QUARTERLY REPORT containing the interim condensed financial statements for the third quarter of 2010

Transcription

1 FINANCIAL SUPERVISION AUTHORITY QUARTERLY REPORT containing the interim condensed financial statements for the third quarter of 2010 prepared in accordance with the International Accounting Standard 34 Interim Financial Reporting in the Polish currency (PLN) Zespół Elektrociepłowni Wrocławskich KOGENERACJA S.A. (peł na nazwa emitenta) KOGENERACJA S.A. (skrócona nazwa emitenta) Usługi inne (sektor wg klasyfikacji GPW w Warszawie) Wrocław (kod pocztowy) (miejscowość) Łowiecka 24 (ulica) (numer) (071) (071) kogeneracja@kogeneracja.com.pl (telefon) (fax) ( ) (NIP) (REGON) (www)

2 List of contents A. FINANCIAL HIGHLIGHTS... 4 I. BASIC CONSOLIDATED FIGURES... 4 II. SELECTED UNCONSOLIDATED FIGURES (KOGENERACJA S.A.)... 5 III. RATES USED FOR CONVERSION OF SELECTED FINANCIALS... 5 B. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF KOGENERACJA GROUP... 6 I. CONDENSED CONSOLIDATED INCOME STATEMENT AND CONDENSED STATEMENT OF COMPREHENSIVE INCOME Condensed consolidated income statement Condensed consolidated statement of comprehensive income... 7 II. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 8 III. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS IV. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY V. SELECTED NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Key information on the KOGENERACJA Group Control over the Group Organisation of the Group Companies covered by the consolidated financial statements Changes in the Group structure in the third quarter of Accounting policies Seasonality of business Exceptional items having material impact on the financial statements Significant changes in estimates Costs by nature Net financial expenses Dividend declared or paid Operating segments Provisions Impairment losses on financial assets Contingent receivables and liabilities Guarantees issued by KOGENERACJA S.A. or its Group companies in the third quarter of Litigations Related party transactions Non-recurring transactions between related parties Loans and borrowings Issue and repurchase of debt and equity securities and repayment of debt Future obligations in respect of investment agreements Events occurring after the end of the reporting period Corrections to previous periods C. INTERIM CONDENSED UNCONSOLIDATED FINANCIAL STATEMENTS OF KOGENERACJA S.A I. CONDENSED UNCONSOLIDATED INCOME STATEMENT AND CONDENSED UNCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Condensed unconsolidated income statement Condensed unconsolidated statement of comprehensive income II. CONDENSED UNCONSOLIDATED STATEMENT OF FINANCIAL POSITION III. CONDENSED UNCONSOLIDATED STATEMENT OF CASH FLOWS IV. CONDENSED UNCONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY V. SELECTED NOTES TO THE INTERIM CONDENSED UNCONSOLIDATED FINANCIAL STATEMENTS Accounting policies Seasonality of business Exceptional items having material impact on the financial statements Significant changes in estimates Costs by nature Net financial income Dividend declared or paid Provisions

3 9. Impairment losses on assets Contingent receivables and liabilities Guarantees issued by KOGENERACJA S.A. in the third quarter of Litigations Related party transactions Non-recurring transactions between related parties Loans and borrowings Issue and repurchase of debt and equity securities and repayment of debt Future obligations in respect of investment agreements Events occurring after the end of the reporting period Corrections to previous periods D. ANALYSIS OF GROUP PERFORMANCE AND THE PERFORMANCE DRIVERS Summary of key achievements and failures Factors affecting the Group s net profit in the third quarter of Factors that will affect KOGENERACJA s performance in the subsequent periods Other information relevant to the assessment of employment, property and financial position of KOGENERACJA Management Board s opinion on the previously published projections E. OTHER INFORMATION INCLUDED IN THE QUARTERLY REPORT QS3/ Current reports published in the third quarter of Shares of the Company and its connected companies held by directors Quotation of the KOGENERACJA shares on Warsaw Stock Exchange

4 A. Financial highlights I. Basic consolidated figures Basic figures from consolidated statement of comprehensive income in EURO thousand I-IX 2010 I-IX 2009 I-IX 2010 I-IX Revenues Revenue from compensation for PPAs Operating profit Profit before tax Profit for the period Profit for the period attributable to ordinary shareholders Profit for the period attributable to non- controlling interests Basic earnings per share 5,31 6,58 1,32 1,49 Basic figures from consolidated statement of cash flows 9. Net cash flow from operating activities Net cash flow from investing activities ( ) ( ) (34 342) (24 757) 11. Net cash flow from financing activities ( ) (58 542) (34 311) (13 307) Basic figures from consolidated statement of financial position 31 September December September December Non-current assets Current assets Non-current assets held for sale Total assets Non-current liabilities Current liabilities Equity attributable to ordinary Equity attributable to non- controlling interests Equity Number of shares (in thousands) Book value and diluted book value per share (in PLN/EUR) 65,56 63,70 16,44 15,50 4

5 II. Selected unconsolidated figures (KOGENERACJA S.A.) Basic figures from unconsolidated statement of comprehensive income in EURO thousand I-IX 2010 I-IX 2009 I-IX 2010 I-IX Revenues Operating profit Profit before tax Profit for the period Basic figures from unconsolidated statement of cash flows 5. Net cash flow from operating activities Net cash flow from investing activities (85 728) (79 909) (21 358) (18 164) 7. Net cash flow from financing activities (78 132) (15 398) (19 466) (3 500) Basic figures from unconsolidated statement of financial position 31 September December September December Non-current assets Current assets Non-current assets held for sale Total assets Non-current liabilities Current liabilities Equity III. Rates used for conversion of selected financials Statement of financial position items - average exchange rate announced by NBP as at 30 Septemebr 2010 Statement of comprehensive income and cash flows items - arithmetic average of average exchange rates announced by NBP as at the end of each mont of the period from 1 January to 30 Septemeber 2010 Statement of financial position items - average exchange rate announced by NBP as at 31 December 2010 Statement of comprehensive income and cash flows items - arithmetic average of average exchange rates announced by NBP as at the end of each mont of the period from 1 January to 30 Septemeber ,9870 4,0138 4,1082 4,3993 5

6 B. Interim condensed consolidated financial statements of KOGENERACJA Group I. Condensed consolidated income statement and condensed statement of comprehensive income 1. Condensed consolidated income statement For the period ended 30 September th quarter of quarters of th quarter of quarters of 2009 Note For period from 1 July 2010 to 30 September 2010 For period from 1 January 2010 to 30 September 2010 For period from 1 July 2009 to 30 September 2009 For period from 1 January 2009 to 30 September 2009 current period current period previous period previous period I. Revenue II. Revenue from compensation for PPAs III. Cost of sales 10 ( ) ( ) ( ) ( ) IV. Gross profit on sales (11 606) (12 971) V. Other operating income VI. Distribution expenses 10 (3 126) (8 060) (4 081) (9 742) VII. General and administrative expenses 10 (7 251) (25 054) (8 167) (27 783) VIII. Other operating expenses (2 088) (9 445) (2 248) (8 534) IX. Operating profit (22 883) (25 565) X. Finance income XI. Finance expenses (3 663) (13 775) (5 948) (18 576) XII. Net finance costs 11 (3 054) (7 081) (3 630) (11 774) (result on financial activities) - XIII. Profit from investment in subsidiaries (824) XIV. Impairment losses on goodwill (2 208) XV. Profit before income tax (25 937) (29 195) XVI. Income tax (19 395) (24 325) XVII. Share in profit of equity accounted investees - - (25) 55 XVIII. Profit for the period (19 600) (23 731) Profit for the period attributable to ordinary shareholders (19 482) (21 915) Profit for the period attributable to noncontrolling interests (118) (1 816) Basic earnings per share attributable to shareholders of the Parent Company (in PLN) Diluted earnings per share attributable to shareholders of the Parent Company (in PLN) (1,31) 5,31 (1,47) 6,58 (1,31) 5,31 (1,47) 6,58 6

7 2. Condensed consolidated statement of comprehensive income For the period ended 30 September th quarter of quarters of th quarter of quarters of 2009 For period from 1 July 2010 to 30 September 2010 For period from 1 January 2010 to 30 September 2010 For period from 1 July 2009 to 30 September 2009 For period from 1 January 2009 to 30 September 2009 current period current period previous period previous period Profit for the period (19 600) (23 731) Other comprehesive income TOTAL comprehensive income (19 600) (23 731) Attributable to the ordinary shareholders (19 482) (21 915) Attributable to attributable to noncontrolling interests (118) (1 816)

8 II. Condensed consolidated statement of financial position As at 30 September September December 2009 current period previous period ASSETS I. Non-current assets 1. Property, pland & equipment Intangible fixed assets, including: goodwill on related parties Perpetual usufruct of land Investment property Long-term receivables Long-term investments in subsidiaries, associates and jointly controlled entities Other long-term investments Deferred tax assets Total non-current assets II. Current assets 1. Inventories Biological assets Short-term investments Income tax receivables Trade and other receivables Cash and cash equivalents Total current assets Total assets

9 Note 30 September December 2009 current period previous period EQUITY AND LIABILITIES I. Equity 1. Share capital Share premium Revaluation reserves (267) - 4. Other capital reserves Retained earnings Equity attributable to ordinary shareholders Non- controlling interests Total equity II. Liabilities I) Non-current liabilities 1. Loans, borrowings and debt securities Employee benefit liabilities Deferred income Deferred tax liability Other long-term liabilities Total non-current liabilities II) Current liabilities 1. Loans, borrowings and debt securities Other short-term financial liabilities Income tax liabilities Trade and other liabilities Employee benefit liabilities Short-term provisions Total current liabilities Total liabilities Total equity and liabilities

10 III. Condensed consolidated statement of cash flows For the period ended 30 September 2010 A. Cash flows from operating activities For period from 1 January 2010 to 30 September 2010 current period For period from 1 January 2009 to 30 September 2009 previous period I. Profit for the period II. Adjustments 1. Depreciation and amortisation (Gain)/loss on investing activities (766) (Gain)/loss on sale of property, plant and equipment (11 535) 4. Interest and dividends Income tax expense Profit from investments in subsidiaries and associates - (55) III. Profit from operating activities Change in trade and other receivables Change in inventories (25 293) 3. Change in short-term and other liabilities, except for loans and borrowings (24 539) Change in employee benefit liabilities (3 329) (1 815) IV. Net cash flows generated on operating activities Income tax paid (22 933) (7 418) 2. Other adjustments V. Net cash from operating activities

11 For period from 1 January 2010 to 30 September 2010 current period For period from 1 January 2009 to 30 September 2009 previous period B. Cash flows from investing activities I. Investment inflows Proceeds from sale of intangible assets and property, plant and Dividends received Interest received Other proceeds Other proceeds II. Investment outflows ( ) ( ) 1. Sale of subsidiary, after decrease of cash and cash equivalents in sold subsidiary - (1 022) 2. Acquisition of intangible assets and property, plant and equipment ( ) ( ) 3. Acquisition of investment properties - (236) 4. Acquisition of financial assets (15) - III. Net cash from investing activities ( ) ( ) C. Cash flows from financing activities I. Financial inflows Proceeds from loans and borrowings II. Financial outflows ( ) (70 584) 1. Dividends and other payments to shareholders (677) - 2. Repayment of loans and borrowings (51 999) (52 364) 3. Redemption of debt securities ( ) (2 872) 4. Interest paid (15 925) (15 179) 5. Payment of financial lease liabilities (680) (169) III. Net cash from financing activities ( ) (58 542) D. Total net cash flows (11 027) E. Net change in cash and cash equivalents (11 027) F. Cash and cash equivalents at the beginning of the period G. Cash and cash equivalents at the end of the period

12 IV. Condensed consolidated statement of changes in equity For the period ended 30 September 2010 Share capital Share premium Revaluation reserves Other capital reserves Retained earnings Share capital attributable to ordinary shareholders Non- controlling interests TOTAL equity Equity as at 1 January Net profit for the period Total comprehensive income for IIIQ of Dividends paid to shareholders (52 150) (52 150) (677) (52 827) Distribution of profit to other capital reserves (80 853) - - Equity as at 30 September (267) For the period ended 30 September 2009 Share capital Share premium Revaluation reserves Other capital reserves Retained earnings Share capital attributable to ordinary shareholders Non- controlling interests TOTAL equity Equity as at 1 January (6) Net profit for the period Total comprehensive income for IIIQ of Dividends paid to shareholders (30 578) (30 578) - (30 578) Distribution of profit to other capital reserves (38 212) - - Valuation of financial instruments (5 095) (9 408) (7 908) Share-based payments ACT 2007 (IFRS 2) Equity as at 30 September

13 V. Selected notes to the interim condensed consolidated financial statements 1. Key information on the KOGENERACJA Group The parent company of the KOGENERACJA Group ( Group ) is Zespół Elektrociepłowni Wrocławskich KOGENERACJA S.A. (KOGENERACJA S.A., Parent, Company ), joint stock company registered in Poland and having its registered office in Wrocław at ul. Łowiecka 24. The Company operates from premises located in Wrocław and Siechnice (near Wrocław). The Parent Company is registered with the District Court for Wrocław-Fabryczna, VI Economic Division of the National Court Register on 19 February 2001, under no. KRS The Parent Company's tax and statistical numbers are: NIP: REGON: At 30 September 2010, the Management Board of the parent company consisted of the following persons: Denis Bretaudeau - Management Board President Andrzej Siennicki. - Management Board Member Roman Traczyk - Management Board Member Krzysztof Wrzesiński - Management Board Member On 5 October 2010, Mr. Denis Bretaudeau stepped down as the Company s Management Board President and Managing Director effective from 19 October At the meeting on 19 October 2010, the Supervisory Board appointed Mr. Philippe Gagneux the Company's Management Board President effective from 20 October (Current Reports 30, 33/2010). Since 20 October 2010, the Management Board of the Company has consisted of the following persons: Philippe Gagneux - Management Board President Andrzej Siennicki. - Management Board Member Roman Traczyk - Management Board Member Krzysztof Wrzesiński - Management Board Member The core business of the Parent Company and its consolidated subsidiaries is: production of electricity and heat; trade in electric energy, heat, energy products and services, distribution of heat; repair and installation of energy and industrial equipment; gardening production and food processing, economic use of combustion waste and supply of biomass for production of energy from renewable sources; production of construction mixes based on cement, aggregates and side products of hard coal combustion for road construction (road bases, stabilisers); logistics and storage services. The condensed consolidated financial statements for the period ended 30 September 2010 includes financial statements of the Parent Company and its subsidiaries ( the Group ). The comparative figures for the period ended 30 September 2009 also reflect the Group's share in net assets of associates and joint-ventures. KOGENERACJA Group is a member of EdF Group, France. 13

14 2. Control over the Group (in accordance with 87 section 7 point 5 of the Ordinance) Below is a list of the shareholders holding directly or indirectly through subsidiaries at least 5% of the total voting power at the General Meeting of KOGENERACJA S.A. At the date of filing the report for 1st quarter of 2010 number of votes at the GSM presented in the first quarter report % of votes at the GSM presented in the first quarter report change of % in the period number of votes at the GSM at the report filing date % of votes at the GSM presented in the prior quarter report EC Kraków S.A , ,74 EDF International S.A , ,67 EnBW A.G , ,59 OFE PZU "Złota Jesień" , ,78 OFE ING , ,70 Legg Mason FIO , ,15 EDF International S.A., EnBW AG having its registered office in Karlsruhe and Elektrociepłownia Kraków S.A. (Group companies) jointly hold 50% voting power in the Parent Company). 14

15 3. Organisation of the Group (in accordance with 87 section 7 point 2 of the Ordinance) a. Group structure Graphical structure of the Group and KOGENERACJA s share in the net worth of its individual subsidiaries and associates is presented in the chart below. As at 30 September 2010 KOGENERACJA S.A. Subsidiaries - consolidated 98,40% 100% 100% 51,0% EC Zielona Góra S.A. Renevis Sp. z o.o. ZEC Hurt Sp. z o.o. in liquidationi PPO Siechnice Sp. z o.o. Energokrak Sp. z o.o. 12,40% Everen Sp. z o.o. Associates - not accounted for using equity method LEGEND: KOGENERACJA s shares Even though KOGENERACJA S.A. does not have any capital ties with Everen Sp. z o.o. the company is reported as an associate because the two entities carry out material transactions with each other. On 1 July 2010, an entry was made for the merger of: KOGENERACJA S.A. (the acquiring company) with ZC Term- Hydral Sp. z o.o. (the acquired company) in the Business Register of the National Court Register (decision of the District Court for Wrocław-Fabryczna, VI Economic Division, of 2 July 2010). On 29 July 2010, the Extraordinary General Meeting of ZEC Hurt Sp. z o.o. adopted a resolution to liquidate the company effective from 31 July

16 b. Subsidiaries The tables below show the percentage share in the share capital of the Group subsidiaries and the nominal value of the shares held by KOGENERACJA S.A. as at 30 September 2010 and As at 30 September 2010 Share capital Number of shares Nominal value of a share No of shares held by KOGENERACJA S.A. (directly) Number of shares Nominal value of shares % of capital EC Zielona Góra S.A ,4 Renevis Sp. z o.o. *) ,0 ZEC Hurt Sp. z o.o. on liquidation ,0 PPO Siechnice Sp. z o.o ,0 *) On 1 April 2010, the District Court in Wrocław registered the merger of Renevis Sp. z o.o. and Ekotrakt Sp. z o.o. **) On 29 July 2010, the Extraordinary General Meeting of ZEC Hurt Sp. z o.o. adopted a resolution to liquidate the company effective from 31 July As at 30 September 2009 Share capital Number of shares Nominal value of a share No of shares held by KOGENERACJA S.A. (directly) Number of shares Nominal value of shares % of capital EC Zielona Góra S.A ,4 Renevis Sp. z o.o ,0 PPO Siechnice Sp. z o.o ,0 ZEC Hurt Sp. z o.o ,6 Ekotrakt Sp. z o.o The Company did not have any indirect shares in subsidiaries as at 30 September The table below show the Company s indirect shares in the individual companies as at 30 September As at 30 September 2009 Shares of KOGENERACJA S.A. Direct share in % EC ZG Renevis PPO ZEC Hurt Term Hydral 98,40 100,00 51,00 100,00 TOTAL direct and 100,00 indirect share in % Ekotrakt Sp. z o.o. subsidiaries share 100,00 indirect share , ,00 16

17 c. Associates The tables below show the Company s indirect and direct shares and the overall stake in associates as at 30 September 2010 and 30 September As at 30 September 2010 Shares of KOGENERACJA S.A. Direct share in % EC ZG Renevis PPO ZEC Hurt Term Hydral 98,40 100,00 51,00 100,00 TOTAL direct and 100,00 indirect share in % Energokrak Sp. z o.o. subsidiaries share indirect share 12, ,40 As at 30 September 2009 Shares of KOGENERACJA S.A. Direct share in % EC ZG Renevis PPO ZEC 98,40 100,00 51,00 99,60 TOTAL direct and indirect share in % Energokrak Sp. z o.o. ECeAuto Sp. z o.o. subsidiaries share indirect share 12, ,40 subsidiaries share 21,81 indirect share - 21, ,46 d. Ultimate parent The ultimate parent is EdF Group, France. 4. Companies covered by the consolidated financial statements (in accordance with 87 section 7, point 2 of the Ordinance) KOGENERACJA S.A. Parent of the Group, as at 30 September 2010 included the following 6 subsidiaries in the consolidated financial statements: EC Zielona Góra S.A. - subsidiary (full consolidation); Renevis Sp. z o.o. (previous name: VKN Polska Sp. z o.o.) - subsidiary (full consolidation); ZEC Hurt Sp. z o.o., in liquidation, subsidiary (full consolidation); Z.C. Term-Hydral Sp. z o.o. - subsidiary (full consolidation for the period from 1 January to 30 June 2010); on 1 July 2010, ZC Term-Hydral Sp. z o.o. merged with KOGENERACJA S.A. Przedsiębiorstwo Produkcji Ogrodniczej Siechnice Sp. z o.o. - subsidiary (full consolidation); Ekotrakt Sp. z o.o. - subsidiary (full consolidation for the period from 1 January to 31 March 2010); on 1 April 2010 Ekotrakt merged with Renevis Sp. z o.o. In addition to the subsidiaries named above, the comparative figures for Q also include 2 fully consolidated subsidiaries and reflect an investment in one associate (accounted for using the equity method) during the period of control: ZEC Sp. z o.o. subsidiary (full consolidation for the period from 1 January to 31 March 2009); On 1 April 2009, ZEC Sp. z o.o. (acquired entity) merged with EC Zielona Góra S.A. (acquiring entity). ZEC Service Sp. z o.o. - subsidiary. On 29 June 2009, KOGENERACJA sold its shares in ZEC Service Sp. z o.o. The interim consolidated financial statements for H include the result of ZEC Service Sp. z o.o. for the period from to ECeAuto Sp. z o.o.; associate (equity method accounting for the period from 1 January to 30 September 2009). On 30 September 2009, EC Zielona Góra S.A. sold its shares in ECeAuto Sp. z o.o. 17

18 5. Changes in the Group structure in the third quarter of 2010 (in accordance with 87 section 7 point 3 of the Ordinance) In the third quarter of 2010, the following changes took place in the Group s structure: On 1 July 2010, the District Court in Wrocław ratified the acquisition of Z.C. Term-Hydral Sp. z o.o. by KOGENERACJA S.A. On 2 July 2010 the court registered an increase in the share capital of Renevis Sp. z o.o. The resolution on increasing the Company s share capital from PLN 19,100 thousand to PLN 29,100 thousand was adopted by the Extraordinary General Meeting on 23 June All the shares were acquired by KOGENERACJA S.A. On 29 July 2010, the Extraordinary General Meeting of ZEC Hurt Sp. z o.o. adopted a resolution to liquidate the company effective from 31 July At the same meeting, the EGM also resolved to appoint to liquidators for the company. Effectively, ZEC Hurt Sp. z o.o. will be wound up and struck off the register of companies. On 31 August 2010, the Extraordinary General Meeting of ZEC Hurt Sp. z o.o. approved the opening balance of the liquidation process as at 31 July Accounting policies a. Statement of conformity These consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard 34 Interim Reporting and in accordance with the applicable accounting standard applicable to the interim reporting, as approved by the European Union, published and binding at the date of preparation of these interim condensed consolidated financial statements. The provisions of the Accounting Act of 29 September 1994, Journal of Laws of 2002, no. 76 item 694, as amended and its supporting regulations were applied to the extent not covered by the foregoing standard. (Journal of Laws of 2009 no. 152, item 1223 as amended) and its supporting regulations. The interim condensed financial statements should be read in conjunction with the annual financial statements (consolidated and unconsolidated, as appropriate). The International Financial Reporting Standards (EU IFRS) contain all the International Accounting Standards, International Financial Reporting Standards and their related Interpretations, except the Standards and Interpretations referred to below, which await EU approval and the Standards and Interpretations which have been approved by the EU but have not entered into force yet. b. Basis of preparation of the financial statements Data in the condensed interim consolidated financial statements are expressed in PLN, which is the Group s functional and reporting currency for this report. Data are rounded to full thousands. The condensed interim consolidated financial statements have been prepared under the historical cost convention, except assets and liabilities measured at fair value:. derivatives, available-for-sale financial assets and financial assets measured at fair value through profit and loss. The preparation of this report in conformity with IFRS, requires management to make judgement, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. In these condensed interim consolidated financial statements the same accounting policies and calculation methods were used as in the previous annual consolidated financial statements (for the period ended 31 December 209), except 18

19 the accounting policies and calculation methods pertaining to the income tax (see B.V. Selected notes to the interim condensed consolidated financial statements, point 9g), and except changes in the standards and interpretations approved by the EU, applicable to the reporting periods starting after 1 January 2010, as presented in the table below: Standards and interpretations approved by the EU Standards and interpretations approved by the EU Type of expected change in the accounting policies Potential impact on financial statements Effective date for the periods starting on the day or later Improvements to the International Financial Reporting Standards 2008: Improvements to IFRS 5 Non-current Assets Held for Sale IFRS 5 has been amended as follows: an entity that is committed to a sale plan involving loss of control of a subsidiary shall classify all the assets and liabilities of that subsidiary as held for sale when the criteria set out in paragraphs 6-8 are met; disclosures relating to the discontinued operations are required when the subsidiary is a disposal group that meets the definition of a discontinued operation. The amendments do not have any material impact on the Group s financial statements. 1 July 2009 IFRIC 15 Agreements for the Construction of Real Estate IFRIC 15 clarifies that revenue arising from agreements for the construction of real estate is recognised by reference to the stage of completion of the contract activity in the following cases: the agreement meets the definition of a construction contract in accordance with IAS 11.3; the agreement is only for the rendering of services in accordance with IAS 18 (i.e. the entity is not required to supply construction materials), and the agreement is for the sale of goods but the revenue recognition criteria of IAS are met continuously as construction progresses. In all the other cases, revenue is recognised when all of the revenue recognition criteria of IAS are satisfied (i.e., upon completion of construction or upon delivery). IFRIC 15 does not apply to the Group as the Group never signed any agreements for the construction of real estate. 1 January 2009 In accordance with Commission Regulation No. 636/2009 all entities shall adopt the amendments not later than from the start of their first financial year starting after 31 December IFRIC 18 Transfers of Assets from Customers The Interpretation applies to agreements in which an entity receives an item of property, plant and equipment from a customer that the entity uses either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods and services, or to do both. This Interpretation also applies to agreements in which the entity receives cash from customer when that amount of cash is used only to construct or acquire an item of property, plant or equipment.. The entity that received a contribution within the scope of the IFRIC 18 does not apply to the Group s financial statements as the Group does not receive fixed assets from its customers 1 July 2009 In accordance with Commission Regulation No. 1164/2009 all entities shall adopt the amendments not later than from the start of their first financial year starting after 31 October

20 interpretation recognises this item as an asset if it determines that the transferred item meets the definition of an asset. The corresponding amount will be recognised as revenue. The exact timing of the revenue recognition will depend on the facts and circumstances of each particular arrangement. Revised IFRS 3 Business combinations Amended the scope of the revised standard and expanded the definition of a business. The revised standard also includes other material changes, including: All consideration, including contingent consideration, transferred by the acquirer shall be recognised and measured at fair value at the acquisition date. Any subsequent change to the value of the contingent consideration should be reflected in profit and loss. Transaction costs other that the cost of shares or debt issue should be recognised as a profit or loss for the particular period. The acquirer may measure minority interests at fair value at the acquisition date (full goodwill) or as its proportional share in fair value of the identifiable assets and liabilities for each transaction. As the revised standard should not be applied to business combinations occurring before the date for first adoption of the standard, it is not expected that the revised standard will have impact on the financial statements with regard to the business combinations that took place before the effective date of the revised standard. 1 July 2009 In accordance with Commission Regulation No. 495/2009 all entities shall adopt the revised IFRS 3 not later than from the start of their first financial year starting after 30 June Revised IAS 27 Consolidated and Separate Financial Statements The term minority interest was replaced with non-controlling interests, which is defined as the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. The amended standard also changes the allocation of profit or loss and other comprehensive income between the controlling and noncontrolling interests. The amendments do not have any impact on the Group s financial statements. 1 July 2009 In accordance with Commission Regulation No. 494/2009 all entities shall adopt the revised IAS 3 not later than from the start of their first financial year starting after 30 June Revised IFRS 1 First-time Adoption of International Financial Reporting Standards The updated standard has a different structure (with technical content unchanged), so that all the exceptions that were earlier included in the body of the standard were transferred to the relevant appendices. The amendments do not have any impact on the Group s financial statements. 1 July 2009 In accordance with Commission Regulation No. 1136/2009 all entities shall adopt the amendments not later than from the start of their first financial year starting after 31 December Amendments to IAS 39 Financial instruments: Recognition and measurement The amended Standard clarifies the application of existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship. In designating a hedging relationship the risks or portions must be separately identifiable and reliably measurable; however inflation cannot be designated, except in limited circumstances. The amendments do not have any impact on the Group s financial statements. 1 July 2009 In accordance with Commission Regulation No. 839/2009 all entities shall adopt the amendments not later than from the start of their first financial year starting after 30 June

21 IFRIC 17 Distributions of Non-cash Assets to Owners The Interpretation applies to nonreciprocal distributions of non-cash assets to owners. In accordance with the Interpretation a liability to pay a dividend shall be recognised when the dividend is appropriately authorised and is no longer at the discretion of the entity and shall be measured at the fair value of the assets to be distributed. The carrying amount of the dividend payable shall be remeasured at each reporting date, with any changes in the carrying amount recognised in equity as adjustments to the amount of the distribution. When the dividend payable is settled the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the dividend payable shall be recognised in profit or loss. As the interpretation is applied prospectively, it will not have any impact on the financial statements for the periods prior its first adoption. Also, as the interpretation applies to future dividends which are determined by the executive board / general meeting, its impact on the financial statements may not be established in advance. 1 July 2009 In accordance with Commission Regulation No. 1142/2009 all entities shall adopt the amendments not later than from the start of their first financial year starting after 31 October Improvements to the International Financial Reporting Standards 2009 The document Improvements to the International Financial Reporting Standards 2009 contains 15 improvements to 12 standards. This is a collection of improvements and revisions which are necessary, but not so urgent or material to be covered by separate projects. Most of the improvements are slight revisions or relate to terminology. Each change has an individual effective date, but most of the provisions relate to the annual periods commencing 1 January 2010 or thereafter. The amendments do not have any material impact on the Group s financial statements. 1 January 2010, except changes to IFRIC 9 Reassessment of Embedded Derivatives Scope of IFRIC 9 and revised IFRS 3 and IFRIC 16 Hedges of a Net Investment in a Foreign Operation Amendment to the restriction on the entity that can hold hedging instruments, IAS 38 Intangible Assets Additional consequential amendments arising from revised IFRS 3, IFRS 2 Share based Payments Scope of IFRS 2 and revised IFRS 3 Business Combinations where the effective date is 1 July 2009 and IAS 18 Revenue Determining whether an entity is acting as a principal or as an agent where the effective date is not given. Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards Additional Exemptions for First-time Adopters The amendment consists in issuing additional optional exemptions for firsttime adopters of IFRSs with respect to: establishing of deemed cost for oil and gas assets; reassessment of lease determination; establishing of deemed cost for operations subject to rate regulation. The amendments do not have any impact on the Group s financial statements. 1 January 2010 Amendments to IFRS 2 Share-based Payment Group Cash-settled Sharebased Payment Transactions The most important amendment to IFRS 2, is that the standard requires an entity receiving goods or services in either an equity-settled or a cash-settled sharebased payment transaction to account for the transaction in its separate or The amendments do not have any impact on the Group s financial statements. 1 January

22 individual financial statements. Previously, such transactions within the Company were not regulated by IFRS 2. Amendments to IAS 32 Classification of Rights Issues The amendment requires that rights, options and warrants relating to acquisition of a particular number of equity instruments for a particular amount in any currency are equity instruments if the entity offers such rights, options and warrants pro rata to the existing owners of the same class of equity instruments that are not derivatives. The amendments to IAS 31 do not relate to the Group financial statements as the Group did not issue such instruments in the past. On 1 February 2010, In accordance with Commission Regulation No. 1293/2009 all entities shall adopt the amendments not later than from the start of their first financial year starting after 31 January IFRIC 19 Extinguishing financial liabilities with equity instruments The interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability are consideration paid in accordance with IAS The above described equity instruments shall be measured at the fair value and the difference between the carrying amount of the financial liability extinguished and the initial measurement of the equity instruments issued should be recognized in profit or loss. The amendments do not have any impact on the Group s financial statements. 1 July 2010 In accordance with Commission Regulation No. 662/2010 all entities shall adopt the revised IFRIC 19 not later than from the start of their first financial year starting after 30 June Revised IAS 24 Related Party Disclosures The change introduces exemptions from disclosures of the amounts of transactions with related parties, balances, including contingent liabilities with (a) government which exercises control or joint control over the reporting unit or exercises a significant influence over such unit, and (b) other unit which is a related party as the same government exercises control or joint control over the reporting unit and the other unit or exercises a significant influence over them. The revises standards requires that the units who use the exemption should make specific disclosures. The updated IAS 24 does not relate to the Group's financial statements as the Group is not controlled by the government. Moreover, it is not expected that the updated definition of a related party will result in emergence of new connections that would need to be disclosed in the financial statements. 1 January 2011 In accordance with Commission Regulation No. 632/2010 all entities shall adopt the amendments not later than from the start of their first financial year starting after 31 December The updated Standard also changes the definition of a related party to cover additional entities, e.g. companies associated with the controlling shareholder and companies which are controlled or jointly controlled by member of the key management personnel. Amendments to IFRIC 14 Prepayments of a Minimum Funding The amended IFRIC 14 relates to accounting for prepayments where there are Minimum Funding Requirements. An entity is now required to recognise such prepayments as an asset as it acquires future economic benefits resulting from the prepayments available as reduction of the future contributions in the periods when the payments connected with the minimum funding requirements would be required in the absence of prior prepayments. The amendments to IFRIC 14 do not relate to the Group financial statements as the Group does not have any plans with minimum funding requirements. 1 January 2011 In accordance with Commission Regulation No. 633/2010 all entities shall adopt the amendments not later than from the start of their first financial year starting after 31 December

23 Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters The amendment would provide relief to first-time adopters from the requirement to provide comparative period disclosures for the information required to be presented by the Amendments to IFRS 7 if the first IFRS reporting period starts earlier than 1 January The amendments do not have any impact on the Group s financial statements. 1 July 2010 In accordance with Commission Regulation No. 574/2010 all entities shall adopt the revised IFRS 1 and IFRS 7 not later than from the start of their first financial year starting after 30 June Standards and interpretations awaiting approval by the EU Standards and interpretations approved by the EU Type of expected change in the accounting policies Potential impact on financial statements Effective date for the periods starting on the day or later Improvements to the International Financial Reporting Standards 2010 The document Improvements to the International Financial Reporting Standards 2009 contains 11 improvements to 6 standards and 1 interpretation. The amendments do not have any material impact on the Group s financial statements. 1 January 2011 except amendments to IFRS 3 Business Combinations transitional provisions relating to contingent consideration in the case of combinations which occur prior to the effective date of the amended standard. Measurement of noncontrolling interest; Nonmodifiable and voluntarily modifiable share-based payments; IAS 27 Consolidated and Separate Financial Statements - transitional provisions relating to changes in IAS 21, IAS 28 and IAS 31, which occurred as a result of changes to IAS 27- where the effective date is 1 July IFRS 9 Financial instruments The new standard replaces the guidelines contained in IAS 39 Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets. The standard eliminates the categories existing under IAS 39: Held to maturity; Available for sale and Loans and receivables. At the time of initial recognition the financial assets will be included in one of the two categories: The Group does not expect that IFRS 9 will have a material influence on the financial statements. It is expected that due to the specific nature of the Group s operations and the type of financial assets held, the Group's policies on recognition and measurement of financial assets will not change as a result of application of IFRS 9. 1 January 2013 financial assets measured at amortised cost, or financial assets measured at fair value. A financial asset is measured at amortised cost if the following two 23

24 conditions are met: the assets are held as part of a business model whose purpose is to maintain assets to acquire flows from a contract, and if the contractual terms give rise to emergence, at particular times, of cash flows that represent only principal payments and interest on the outstanding portion of the principal. The gains and losses from measurement of financial instruments at fair value as included in profit and loss of the current period except where the investment in an equity instrument is not intended for trading. IFRS 9 permits decisions on measurement of such instruments at the time of their initial recognition at fair value through other comprehensive income. The decision is irreversible. The selection may be made for each instrument separately. The values included in other comprehensive income may not be reclassified to the profit and loss in subsequent periods. 7. Seasonality of business (in accordance with 87 section 4 point 3 of the Ordinance) The Group s business is characterised by seasonality. In the segment of electricity and heat production and the segment of heat distribution, the main revenue streams are generated in the so-called 'heating season', which includes the winter months of the year. In the agriculture and gardening segment, most of the revenues arise in the spring and summer months. The segment of maintenance services for industry is fairly unaffected by seasonality, however most of energy plants order maintenance works and overhauls mainly outside of the heating season. 24

25 8. Exceptional items having material impact on the financial statements a. Weather derivative In December 2006, the parent company procured an insurance policy against the loss of profit due to weather anomalies - 'collar' weather derivative. The policy agreement envisages that the company will receive damages depending on the value of the weather index in the covered periods (for each year of the agreement, the cover periods are the months from January to April and from October to December). The parties agreed relevant liability thresholds for the weather index for the insurer (high temperatures) and the company (low temperatures). If the weather index is between the defined thresholds, neither party will be required to pay. Damages will be paid after the end of year of the life of the agreement. The term of the agreement is 3 years, i.e. from 1 January 2007 to 31 December The maximum amount of damages (maximum exposure to risk) may not exceed PLN 6,000 thousand for an annual cover period and PLN 16,000 thousand for a 3-year term. In 2009, the Company received damages for the previous year in the amount of PLN 3,372 thousand (PLN 2,929 thousand in 2008). As on 31 December 2009, KOGENERACJA s weather cover expires, already in mid 2009 the Company's Management Board procured relevant analyses to see if and on what terms a similar insurance cover can be obtained for another 3- year term. On the basis of the proposals received it was found that possible extension of the existing agreement on the same terms would result in the premium rising several times, which would not be favourable for KOGENERACJA S.A., so in 2010 the agreement was not extended. b. Compensations to cover stranded costs in subsidiary EC Zielona Góra S.A. As a result of termination of the Long Term Contracts for electricity sale by EC Zielona Góra S.A., at the date of these financial statements the company can claim compensation for the period from 1 January to 31 December 2010 (Art of the Act dated 29 June 2007 on the rules of covering stranded costs arising on termination of Power Purchase Agreements) in the amount of PLN 13,000 thousand. The value of the annual correction to the stranded costs for 2010 depends on a number of factors, particularly on the profit on sale of electricity to be achieved by the producer (EC Zielona Góra S.A.) in The final correction will be made after the end of the correction period, i.e. the period when the terminated Power Purchase Agreement was in place. The received advance payments, reduced by the annual correction and the final correction in the part expected to be returned in the future periods are recognised at a discount in the long-term liabilities of the company. The amount of the discount calculated for each advance payment in the year when it was received is recognised in the revenue from compensations for termination of the PPAs. Revenue from compensations for termination of the PPAs for the period from 1 January to 30 September 2010 of PLN 5,069 thousand (1 January to 30 September 2009: PLN 17,260 thousand) correspond to the value of the discount on the advance payments in the year they were received. According to the best estimates of the Management Board of EC Zielona Góra S.A. the received advance payments towards stranded costs will be returnable in the future periods. For this reason the advance payments received in were recognised as liabilities at discounted value. At the same time, some provisions of the Act on termination of the Power Purchase Agreements (PPAs), particularly those relating to calculation and correction of stranded costs, are unclear and require an interpretation. They are currently being analysed by the electricity producers in association with the President of the Energy Regulatory Office. The lack of prior practice in this regard and changes in the energy market and the associated projections result in uncertainty about the final value of the compensation for the period presented in these consolidated financial statements. 25