33.2 Onerous contracts resulting, among others, from the approval of a tariff for G tariff group customers

On January 3, 2020 the President of the Energy Regulatory Office approved a tariff of PGE Obrót S.A. for G tariff group customers who do not use free market offers for electricity sales for the period from January 18, 2020 to March 31, 2020. The approved price level did not fully cover the purchase prices of electricity, property rights and own costs of the conducted regulated activities, causing the loss of profitability of sales made by PGE Obrót S.A. to G tariff group customers not using free-market offers for the sales of electricity and to G tariff group customers using free-market offers, where the sales price is correlated with the price approved by the President of the Energy Regulatory Office. The Management Board of PGE Obrót S.A. initiated a procedure requesting that the President of the Energy Regulatory Office introduce another tariff for the sale of electricity for the period from April 1, to December 31, 2020. The actions taken were aimed at obtaining such electricity sale prices that would allow the company to cover its actual costs of electricity contracting, property rights and operating costs. In his decision of July 8, 2020, the President of the Energy Regulatory Office rejected the request in this subject matter. On July 29, 2020 PGE Obrót S.A. filed an appeal against this decision.

On December 9, 2020, the President of the Energy Regulatory Office approved the tariff set by PGE Obrót S.A. for electricity for the period from January 1 to December 31, 2021 for customers in G tariff groups. The tariff approved for 2021 provides for an increase of electricity prices in relation to the prices of 2020. The approved prices for 2021 cover the actual variable costs of electricity contracting for 2021.

As far as onerous contracts within the meaning of IAS 37 are concerned, the Group is of the opinion that there were no such contracts as at December 31, 2020 due to the positive margin generated between the cost of producing energy and its sale to end users. Accordingly, the consolidated results of the PGE Group do not include the issue of establishing, using and reversing particular provisions.

Meanwhile, in 2020 the Trade segment reversed the PLN 332 million provision for onerous contracts, which had been established in 2019. This had no impact on the result of the PGE Capital Group.