14.3. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES AND ASSOCIATES

PROFESSIONALJUDGEMENT

Based on its own judgment, taking into account its rights, obligations, considering the structure, legal form and the terms of the agreement agreed by the parties, the Group assessed that BOP, PPPT, Pieridae Production, Polska Grupa Górnicza i Elektrownia Ostrołęka constitute a joint contractual arrangement whereby ORLEN Group exercises joint control over them.

The agreements give all shareholders a joint control over the companies, decisions related to significant operations require the unanimous approval of all shareholders, and the legal form of separate entities does not give shareholders the right to their assets and obligations to repay liabilities. In relation to above, the Group classified above investments as joint ventures that are accounted for under equity method in the consolidated financial statements.

Based on professional judgment, the Group assessed that the investment in Butadien Kralupy is a joint operation. The contractual arrangements for this investment indicate that the parties to the contract are entitled to substantially all economic benefits generated by the company's assets and are its only source of income. The obligation of the parties to purchase the entire production Butadiene Kralupy reflects the company's sole dependence on the parties to generate cash flows, meaning that the parties effectively have an obligation to finance the settlement of the company's liabilities. These facts and circumstances indicate that the investment in Butadien Kralupy is a joint operation and therefore the Group recognizes its share (51%) in assets, liabilities, revenues and costs of the company.

 

 Place of business

 Principal activity

 Participation in share capital

 Valuation method

joint ventures

Basell ORLEN Polyolefins Sp. z o.o. (BOP) (PKN ORLEN)

 Płock/Poland

 production, distribution and sales of poliolefins

50.00%

 equity method

Płocki Park Przemysłowo-Technologiczny (PPPT) (PKN ORLEN)

 Płock/Poland

 construction and renting real estate

50.00%

 equity method

Pieridae Production GP Ltd (ORLEN Upstream Group)

 Calgary/Canada

 exploration and extraction of minerals, storage, transport and logistics

50.00%

 equity method

Polska Grupa Górnicza (ENERGA Group)

 Katowice/Poland

 coal mining

15.32%

 equity method

Elektrownia Ostrołęka (ENERGA Group)

 Ostrołęka/Poland

 production of electricity and heat

50.00%

 equity method

Associates

Polimex Mostostal S.A. (ENERGA Group)

 Warsaw/Poland

an engineering and construction company, general contractor in the field of industrial construction, producer and exporter of steel structures

16.48%

 equity method

ElectroMobility Poland (ENERGA Group)

 Warsaw/Poland

 electromobility and electric cars

25.00%

 equity method

UAB Naftelf (Grupa Orlen Lietuva)

 Vilnius / Lithuania

 aviation fuel trading and construction warehouses

34.00%

 equity method

joint operations 

Butadien Kralupy a.s. (Unipetrol Group)

 Kralupy nad Vltavou/Czech Republic

 manufacturing of butadien

51.00%

 share in assets
and liabilities

* The Group, through ENERGA SA, holds 39 million shares of Polimex Mostostal with a nominal value of PLN 2, which represents approximately 16.48% of the shareholding structure of this company. Polimex Mostostal shares are listed on the Warsaw Stock Echange (WSE). The fair value of the company as at 31 December 2020 amounted to PLN 145 million.

As at 31 December 2020 ORLEN Upstream Group has participated in the following joint operations:

  • consortium (Blue Gas – Polish Shale Gas program) founded by ORLEN Upstream (OU), Polskie Górnictwo Naftowe i Gazownictwo (PGNIG), LOTOS Petrobaltic and University of Science and Technology (Akademia Górniczo-Hutnicza), Institute of Oil and Gas (Instytut Nafty i Gazu), Gdansk University of Technology, Warsaw University of Technology. Works under the Blue Gas program - Polish Shale Gas were completed, projects settled in both material and financial terms.The program aimed to manufacture and commercialize the technology and gain knowledge for the extraction of shale gas in Poland. The cooperation was summarized in all 6 of 10 notified projects. The total contribution of ORLEN Upstream in the implementation of the above projects amounted to over PLN 24 million. Applications were collected that provides grounds for applying for patent rights for developed solutions, which have been submitted to the relevant authorities for an opinion. To the end of December 2020, the Patent Office of the Republic of Poland granted 3 patent decisions in favor to the Consortium Members;
  • exploration – extraction projects carried out together with PGNiG (the search areas „Sieraków” – 49% share of ORLEN Upstream and the search areas “Płotki” – 49% share of ORLEN Upstream). The agreements provide the conduct of joint operations and activities in the field of exploration, prospection and extraction of crude oil and natural gas.

ORLEN Upstream Group has the right to proportionate share of the income and bears a proportionate share in the costs of joint operations.

Investments accounted for under equity method

 

31/12/2020

31/12/2019

Joint ventures, incl.:

 680

 672

Basell ORLEN Polyolefins Sp. z o.o. (PKN ORLEN)

 648

 640

Associates

 78

 6

Polimex Mostostal S.A. (ENERGA Group)

 72

 -

UAB Naftelf (Orlen Lietuva Group)

 6

 6

 

 758

 678

Share in profit from investments accounted for under equity method

 

2020

2019

Joint ventures

 143

 136

Basell ORLEN Polyolefins Sp. z o.o.    (PKN ORLEN)

 143

 136

Associates

 6

 -

Polimex Mostostal S.A. (ENERGA Group)

 6

 -

 

 149

 136

For 2020, the unrecognized share of the loss since the acquisition of the ENERGA Group in relation to Elektrownia Ostrołęka amounted to PLN (90) million, and in relation to Polska Grupa Górnicza amounted to PLN (54) million.

Condensed financial information of Basell ORLEN Polyolefines Group

 

31/12/2020

31/12/2019

Non-current assets

 733

 789

Current assets

 1,178

 1,259

cash

 235

 366

other current assets

 943

 893

Total assets

 1,911

 2,048

Total equity

 1,329

 1,324

Non-current liabilities

 61

 61

Current liabilities

 521

 663

trade and other liabilities

 498

 646

Total liabilities

 582

 724

Total equity and liabilities

 1,911

 2,048

Net debt

 (235)

 (366)

Net assets

 1,329

 1,324

Group’s share in joint ventures (50%)

 665

 662

Elimination of unrealised profit and loss

 (17)

 (22)

Joint ventures investments accounted for under equity method

 648

 640

 

2020

2019

Sales revenues

 3,298

 3,741

Cost of sales, incl.:

 (2,847)

 (3,271)

Depreciation and amortisation

 (88)

 (90)

Gross profit on sales

 451

 470

Distribution expenses

 (106)

 (104)

Administrative expenses

 (21)

 (23)

Other operating income and expenses, net

 1

 (5)

Profit from operations

 325

 338

Net finance income and costs

 17

 (4)

Profit before tax

 342

 334

Tax expense

 (65)

 (64)

Net profit

 277

 270

Total net comprehensive income

 277

 270

Dividends received from joint ventures

 137

 107

Net profit

 277

 270

Group’s share in joint ventures (50%)

 139

 135

Elimination of unrealised profit and loss

 4

 1

Group’s share in result of joint ventures accounted for under equity method

 143

 136

Condensed financial information of the associate of POLIMEX-Mostostal (ENERGA Group)

 

31/12/2020
 (unaudited)

Non-current assets

 311

Current assets

 1,187

cash

 368

other current assets

 819

Total assets

 1,498

Non-current liabilities

 220

Current liabilities

 936

Total liabilities

 1,156

Total equity and liabilities

 1,498

Net assets

 342

Group’s share in associates (16,48%)

 56

Elimination of unrealised profit and loss

 16

Investments in associates

 72

 

8 MONTHS
FOR THE PERIOD
from 01/05/2020 to 31/12/2020
 (unaudited)

Sales revenues

 1,248

Depreciation and amortisation

 (28)

Net finance income and costs

 (14)

Profit before tax

 49

Tax expense

 (12)

Net profit

 37

Total net comprehensive income

 35

Net profit

 37

Group’s share in associates (16,48%)

 6

Group’s share in profit of associates

 6

In 2020 and 2019, there were no significant restrictions in associates and joint ventures resulting from loans agreements, regulatory requirements and other contractual agreements that would restrict access to assets and settlement of liabilities of the Group.

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