Information on non-cash one-off items affecting the consolidated results of PGE Group in the fourth quarter of 2012

The Management Board of PGE Polska Grupa Energetyczna S.A. (PGE) discloses information on expected impact of non-cash one-off items on consolidated financial results of PGE Capital Group in the fourth quarter of 2012.

In the consolidated financial statements for the year ended December 31, 2012, PGE Group will recognize non-cash one-off items. The most important items in the Conventional Generation segment are as follows:

1. Revenues from termination of the long-term contracts for sales of electric power and electricity (so called LTC compensations) alongside with adjustment resulting from a favourable Court of Appeal verdict

Revenues from LTC compensations are presented separately in the profit and loss account due to their special characteristics. According to the applied accounting rules, the impact of the one-off items resulting from LTC compensations on income and EBITDA in Conventional Generation amounts to PLN 1,253 million in the fourth quarter of 2012. The above value mainly consists of revenues resulting from recalculation of LTC compensations model allowing for among others updated electricity prices path and from change in allocation of the final adjustment – in total amount of approximately PLN 1,184 million. The remaining amount – approximately PLN 69 million – results from adjustment of revenues as a consequence of a favourable Court of Appeal Verdict.

2. Impairment of Dolna Odra power plant assets

On the grounds of tests based on IAS 36 for the impairment of assets for the particular electricity and heat generators, PGE Group revaluates assets of Dolna Odra power plant. The test results showed the loss of value in property, plant and equipment in amount of approximately PLN 1,486 million.

3. Change in valuation of provisions for recultivation resulting from modified assumptions for the discount rate level

Significant drop in interest rates in Poland in the fourth quarter of 2012 necessitated a change of the discount rate applied in PGE Group, among others for valuation of provisions for recultivation (from 5.75% at the end of 2011 to 4.00% at the end of 2012). Modification of the discount rate resulted in increase of provisions for recultivation by approximately PLN 886 million.

4. Impairment of the CCS project

By the end of 2012 PGE did not secure financing of the CCS (carbon capture and storage) project due to the lack of European Union support in funding. Moreover, PGE Group identifies number of technological, legal and social risks which imply material hazard for project continuation. As a result, impairment on to-date expenditures related to the realization of the CCS project in the amount of approx. PLN 156m was made.

Aside from the above mentioned one-off items, which will be recognized in the Conventional Generation segment of the PGE Group consolidated financial statement for the year ended December 31, 2012, PGE will also recognize non-cash one-off item being change in the actuarial provisions resulting from the change in the actuarial assumptions, including change of the discount rate applied. This one-off item will increase provision for employee benefits within the employment period by approximately PLN 244 million. Whereas, provision for employee benefits after the employment period will increase by approximately PLN 202 million (impact on other income line, below net profit).

Anticipated combined impact of the abovementioned non-cash one-off items on consolidated financial results of the PGE Group factor presents as follows:

• Impact on gross profit – approx. PLN (1,519)m

• Impact on EBITDA – approx. PLN (1,519)m

• Impact on net profit attributable to equity holders of the parent company – approx. PLN (1,213)m

• Impact on other income after deferred tax – approx. PLN (164)m

Disclaimer:

The consolidated financial statement of the PGE Group is currently being audited by the professional auditor and the abovementioned numbers are not final and may change. PGE will publish stand alone and consolidated financial statements for the year ended December 31, 2012 on March 14, 2013.

Legal ground: Art. 56 section 1 point 1 of the Act on public offering, conditions governing the introduction of financial instruments to organised trading, and public companies (Dziennik Ustaw of 2009 no 185, item 1439, as amended).