28.1 Contingent liabilities

The liabilities represent the value of possible future reimbursements of financing received by the PGE Group companies from environmental funds for certain investment projects. The received financing will have to be returned if investment projects for which they were granted do not bring the expected environmental effect.

This contingent liability relates mainly to a dispute with WorleyParsons, which made a claim for the payment of PLN 59 million as remuneration due to the claimant and for the return of the amount that was allegedly unduly deducted by PGE EJ 1 sp. z o.o. from a bank guarantee. Subsequently, the claim was extended to PLN 104 million (i.e. by PLN 45 million). On March 31, 2018, the company filed a response to the extended claim of WorleyParsons. The Group does not recognise the claims and believes that the court is unlikely to award the claims in favour of WorleyParsons.

These liabilities represent sureties issued by PGE Capital Group companies for bank guarantees provided as a deposit to secure exchange transactions resulting from the membership in the Warsaw Commodity Clearing House. In the comparative period, the value of guarantees amounted to PLN 1,846 million. The decrease in guarantees resulted from the compensation agreement executed among the PGE Capital Group companies in January 2020. Under the agreement, in accordance with the Regulations of the Warsaw Commodity Clearing House, guarantee deposits within an energy group may be netted, thanks to which opposite items within the PGE Capital Group were netted and thus no longer required a guarantee.

According to the concluded agreements for the purchase of fuels (mainly coal and gas), the PGE Capital Group is obliged to receive a specified minimum volume of fuels and not to exceed a specified maximum level of gas consumption in particular periods. A failure to receive minimum volumes of fuels specified in contracts may result in the necessity to pay applicable fees (in case of the gaseous fuel, the volumes paid for, but not received by particular cogeneration plants and power plants may be received within the next three contractual years).

In the opinion of the PGE Capital Group, the terms and conditions of fuel supplies to its generation facilities as described above do not differ from the terms and conditions of fuel supplies to other power plants in the Polish market.

Contingent liabilities for perpetual usufruct of land are related to the updated annual fees for perpetual usufruct of land.  The Branches of PGE GiEK S.A. filed appeals against received decisions to the Local Government Appeal Boards. The value of the contingent liability was measured as the difference between the discounted sum of the updated fees for perpetual usufruct for the whole period for which the perpetual usufruct was established and the liability for perpetual usufruct of land, which was recognised in the books on the basis of previously paid fees.

Other contingent liabilities mainly comprise the aforementioned claim of WorleyParsons in the amount of PLN 33 million.