28.4 Other court cases and disputes

Former shareholders of PGE Górnictwo i Energetyka S.A. filed petitions to courts, requesting that PGE S.A. participate in negotiation aimed at amicable settlement of claims for the payment of compensation for, in their opinion, incorrect determination of the exchange ratio of PGE Górnictwo i Energetyka S.A. shares for PGE S.A. shares during the consolidation process that took place in 2010. The total value of claims resulting from these petitions filed by the former shareholders of PGE Górnictwo i Energetyka S.A. amounts to over PLN 10 million.

Irrespective of the foregoing, on November 12, 2014 Socrates Investment S.A. (an entity that purchased claims from the former shareholders of PGE Górnictwo i Energetyka S.A.) filed a lawsuit requesting that the court award it compensation in the total amount of over PLN 493 million (plus interest) for damage incurred in respect of the incorrect (in its opinion) determination of the share exchange ratio applied in the merger of PGE Górnictwo i Energetyka S.A. and PGE S.A. The Company filed a response to the lawsuit. The case is now the subject of proceedings in the court of first instance. On November 20, 2018, a hearing was held on the subject of the appointment of an expert witness. At present the first instance court proceedings are underway. In its decision dated April 19, 2019, the court appointed expert witnesses responsible for the preparation of an opinion in the matter. By the date of these financial statements, the appointed experts had not submitted their opinion. The date of the next hearing will be set by the court ex officio.

In addition, a similar claim was submitted by Pozwy Sp. z o.o., which had bought claims from the former shareholders of PGE Elektrownia Opole S.A. Pozwy sp. z o.o. filed a lawsuit to the Regional Court in Warsaw against PGE GiEK S.A., PGE S.A. and PwC Polska sp. z o.o. (hereinafter referred to as Respondents) requesting that the Respondents be ordered, in solidum, or jointly and severally, to pay for the benefit of Pozwa sp. z o.o. compensation in the total amount of over PLN 260 million with interest for the allegedly incorrect (in its opinion) determination of the exchange ratio of PGE Elektrownia Opole S.A. shares for PGE GiEK S.A. shares in the process of the merger of these companies. This lawsuit was served on PGE S.A. on March 9, 2017 and the deadline for filing a response to the lawsuit was set by the court at July 9, 2017. PGE S.A. and PGE GiEK S.A. submitted a response to the claim on July 8, 2017. On September 28, 2018, the District Court in Warsaw ruled in the first instance and the lawsuit by Pozwy sp. z o.o. against PGE S.A., PGE GiEK S.A. and PWC Polska sp. z o.o. was dismissed. On April 8, 2019, PGE S.A. received a copy of the appeal filed by the claimant on December 7, 2018. A response to the appeal was prepared on April 23, 2019.

The PGE Group companies do not acknowledge the claims of Socrates Investment S.A., Pozwy sp. z o.o. and other shareholders submitting requests for amicable settlements. According to PGE S.A., these claims are groundless and the entire consolidation process was conducted in a fair and correct manner. The value of shares in the companies subject to consolidation had been determined by an independent company, i.e. PwC Polska sp. z o.o. Furthermore, the consolidation plan, including the ratio of converting shares in the acquired company into shares in the acquiring company was audited with respect to its correctness and reliability by an expert appointed by the court of registration, and no irregularities were identified. The court subsequently registered the merger of the aforementioned companies.

The PGE Group did not establish any provision for the filed lawsuit.

In 2016, the companies PGE GiEK S.A., PGE EO S.A. and PGE Energia Natury PEW sp. z o.o. (acquired by PGE EO S.A.) received from Enea S.A. statements on termination of long-term agreements for the sale of property renewable energy property rights, so-called “green certificates”. Justifying these terminations, Enea S.A. claimed that the companies had seriously breached the provisions of the agreements in the form of failure to renegotiate their provisions in accordance with the adaptive clause, which Enea S.A. had requested in July 2015 in connection with an alleged change in legal regulations affecting the performance of these agreements.

In the opinion of the PGE Capital Group, the notices of termination submitted by Enea S.A. were submitted in breach of the terms and conditions of the agreements. The companies took appropriate measures to enforce their rights. In view of the fact that Enea S.A. refused to perform the long-term agreements by purchasing property rights resulting from energy origin certificates received by the PGE Group companies in connection with the generation of renewable electricity, PGE GiEK S.A. and PGE Energia Natury PEW sp. z o.o. demanded that Enea S.A. pay contractual penalties and PGE EO S.A. demanded payment of compensation for damage suffered on this account. In October 2020, at the request of the parties, the court proceedings were suspended due to the parties’ willingness to hold amicable negotiations as an alternative means of resolving the disputes.

Due to the fact that, in the opinion of the PGE Capital Group, the notices of agreement termination were submitted by Enea S.A. in breach of the terms and conditions of the agreement, as at December 31, 2020 the Group recognised receivables in the amount of PLN 164 million (of which PLN 11 million was recognised as revenue for the current period). In the opinion of the companies of the PGE Capital Group based, among others, on available legal opinions, a favourable settlement of the aforementioned disputes is more probable than an unfavourable settlement.

Additionally, 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 in the combined amount of PLN 47 million under invoices issued to Enea S.A. for the sale of energy origin certificates based on these agreements. Enea S.A. refused to pay the receivables, claiming that it had effectively set them off against its receivables from the Group companies on account of damages claimed in connection with the alleged damage caused as a result of the companies’ failure to renegotiate the agreements under a contractual procedure. According to the Group companies, the deductions were ineffective as Enea S.A.’s claims for payment of damages never arose, and there were no grounds to accept Enea S.A.’s position that the companies had breached any terms and conditions of the agreements. In October 2020, at the request of the parties, the court proceedings were suspended due to the parties’ willingness to hold amicable negotiations as an alternative means of resolving the disputes.