie S.A. and Alior Bank S.A. The signing of investment agreement in June 2020 and clearance from the anti-trust regulator for PKN ORLEN to acquire control of RUCH have enabled the acquisition process to move forward. The final and binding statement by the court of the performance of restructuring arrangements with creditors by RUCH in November 2020 as part of two accelerated arrangement proceedings was the last condition and enabled PKN ORLEN to finalize the acquisition of a majority stake in RUCH.

On 24 November 2020 General Meeting of RUCH adopted a resolution to increase the company’s share capital by the amount of PLN 109,189,617, through the issue of 109,189,617 shares with a nominal value of PLN 1 each. The issue price of 1 share was PLN 1.83. As a part of the adopted resolution, PKN ORLEN acquired and at the same time paid for 70,973,251 shares of RUCH for the consideration of PLN 130 million, representing 64.94% of the share capital of the company and corresponding to 64.94% of the total number of votes at the General Meeting of RUCH. Thus, 24 November 2020 is the date on which PKN ORLEN obtained control of RUCH.

Full settlement of the transaction

The acquisition of the RUCH shares is being settled using the acquisition method in accordance with IFRS 3 Business Combinations.

In the consolidated financial report of 2020 and in the consolidated quarterly report for the 1^st quarter of 2021, the Group presented a provisional settlement of transactions due to the uncompleted process of valuation of fixed assets and contingent liabilities. In the 2^nd quarter of 2021 the Group finalized the process carried out by independent appraisers of valuation to fair value of individual items of property plant and equipment and intangible assets, as well as the right-of-use assets. Therefore, in the consolidated half-year report for the 1^st half of 2021 and in these consolidated financial statements, the Group presents the final fair values of the acquired assets and liabilities as part of the final settlement of the RUCH acquisition transaction.

The final value of net assets amounted to PLN 73 million, which means an increase by PLN 31 million compared to the provisional settlement of the transaction presented in the consolidated financial statements for 2020 and in the consolidated quarterly report for the 1^st quarter of 2021. There were significant changes mainly in property, plant and equipment, the fair value of which as part of the final settlement amounted to PLN 42 million (the provisional value was PLN 13 million). There were no significant changes in relation to other items of net assets.

Fair value of identifiable major classes of assets acquired and liabilities assumed of RUCH Group recognised as at the acquisition date is as follows:

The goodwill arising from the acquisition of RUCH results from estimated synergies and other benefits resulting from the merger of RUCH’s operations with the ORLEN Group. By acquiring RUCH, the Group is pursuing its strategy of developing the retail area based on locations outside fuel stations and comprehensive customer services, including courier services.

Effective use of RUCH’s assets will strengthen the position of the ORLEN Group on the retail market through significant expansion of the sales network and planned development of new catering and shop formats, as well as further increase its competitiveness in terms of service quality, assortment, services and improved operating standards in the retail segment.

Recognised goodwill represents the value of assets, that could not be recognised separately under the requirements of IAS 38 Intangible Assets (employees and their knowledge, business components and relationships with the environment).

At the date of taking control, securities were established on the assets of RUCH and its subsidiaries for the benefit of Alior Bank under the agreements signed with the bank. As at 31 December 2021, RUCH’s debt to Alior Bank has been repaid in full. RUCH completed also the remaining steps necessary to release the securities established on its assets. The securities were released by Alior Bank as of 9 November 2021.

7.3.2. Settlement of acquisition of Livingstone Sp. z o.o shares in accordance with IFRS 3 Business Combinations

On 11 February 2021, ORLEN Wind 3 Sp. z o.o. (“ORLEN Wind 3” ) acquired from foreign investment founds 100% shares in Livingstone Sp.z o.o. (Livingstone) with its headquarters in Warsaw. The fair value of the payment made amounted to PLN 24 million. Furthermore, on the same day ORLEN Wind 3 signed with Livingstone Sp. z o.o. a loan agreement for the amount of PLN 76 million, which was designated for repayment of liabilities of the acquired company indicated in the share purchase agreement, including in particular liabilities towards former shareholders under granted loans and bank credits in the amount of PLN 34 million and PLN 41 million, respectively. The core business of the acquired company is generation of electricity from renewable energy sources at the Kanin wind farm located in the West Pomeranian province with a capacity of 20 MW. The transaction was executed as part of ORLEN Group’s strategy aimed at, among other things, expanding its portfolio of zero-emission energy sources.

Full settlement of the transaction

The transaction of Livingstone acquisition is subject to settlement applying the acquisition method in accordance with IFRS 3 Business Combinations. In the consolidated quarterly report for the 1^st quarter of 2021, the Group presented the temporary settlement of the transaction, because of the unfinished process of valuation of fixed assets and contingent liabilities. In the 2^nd quarter of 2021 the Group completed the process of valuation of individual property, plant and equipment and intangible assets carried out by independent appraisers. Therefore, in the consolidated half-year report

for the 1^st half of 2021 and in these consolidated financial statements, the Group presents the final fair values of the acquired assets and liabilities as part of the final settlement of the Livingstone acquisition.

The final value of net assets amounted to PLN (23) million, which means a decrease by PLN 32 million compared to provisional settlement of the transactions presented in the consolidated quarterly report for the 1^st quarter of 2021. There were significant changes mainly in property, plant and equipment, the fair value of which as part of the final settlement amounted to PLN 62 million (the provisional value amounted to PLN 91 million). There were no significant changes in relation to other net assets.

The fair value ​​of the identifiable major items of Livingstone’s acquired assets and liabilities at the acquisition date are as follows:

As part of the acquisition transaction, the previously existing relationships due to the agreements concluded before the acquisition date between Livingstone and the ORLEN Group’s company were settled at the estimated fair value of PLN (8) million, which was recognised as other operating expenses.

The goodwill identified on the acquisition of Livingstone presents the estimated fair value of the expected benefits and synergies in the ORLEN Group as part of the implemented strategy to expand the portfolio of renewable energy sources.

Net cash outflow related to the acquisition of Livingstone, being the difference between acquired net cash (recognised as cash flows from investing activities) and cash transferred as a consideration amounted to PLN (22) million.

If the acquisition of the Livingstone shares took place at the beginning of the annual reporting period, the Group’s net profit would be PLN 11,186 million, and sales revenues would be PLN 131,341 million. The share of Livingstone in the sales revenues generated by the ORLEN Group for the 2021 amounted to PLN 14 million and PLN 4 million, respectively.

7.3.3. Settlement of acquisition of Polska Press shares in accordance with IFRS 3 Business Combinations

On 1 March 2021 PKN ORLEN acquired from German Verlagsgruppe Passau Capital Group 100% shares in Polska Press Sp. z o.o. with its headquarters in Warsaw. Polska Press is one of the largest publishing groups in Poland with about 20 regional dailies, nearly 120 local weeklies as well as about 500 online websites. The acquisition of Polska Press is in line with PKN ORLEN’s strategic plans to strengthen retail sales, including non-fuel sales. By acquiring Polska Press the Company gained, i. a. access to 17.4 million Internet users and the possibility to acquire new customers, optimise marketing costs and develop big data tools within the Group. As part of the final price settlement, after an adjustment by PLN 13 million, which was affected by the change in working capital and net debt, the final fair value of the payment transferred amounted to PLN 222 million.

Full settlement of the transaction

The Group finally completed the process of valuation of individual property, plant and equipment and intangible assets as well as right-of-use assets carried out by independent appraisers. Therefore, in these consolidated financial statements, the Group presents the final fair values of the acquired assets and liabilities as part of the final settlement of the Polska Press acquisition.

The final net asset value amounted to PLN 230 million, which means an increase by PLN 30 million compared to the interim settlement of the transaction presented in the consolidated quarterly reports and in the consolidated semi-annual report for the 1^st half of 2021.

The material changes are mainly positions which fair value in final settlement are:

• property, plant and equipment PLN 84 million (provisional value was PLN 67 million) and increased by PLN 17 million,
• intangible assets PLN 19 million (provisional value was PLN 1 million) what means increasing by PLN 18 million PLN,
• right to use assets PLN 61 milion (provisional value was PLN 1 million PLN) what means increasing by PLN 60 million,
• deferred tax assets PLN 13 million (provisional value was PLN 20 million) what means decreasing by PLN 7 million,
• inventories PLN 12 million (provisional value was PLN 19 million) what means decreasing by PLN 7 million,
• trade liabilities and other PLN 43 million (provisional value was PLN 42 million) what means increasing by PLN 1 million,
• leasing liabilities PLN 57 million PLN (no provisional value).

There were no significant changes in relation to other net assets.

The fair value ​​of the identifiable major items acquired assets and liabilities at the acquisition date are as follows:

The total value of non-controlling interest presented in the above table, valued at PLN 9 million and measured on a pro-rata basis of net assets includes the non-controlling interest within the Polska Press Group, related to net assets of subsidiary Pro Media, in which Polska Press hold 53% in share capital.

Net cash outflow related to the acquisition of Polska Press, being the difference between acquired net cash (recognised as cash flows from investing activities) and cash transferred as a consideration amounted to PLN (118) million.

If the acquisition of the Polska Press shares took place at the beginning of the annual reporting period, the Group’s net profit would be PLN 11,182 million, and sales revenues would be PLN 131,385 million. The share of Polska Press in the sales revenues generated by the ORLEN Group for the 2021 amounted to PLN 274 million. The share of the Polska Press Group in the ORLEN Group’s results for the 2021 was no material.

On 17 March 2021, the Commissioner for Human Rights of Poland (Commissioner) announced in a communique published on his website that he appealed to the District Court in Warsaw (Court of Competition and Consumer Protection) against the decision of the President of the Office of Competition and Consumer Protection (OCCP) of 5 February 2021 on consent to concentration consisting in taking over by PKN ORLEN control over Polska Press Sp. z o.o. The case is pending before the court. At the same time, the Commissioner filed a motion to the court to suspend the execution of the President of OCCP decision (including the ban on exercising participation rights by PKN ORLEN in Polska Press).

On 8 April 2021, the District Court issued an order to suspend the execution of the decision of the President of OCCP of 5 February 2021 until the court resolves the appeal submitted by the Commissioner. As at the date of these consolidated financial statements, the court has not issued any decision on the appeal filed by the Commissioner. In the opinion of PKN ORLEN, this order of 5 February 2021 does not affect the effectiveness of the acquisition by PKN ORLEN of shares in Polska Press, as the acquisition was made before the court issued this order; the court’s order does not restrict PKN ORLEN in exercising its rights from shares in Polska Press (the court in its order did not consider the Commissioner’s motion in this respect). On 15 September 2021, PKN ORLEN was entered into the National Court Register as the sole shareholder of Polska Press.

On the basis on its own judgment, on the obtained legal analyses prepared by external law firm, the Group assessed that as at 31 December 2021, in accordance with the requirements of IFRS 10, has control over Polska Press, and therefore it was consolidated using the full method. In the following reporting periods, the Group will analyse new facts and circumstances to assessing control.

7.3.4. Settlement of acquisition of ORLEN Transport Sp. z o.o. (formerly OTP Sp. z o.o.) shares in accordance with IFRS 3 Business Combinations

On 31 March 2021, PKN ORLEN acquired from Trans Polonia Group, 100% of shares in ORLEN Transport Sp. z o.o. (ORLEN Transport) with its headquarters in Płock.

ORLEN Transport is one of the largest road transport service providers in Poland.

ORLEN Transport operates a modern fleet of over 200 sets to the transport of dangerous goods by road (ADR) of class II and III. It employs nearly 700 employees, including over 550 drivers. The transaction will enable dynamic development and optimization of logistics processes. The reconstruction of own transport capacity within the Group’s structures and the planned centralization of road logistics management will also have a positive impact on ORLEN Group’s results. In this way, the Group will definitely strengthen its position on the road transport market. The fair value of the payment made amounted to PLN 102 million.

Full settlement of the transaction

The transaction of acquisition of shares in ORLEN Transport Sp. z o.o. is accounted for using the acquisition method in accordance with IFRS 3 Business Combinations. In the 4^th quarter of 2021, the Group finally completed the process of valuation of individual property, plant and equipment and intangible assets as well as right-of-use assets carried out by independent appraisers. Therefore, in these consolidated financial statements, the Group presents the final fair values ​​of the acquired assets and liabilities as part of the final settlement of the acquisition of ORLEN Transport Sp. z o.o .

The final value of net assets was PLN 22 million, which means an increase by PLN 5 million compared to the interim settlement of the transaction presented in the consolidated quarterly reports for the 1^st and 3^rd quarter of 2021 and in the consolidated semi-annual report for the first half of 2021. There were significant changes mainly in the valuation of the right-of-use assets and the corresponding lease liabilities, the fair value of which as part of the final settlement was PLN 39 million (the provisional value was PLN 46 million and PLN 50 million, respectively) and intangible assets with a fair value as part of the final settlement was PLN 4 million (provisional value was negligible).

There were no significant changes in relation to other net assets.

The fair value ​​of the identifiable major items of ORLEN Transport Sp. z o.o acquired assets and liabilities at the acquisition date are as follows:

Goodwill recognised as a result of acquisition of ORLEN Transport consist of, first of all, fair value of expected cost synergies and additional benefits connected with gained operating flexibility  in the area of logistic processes, including fleet management and increasing of synergies in road transport segment among companies from the ORLEN Group.

In addition, transport costs will be limited due to increased utilisation of the fleet and retention of margin on road transport in the Group.

Possession of own fleet and centralisation of logistical processes, apart from cost optimisation, will also facilitate execution of strategy of the ORLEN Group in relation to digitalisation of processes.

Net cash outflow related to the acquisition of ORLEN Transport, being the difference between acquired net cash (recognised as cash flows from investing activities) and cash transferred as a consideration amounted to PLN (94) million.

If the acquisition of the ORLEN Transport shares took place at the beginning of the annual reporting period, the Group’s net profit would be PLN 11,190 million, and sales revenues would be PLN 131,346 million.

The share of ORLEN Transport in the sales revenues and result generated by the ORLEN Group for the 2021 amounted to PLN 100 million and PLN 6 million, respectively.

7.3.5. Settlement of acquisition of Nowotna Farma Wiatrowa Sp. z o.o. shares in accordance with IFRS 3 Business Combinations

As at 26 February 2021, Orlen Wind 3 Sp. z.o.o. signed with investment funds: Taiga Inversiones Eolicas SCR SA and Santander Energias Renovables SCRA SA, with its headquarters in Madrid, Spain, purchase agreement of 100% of shares in Nowotna Farma Wiatrowa Sp. z.o.o. (Nowotna Farma Wiatrowa), with its headquarters in Gdańsk, which is the owner of wind farms: Kobylnica, Subkowy, Nowotna. Purchased wind farms have combined power of 89.4 MW. After receiving positive decision of Polish Office of Competition and Consumer Protection, ORLEN Wind 3 as at 14 April 2021 finalized transaction, acquired 100% shares and took control over Notowna Farma Wiatrowa. The fair value of the payment made amounted to PLN 372 million.

Acquiring of wind farms in Pomerania is next step in the ORLEN Group strategy of building modern multi-energy concern and striving for realization of emission neutrality, among others, through investment in zero-emission energy sources.

Full settlement of the transaction

The transaction of acquisition of shares in Nowotna Farma Wiatrowa Sp. z o.o. is accounted for using the acquisition method in accordance with IFRS 3 Business Combinations. In the 4^th quarter of 2021, the Group expects that it has finally completed the process of valuation to fair value of individual property, plant and equipment and intangible assets carried out by independent appraisers. Therefore, in these consolidated financial statements, the Group presents the final fair values of the acquired assets and liabilities as part of the final settlement of the purchase transaction of Nowotna Farma Wiatrowa Sp. z o.o.

The final value of net assets amounted to PLN 238 million, which means an increase by PLN 129 million compared to the interim settlement of the transaction presented in the consolidated semi-annual report for the first half of 2021 and in the consolidated quarterly report for the 3^rd quarter of 2021. The change is mainly due to:

• recognition of intangible assets in the amount of PLN 148 million regarding the valuation of contracts for the sale of electricity from RES and contracts for the sale of property rights resulting from certificates of origin,
• valuation of property, plant and equipment, the fair value of which as part of the final settlement amounted to PLN 300 million (provisional value was PLN 309 million) and decreased by PLN 9 million,
• recognition of additional provisions (mainly provisions for dismantling), the fair value of which as part of the final settlement amounted to PLN 25 million (provisional value was PLN 11 million), which means an increase by PLN 14 million,
• adjustments of other liabilities by the amount of PLN 34 million resulting from the adjustment of the value of deferred income due to grants received in previous periods, which as at the acquisition date do not involve any potential outflow of cash in the future and thus do not meet the definition of a liability,
• recognition of an additional deferred tax liability as a result of the above changes, the value of which was determined at the level of PLN 33 million as part of the final settlement (the provisional value was PLN 12 million).

Additionally, as part of the full settlement, right-of-use assets in the amount of PLN 13 million and lease liabilities in the amount of PLN 14 million, resulting from the recognition of lease contracts existing as at the take-over date, were recognized.

There were no significant changes with regard to the remaining items of net assets.

The fair value ​​of the identifiable major items of Nowotna Farma Wiatrowa Sp. z o.o. acquired assets and liabilities at the acquisition date are as follows:

As a result of the completion of the purchase price settlement process, the determined goodwill of PLN 134 million decreased by PLN 129 million compared to the provisional settlement of the transaction presented in the consolidated half-year report for the 1st half of 2021 and in the consolidated quarterly report for the 3^rd quarter of 2021, as a significant part of it was allocated to other assets as a result of the process of valuation to fair value of property, plant and equipment carried out by independent appraisers, including, in particular, the fair value recognized under intangible assets of existing RES electricity sales contracts and contracts for the sale of property rights resulting from certificates of origin.

The goodwill remaining in the final settlement relates to the fair value of potential future PPA and CPA contracts, for which flows are forecasted over the next dozen or so years, as well as the expected benefits and synergies across the Group as part of the strategy of expanding the portfolio of renewable energy sources.

Net cash outflow related to the acquisition of Nowotna Farma Wiatrowa, being the difference between acquired net cash (recognised as cash flows from investing activities) and cash transferred as a consideration amounted to PLN (308) million.

If the acquisition of the Nowotna Farma Wiatrowa shares took place at the beginning of the annual reporting period, the Group’s net profit would be PLN 11,200 million, and sales revenues would be PLN 131, 366 million. The share of Nowotna Farma Wiatrowa in the sales revenues and result generated by the ORLEN Group for the 2021 amounted to PLN 115 million and PLN 49 million, respectively.

7.3.6. Settlement of acquisition of UAB Mockavos terminalas shares in accordance with IFRS 3 Business Combinations

As at 15 June 2021, AB ORLEN Lietuva acquired 100% of shares in UAB Mockavos terminalas. The fair value of the payment made amounted to EUR 45 million (PLN 202 million).

The terminal in Mockava was built in 2017. Its area, together with the adjacent land, is approx. 40 ha. The total tank capacity of the terminal is 19 thousand m³, while the reloading capacity is estimated at 1.2 million tonnes of liquid fuels per year. The terminal in Mockava is the only railway transhipment terminal at the Polish-Lithuanian border, which is used for reloading of petroleum products manufactured at the refinery in Mažeikiai for the Polish and Ukrainian markets.

Full settlement of the transaction

The acquisition of the UAB Mockavos terminalas shares is being settled using the acquisition method in accordance with IFRS 3 Business Combinations.

In the 3^rd quarter of 2021 the Group finalized the process of valuation to fair value of individual items of property plant and equipment and intangible assets, as well as the right-of-use assets.

Therefore, in the consolidated report for the 3^rd quarter of 2021, as well as in in these consolidated financial statements, the Group presents the final fair values of the acquired assets and liabilities as a part of the final settlement of the acquisition of UAB Mockavos terminalas.

With regard to individual balance sheet items, the final valuation did not differ significantly from the provisional one disclosed in the report for the 1^st half of 2021.

Fair value of identifiable major classes of assets acquired and liabilities assumed of Mockavos terminalas recognised as at the acquisition date is as follows:

The goodwill arising from the acquisition of Mockavos terminalas mainly presents the value of the projected cost synergies, including, among others, those related to with the elimination of the fees incurred so far for the use of the terminal and greater independence and the possibility of implementing new, more effective logistics solutions, as well as the value of other assets (workforce, logistic customer service, presence in a given geographical location, the possibility of implementing development plans in the area, which the terminal is located) that could not be separately accounted for in accordance with the requirements of IAS 38 Intangible Assets.

Net cash outflow related to the acquisition of Mockavos terminalas, being the difference between acquired net cash (recognised as cash flows from investing activities) and cash transferred as a consideration amounted to PLN (202) million.

If the acquisition of the Mockavos terminalas shares took place at the beginning of the annual reporting period, the Group’s net profit would be PLN 11,191 million, and sales revenues would be PLN 131,343 million. The share of Mockavos terminalas in the sales revenues and in profit generated by the ORLEN Group for the 2021 was not material.

7.3.7. Change in the shareholding structure in Baltic Power

On 24 March 2021, by the decision of the Extraordinary General Meeting of Shareholders of Baltic Power Sp.z o.o. (Baltic Power) a resolution to increase the company’s share capital by PLN 1 million by creating 5,665 new shares with a nominal value of PLN 100 each was adopted. All new shares, representing 48.56% of the share capital, were acquired in full by NP Baltic Wind B.V. with its headquarters in Amsterdam (a subsidiary of Northland Power) and covered them in full with a cash contribution in the total amount of EUR 35 million (i.e. PLN 163 million) and PLN 93 million. The surplus of the cash contribution over the nominal value of the new shares in the amount of EUR 35 million (i.e. PLN 163 million) and PLN 92 million was transferred to the reserve capital of Baltic Power.

As a result of this transaction, PKN ORLEN lost control over Baltic Power. Taking into account the terms of the partnership agreement signed with NP Baltic Wind B.V., PKN ORLEN assessed the continued investment in Baltic Power (51.44% share in the share capital) as a joint venture, which was included in these consolidated financial statements using the equity method. In the financial result, the amount of PLN 156 million was recognised in other operating income as the difference between the net assets as at the date of loss of control of PLN 112 million and the fair value of the investment held in Baltic Power as at the date of loss of control in the amount of PLN 268 million.

Based on performed analyses and valuation of acquired assets and liabilities, the final fair value of identifiable assets and liabilities of Baltic Power was determined at the time of kept investment as joint venture at the amount of PLN 384 million. The Group shares in net assets amounted to PLN 198 million (51.44%).

The obtained goodwill, representing the excess of the fair value of the investment held in Baltic Power over the Group’s part of the company’s net assets, amounted to PLN 70 million.

On 29 June 2021 and 29 November 2021, the share capital of Baltic Power Sp. z o.o. was increased, by four and two additional shares, respectively. All new shares were acquired by the company’s partner – NP Baltic Wind B.V. and covered them in full with a cash contribution in the amount of PLN 34 million. As a result of these events, share of PKN ORLEN in the company decreased and as at 31 December 2021 it amounted to 51.41%. In other operating income in the 2021 there was recognition of profit on dilution of shares in the amount of PLN 17 million.

In subsequent reporting periods, additional capital increases are planned by Baltic Power, which will be fully covered by NP Baltic Wind B.V., leading to increase the share of NP Baltic Wind B.V to 49% (and at the same time decrease the share of PKN ORLEN to 51%).

7.4. Change in the ORLEN Group structure after the end of the reporting period

• on 17 February 2022, the name of the company was changed from UAB Mockavos terminalas to UAB ORLEN Mockavos terminalas;
• on 7 March 2022, through the S24 system, Polska Press Sp. z o.o acquired 100% of shares in a limited liability in PL24 Sp. z o.o.;
• on 15 March 2022, an Extraordinary General Meeting of ORLEN Południe S.A was held, regarding the consent to the increase of the share capital of ORLEN Południe S.A.;
• on 17 March 2022, the transfer of ownership of 10 registered shares in the share capital of Konsorcjum Olejów Pracy – Organizacja Odzysku Opakowań i Olejów Spółka Akcyjna of shares was made to ORLEN Południe S.A;
• on 18 March 2022, the Extraordinary General Meeting of Shareholders of CCGT Ostrołęka Sp. z o.o. which adopted a resolution on increasing the share capital of CCGT Ostrołęka Sp. z o.o. All new shares will be acquired by PKN ORLEN SA, which will make a cash contribution of PLN 193 million.