14.3. Investments in jointly controlled entities and associates

PROFESSIONAL JUDGEMENT

Based on its own judgment, taking into account its rights, obligations, considering the structure, legal form and the terms of the agreement agreed by the parties, the Group assessed that BOP, PPPT, Baltic Power, Pieridae Production, Polska Grupa Górnicza i Elektrownia Ostrołęka constitute a joint contractual arrangement whereby ORLEN Group exercises joint control over them. The agreements give all contract parties a joint control over the companies, decisions related to significant operations require the unanimous approval of all contract parties, and the legal form of separate entities does not give contract parties the right to their assets and obligations to repay liabilities. In relation to above, the Group classified above investments as joint ventures that are accounted for under equity method in the consolidated financial statements.

Based on professional judgment, the Group assessed that the investment in Butadien Kralupy is a joint operation. The contractual arrangements for this investment indicate that the parties to the contract are entitled to substantially all economic benefits generated by the company’s assets and are its only source of income. The obligation of the parties to purchase the entire production Butadiene Kralupy reflects the company’s sole dependence on the parties to generate cash flows, meaning that the parties effectively have an obligation to finance the settlement of the company’s liabilities. These facts and circumstances indicate that the investment in Butadien Kralupy is a joint operation and therefore the Group recognizes its share (51%) in assets, liabilities, revenues and costs of the company.

As at 31 December 2021 ORLEN Upstream Group has participated in the following joint operations:

• consortium (Blue Gas – Polish Shale Gas program) founded by ORLEN Upstream (OU), Polskie Górnictwo Naftowe i Gazownictwo (PGNIG), LOTOS Petrobaltic and University of Science and Technology (Akademia Górniczo-Hutnicza), Institute of Oil and Gas (Instytut Nafty i Gazu), Gdansk University of Technology, Warsaw University of Technology. Works under the Blue Gas program – Polish Shale Gas were completed, projects settled in both material and financial terms.The program aimed to manufacture and commercialize the technology and gain knowledge for the extraction of shale gas in Poland. The cooperation was summarized in all 6 of 10 notified projects. The total contribution of ORLEN Upstream in the implementation of the above projects amounted to over PLN 24 million. Applications were collected that provides grounds for applying for patent rights for developed solutions, which have been submitted to the relevant authorities for an opinion. To the end of December 2021, the Patent Office of the Republic of Poland granted 3 patent decisions in favor to the Consortium Members;
• exploration – extraction projects carried out together with PGNiG (the search areas „Sieraków” – 49% share of ORLEN Upstream and the search areas “Płotki” – 49% share of ORLEN Upstream). The agreements provide the conduct of joint operations and activities in the field of exploration, prospection and extraction of crude oil and natural gas.

ORLEN Upstream Group has the right to proportionate share of the income and bears a proportionate share in the costs of joint operations.

Investments accounted for under equity method

Share in profit from investments accounted for under equity method

Condensed financial information of the joint ventures of Basell ORLEN Polyolefines Group

Condensed financial information of the joint ventures of Baltic Power Sp. z o.o.

Condensed financial information of the associate of POLIMEX-Mostostal S.A. (ENERGA Group)

Share in Polimex-Mostostal was classified as an associate accounted for using the equity method. The Group has a significant influence on investments by influencing financial and operating policy and determining the composition of Polimex-Mostostal bodies.

In 2021 and 2020, there were no significant restrictions in associates and joint ventures resulting from loans agreements, regulatory requirements and other contractual agreements that would restrict access to assets and settlement of liabilities of the Group.