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Consolidated financial statements

In 2016, the PGNiG Group generated revenue of PLN 33,196m, down PLN 3,268m (or 9%) from the year before when it reached PLN 36,464m. With operating expenses lower by 10% and amounting to PLN 29,836m, the PGNiG Group generated a consolidated operating result (EBIT) of PLN 3,360m (up 2% yoy). The operating result before depreciation and amortization (EBITDA) was PLN 5,974m, i.e. slightly lower, by PLN 105m (or 2%), than the year before. This level of performance was achieved despite the low prices of crude oil on the global markets and despite the low prices of gas in Central Europe in a situation of ongoing deregulation of the gas market in Poland. The Group’s sales activities coupled with lower temperatures resulted in a 6% increase in the volume of gas sold by the PGNiG Group from 23 bcm in 2015 to 24.3 bcm in 2016.

Changes in EBITDA 2015 vs. 2016

PLNm

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The consolidated financial statements for the financial year ended December 31st, 2016 are available on the website www.en.pgnig.pl/investor-relations/reports/periodic. An independent statutory auditor’s opinion together with a report supplementing the opinion on the audit of the consolidated financial statements for the financial year ended December 31st, 2016 is included in the consolidated annual report of the PGNiG Group for 2016.

Financial highlights of the PGNiG Group

for the year ended December 31st 2016

PLNm 2016 2015 Change y/y
Sales revenue 33,196 36,464 (3,268)
Total operating expenses, including (29,836) (33,174) 3,338
Depreciation and amortisation (2,614) (2,790) 176
Operating profit (EBIT) 3,360 3,290 70
Profit before tax 3,210 3,014 197
Net profit 2,349 2,136 213
Net cash flows from operating activities 5,922 7,271 (1,349)
Net cash flows from investing activities (3,842) (3,147) (695)
Net cash flows from financing activities (2,269) (829) (1,440)
Net increase/(decrease) in cash (189) 3,282 (3,471)
2016 2015
Total assets 49,672 48,292 1 380
Non-current (long-term) assets 36,236 35,643 593
Current (short-term) assets, including 13,436 12,649 787
Inventories 2,510 2,229 281
Total equity and liabilities 49,672 48,292 1,380
Total equity 32,016 30,741 1,274
Total non-current liabilities 7,303 11,262 (3,959)
Total current liabilities 10,353 6,289 4,064
Total liabilities 17,656 17,551 105
Consolidated statement of profit or loss

for the year ended December 31st 2016

 PLNm 2016 2015
Revenue from sale of gas 26,429 30,263
Other revenue 6,767 6,201
Revenue 33,196 36,464
Cost of gas sold (18,320) (22,005)
Other raw materials and consumables used (2,427) (2,211)
Employee benefits expense (2,573) (2,714)
Transmission services (1,106) (1,156)
Other services (1,412) (1,235)
Taxes and charges (765) (628)
Other income and expenses (332) (515)
Work performed by the entity and capitalised 868 953
Recognition and reversal of impairment losses on property, plant and equipment and intangible assets (1,155) (873)
Operating profit before depreciation and amortisation (EBITDA) 5,974 6,080
Depreciation and amortisation (2,614) (2,790)
Operating profit (EBIT) 3,360 3,290
Net finance costs (76) (225)
Profit/(loss) from equity-accounted investees (74) (51)
Profit before tax 3,210 3,014
Income tax (861) (878)
Net profit 2,349 2,136
Net profit attributable to:
Owners of the parent 2,351 2,134
 Non-controlling interests (2) 2
Weighted average number of ordinary shares (million) 5,867 5,900
Basic and diluted earnings per share (PLN) 0.40 0.36
Profitability

as at December 31st 2016

 PLNm 2016 2015
EBIT
operating profit
3,360 3,290
EBITD
operating profit + depreciation/amortisation
5,974 6,080
ROE
net profit to equity at end of period
7.3% 6.9%
Net margin on sales
net profit to sales revenue
7.1% 5.9%
ROA
net profit to assets at end of period
4.7% 4.4%
Liquidity

as at December 31st 2016

PLNm 2016 2015
Current ratio
current assets to current liabilities (net of employee benefit obligations, provisions and deferred revenue)
1.5 2.5
Quick ratio
current assets less inventories to current liabilities (net of employee benefit obligations, provisions and deferred revenue)
1.2 2.0
Debt

as at December 31st 2016

 PLNm 2016 2015
Debt ratio
total liabilities to total equity and liabilities
35.5% 36.3%
Debt/equity ratio
total liabilities to equity
55.1% 57.1%

Consolidated statement of comprehensive income for the year ended December 31st 2016

 PLNm  2016 2015
Net profit 2,349 2,136
Exchange differences on translating foreign operations 23 15
Hedge accounting 783 (431)
Revaluation of financial assets available for sale 2
Deferred tax (149) 82
Other comprehensive income subject to reclassification to profit or loss 659 (334)
Actuarial losses on employee benefits (29) (35)
Deferred tax 5 2
Share of other comprehensive income of equity-accounted investees (2)
Other comprehensive income not subject to reclassification to profit or loss (26) (33)
Other comprehensive income, net 633 (367)
Total comprehensive income 2,982 1,769
Total comprehensive income attributable to:
Owners of the parent 2,984 1,767
Non-controlling interests (2) 2

Consolidated statement of cash flows for the year ended December 31st 2016

 PLNm 2016 2015
Cash flows from operating activities
Net profit 2,349 2,136
Depreciation and amortisation 2,614 2,790
Current tax expense 861 878
Net gain/(loss) on investing activities 884 578
Other non-monetary adjustments 368 430
Income tax paid (611) (833)
Movements in working capital (543) 1,292
Net cash from operating activities 5,922 7,271
Cash flows from investing activities    
Payments for acquisition of tangible exploration and
evaluation assets under construction
(713) (986)
Payments for other property, plant and equipment
and intangible assets
(2,255) (2,168)
Payments for shares in related entities (1,027) (59)
Other items, net 153 66
Net cash from investing activities (3,842) (3,147)
Cash flows from financing activities    
Payment for treasury shares (645)
Increase in debt 451 1,948
Proceeds from derivative financial instruments 89 84
Decrease in debt (1,021) (1,578)
Dividends paid (1,062) (1,180)
Payment for derivative financial instruments (78) (81)
Other items, net (3) (22)
Net cash from financing activities (2,269) (829)
Net cash flows (189) 3,295
Cash and cash equivalents at beginning of period 6,021 2,726
Foreign exchange differences on cash and cash equivalents (4) (1)
Cash and cash equivalents at end of period 5,832 6,021

Consolidated statement of financial position for the year ended December 31st 2016

PLNm 2016 2015* 2014*
ASSETS
Property, plant and equipment 33,149 32,967 33,528
Intangible assets 1,079 1,138 1,113
Deferred tax assets 100 42 58
Equity-accounted investees 1,229 840 856
Other assets 679 656 642
Non-current assets 36,236 35,643 36,197
Inventories 2,510 2,229 3,189
Receivables 4,288 3,379 4,241
Derivative financial instruments 623 709 567
Other assets 129 146 132
Cash and cash equivalents 5,829 6,022 2,728
Assets held for sale 57 164 147
Current assets 13,436 12,649 11,004
TOTAL ASSETS 49,672 48,292 47,201
EQUITY AND LIABILITIES      
Share capital and share premium 7,518 7,640 7,640
Accumulated other comprehensive income (4) (637) (270)
Retained earnings 24,499 23,733 22,794
Equity attributable to owners of the parent 32,013 30,736 30,164
Equity attributable to non-controlling interests 3 5 5
TOTAL EQUITY 32,016 30,741 30,169
Financing liabilities 1,346 5,799 5,069
Employee benefit obligations 702 565 604
Provision for well decommissioning costs 1,641 1,540 1,580
Other provisions 198 188 223
Grants 815 843 843
Deferred tax liabilities 1,932 1,557 1,525
Other liabilities 669 770 815
Non-current liabilities 7,303 11,262 10,659
Financing liabilities 5,006 583 769
Derivative financial instruments 346 1,165 593
Trade and tax payables [A] 3,179 2,765 3,306
Employee benefit obligations 334 352 284
Provision for well decommissioning costs 20 33 28
Other provisions 560 661 692
Other liabilities 908 730 701
Current liabilities 10,353 6,289 6,373
TOTAL LIABILITIES 17,656 17,551 17,032
TOTAL EQUITY AND LIABILITIES 49,672 48,292 47,201

[A] Including income tax of PLN 180m (2015: PLN 53m).

* Restated.

Consolidated statement of changes in equity for the year ended December 31st 2016

Equity attributable to owners of the parent Equity attributable to non-controlling interests Total equity
 PLNm Share capital and share premium, including: Accumulated other comprehensive income: Retained earnings Total
Share capital Share premium Treasury shares Exchange differences on translating foreign operations Hedging reserve Revaluation of financial assets available for sale Actuarial gains/(losses) on employee benefits Share of other comprehensive income of equity-accounted investees
As at Jan 1, 2015 5,900 1,740 (66) (216) 12 22,794 30,164 5 30,169
Net profit 2,134 2,134 2 2,136
Other comprehensive income, net 15 (349) (33) (367) (367)
Total comprehensive income 15 (349) (33) 2,134 1,767 2 1,769
Dividend (1,180) (1,180) (1,180)
Changes in the Group (15) (15) (2) (17)
As at Dec 31, 2015 5,900 1,740 (51) (565) (21) 23,733 30,736 5 30,741
Net profit 2,351 2,351 (2) 2,349
Other comprehensive income, net 23 634 2 (24) (2) 633 633
Total comprehensive income 23 634 2 (24) (2) 2,351 2,984 (2) 2,982
Dividend (1,062) (1,062) (1,062)
Acquisition of treasury shares (645) (645) (645)
Cancellation of treasury shares (122) 645 (523)
As at Dec 31, 2016 5,778 1,740 (28) 69 2 (45) (2) 24,499 32,013 3 32,016

Operating segments for the year ended December 31st 2016

PLNm Exploration
and Production
Trade
and Storage
Distribution Generation Other Segments Total Reconciliation with consolidated data Total
Sales to external customers 2,776 27,740 1,078 1,472 130 33,196  
Inter-segment sales 1,515 440 3,837 723 110 6,625  
Total revenue 4,291 28,180 4,915 2,195 240 39,821 (6,625) 33,196
EBITDA 1,285 1,410 2,559 759 (61) 5,952 22 5,974
Depreciation and amortisation (1,066) (252) (924) (360) (14) (2 616) 2 (2,614)
EBIT (operating profit) 219 1,158 1,635 399 (75) 3,336 24 3,360
Recognition and reversal of impairment losses on property, plant and equipment
and intangible assets
(1,089) (28) (4) (16) (18) (1,155) (1,155)
Profit/(loss) from
equity-accounted investees
(53) (21) (74) (74)
Expenditure on acquisition of property, plant and equipment and intangible assets (1,314) (121) (1,123) (391) (9) (2,958) (10) (2,968)
Property, plant and equipment 12,881 4,227 12,765 3,378 110 33,361 (212) 33,149
Workforce* 7,720 3,520 10,846 1,870 1,315 25,271  

*Excluding the workforce of equity-accounted investees.

Operating segments for the year ended December 31st 2015

PLNm Exploration
and Production
Trade
and Storage
Distributiona Generation Other Segments Total Reconciliation with consolidated data Total
Sales to external customers 3,148 31,274 654 1,215 173 36,464  
Inter-segment sales 1,707 468 3,931 672 152 6,930  
Total revenue 4,855 31,742 4,585 1,887 325 43,394 (6,930) 36,464
EBITDA 2,426 623 2,339 679 12 6,079 1 6,080
Depreciation and amortisation (1,331) (242) (889) (312) (18) (2,792) 2 (2,790)
EBIT (operating profit 1,095 381 1,450 367 (6) 3,287 3 3,290
Recognition and reversal of impairment losses on property, plant and equipment
and intangible assets
(839) (3) (2) (30) 1 (873) (873)
Profit/(loss) from
equity-accounted investees
(51) (51) (51)
Expenditure on acquisition of property, plant and equipment and intangible assets (1,460) (171) (1,180) (353) (7) (3,171) 17 (3,154)
Property, plant and equipment 13,378 4,290 12,573 2,840 133 33,214 (247) 32,967
Workforce* 8,903 3,462 10,678 1,071 1,305 25,419  

*Excluding the workforce of equity-accounted investees.