Corporate Social Responsibility Report 2019 Table of contents

2 3 In 2019, the Polenergia Group enjoyed a run of of photovoltaic farms, which will be the second 1. success resulting from both increasingly better most important segment of energy generation Letter financial performance and progress in the area from renewable sources after wind energy. of sustainable business. The Group recorded high What deserves a special emphasis is the fact growth dynamics of all key financial indicators from the President that we commenced the construction of the already in Q1, which continued in the successive Szymankowo Wind Farm with the capacity of 38 months, owing to the segment of wind power and MW last year. It is the first project of the Company increase in the production of green certificates and one of the first in the Polish market which and electricity. Moreover, the past year brought did not need any support within the auction significance changes – both to the Company and to system or in the form of long-term electricity its market environment. offtake agreements when determining the Polenergia finalized contracts with Equinor conditions of financing. The execution of this (formerly: Statoil), its Norwegian partner, concerned project will take around 2 years and electricity will with the implementation of three strategic projects start flowing to consumers in 2021. The project is of constructing wind farms in the Baltic Sea. These consistent with the Polenergia Group’s strategy: projects have obtained additional conditions for being an investment in the most technologically connection, which will enable an increase in the advanced renewable energy sources, supporting total capacity of the farms developed by MFW decarbonization and modernization of the Polish Bałtyk II Sp. z o.o., MFW Bałtyk III Sp. z o.o., and energy sector on the one hand, and enabling Polenergia Bałtyk I S.A. to 3,000 MW. All three of our profitability maximization on the other hand. projects have already attracted a renowned partner, In 2019, our gas company, the Nowa Sarzyna which is evidence of the real prospects for the Cogeneration Plant, won the Capacity Market development of the offshore wind energy sector in auction for 2024 again after, the year before, both Poland and acknowledgement of the quality of the this company and Mercury Energia, another entity works performed by the Group. of ours, won auctions for 2021, 2022, and 2023. The In 2019, the Polenergia Group enjoyed a run of success Polenergia obtained funding for the construction Nowa Sarzyna Cogeneration Plant also entered into resulting from both increasingly better financial of 8 photovoltaic farms with the total capacity another 3-year contract providing for the self-start- of 8 MW near Sulechów (Lubuskie Voivodeship). up and reconstruction of the power system in case performance and progress in the area of sustainable The projects have already been completed and of blackout with Polskie Sieci Elektroenergetyczne. business. put into operation. We estimate that their annual What is of utmost importance, the Polenergia production will be over 8 GWh of electricity, which Group won an auction for large onshore wind corresponds to the demand of 4.5 thousand power plants in 2019. Our three projects will receive households. Our priority is the further development support for 15 years, which gives us a chance for

4 5 increasing the installed wind energy capacity by o ethical pursuit of the business, which A responsible attitude and active over 70% (from the present 250 MW to 436 MW). will be manifested, among others, in involvement in sustainable development The fact of winning the wind auction is very good transparent actions, corruption prevention, issues are embedded in Polenergia’s news to our shareholders. It means that the Group responsible selection of business partners, ongoing and future business. The strongly enhances its business engagement in active participation in maintaining security Company intends to engage a larger the segment which generates record-breaking of electricity supplies, and care for such group of Stakeholders, in particular performance. We efficiently build a portfolio of preparation of projects for construction and Employees, in such projects in the secure and market-oriented wind projects. management as ensures that they are not coming years. The Group endeavors to only safe to local communities but also bring keep a balance between generating Polenergia sees its business future with green an added value to them, one falling within the good economic performance, satisfying energy. On adoption of a new Corporate Social scope of the 17 UN Sustainable Development the expectations of its Customers, and Responsibility Strategy in 2019, we reinforced our Goals; protecting the long-term interests of actions for a better use of renewable energy sources the natural and social environments. in all areas of our operation. It is only through environmental protection, including e.g. o Therefore, it bases its development on implementing new solutions that we will be able reduction of greenhouse gas emissions and the latest available technologies utilizing to fully discern and use the potential of RES the environmental education of Customers; renewable and conventional energy dynamic development of which will counteract safety and development of Employees based, sources with proper care taken of the climate changes and form a new model of o among others, on strict safety procedures and safety of people and the protection of the economic growth. periodic training courses in first aid as well as on natural environment. The Corporate Social Responsibility Strategy of expansion of the staff’s skills through training, I hope that all readers interested in our the Polenergia Group for 2019-2022, which we and on reduction of gender inequalities vision of responsible business will find presented in April last year, comprehensively as regards employment and promotion this report very satisfying. describes all areas of the Group’s activity and the opportunities; key projects that will determine the outlook for our strengthening of the relationships with development in the area of responsibility in the o Customers and local communities through Yours faithfully, coming years. This outlook will provide primarily for: dialog and openness to their needs. Michał Michalski, Ph.D.

President of the Polenergia S.A. Management Board

6 7 Poland’s economic growth over the past 30 years The further success will depend on whether Poland 2. can be considered a major success. However, will be able, among others, to increase productivity, Polenergia maintaining such a dynamic growth rate requires streamline the labor market, and ensure a business- Group continuous efforts and a sound economic policy. and society-friendly environment1. According to the report presented by McKinsey & Company, development in order to maintain economic growth, the focus should be placed on its drivers, such as: – support for Poland’s economic growth employees and development of the environmental their development, energy infrastructure protection, which including and supplies of private and public influences the quality investments in future electricity the prices investment projects of life, in particular in staff (educational and availability of times of the climate programs, education which translate crisis of specialists) directly into the economic growth rate

Developing a modern power sector based on Polenergia Group fits into the development scenario renewable energy sources, developing domestic consistent with the aspiration of the European Union. component and service supply chains for its If we want to reach the target of a carbon-neutral The Polenergia Group is an integrated utility group purposes, supporting state-of-the-art solutions in the economy by 2050, we must plan our actions now. uniting companies producing energy from renewable or area of energy generation, distribution, and trading, The Group’s development means not only striving for developing prosumer energy sources, and ensuring clean energy production but also contributing to the gas sources and operating in the areas of distribution of security of supplies – this core business of the economic development of Poland. and trade in electricity, proprietary interest, and gas.

1 Poland 2030. A chance to join the economic big league, McKinsey & Company in cooperation with Forbes, August 2019, https://www.mckinsey.com/pl/our-insights/polska-2030.

8 9 This report covers the whole Group as it is For the purpose of the previous report, areas of 3. consolidated in the financial statements. It Polenergia’s material impact on the environment Corporate Social comprises information about the Group’s parent were defined and stakeholders significantly company and a number of special purpose affected by and/or affecting the Group were vehicles created for the purposes of execution of identified. The Company believes that the outcomes Responsibility specific development and construction projects. of the studies are still topical and therefore they In preparing it, the corporate social responsibility were used when preparing this publication. Strategy guidelines laid down in the PN-ISO 26000 standard and the requirements of reporting for the institutions financing the projects implemented by and key areas in the the Group were also followed. Polenergia Group Presented below is a list of identified key areas of responsibility of the Polenergia Group which will be discussed in detail in the subsequent chapters of this report.

Area of Social or Impact aspects and indi- Signifi- responsibility environmental aspect cators according to GRI cance

» Biodiversity Impact of the project on the » Waste and sewage Environment high local natural environment » Complaint mechanisms

» Materials Impact of the business on the Environment » Energy high climate This publication is the 5th comprehensive corporate » Emissions social responsibility report of the Polenergia Group. Environment Acquisition of biomass » Materials medium It has been prepared in accordance with core GRI Concerns of local communities related to the Society » Local communities high Standards and has not been subjected to any additional inconvenience to be caused by the anticipated projects verification. Occupational safety and Employees » OSH high health

10 11 Corporate Social Responsibility Strategy of the Polenergia Group Ethical running Environmental for 2019-2022 of the business protection

The updated Responsibility Strategy has been The next stage in the process was a meeting applicable in the Company since 2019. The Strategy attended by persons managing each area of set certain measurable goals for 2019-2022 in the Company’s operations. 15 persons, including We ensure Poland’s energy security We minimize the environmental impact all areas of the Polenergia Group’s business. members of the Management Board, participated and contribute to the reduction of of our activity by monitoring the effect This document constitutes the basis for the in the meeting. It was held in the form of a greenhouse gas emissions by offering of the newly delivered projects on the development and operation in the CSR areas for all workshop devoted to an analysis of crucial aspects energy from renewable sources. We act surroundings. We reduce the amount Group companies. of sustainable development for the Polenergia in a responsible manner in the entire of waste we produce, in particular in the Group. supply chain: we conduct environmental area of office work. We are open to dialog The works on updating the Strategy were and OSH audits of the facilities we with stakeholders on environmental performed in a few stages. It began with an in- During the creation of the new Strategy, opinions administer and we incorporate ethical protection. depth survey of employee opinions in order to expressed by external stakeholders were also and environmental clauses in contracts find out their assessment of the CSR activities taken into consideration. For this purpose, with our key subcontractors. We find undertaken by the Polenergia Group. Through their analysis and mapping was performed. An transparency of dealings and preventing their participation in the survey, the employees opinion poll was conducted in key stakeholder corruption crucial: we stress these had the opportunity to voice the most significant groups, including shareholders, banks, suppliers, issues at employee training courses. issues which in their opinion should be taken into investors, representatives of local communities, We reinforce ethical culture in the consideration when preparing the document. the Supervisory Board, local self-governments, and organization by increasing employee According to employees, the most important industry associations. awareness of the matter and creating programs pursued by the Polenergia Group in The Strategy for 2019-2022 is closely related to the the necessary tools for managing these the sphere of social responsibility are actions for Company’s business strategy and refers to global issues (Code of Ethics of the Polenergia occupational safety and health as well as staff Sustainable Development Goals set by the United Group). training and development support. Nations. The document specifies 15 goals and 32 targets to be achieved in four key responsibility areas of the Polenergia Group.

12 13 Safety and Strengthening development relationships with of employees customers and communities

Employee safety is our priority. We ensure safety procedures compliant with We are committed to developing ISO 18001, we endeavor to fully eliminate relationships with local communities in severe and fatal accidents as well as the areas of our operation. We are open occupational diseases among both our to dialog and our charity activity focuses employees and our subcontractors. We on supporting inhabitants of these areas enable our employees to develop their and helping them solve their problems. knowledge and competences through We take actions aimed to prevent access to training. Our crucial value is breaches of customer privacy and loss diversity and equal opportunities. We of customer data. We provide complaint systemically manage diversity, guarantee mechanisms and efficiently respond to equal opportunities as regards access to any issues notified by customers and senior positions, make efforts to ensure local communities. equal pay for men and women. We take measures to prevent discrimination and facilitate returns after maternity or paternity leaves.

14 15 4. Values of the Polenergia Group Both the Polenergia Group’s employees and Moreover, it meets the highest environmental business partners are required to shape the protection and labor standards and expects the workplace culture compliant with the values laid same from the entities with which it cooperates. down in the Universal Declaration of Human Rights, Responsible attitudes of all partners in the supply the United Nations Sustainable Development chain not only streamline work and ensure Goals, and the principles of the United Nations the expected quality of service and operation Global Compact Ethics Program2. The Code of of the Company’s assets but also allows it to Ethics of the Polenergia Group provides for the comprehensively manage its environmental impact. possibility to notify the Ethics Committee of abuses in this sphere. Our contracts with employees and business partners contain provisions on complying with principles of ethics and caring for the natural environment and local communities.

The methods of the Polenergia Group’s operation are determined by broadly defined ethics. This The standards and the Code of Ethics is manifested in the Company’s responsible are available on approach to stakeholders: shareholders, employees, collaborators, business partners. The Group All principles that the Polenergia Group is guided observes the principles of fair competition when www.polenergia.pl by in its business are communicated by way of its selecting suppliers and contractors and acts in publicly available Environmental and Social Policy and a manner devoid of any attributes of corruption. Corporate Social Responsibility Strategy.

2 The Polenergia Group joined the Global Compact Ethics Program and the Partnership for the Achievement of the Sustainable Development Goals “Together for the Environment” in 2017.

16 17 Managing diversity in the Polenergia Group

o The Code of Ethics of the Polenergia Group fully complies with the principle of equality and non-discrimination on the grounds enumerated in Article 183a § 1 of the Labor Code, which provides that employees should be treated equally as regards establishing and terminating an employment relationship, conditions of employment, promotion, and access to training in order to improve professional qualifications, in particular regardless of sex, The Responsibility Strategy incorporates diversity age, disability, race, religion, nationality, political to the business and management strategy of the views, trade union membership, ethnic origin, Company and makes it a priority in the area of denomination, sexual orientation, as well its diversity and inclusion actions. The Polenergia as regardless of employment for a definite Group has been also a signatory of the Charter of or indefinite term, or full-time or part-time Diversity since August 2019. employment. Diversity management is a business strategy o Through the Work Regulations, Code Of which creates and promotes equal opportunities, Ethics, and Corporate Social Responsibility appreciates the values hidden in cultural differences Strategy, the Polenergia Group implements the between people, and uses the diversity potential principle of equal treatment of all employees. for the effective pursuit of the organization’s goals. By implementing the Standards for its business Therefore, in 2020, the Group will concentrate on partners, the Group promotes these values also the actions supporting diversity of employees and among them. equal opportunities for them as provided for in the CSR Strategy. The Group began the implementation o In 2015, it introduced a procedure for notifying of the systemic approach to diversity with an breaches of the principle of equal treatment extensive analysis of its conduct:

18 19 both in the Group and among its business which fits into the UN Sustainable Development partners and established the Ethics Committee Goal 8 (Economic growth and decent work), to consider such notifications. the Polenergia Group will continue its actions for availability of training and development of The Polenergia Group ensures equal o professional skills (with the availability always opportunities as regards access to senior receiving high ratings in employee satisfaction positions and monitors the percentage of surveys). Moreover, the Company will expand women holding the key positions in the the scope of its training courses and workshops Company head office (it was 37% in Q4 2018, by efficient working time management and and 42% in Q2 and Q3 2019). achievement of the work–life balance. o The use of maternity and paternity leaves as o A series of obligatory training courses well as the percentage of returns to active dedicated to the equality policy and support for work after giving birth to a child are subject to women’s development will be delivered to the monitoring. management staff. Training courses in diversity o The Work Regulations enable remote work management and career planning for women and flexible working hours. These solutions are will be also prepared as part of the Polenergia addressed to all employees. Group policy of providing female employees with competence development and promotion o The Company monitors the issue of equal pay opportunities. for men and women.

o Organization of training courses in diversity and inclusion has been planned for 2020. In its pursuit of the goal provided for in the CSR Strategy, namely Employee training and education, supporting career development,

20 21 Key operational assets and development projects of the Polenergia Group by 5. Description operating segments and energy sources

Sales/ Source Energy generation Distribution of the Retail

Special purpose vehicles Polenergia Dystrybucja Sp. z o.o. established to operate existing Polenergia Group’s – a specialized distributor and Renewable energy onshore wind farms; new Polenergia seller of electricity to factories sources onshore and offshore wind Obrót S.A. and commercial and residential farm projects; photovoltaic buildings business projects

Polenergia Nowa Sarzyna Cogeneration Plant (methane- Natural gas Polenergia Dystrybucja Sp. z o.o. Polenergia rich natural gas, Polenergia /coke-oven gas /PPG Polska Sp. z o.o. Obrót S.A. Mercury Power Plant (coke- oven gas)

Polenergia in its current shape and form was created in August 2014 following the acquisition of the utility assets of the Polenergia Holding S.á r.l. Group. The restructuring process opened up prospects for Polenergia’s long-term sustainable growth.

22 23 Renewable energy sources

Power generation

Onshore wind power generation

In 2005-2015, wind power plants were the most rapidly growing branch of the renewable energy Polenergia generation sector in Poland. In 2005, the installed The Polenergia Group produces clean capacity of wind power plants was 83.28 MW, energy using modern wind turbine Group’s while the figure reached 5,848.67 MW by 2017. technologies. The Group’s activity in business This rapid growth of the industry was halted the area of wind energy generation due to unfavorable national legislation. 2019 development includes: saw considerable changes in the regulatory environment and the new RES auction, held on 5 December, will result in the further development of the sector. The effect of the auction concerning wind and photovoltaic plants with the capacity Trading in energy, above 1 MW was the contracting of energy worth emissions, property Energy PLN 16.2 billion, of which PLN 16.1 was attributable rights and gas distribution development and operation of wind to wind power generation. The contracted amount sale of wind farms farms corresponds to the generation of over 2,200 MW of installed capacity and therefore the construction of successive onshore wind farms should be expected.

24 25 The Group is an operator and owner of wind Farm infrastructure and since that moment the farms. Our first wind farm with the capacity of company’s wind project portfolio size has been 249.3 Polenergia Group's wind farms in 2019 22 MW launched its operation in January 2007 MW, ranking it among the leaders of the Polish in Gnieżdżewo near Puck in northern Poland. In market. January 2012, two wind farms, the Łukaszów Wind The company takes advantage of outstanding wind Farm (34 MW) and the Modlikowice Wind Farm conditions and state-of-the-art technologies to Puck (24 MW) were put into operation near Zagrodno in consistently achieve an electricity generation level south-western Poland, followed by the Gawłowice above the market average. In 2019, the electricity Wind Farm near Radzyń Chełmiński (northern produced by wind farms was higher by 19% (738 Poland) and the Rajgród Wind Farm near Grajewo Rajgród GWh). The net productivity of Polenergia’s wind Gawłowice (north-eastern Poland) in the subsequent years. farms in Q4 2019 maintained above the average Skurpie In Q3 2015, the group of the existing five farms figure of the whole Polish sector and reached 39.1%. was enlarged by a 43.7 MW wind farm located in The Mycielin Wind Farm is the leader, with the Krzęcin the village of Skurpie near Płośnica in northern productivity over the whole previous year reaching Poland, and the Gawłowice Wind Farm underwent as high as 40%. A slightly lower result, 39%, was expansion. In February 2016, Mycielin Wind Farm achieved by the Gawłowice Wind Farm. Both these with the capacity of 48 MW was put into operation farms account for nearly 45% of production recorded near Niegosławice in western Poland. In May by Polenergia’s wind power generation segment. 2018, Polenergia purchased the Krzęcin Wind Mycielin

No. Location Capacity (MW) Year commissioned Modlikowice Łukaszów 1 Puck 22 2006

2 Modlikowice 24 2011

3 Łukaszów 34 2011

4 Gawłowice 41.4 2014

5 Rajgród 25.3 2014

6 Skurpie 43.7 2015

7 Gawłowice II 6.9 2015

8 Mycielin 46 2015/16

9 Krzęcin 9 2010 (acquired in 2018)

26 27 Modlikowice Puck Wind Farm Wind Farm Located in Gnieżdżewo near Puck, put Located near Zagrodno in Złotoryja into operation in January 2007. The county in south-western Poland, put into farm’s total capacity is 22 MW, generated operation in early 2012. Its total capacity by turbines with a capacity of 2 MW each. is 24 MW, generated by 12 Vestas V90- The farm’s operator is Dipol Sp. z o.o., 2.0 MW turbines installed on 105-meter a special purpose vehicle wholly owned towers. The farm’s operator is Talia by Polenergia S.A. Sp. z o.o., a special purpose vehicle wholly owned by Polenergia S.A.

Gawłowice Łukaszów Wind Farm Wind Farm Located near Zagrodno in Złotoryja Located near Grudziądz in Kujawsko-Pomorskie county in south-western Poland, put into Voivodeship, put into operation in Q4 2014. operation in early 2012. Its total capacity Its total capacity was 41.4 MW, generated by is 34 MW, generated by 17 Vestas V90- 18 Siemens SWT-2.3-108 turbines installed on 2.0 MW turbines installed on 105-meter 115-meter towers. In 2015, the farm was expanded towers. The farm’s operator is Amon by 3 successive turbines of this type and its Sp. z o.o., a special purpose vehicle wholly capacity increased to 48.3 MW as a result. The owned by Polenergia S.A. farm’s operator is Polenergia Farma Wiatrowa 1 Sp. z o.o., a special purpose vehicle wholly owned by Polenergia.

28 29 Polenergia has won auctions and obtained financing mentioned Szymankowo Wind Farm with the for the Szymankowo Wind Farm project (decision to capacity of 38 MW (annual production of 120 GWh), implement the project was made before receiving Kostomłoty Wind Farm with the capacity of 27 MW Rajgród Wind Farm Skurpie Wind Farm the support), which will help the Group increase (82 GWh) and Dębsk Wind Farm with the capacity of the installed capacity by over 74% following the 121 MW (346 GWh). Located near Grajewo in Podlaskie Located near Płośnica in Działdowo construction of successive three farms: the already Voivodeship, put into operation in Q4 county in Warmińsko-Mazurskie 2014. Composed of 11 Siemens SWT- Voivodeship, put into operation in Q4 2.3-108 turbines installed on 115-meter 2015. Composed of 19 Siemens SWT- towers, the farm has the total capacity 2.3-108 turbines installed on 115-meter This is good news for Polenergia’s shareholders that we have won of 25.3 MW. The farm’s operator is towers, the farm has the total capacity the auction because this means that the Group strongly increases Polenergia Farma Wiatrowa 6 Sp. z o.o., of 43.7 MW. The farm’s operator is a special purpose vehicle wholly owned Polenergia Farma Wiatrowa 4 Sp. z o.o., its business engagement in a segment that achieves record- by Polenergia. a special purpose vehicle wholly owned breaking results at present. We have already decided to construct by Polenergia. the Szymankowo Wind Farm and the auction we have won will allow us additionally to maximize the profitability of this project. Now we are launching a huge construction project of Dębsk Wind Farm and Kostomłoty Wind Farm, which have been granted guaranteed support as part of the auctioning system. These three investment projects Mycielin Wind Farm Krzęcin Wind Farm will add 186 MW of new wind capacity to Polenergia, which means an impressive growth by 74%, to 436 MW. We consistently and efficiently Located near Niegosławice and Located near Krzęcin in Choszczno county in Szprotawa in Żagań county in Lubuskie Zachodniopomorskie Voivodeship. It is composed build a portfolio based on secure and market-oriented wind projects. Voivodeship, received the operational of 4 Nordex S77 turbines with the capacity of permit in Q1 2016. Composed of 23 Vestas 1.5 MW each. The farm was constructed in 2010 V110-2.0 MW turbines, the farm has the and has been operated by Polenergia Farma total installed capacity of 46 MW. The Wiatrowa 23 Sp. z o.o., a special purpose vehicle farm’s operator is Polenergia Farma wholly owned by Polenergia, since 2018. Wiatrowa Mycielin Sp. z o.o., Michał Michalski a special purpose vehicle wholly owned by Polenergia. President of the Management Board of Polenergia

30 31 Offshore wind farms in the Baltic Sea. Development prospects.

Offshore wind farms are one of the most rapidly valid location permit and conditions for connection growing electricity production technologies received from the transmission system operator. not only in Europe but globally. Owing to For the purpose of Bałtyk II Offshore Wind Farm the implementation of successive offshore and Bałtyk III Offshore Wind Farm projects, a projects, Poland will face both a challenge and preliminary geological study of the seabed has an opportunity to create a supply chain for the already been executed and a two-year wind whole offshore power generation sector, based measurement campaign has been carried out on Polish ports and industry, engaging domestic using the LIDAR system. Thanks to the confirmed manufacturers of cables, foundations and outstanding wind conditions, it will be possible to transformer stations as well as companies operating use the energy effectively and to reduce the plant in the shipbuilding industry, the steel industry and wear, which will make offshore wind farms a stable others. An analysis of the offshore market potential renewable energy source. The anticipated farm prepared by McKinsey, a consulting firm, and service life is 25-30 years. published in 2016 predicts that the development of offshore wind generation projects in Poland may In December 2019, Polenergia S.A. sold 50% create up to 77,000 new jobs related to the sector of shares in the Bałtyk I Offshore Wind Farm directly or indirectly and add PLN 60 billion to the construction project to Equinor ASA. The country’s GDP by 2030. transaction constituted the execution of an option included in the agreement signed in May 2018. Thus The strategic projects of Polenergia, implemented all the three undertakings have a renowned partner, jointly with Equinor, the Norwegian partner, are the experienced in the execution of offshore projects. construction of first wind farms in the Baltic Sea in In 2018, Polenergia won an auction for Poland, with the capacity of 3,000 MW. Polenergia In order to enable the construction of first offshore photovoltaic farm projects with a capacity has obtained final non-appealable decisions on wind farms in Poland, it is necessary to introduce of up to 1 MW and secured the right to sell environmental conditions for the construction detailed regulations to take into account the electricity for projects with a total capacity of Bałtyk II Offshore Wind Farm (April 2017) and specificity of such projects, i.e. their scale and of 8 MW. Over the settlement period Bałtyk III Offshore Wind Farm (July 2016) along with complexity, as well as, at least at the beginning, (15 years), these farms are expected to connection agreements, as well as a valid decision their limited number. Therefore, the schedule generate 117 GWh of electricity. They were on environmental conditions for the construction provides that electricity might be supplied from the already completed and put into operation of transmission infrastructure (March 2019). The Bałtyk II Offshore Wind Farm and Bałtyk III Offshore in 2019. third project, Bałtyk I Offshore Wind Farm, has a Wind Farm for the first time in 2025.

32 33 In its publication of November 20193, WindEurope wind. 450 GW would cover 30% of the energy points to the intensive development of wind demand in the aforementioned year. farms as a condition for achievement of climate By 2050, projects with the total capacity of 380 GW MFW Bałtyk I neutrality. Europe boasts one of the largest offshore will be constructed in northern Europe (the Atlantic wind resources in the world. According to the by the coast of France, Ireland and Great Britain, International Energy Agency (IEA), offshore energy the North Sea, the Irish Sea and the Baltic Sea), i.e. might become the primary energy source in Europe on areas characterized by rich wind resources, a by 2042. The currently installed capacity of 20 GW high energy demand and effective supply chains. covers 1.5% of our continent’s annual electricity The remaining 70 GW of installed capacity will be demand on average. As calculated by the European attributable to projects located in the waters of Commission, Europe needs between 230 and 450 Southern Europe. MFW Bałtyk II GW of offshore wind by 2050, which would make wind the primary energy source along with onshore MFW Bałtyk III Biomass-derived fuels

Biomass is used as a renewable energy source by the direct burning of wood and its waste products, straw, energy crops or waste obtained in crop production. In 2008, the Polenergia Group embarked on the execution of projects aimed at supplying the utility sector with pellets made of The pellet plant in Zamość was put into operation in Q2 2012. It is operated by Polenergia Biomasa agricultural biomass, predominantly straw. Energetyczna Wschód Sp. z o.o. The selection of the Zamość business subzone as the plant location Since 2019, the Polenergia Group has been was driven by the availability of raw material for production. The pellet produced in Zamość is operating only the pellet plant in Zamość. delivered mainly to the Połaniec Power Plant (and also Two plants, located in Sępólno Krajeńskie and to the Ostrołęka Power Plant). The plant’s production volume is approx. 4,000 tons of fuel per month. Ząbkowice Śląskie, have been sold.

3 Our energy, our future: How offshore wind will help Europe go carbon-neutral, windeurope.org/about-wind/reports/our-energy-our-future/.

34 35 Trading in energy, emissions, property rights and gas

Conventional power generation

Polenergia is engaged in the construction and In 2019, the Polenergia Group operated operation of energy generation facilities based on two industrial energy generation the gas fired conventional technology (low-carbon facilities: fuel combustion), including the cogeneration of electricity and thermal energy. Mercury Nowa Sarzyna

Nowa Sarzyna Mercury Power Cogeneration Plant Plant

36 37 The Mercury Power Plant generates electricity from fuel which previously constituted an unused byproduct obtained as part of the operation of coking plants. The Nowa Sarzyna Cogeneration Plant uses natural gas, the

combustion of which generates relatively low levels of CO2, particulate matter and NOx and SO2 emissions, and thus, in general, a weaker environmental impact.

Nowa Sarzyna Mercury Cogeneration Plant Power Plant

Located in Nowa Sarzyna near Leżajsk in Located in Wałbrzych, managed by Podkarpackie Voivodeship. The facility Mercury Energia. The project is executed is fired with methane-rich natural gas under a contract with Wałbrzyskie and has the total capacity of 116 MWe Zakłady Koksownicze Victoria S.A. The (electrical) and 70 MWt (thermal). The Mercury Power Plant started generating generated electricity is supplied to the electricity in early July 2006. The power National Power System through three unit consists of a gas boiler and a steam overhead 110 kV high voltage power lines. turbine with the capacity of ca. 8 MWe. The heat generated in the facility is used Electricity is generated from coke-oven for process and heating purposes of gas, formed as a byproduct during coke nearby chemical plants and for heating production. It is worth noting that before purposes of the town of Nowa Sarzyna. the project got underway, this gas was simply burned at the flare and was not put to any use. This innovative project has not only contributed to improving the business efficiency of the plants but above all has allowed to obtain energy without an additional burden on the environment.

38 39 Energy distribution Gdańsk

Polenergia Dystrybucja is a distributor and for the purposes of buildings) and electromobility Szczecin supplier of electricity for industrial, residential and (development of a network of electric car chargers). commercial consumers, among others housing Investments in new technologies, which make Białystok developments, production plants, office buildings consumers independent of solutions based on Toruń and shopping centers. The company pursues its fossil fuels, bring enormous, not only economic activities in various regions, with the major role benefits because they permit reduction of CO 2 Poznań played by the Warsaw-based distribution branch. emissions and combatting of smog. The market Warszawa Polenergia Dystrybucja is the largest non-public saturation with eco-friendly facilities will contribute distribution grid operator; only 4 Polish state-owned to raising the society’s awareness and might companies operate on a larger scale. It is also the indirectly accelerate legislation changes in relation Łódź second largest DSO in Warsaw, after innogy. to prosumer energy generation. Polenergia Dystrybucja manages 44 projects Polenergia Kogeneracja, another Polenergia Group Wrocław (areas) in total in whole Poland, and additionally 42 subsidiary, is a natural gas distributor focusing Kilece projects are at the development stage according on supplies for industrial plants through its own to the investment plan until 2023, approved by the distribution infrastructure. Currently, the Company Energy Regulatory Office. The plan provides that provides a gaseous fuel distribution service to an Katowice the Company will record a growth of the number industrial customer in Tomaszów Mazowiecki, Kraków of connected consumers from the current 15,000 to with the annual volume of distributed natural gas 77,000 in 2028. equivalent to approx. 350 GWh of energy.

Furthermore, the Company executes projects in the area of photovoltaics (electricity generation

40 41 Polenergia Obrót S.A.

Trade in energy and Trade in property rights from emission allowances renewable energy sources and guarantees of origin Polenergia Obrót is a company specializing in wholesale trade in electricity, gas, property rights, The company also trades in property rights from CO emission allowances and guarantees of origin. 2 certificates of origin, in both forward contracts and Since October 2013, the company has been an spot transactions. active direct member of the Polish Power Exchange, at the same time gradually increasing the number In 2015, Polenergia Obrót was the first company of trading partners on over-the-counter markets. in the Polish market to initiate transactions on In 2013, Polenergia Obrót entered the wholesale the market of guarantees of origin on behalf of electricity market in Germany, including inter- producers from the Polenergia Group, and has still system exchange transactions. Since December continued its activities in this field. 2013, it has been a direct member of the EPEX SPOT SE exchange, and since July 2018 also of the EEX exchange. Since March 2017, the Company has been Trade in gaseous fuels trading in electricity in the Czech Republic and Slovakia – on the OTE and OKTE exchanges. On 18 In 2014, the Company obtained a license for trade emission November 2016, it started trading in CO2 in gaseous fuels domestically and with foreign allowances on the ICE exchange in London counterparties. At the end of 2017, it started trading (through the brokerage of Marex Spectron). in natural gas on the ICE Endex.

42 43 Management of Group’s production portfolio and development plans

A significant area of Polenergia Obrót’s business Polenergia Obrót is a member of industry is undergoing a real revolution and the Company is the provision of comprehensive services to the organizations uniting energy market participants. finds it important that electricity consumers can Polenergia Group companies related to managing The company is a supporting member of the take advantage of it, at the same time consciously

its portfolio of electricity, property rights, CO2 Association of Energy Trading and a regular supporting renewable energy development emissions and guarantees of origin. member of the European Federation of Energy mechanisms. An example of such an event was the Traders (EFET). RE-Source Poland conference, which was held on Cooperation with related companies encompasses 4-5 February 2020. It was organized by the Polish the whole value chain, from generation (wind farms, Polenergia Obrót, as a highly specialized trading Wind Energy Association, while Polenergia Obrót cogeneration plant, power plant) to sales of energy company participating in wholesale energy became the industry partner. More information to end customers. The range of services provided by markets, constitutes a platform for Polenergia about the event: the company includes (without limitation): Group’s trading activity development.

o participation in the development of a trading One of the areas of interest of Polenergia Obrót strategy and hedging the portfolio, is territorial expansion within the key areas of expertise boasted by the Company. It intends to risk management, o seize the opportunities arising from the possibility o trade balancing. to sell electricity to end consumers and to aggregate energy from renewable sources. More information about the event: o wind farm generation forecasting. Polenergia Obrót also joins educational projects o services of a trading operator, a trading and addressed to its customers and enterprises. The resourcepoland.pl technical operator and a market operator. Company participates in thematic conferences to popularize the new solutions, e.g. cPPA The aforementioned services are offered also to contracts according to the EFET Standard, among entities that are not members of the Group. industrial energy consumers. The energy market

44 45 The energy market in Poland faces a significant change in the area of energy supplies to end customers. Large business entities may purchase energy directly from producers of energy from renewable sources at a lower price than the present market price already today. Long-term agreements on purchase of energy from renewable sources are a model that guarantees stability and predictability of costs to the consumers, and allows the investors to achieve the bankability of RES projects. In each case, the role played by the trading companies is essential; they are intermediaries in energy supplies by adjusting the characteristics of production to the structure of energy received by the end consumer.

Jarosław Bogacz Member of the Polenergia S.A. Management Board, President of the Polenergia Obrót S.A. Management Board

46 47 6. Environmental Offshore wind farms

The development of offshore wind farm projects industry development. The creation of offshore protection is also necessary, according to WindEurope, for wind farms entails the development of the power the achievement of EU climate neutrality by 2050. grid, which has been unreliable in Poland so far. – summary of activities The Baltic Sea potential in this regard has been This country is the runner-up in the EU in terms estimated at 83 GW, including 28 GW for the Polish of the system average interruption duration in area of this sea4. electricity supplies (SAIDI), determined in minutes in 2019: per consumer5. Offshore wind farms constitute also an investment in secure energy supplies and in energy that is not The special purpose vehicles executing the Bałtyk

burdened with costs of CO2 emissions. The high II Offshore Wind Farm and Bałtyk III Offshore electricity prices and the failure rate of the power Wind Farm projects have obtained permits for the system may constitute factors that decelerate the creation of artificial islands, connection conditions

4 windeurope.org/wp-content/uploads/files/about-wind/reports/WindEurope-Our-Energy-Our-Future.pdf.

5 www.mckinsey.com/pl/our-insights/polska-2030.

Polenergia has executed projects involving the construction of wind farms in the Baltic Sea since 2010. Such projects are the Group’s strategic investments, which will allow not only the Group alone but also the whole Polish economy to benefit from the development of this sector. The construction of wind farms with the total capacity of 6,000 MW in the Baltic Sea by 2030 may add extra PLN 60 billion to Poland’s GDP and create additional 77,000 jobs.

48 49 which authorize connection of the farms to the National Power System, and location permits for Partnerships and best the whole offshore route of the connection cable. practices Polenergia is the first and sole entity in Poland to obtain two final non-appealable decisions on environmental conditions for the construction of In 2019, the companies executing offshore wind offshore wind farms: Bałtyk II Offshore Wind Farm farm projects under a partnership became engaged (April 2017) and Bałtyk III Offshore Wind Farm (July in a range of activities, both related to the supply 2016). In 2019, the companies received the decision chain development for the purposes of these on environmental conditions for the construction of investments and to the knowledge and experience transmission infrastructure. The third project, Bałtyk sharing with the future staff: I Offshore Wind Farm, has a valid location permit and conditions for connection received from the transmission system operator. Construction of the supply In 2018, Polenergia established cooperation with Equinor for the purposes of a joint execution of chain for the new RES sector the Bałtyk II Offshore Wind Farm and Bałtyk III For the first time in the history of the Polish Offshore Wind Farm projects. The company signed offshore wind farm market, Polenergia and Equinor a cooperation agreement for the Bałtyk I Offshore organized the Supplier Day jointly with the Polish Wind Farm project execution in December 2019. Offshore Wind Energy Society. The meeting was The total capacity of the projects developed by the held on 9 May 2019 in Gdynia and it was addressed companies is 3,000 MW. to businesses interested in joint execution of offshore wind farm projects. For the purpose of Bałtyk II Offshore Wind Farm and Bałtyk III Offshore Wind Farm projects, a The event was attended by nearly 50 enterprises preliminary geological study of the seabed has representing various areas of production and already been executed and a two-year wind services for the sector: wind turbines and towers, measurement campaign has been carried out using steel structures, anti-corrosion screens, marine the LIDAR system. It confirmed that thanks to the cables and large transmission infrastructure, outstanding wind conditions in the Baltic Sea it specialist vessels for handling the offshore wind will be possible to use the energy effectively and power plant construction and maintenance to reduce the plant wear, which will make offshore processes, logistics and port facilities, design wind farms a stable renewable energy source. Their services, and many more. anticipated service life is 25-30 years.

50 51 This is the first such type of meeting with representatives of companies being part of the Polish supply chain for offshore wind farm projects. This is an excellent opportunity for establishing good relationships with potential local suppliers of components and services for our projects and for discussing the possibility of any future cooperation. The participation in development of a completely new branch of the energy industry in Poland is of enormous importance to us.

Vidar Birkeland Bałtyk II and Bałtyk III Project Director

It was very important for Polenergia and Equinor the potential suppliers that Equinor and Polenergia ASA, its Norwegian partner, to begin talks with acting jointly would like not only to build business Polish suppliers, learn about opportunities and relationships but above all to create a stable, socially establish relationships with enterprises that have responsible supply chain in the offshore wind farm a chance to become part of the supply chain and sector that is new in Poland. benefit from the intensive development of the new sector. An extremely significant aspect was showing

52 53 Education of staff that will make it possible to tap the potential of the Polish offshore wind farm market

Since November 2019 Polenergia and Equinor In addition, Equinor and Polenergia supported the have collaborated with the Gdańsk University of organization of the Baltic Energy Industry Forum in Technology (GUT) and the Polish Offshore Wind 2019. Energy Society in running university programs for the future offshore wind energy sector staff. Polenergia’s employees involved in the development of offshore projects became lecturers The following websites have been prepared for the of postgraduate studies in offshore wind energy projects: held at the Faculty of Ocean Engineering and Ship The websites www.mfwbaltyk1.pl, www.baltyk3.pl Technology of GUT. and www.baltyk2.pl present key project parameters, The Polenergia Group established cooperation with contain comprehensive non-technical summaries the Gdańsk University of Technology because the of the environmental reports and survey results, success of offshore wind energy in Poland relies on information on new activities and announcements appropriately educated and trained engineering (e.g. on public consultations). They can be used by and technical staff, who will fully secure the all stakeholders, including local communities and development opportunities of this sector. This enterprises interested in establishing cooperation in cooperation is an opportunity to acquire knowledge supply chain creation, to contact the Group. and learn best global practices in the field of offshore.

54 55 The construction site facilities are scheduled to be Preparatory works for the construction were Onshore wind farm project set up in Q1 2020, while the construction will be performed at the turn of 2020. The local community finished and the project taken over in May 2021. was informed about the project commencement. in Szymankowo A consultation point was launched near Miłoradz, Siemens Gamesa Renewable Energy will be where all materials concerning the project as well as the supplier of the turbines as well as the entity contact details of the site manager and the Group’s providing the farm technical support service The Szymankowo Wind Farm project is executed by On 5 November 2019, Polenergia signed the Environmental Protection Department were made for the period of 25 years of its commissioning. Polenergia Farma Wiatrowa Szymankowo Sp. z o.o., financing agreement and the construction available. a special purpose vehicle. The farm will be located contracts regarding the Szymankowo Wind Farm. Przedsiębiorstwo Budownictwa Drogowo- near Miłoradz in Malbork county in Pomorskie Bank financing at the amount of PLN 107 million Inżynieryjnego, being part of the ERBUD Group, will During coordination conferences, construction Voivodeship. has been acquired for the project implementation. be the construction work contractor. The estimated work contractors were familiarized with the The project is financed by a syndicate of banks annual electricity generated by the new wind environmental requirements for the project and The project will be composed of 11 Siemens SWT-2.3- composed of the European Bank for Reconstruction farm is nearly 120 GWh, which corresponds to the with the environmental supervision inspectors, who 108 wind turbines with the total capacity of 38 MW and Development, mBank and ING Bank Śląski. annual demand of 60,000 households. The project will monitor the earthworks in accordance with and auxiliary infrastructure. execution will result in avoiding the emissions of up the Group’s practice. The companies with which

to 104,000 tons of CO2, 98,000 of SO2, 99 tons of NOx, Polenergia cooperates undertook to comply with its 35 tons of CO and 6 tons of particulate matter. After ethical standards6. the commissioning of the project, the total capacity The work commencement will involve also the of Polenergia’s onshore wind farms will increase by Szymankowo preparation of a plan of use of roads for transporting 15%. construction materials and turbines themselves. The Szymankowo Wind Farm is an exceptional The plan will be available to all residents of the project for the Polenergia Group. After the nearby towns and villages and will be consulted construction of the Mycielin Wind Farm, which with local authorities. Group’s partners will received the operational permit in February 2016, appoint contact persons, who will receive any Polenergia did not execute successive projects due comments and answer any questions regarding the to the unfavorable regulatory environment. construction and work organization.

It must be underlined that this will be the first wind farm in Poland the decision to construct which did not depend on obtaining support - as part of the auctioning system or long-term electricity offtake agreements. Its construction shows that “green energy” is not expensive.

6 polenergia.pl/pol/pl/strona/%5Btitle-raw%5D-103.

56 57 The Polenergia Group finds it imperative that Protected sites near Szymankowo the local communities are informed and the Wind Farm environmental impact is minimized at each stage of the project implementation. The closest protected sites are the Natura 2000 Special Protection Area “Lower Vistula Valley” (ca. 3.3 Information about the project is presented in local km west of the planned wind turbines), Special Area press (among others “Dziennik Bałtycki”, “Nasze of Conservation “Lower Vistula” (ca. 3.3 km west) Miasto. Malbork”7 and “Wieści Gminne” presenting and Central Żuławy Protected Landscape Area (ca. the news from Miłoradz commune). 3.3 km west); the farm will not have a significant environmental impact on none of them. None of Best practices as part of CSR strategy the wind turbines is located in a protected area, e.g. within the Natura 2000 network. An example of Polenergia’s support for initiatives for popularization of regional history and traditions is the financial aid for the publication of a book about Kończewice village in Miłoradz commune by a local association.

Onshore wind farm projects in development

In 2019, as many as 3 Polenergia’s projects won the auction organized by the Energy Regulatory Office. Projects with the total capacity of 186 MW, +74% which participated in the December auction for large onshore wind power plants, will receive support for fifteen years. They will give Polenergia an opportunity to increase the installed capacity of its projects of this type from the present 250 MW to 250 MW 436 MW 436 MW. This growth will reach 74%.

7 malbork.naszemiasto.pl/w-gm-miloradz-powstanie-farma-wiatrowa-szymankowo-prad-ma/ar/c3-7527691.

58 59 The aforementioned projects are: New projects put into operation in 2019: Kostomłoty Dębsk Wind Farm Wind Farm Sulechów PV with the total capacity of 121 MW, to be constructed in Mazowieckie Voivodeship, will be located near Kostomłoty in First photovoltaic projects of Polenergia Group while the estimated annual energy production is near Żuromin and Kuczbork-Osada. It Dolnośląskie Voivodeship. It will be were put into operation in Q4 2019. The Sulechów ca. 8,200 MWh, which corresponds to the energy will be composed of 55 turbines and the composed of 9 turbines with the total PV project is composed of 8 photovoltaic farms consumption by ca. 4,000 buildings. The farm’s annual electricity production will be ca. capacity of 27 MW and the estimated with the capacity of 1 MWp each. The facilities are operation will permit also avoiding the emission of annual energy production will be ca. 82 346 GWh. located in Kruszyna near Sulechów in Zielona Góra ca. 8 million tons of CO2 annually. The service life of GWh. county. The total investment area is ca. 16.5 ha, the plant is estimated at ca. 25 years.

Szymankowo Wind Farm Sulechów

will be constructed near Lichnowy in Pomorskie Voivodeship. The planned capacity of the plant is 38 MW and the annual energy production – 120 GWh.

60 61 From the environmental protection point of view, The implementation of the aforementioned Best practices it is also important that the panels used in the and successive photovoltaic projects will allow

farm are covered by the PV Cycle certificate. This production of clean energy, without CO2 emissions During the construction of Sulechów PV farm, means that each used up or damaged panel will contributing to climate changes. It will also enable works related to the development of area that was be recycled in 100% (silicon, glass, aluminum). Solar the increase in the volume of electricity generated not covered by the panels were performed. The and electric lines as well as the other infrastructure by photovoltaic farms, which will increase the structures composed of PV panels occupy more (inverters, LV/MV substations) will also be recycled. energy security of Poland (photovoltaic energy is or less a half of the whole area (ca. 16 ha) intended generated in the period of the highest grid power 1/3 of the food production volume is attributable for the undertaking, while the other part remains to bees and their work. Without them, numerous consumption, i.e. during the day) and flatten undeveloped for process reasons. The Company plant species could not develop or their crops would the power curve. Therefore, the development of produce low yields. According to the United Nations decided to establish bee yards on the farm site. Food and Agriculture Organisation (FAO), 100 arable photovoltaic farms is a very important direction of crop species provide ca. 90% of food worldwide; as renewable energy generation development and The undeveloped areas will be “returned” to the many as 71 of them must be pollinated by members nature: honey producing flower meadows will be of the bee family. We owe as many as 4,000 varieties fits in the Group’s new CSR strategy for the period of vegetables to these insects. Thus, the Sulechów 2019-2022. created there to serve pollinators, in particular PV site is a perfect place to help the animals on honey bees. The effect will be increased biodiversity which our lives depend. of the monocultures of crops surrounding the project site, and the farm will be home to beautiful colorful flowers blossoming over the whole vegetation period.

Due to the growing area of agricultural The transport and installation of ten beehives with monocultures, the intensive use of chemicals and bee colonies and the sowing of flower meadows are climate changes, the populations of pollinators scheduled in spring 2020. are dwindling rapidly; mass extinction of bees has been observed since the 1960s. Also changes in The Polenergia Group hopes that the above best the spatial structure of villages and towns are a practice will contribute to the development of significant factor in this context. The liquidation similar measures in other PV farms that are created of idle lands, balks, blossoming meadows and in Poland. The coming years are likely to see a very home gardens is the reason why bees experience intensive development of such plants, which means food (pollen and nectar) shortage. There are also that photovoltaic energy may drive a considerable too few shelters and spaces for solitary bees and increase in biodiversity. bumblebees to build nests or lay eggs.

62 63 Projects in operation

Polenergia Nowa Sarzyna proper course of the system restoration process Cogeneration Plant (NSCP) after a complete or partial loss of voltage. The most crucial element of this process is the NSCP’s supply of power necessary to start up the power unit in the NSCP is located near Nowa Sarzyna in the north- selected system power plant. eastern part of Podkarpackie Voivodeship. The facility operates in an industrial area, in the NSCP is Poland’s first thermal power plant whose immediate vicinity of a chemical plant of CIECH generating units are capable of self-start-up Sarzyna S.A. (CIECH Group). and may be used in the process of recovery of the National Power System. Before NSCP, only Since its inception, the Company has been putting hydroelectric power plants had this technical particular emphasis on acting in compliance with capability. In 2019, NSCP and PSE signed another, the applicable laws and all relevant environmental three-year, self-start-up service agreement, which regulations and best practices. Authorized will enter into force on 1 July 2020. institutions have for a number of years expressed a very good opinion about NSCP’s actions and In 2019, NSCP obtained a certificate of a Capacity approach to the inspected aspects. The raising of Market participant and contracted a capacity employees’ awareness and the use of procedures obligation for 2024. requiring NSCP contractors to observe stringent Since 2014, NSCP has had in place an ISO 14001 environmental standards are a matter of particular Environmental Management System in the appreciation. In 2019, no fines were imposed on field of electricity and heat cogeneration. In July the Company for any breaches of environmental 2019, Lloyd’s Register LRQA carried out an audit protection regulations. regarding the compliance of NSCP’s environmental In 2019, Polenergia Elektrociepłownia Nowa management system with ISO 14001:2015. It Sarzyna Sp. z o.o. (NSCP) provided a service of confirmed that the system met the requirements recovery of the National Power System under a of the above standard and was recommended 4-year contract signed in 2016 with Polskie Sieci for approval in the field of electricity and heat Elektroenergetyczne S.A. The service included the cogeneration. self-start-up of gas turbine generator sets and their In 2011, by decision of the Voivodeship Commandant operation in a spun-off portion of the National of the State Fire Service, NSCP was entered in the Power System to the extent necessary for the

64 65 list of facilities located in Nowa Sarzyna commune those fired with coal. NSCP does not generate any the operation of which involves a high or elevated sludge waste, its greenhouse gas emissions are risk of a major industrial failure. The list also includes lower by almost 50%, its NO emissions are approx. x Prizes and rankings the chemical plants of CIECH Sarzyna S.A. and seven times lower, and it emits trace quantities of

Silikony Polskie Sp. z o.o. SO2 and particulate matter. The applied technology limits the quantity and aggressiveness of industrial The applied technologies and the quantities wastewater, while the recycling of rainwater of fuels and commodities consumed as well as and condensate and the use of condensate the efficiency, availability and reliability of the from the heating systems translates into a lower plants minimize the adverse impact of NSCP on consumption of raw water. the natural environment, including the climate, In November 2019, NSCP received the compared to facilities of a similar capacity, e.g. In September 2019, NSCP was awarded “Fair Play Enterprise 2019” Business a distinction by the “Wprost” weekly: Quality Certificate. What is more, “Wprost” Eagle Diploma of Podkarpackie the President of the Company, Jacek In 2019, NSCP obtained the following Voivodeship. Głowacki, was awarded the title of 8 decisions on environmental conditions: Business Fair Play Ambassador 2019 .

Water rights permit Decision approving for discharge of the Plan of industrial wastewater Integrated permit – methodology of to sewerage facilities consolidated text monitoring covering owned by CIECH 4th stage of EU ETS Sarzyna S.A. NSCP introduced measures for minimization of the adverse environmental impact in 2019, consisting in gradual abandoning of the use of plastic packaging. Plastic mineral water bottles were replaced with glass bottles while plastic disposable water cups and plastic bags - with paper cups and bags. NSCP encourages its employees to use the resources (paper, water, energy) reasonably.

In 2019, a major inspection of GT12 and a major In December 2019, the State Fire Service carried out inspection of the steam turbine was carried out an inspection at NSCP regarding the compliance and planned overhauls of auxiliary equipment were with fire regulations and safety requirements in a performed. Moreover, new systems were upgraded facility with an elevated risk of a major industrial and/or installed (replacement of DCS, steam turbine failure. body heating, replacement of 125 V batteries). 8 More information about this award is provided on the Fair Play Enterprise Program website: przedsiebiorstwo.fairplay.pl/laureaci-przedsiebiorstwo-fairplay2019.html.

66 67 Mercury Power Plant

Commissioned in 2006, it is located on the site In accordance with the requirements of the of the former Victoria Cogeneration Plant in emission permit, measurements are carried out at Wałbrzych. The Mercury Power Plant is fired with the Mercury Power Plant (total particulate matter,

waste coke-oven gas obtained from Wałbrzyskie NO2, SO2) and reports are prepared on the use of Zakłady Koksownicze “Victoria” S.A. the environment based on which environmental

fees are paid by the plant. A report on CO2 The facility operates within the framework of the EU emissions is prepared and verified by an external Emissions Trading System (EU ETS), currently of its accredited auditor and relevant annual reports third stage (2013-2020). It has in place an approved are added to the National Base of KOBIZE. Waste and updated plan for monitoring CO emissions and 2 records are kept and annual reports in this area are a valid permit for releasing gases and particulate submitted to the Marshal’s Office of Dolnośląskie matter into the air. In 2019, the facility was not Voivodeship. Moreover, information is reported on audited by the Inspectorate for Environmental products containing asbestos, in compliance with Protection. Nor were there any fines imposed on the Regulation of the Minister of Economy of 13 the plant for failure to comply with its reporting December 2010 on the requirements for the use duties pertaining to environmental protection, of products containing asbestos and the use and including reporting to the National Centre for cleaning of installations or equipment in which Emissions Management (KOBIZE). asbestos-containing products have been used or are currently used.

68 69 They focus on familiarizing firefighters with the Wind farms rules of contact at a wind farm, the OSH rules, in operation as well as the functioning and operation of wind turbines. Moreover, techniques and climbing equipment used by staff in emergency situations, when it is necessary to perform quick evacuation, Puck Wind Farm are presented. The scenario of practical exercises involves an evacuation of people from the gondola

(Dipol Sp. z o.o.) is located near Gnieżdżewo in the to the ground using various climbing techniques.

Pomorskie Voivodeship. It was commissioned in The exercises cover also practical verification of 2007. From the commencement of operation to the degree of preparation of the facility for rescue 2012, ornithological and chiropterological studies and firefighting activities and development of were carried out and acoustic measurements were firefighting tactics on electrical installations in a 2 taken. Annual reports on the studies are posted on MW wind farm”. The training is aimed at verifying 8 the Polenergia Group’s website . the procedures of conduct in the event of a fire,

In 2019, no fines were imposed on the company and alarm and evacuation, inspecting the organization no inspection was carried out at its facility. of the communication system and extinguishing stations, as well as exercising evacuation of injured As required by the Act on Waste, the Puck Wind persons from heights and on-site assistance. Farm was registered in the BDO (Waste Database) system. Polenergia Group companies are always willing to assist the organizers of this type of training No new protected areas were created in close events. Cooperation with the State Fire Service proximity to the wind farm that might be affected and other services that watch our safety is a very by its operation. important element in the pursuit of their strategy to ensure safety in the workplace. Polenergia’s goal Best practices: is to increase employee awareness and make our staff realize that we all share the responsibility for Since 2017, training exercises of firefighters from the occupational safety and health. The company would “Gdynia” Work-At-Height Rescue Service are held also like to share its experience with subcontractors every year within the Puck Wind Farm premises. and business partners. These exercises were organized for the third time at the Farm in 2019.

8 www.polenergia.pl/pol/pl/strona/puck.

70 71 Modlikowice Wind Farm and Łukaszów Wind Farm

Number of offspring:

Łukaszów Wind Farm (Amon Sp. z o.o.) and Best practices: 2014: 6 Modlikowice Wind Farm (Talia Sp. z o.o.) obtained co-funding from the Operational Programme In 2014, when ornithologists observing birds as part Infrastructure and Environment, Measure 9.4, of post-construction monitoring found nests of the 2015: 3 Generation of energy from renewable sources. Montagu’s harrier on the wind farms, Polenergia launched an active protection program of this rare These wind farms have been in operation since 2012. 2016: 4 species from the Accipitridae family. As part of the In 2019, no fines were imposed on Amon and Talia protection measures taken in 2019, the work system and no inspection was carried out at their facilities. adopted for this area was maintained. Fences were 2017: 6 put up around the nests to prevent agricultural As required by the Act on Waste, Modlikowice and vehicles from harming them during the harvest Łukaszów Wind Farms were registered in the BDO 2018: 9 period and other agronomic processes. In addition, (Waste Database) system. the birds were provided with protection against No new protected areas were created in close predators by surrounding the area with a certified 2019: 17 proximity to the wind farms in 2019 that might be fragrance repellent, completely safe for humans, affected by their operation. animals and the environment. Observations have proven that young harriers from successive broods Total: (in 2014-2019) left the nest safely. 45 offspring

72 73 These practices are aimed at protecting Montagu’s management system. Information on the project the number of breeding bird species since harriers at an early stage of life to considerably Rajgród Wind Farm was made available on the Polenergia Group’s the moment of its construction has remained at increase the chances that the population of website and at the Town Hall in Rajgród, where also a similar level. Mortality with a body disappearance this species will grow. By taking these actions, Rajgród Wind Farm (Polenergia Farma Wiatrowa 6 the results of acoustic tests and the results of post- rate experiment is 1.28 organisms/MW/year. The Polenergia joined the efforts intended to ensure Sp. z o.o.) was commissioned in 2014. It is located in construction monitoring of the impact on birds and local communities (consultation point at the active protection of this bird in Poland, supported Rajgród commune of Grajewo county in Podlaskie bats were delivered. commune hall) and the Regional Directorate for by the patronage of the Ministry of Climate and the Voivodeship. Environmental Protection were informed about No environmental fines were imposed on General Directorate for Environmental Protection. every year of the studies and about their results. the Rajgród Wind Farm in 2019. Moreover, no The farm comprises 11 Siemens SWT-2.3-108 wind The latest annual monitoring cycle took place in Leg-banded individuals could be found in other inspection was carried out there by the Voivodeship turbines with auxiliary infrastructure. 2018; the studies again did not prove an increase countries. A bird from the 2014 brood built a nest in Inspectorate for Environmental Protection. in the mortality rate. In 2019, the final reports Germany, while the last-year nestling was located In January 2015, a post-construction ornithological No new protected areas were created in close on the studies were submitted for examination in the Czech Republic near Brno. Fencing off nests and chiropterological study was commenced on the proximity to the Rajgród Wind Farm in 2019 that and approval to the Regional Directorate for found in high cereals is the only chance to save the farm site and continued in 2016. The observations might be affected by its operation. Environmental Protection. In July 2019, the Director harriers. By such actions the Polenergia Group takes did not reveal any negative impact of the facility on of the Regional Directorate for Environmental care for the biodiversity at its wind farm sites. raptorial birds or white stork offspring leaving their Protection in Bydgoszcz approved the received nests. There was also no elevated mortality among documents and found no significant adverse The company intends to extend the protection of birds or bats. In 2017, the Regional Directorate for impact of the project on birds and bats and stated the Montagu’s harrier to its other wind farms in Environmental Protection in Białystok (Department Gawłowice Wind Farm the compliance with the conditions specified in operation, provided that ornithological monitoring of Land Matters in Łomża), having examined the the decision on environmental conditions and the is performed there and discovers any nests of this report for 2016, did not present any remarks on the guidelines. species. The aforementioned species does not come proposed solutions regarding the monitoring in Gawłowice Wind Farm (Polenergia Farma Wiatrowa into conflict with operating turbines: ornithologists the subsequent years. In 2018, the last cycle of the 1 Sp. z o.o.) is located near Radzyń Chełmiński No environmental fines were imposed on the have never observed dead individuals under them. study on the farm’s impact on bats and birds was of Grudziądz county in Kujawsko-Pomorskie company operating the Gawłowice Wind Farm in carried out. The study did not show an elevated Voivodeship. The first stage of the project was 2019. Nor were there any inspections carried out in level of mortality in these groups of animals. commissioned in 2014 and the next one in the the facility in this period. The final report, containing a summary of the following year. 3-year monitoring exercise, was presented to the A complaint filing procedure has been Ornithological and chiropterological studies environmental protection authorities in 2019. In implemented by the company as part of the facility were carried out in 2015, 2016 and 2018 after the June, the Regional Directorate for Environmental management system. Information on the project is construction of the turbines. The reports on each Protection in Białystok approved the post- available on the Polenergia Group’s website and at study were submitted to the competent authorities construction analysis. the Town and Commune Hall in Radzyń Chełmiński. after collecting and analyzing the data. The A complaint filing mechanism has been monitoring reveals that the wind farm does not No new protected areas were created in close implemented by the company as part of the facility exert any unfavorable impact on birds or bats, the proximity to the Gawłowice Wind Farm in 2019 that breeding avifauna in its area is medium-sized and might be affected by its operation.

74 75 Skurpie Wind Farm Mycielin Wind Farm

Skurpie Wind Farm (Polenergia Farma Wiatrowa Mycielin Wind Farm (Polenergia Farma Wiatrowa 4 Sp. z o.o.) was built near Płośnica of Działdowo Mycielin Sp. z o.o.) was built in 2015 and obtained an county in Warmińsko-Mazurskie Voivodeship. It was operational permit in February 2016. The facility is put into operation in Q3 and Q4 2015 in two stages. located near Mycielin, Gościelin, Gościeszowice, Długie, Dzikowice and Sucha Dolna, in Niegosławice and In 2016 and 2017, the impact of the investment Szprotawa communes of Żagań county in Lubuskie project on birds and bats was monitored on an Voivodeship. ongoing basis. According to the contents of the decision on environmental conditions, the results In 2016, ornithological and chiropterological studies of the studies are submitted to the competent were commenced in accordance with the scope of authorities (the Commune Hall and the Regional post-construction monitoring project agreed on with Directorate for Environmental Protection) after the Regional Directorate for Environmental Protection each half-year of the study. No adverse project in Gorzów Wielkopolski. The annual monitoring impact on birds and bats has been shown. 2019 report was submitted to the Regional Directorate saw another cycle of studies and a summary of the for Environmental Protection in 2017. The authority 3-year ornithological survey. The final report will be did not comment on the applied methodology and submitted to the administration authorities and method of the monitoring but while approving the shared with the local community at an information results from the first year of the study it emphasized point following the finish of the studies and the that the observed mortality levels for raptorial preparation of the analysis, i.e. by the end of Q1 2020. birds and all avifauna were relatively low, far from the threshold values determined on the basis of In 2019, no environmental fines were imposed on the pre-construction monitoring. Another cycle of the company operating the Skurpie Wind Farm and no study began in April 2018 and lasted until the end inspection was carried out at the facility. of March 2019. On 24 July 2019, the Director of the A complaint filing procedure has been implemented Regional Directorate for Environmental Protection by the company as part of the facility management in Gorzów Wielkopolski approved the submitted system. Information on the project is available on the monitoring reports by finding their compliance with Polenergia Group’s website and at the Commune the requirements of the decision on environmental Hall in Płośnica. conditions and indicating that it was not necessary to carry out additional minimization measures. The last, No new protected areas were created in close third, year of the survey will commence in April 2020 proximity to the Skurpie Wind Farm in 2019 that and be finished in 2021, thus encompassing the whole might be affected by its operation. phenological cycle.

76 77 Best practices: not been re-occupied. Inspections at the wind farm did not prove any cases of conflict between A complaint filing procedure has been the representatives of the aforementioned species implemented by the company as part of the facility from the beginning of the monitoring (April 2019). management system. Information on the project is Observations of the red kite will be repeated in the available on the Polenergia Group’s website and at last survey season (2020/2021). the Niegosławice Commune Hall and the Szprotawa When examining the real impact of its investment Commune Hall. projects, the Polenergia Group aims also to observe In 2019, Polenergia decided to support the Great particularly rare species that appear on its sites. Orchestra of Christmas Charity by auctioning the No environmental fines were imposed on the possibility of entering a wind turbine at the Mycielin Mycielin Wind Farm in 2019. No new protected areas Wind Farm. This visit took place in August, and were created in close proximity to the project that visitors had the opportunity to visit Mycielin Wind might be affected by its operation. Farm and see how this type of installation works. Due to the great interest in last year's auction, in 2020 we again put this initiative to the GOCC Acquisition of biomass auction. This year, we also expect guests who will be able to enjoy the view from our highest turbines (turbine height at Mycielin Wind Farm is 125 m). In 2012, the Polenergia Group introduced a Biomass This initiative is all the more valuable to us because acquisition policy (available on www.polenergia. we can support the Great Orchestra of Christmas pl) and relevant procedures. Their purpose is to Charity and join in its beneficial activities. ensure that the supply of biomass to the Group’s facilities is not onerous for the environment or for the communities through which this raw material is transported, and to prevent its acquisition in breach of the best practices and the law. The supply Protection of biodiversity procedures take into account inspection instruments applicable to the sources and method of biomass Bearing in mind the results of the ornithological acquisition and to its transportation. survey completed in the 2018/2019 season, which indicated the nesting of the red kite within ca. By making efforts to minimize its environmental 450 m from the turbine (EW22), an additional impact, Polenergia provides its pellet customers with analysis module was introduced to the post- end product created from biomass acquired in a construction monitoring. It was found in 2019 that sustainable manner. the nest discovered in the 2018/2019 season had

78 79 Initiatives pursued for the benefit and development 7. of local communities are extremely important to Social the Group. The cooperation with the inhabitants is based on continuous dialog and mutual engagement. Such initiatives are pursued mainly engagement by the Group’s project-specific companies, e.g. in the areas of development, construction, and and local community operation. In its everyday activities, the Group focuses its attention on communities that live in the development vicinity of its projects and, above all, on their needs. A particular emphasis is placed on establishing partnership relations and providing assistance. – Polenergia as The ongoing cooperation and commitment are intended to maintain good relations and improve a good neighbor the quality of everyday life for local communities. Among the various initiatives supported by the Group are educational, cultural, artistic, recreational and sports endeavors. Aid is provided also in order to counteract various dimensions of social exclusion and support the execution of infrastructural projects.

Examples of the Group’s initiatives:

Actions taken by Dipol Sp. z o.o. (Puck Wind Farm), The Polenergia Group is engaged in social and environmental which for a number of years has been supporting the organization of the folklore festival “Gnieżdżewo initiatives predominantly through its special purpose vehicles. Boors’ Mischiefs”. All wind farms in operation provide co-funding for the organization of harvest festivals, carnival celebrations and Christmas events for children from schools and day-care centers located in the vicinity of the Group’s projects, and participate in the renovation of such facilities.

80 81 NSCP supports a number of sports clubs, cultural Sports in Leżajsk sponsored by NSCP have also In 2019, companies from Nowa Sarzyna commune centers, and specific non-recurring initiatives achieved spectacular successes at competitions continued their cooperation for the benefit of the that are important for its local community, home and abroad. local community. For instance, in cooperation with which translates into excellent relations with the Town and Commune Hall, they financed the In its efforts to help local communities, Polenergia local residents who also happen to be the organization of the 1st Polish Cyclo-Cross Cup the does not act alone but has been cooperating with Plant’s customers and employees. The company main organizer of which was the Cycling Sports other companies in the region for a number of provides funding e.g. for initiatives organized by Club “Azalia” in Brzóza Królewska. years. Since 2013, the Nowa Sarzyna Cogeneration the Municipal Cultural Center in Leżajsk (organ Plant, in collaboration with the Municipal concerts, periodic events entitled “Curious of Management Company and CIECH Sarzyna, has the world. Leżajsk Travel Festival”), the Municipal been charging uniform heat prices to the less and Company Sports Club Unia Nowa Sarzyna, fortunate residents of the Emergency Assistance the Pedagogical and Psychological Clinic in Housing Estate in Nowa Sarzyna. Furthermore, Leżajsk, the Leżajsk Region Museum, the Special NSCP has granted a discount for heat prices to the Educational Center in Leżajsk, the Social and less fortunate residents every year since 2014. Cultural Association “Leliwa” in Leżajsk, the Musical School in Leżajsk, the Association of Borderland Inhabitants, the Cycling Sports Club “Azalia” in Brzóza Królewska, a well as schools and preschools in Leżajsk and Nowa Sarzyna communes. NSCP joined the environmental initiative entitled “Green Commune 2019” of the Town and Commune Hall in Nowa Sarzyna and was a sponsor of the awards. Additionally, it provided funding for the renovation of the volunteer fire department station in Nowa Sarzyna.

In 2019, the Company continued to sponsor sports clubs and robotics classes for students of the Franciszek Leja Memorial Schools in Grodzisk Górny. The GG team from Grodzisk Górny can boast impressive achievements in robotics competitions home and abroad. It also took part in a discussion panel at the Economic Forum of Young Leaders, which was held in Krynica in September 2019. Young athletes of the Center for Martial Arts and

82 83 The Company is obliged to comply with the process is taken care of by the risk management 8. corporate governance principles laid down in team which has been established to monitor risks Corporate the document “Best Practices of WSE Listed and update the list of key risks on an ongoing Companies 2016”. The risk management policy and basis. The Supervisory Board’s Audit Committee internal control system adopted by the Polenergia oversees the proper compliance with the described governance Group as well as the procedures regulating the principles. enterprise operating processes and principles Regardless of the corporate governance principles, enable management of various risks related to the the Group has adopted the Code of Ethics and has achievement of its business objectives. The risks established the Ethics Committee whose tasks related to the Group’s business are reviewed on a include examination of requests submitted by regular basis. As a result of these efforts, a register employees. Additionally, there is a whistleblowing that classifies risks in terms of their significance and system in place. need for monitoring has been created. The whole

The main tools of the Group’s information policy include:

the Company’s website with readable sections: Investor Relations (it presents financial results and is dedicated a separate section regular/quarterly to investors and on the Company’s presentations of the analysts) and News current and periodic website dedicated Group’s financial (it describes the most reports to sustainable results for investors important market development Polenergia S.A., a company listed on the Warsaw Stock and analysts and operational events concerning Exchange, satisfies all requirements in the areas of corporate the Group), which presents the governance, financial and non-financial reporting, as well as enterprise’s assets, publishes quotations dialog with stakeholders. of its shares, etc.

84 85 GENERAL SHAREHOLDERS’ MEETING SUPERVISORY BOARD MANAGEMENT BOARD

GROUP DEVELOPMENT DIVISION

CLEAN FUEL AND ENVIRONMENT DIVISION

RES GENERATION AND DISTRIBUTION DIVISION

TRADING AND SALES DIVISION

FINANCE AND INVESTOR RELATIONS DIVISION

LEGAL AND ADMINISTRATION DIVISION

86 87 The Polenergia Group companies are active members of many organizations. The Polenergia Group engages also in These are: initiatives for sustainable development:

o Polish Association of Listed Companies o Polish Power Plants Business Association – – representing companies listed on the bringing together entities operating in the o in 2017, it adopted the UN Global Compact Warsaw Stock Exchange, serving them with field of electricity generation. Its member is Ethics Program Standard, i.e. business self- its knowledge of and advice on stock market Polenergia Nowa Sarzyna Cogeneration Plant. regulation based on the UN Guiding Principles regulations. on Business and Human Rights; o European Federation of Energy Traders – o Polish Wind Energy Association – supporting created to improve the quality of energy o since 2017, it has participated in the Partnership and promoting the development of the wind trade in Europe and to promote sustainable for the Achievement of the Sustainable power sector to create favorable conditions for development and a common European energy Development Goals “Together for the investing in this sector of the economy. market. Polenergia Obrót is an EFET member. Environment” established by the UNEP/GRID- Warsaw Center; o Association of Energy Trading – undertaking o Polish-Chinese Business Council – uniting activities for the development of a competitive experts and businesses operating on the Polish o On 31 July 2019, it joined the group of signatories energy market in Poland, developing ethical and Chinese markets. Its objective is to promote of the Charter of Diversity, which is coordinated standards in energy and fuel trade, and investment and mutual trade between Poland by the Responsible Business Forum, a European representing the sector vis-à-vis administration and China. Commission’s initiative for popularizing the institutions and other associations. The policy of equal treatment and management of Polenergia Group is represented in the diversity in the workplace. Association of Energy Trading by Polenergia Obrót.

In addition:

o Polenergia Obrót is a member of the o Polenergia Nowa Sarzyna Cogeneration Plant commodity market managed by the Polish and the Mercury Power Plant operate the Power Exchange. The basic areas in which the facilities covered by the EU Emission Trading exchange operates is trading in commodities Scheme (ETS). and maintaining the Certificate of Origin Register.

88 89 9. Dialog

Polenergia understands and respects the values with the ISO 18001 procedures, it strives for the total with stakeholders cherished by all its stakeholders and therefore it elimination of severe accidents and occupational wishes to build confidence in the Company through diseases. Moreover, it organized periodic training in dialog, which is necessary for maintaining good first aid for employees. Employees and collaborators interpersonal and business relationships. are provided with the suitable conditions for expanding their knowledge and skills. The Group By its adoption of the Corporate Social focuses on increasing women’s professional Responsibility Strategy of the Polenergia Group qualifications and reducing the pay gap between for 2019-2022, the Company identified the most men and women holding analogous positions. The important groups of stakeholders, 4 key areas of Company considers ensuring all employees and business, 15 goals, and 32 targets to be achieved. collaborators equal opportunities and preventing The contracts concluded with the main business discrimination and mobbing an essential value. partners of the Group include clauses on ethics and Through dialog, the Polenergia Group creates and environment, which is evidence of the emphasis enhances good relationships with customers, local placed by the Company on ethical business. governments, and local communities, in particular Polenergia is open to dialog with stakeholders on in the areas of its activity. Local communities receive environmental protection. The Group’s operation support from the Company, e.g. in the form of influences the country’s energy security and charity actions. reduction of greenhouse gas emissions, which The Group’s shareholders, central administration is possible as a result of offering energy from (ministries and their units) as well as regional renewable sources. The Group continuously and local institutions (e.g. Regional Water minimizes its environmental impact, e.g. by Management Authorities, Regional State Forest monitoring the effect of new projects on the Polenergia understands and respects the values cherished by Directorates, government inspectorates, town and surroundings. commune halls) are also marked on the map of its all its stakeholders and therefore it wishes to build confidence Employees and collaborators are among the groups stakeholders. in the Company through dialog, which is necessary for of stakeholders that are crucial for the Polenergia The Polenergia Group pursues its activity in a maintaining good interpersonal and business relationships. Group. The Company makes efforts to ensure responsible manner and develops in an innovative their safety and supports them in the constant and sustainable manner. development of their competences. In accordance

90 91 Best practices:

The social engagement of the Company’s business cooperation with its major business partners, the partners and their care for the natural environment Company remembers to enter into the Agreement are its priorities when creating the supply chain. on Ethical Standards Applicable in the Polenergia Cooperation with such entities helps the Group Group. implement and promote the essentials of social responsibility. That is why, when establishing

The Company also endeavors, in cooperation with external partners, to communicate its commitment to the development of the renewable energy sector and the Polish economy:

in 2019, we presented our strategy of building in 2020, we presented a sustainable supply our actions in chain in times of cooperation with the climate crisis in Investment Reports10 the United Nations Global Compact publication9

9 ungc.org.pl/wp-content/uploads/2019/12/Klimat_a_Prawa_Człowieka_www.pdf.

10 www.investmentreports.co/article/interview-michal-michalski-ceo-polenergia-113/.

92 93 10. Polenergia Organization of office work

Polenergia takes care to ensure that the office as an employer is a friendly place for both our employees and our business partners or counterparties who visit its premises. In connection with the Group’s development, its office space will be altered in 2020 with a view to an even better functionality.

We provide our employees with a broad medical package and an option to have all their family Through its cooperation with the Kulczyk members covered by it as well. They receive also Foundation, the Group employees have the fringe benefits in the form of sports packages opportunity to use tickets for selected events at the comprising a broad range of activities, which is a Grand Theater in Warsaw, which contributes to their manifestation of the Group’s care for the fitness, integration as a result of spending time together recreation, and health of its staff. outside the office.

Dialog

Polenergia employs nearly 200 persons in all its companies. The Management Board of the Polenergia Group Company’s life, Management Board Members cares about employees: well-being of team organize special meetings to provide the staff with In the coming years, the Polenergia Group will pursue actions members in the workplace and also friendly the key information about the Group and its plans in the area of diversity and inclusion, which result from its CSR relations between employees, which translates for the following years. Other opportunities to meet Strategy, and promote the diversity of its team. into a good atmosphere at work on a daily basis. with employees are Christmas, New Year (to wrap The Management Board endeavors to be close up the Group’s annual performance), and Easter. to employees: listen to their needs, requests and There is internal communication in the form of opinions. At times of significant events in the newsletters in the Group.

94 95 Code of Ethics

The Polenergia Group respects employee rights held in the Company. A review and verification of and does not tolerate any form of discrimination, the Ethics Committee Regulations were carried out e.g. based on sex, skin color, religion, membership at the turn of 2020. The new Regulations reinforcing of a national minority, or political views, and it the role of the Ethics Committee was adopted counteracts mobbing. in Q1 2020. The Committee is not a control body serving only the purposes of internal procedures In 2019, the Ethics Committee of the Polenergia and irregularity examination: it also cooperates with Group did not receive any notification of an abuse all business partners of the Group and ensures that or unethical behavior. The Group employees its ethical values are observed in the entire supply comply with the fair competition rules described chain. in the Code. No cases were discovered of any gains resulting from the insider information or positions

Environmental protection

Polenergia attaches great importance to increasing The Group makes all efforts to always act as a the awareness of environmental protection issues socially sensitive entity whose operations contribute among its employees. In the Group Companies, to both its own and the public well-being. In order waste is separated, the number of printouts is to support local communities, it has established minimized, and plastic packaging is replaced. cooperation with beekeepers who live in the towns In 2016, an electronic document flow system and villages where its facilities are in operation. For was rolled out, which not only saves employees’ three years, Polenergia has been placing regular time but also reduces paper consumption to a orders for honey, which its employees consume in considerable extent. The new functions that are the office, especially in winter. By doing this, the implemented to the system improve the printed Company supports local beekeepers and has the material consumption indicators every year. certainty that it purchases an original and natural product.

96 97 Employee training

Polenergia’s growth and competitive edge In 2019, the first series of training courses in In the Group as a whole, the percentage of persons depend on how qualified our employees are. Great cultural differences in an international (Norwegian– working under civil law contracts is very low. Such importance is attached to the Group employees’ Polish) team was organized for those engaged in cases are confined to hiring under a contract of education and training. As an employer, it provides developing offshore wind farms. The workshops commission or a work product contract for the its employees with opportunities to improve were addressed to both Polish and Norwegian purpose of providing a specific service or executing their qualifications by letting them participate employees. Such meetings are aimed not only a specific project. Polenergia enables employees to in training courses, conferences, postgraduate to integrate the staff but also to present the balance their work and private life by permitting, at studies or MBA studies. Polenergia delivers training differences in work and ways of communication, their request, remote work, reduced working time on a broad range of topics to its staff so that the as well as to identify the opportunities arising from or flexible hours. employees may choose the right kind of training diversity. for the requirements of their respective positions. For 2020, Polenergia planned a series of training Beneficial to both the employee and the Company courses in soft skills in HR management for the is the training in the so-called hard skills, e.g. Best practices and educational activities management staff and a workshop to support learning foreign languages or use of computer of the Polenergia Group career development for women. software, and soft skills, such as time management or teamwork skills. In 2019, Polenergia employees The Polenergia Group notices the need participated in almost 5,300 hours of training. for educating the energy sector staff and supplementing the knowledge acquired by students at higher education institutions with the practical experience they can obtain during Employee compensation and hiring apprenticeships in its companies. The Group has supported the Jan Kulczyk Scholarship Program system executed by the Kulczyk Foundation in cooperation with the Adam Mickiewicz University Foundation. The employees are covered by transparent Annual Performance Assessment System. The Polenergia hosts scholarship holders, who may rules governing their compensation and fringe Group employees are assessed by their superiors familiarize themselves with its activity during their benefits, which takes into account the individual on an annual basis; as part of this assessment, the summer apprenticeships. contribution of each employee as well as the achievement of their personal objectives set a year Additionally, two students of the Warsaw University performance of his or her team. The rules are earlier is verified and the results of such verification of Technology participated in apprenticeships provided in the Work Regulations, the Employee translate into the amount of an annual bonus. in the Renewable Energy Project Development Compensation Regulations, and the Employee Department in 2019.

98 99 In accordance with the adopted CSR Strategy, energy engineering sector. In 2020, apart from the the Polenergia Group companies will actively join participation in executing the Gdańsk University of in educational actions in the area of renewable Technology postgraduate program, the Company As a 5th-year student of Power Engineering at the Warsaw University of energy and sustainable development beginning will join in the activities of research clubs bringing Technology, I began my apprenticeship in the Polenergia Development in 2020. The actions taken by Polenergia to date together those who intend to pursue their have been addressed to all age groups, yet from professional career in the energy market. It will also Department. Undergoing an apprenticeship in a company which is 2020 a particular emphasis will be put on educating continue its cooperation with the Lesław A. Paga the leader in generating energy from renewable sources was a highly students of bachelor, master, and postgraduate Foundation as part of the 9th Edition of the Energy valuable experience for me because RES are both my passion and the programs preparing them to work in the modern Academy. topic of my diploma theses. The time spent with the best specialists in the wind and solar power sector enabled me to combine my theoretical knowledge and practical experience. The Development Department takes up difficult tasks which, owing to the knowledge and skills of the staff, are performed effectively and innovatively. The Nowa Sarzyna Cogeneration Plant atmosphere and interpersonal relationships in the company, resulting – student education and team from good team organization, foster effective work. I find getting a job in Polenergia after the completed apprenticeship a big professional integration success and a particularly satisfying achievement resulting from the possibility to make a personal contribution to implementing Guided by the best practices and the intention In 2019, 2 students of higher education institutions to educate the future staff in the energy sector, participated in one-month internships, 1 student environmentally-friendly changes in the Polish energy sector. Polenergia Nowa Sarzyna Cogeneration Plant of a higher education institution took part in a has been organizing free student internships and two-month apprenticeship, and 4 students of apprenticeships and enabling demonstrations of technical high schools underwent internships. the operation of a steam and gas unit, in particular In 2019, a group of students and teachers from for students of technical schools and universities the Construction Trade and General Education Weronika Nieroba for many years. Summer internships create the Combined Schools in Jarosław and the Center opportunity to find out what exactly a power for Vocational and Lifelong Learning in Jarosław generating facility is and what it takes to work got acquainted with the operation of a gas-fired in it. Through such initiatives, the Nowa Sarzyna cogeneration plant. Cogeneration Plant helps to educate high quality specialists in the field of power engineering.

100 101 The Company also puts a strong emphasis on were offered the following entertainments needed themselves, and engage their colleagues its activity in Wrocław in 2014 and the works on integrating its team and has been organizing to choose from: a rope park zone, a Tyrolean and company. As a result of corporate volunteering, creating a similar team of volunteers in Warsaw meetings outdoors for its employees and their slide-down, kinetic sand and 3D pen activities, Polenergia is becoming a place in the creation began at the turn of 2016. Polenergia supported families for many years. In June 2019, an annual construction of family structures, a children’s and development of which its employees want to these efforts e.g. by designing and printing family picnic was held at the Cyziówka Training and zone (pneumatic recreation devices and games), participate. Volunteers working for those in need promotional materials, including by designing the Leisure Center in Kamionka with the participation a field game, and a series of family games and can use their skills and knowledge for this purpose logo of the initiative. The Company’s employees of around 130 people. At the event, the participants competitions. and at the same time develop their own interests have been helping the Foundation to this day by and talents. The Group hopes that volunteerism visiting children in a cooperating hospital and will encourage its staff to involve in social and playing with them, which makes their time spent in Corporate volunteering and charity environmental issues, which will bring them the treatment more pleasant. In 2019, the Group and its sense of satisfaction and improve their professional employees collected presents for children staying competences. at the hospital, e.g. on the Children’s Day or in the actions of the Group Christmas time. In 2019, Polenergia singed a long-term cooperation agreement with the Mały Słoń Foundation, and In the coming years, Polenergia wishes to develop the Company’s employees have been working such initiatives and support them by organizing in the Warsaw Branch of the Foundation since Grant Volunteering Competitions “Good Energy”. its establishment. The Foundation commenced

Occupational safety and health

In cooperation with the Kulczyk Foundation, support a given child in making his or her dreams Polenergia joined in the aid provided by the One come true. There is a Dream Table published on the The Polenergia Group constructs, develops, and Polenergia believes that all accidents at work can Day Foundation by supporting the transportation Foundation’s website oneday.com.pl, which children manages energy generation facilities. Therefore, be prevented. It also wants to share its experience of children from children’s homes to Warsaw and can fill in with their Christmas wishes. one of its strategic goals is to ensure reliability with the subcontractors and business partners organization of the event entitled “One Day”. It of installations and safety of its employees, with which it creates safe workplaces: it ensures Another initiative in which the Group engaged is addressed to dependents of educational care collaborators, local communities, and the natural that the standards implemented in the Group together with the Kulczyk Foundation consisted facilities from all over Poland. The mission of the environment. It undertakes also to satisfy all companies are followed also by them. Focusing on in preparing Christmas cards by children from the One Day Foundation is to prepare Christmas requirements of the law and financing institutions occupational safety, Polenergia expects joint efforts cooperating care facilities. presents for them and give them to the children and to implement the best industry practices, as in forming accident-free workplace culture in the during an event. In 2019, like in previous years, it The Polenergia Group wants its employees to well as to continuously develop the occupational entire supply chain from its business partners. was held in the building of the Warsaw University join its charity actions and provide aid where it is safety and health management system. of Technology. The Group employees could also

102 103 All our facilities in operation must satisfy the increase employee awareness about safety has requirements laid down in the Regulation of been organized, and each wind farm within the the Minister of Economy on occupational safety Group has been equipped with defibrillators. The and health in the vicinity of power engineering Group endeavors to continuously increase the equipment. This means that employees must be standards and wants to have the certainty that its properly trained in this area and their competence facilities guarantee safe working conditions and are in this area must be verified by an examination accident-free. and confirmed by appropriate certificates resulting On an annual basis, an external company issues from the Energy Law. Activities performed on power a declaration that the NSCP facility satisfies the engineering equipment are divided into operations OSH, fire safety, and environmental protection and other activities (e.g. repairs, inspections, requirements. The Company obtained a document measurements, tests, assemblies). Operation is confirming compliance with the law in this regard carried out by qualified personnel in compliance also for 2019. with the relevant instructions and all other activities are performed on the basis of an individual work NSCP is subjected to an annual analysis of order issued separately for each work. its procedures and instructions in the field of occupational safety and health, fire protection, and All Polenergia premises are subject to regular environmental protection, e.g. compliance with OSH inspections and audits. After a review carried the Safe Work at NSCP Organizational Instructions, out in 2016, the occupational safety and health the General OSH Instructions, the Instructions for procedures and instructions were revised. In 2018, External Companies Performing Work at NSCP, the an audit of the occupational safety and health Fire Safety Instructions, the Company Operational management system was conducted. Since then, Emergency Plan, the Failure Prevention Program, the recommendations have been implemented, and the Risk Assessment and Risk Management a new job in the area of OSH and facility operation System. analysis has been created, a series of training to

104 105 Best occupational safety and health practices addresses to employees

Polenergia’s aim is to ensure increase in employee As part of its efforts for workplace safety, which is awareness and engagement in the joint one of the CSR Strategy goals, the Group provides responsibility for workplace safety. This is because all its employees with access to regular training in it begins from everyday behaviors of each of them first aid. and their and other people’s health and lives depend on appropriate reactions in emergencies.

Information on non-compliance with the provisions of labor law, occupational safety and health regula- tions, sanitation regulations or environmental regulations:

In 2019, no cases of non-compliance with the provisions of labor law, occupational safety and health regulations or sanitation regulations were found in any of the Polenergia Group’s plants.

106 107 11. Regulatory Environmental protection law

o publication of the consolidated text of the Act o publication of the consolidated text of the Act environment of 27 April 2001 Environmental Protection Law of 15 May 2015 on Substances that Deplete (Journal of Laws 2019, Item 1396) the Ozone Layer and on Some Fluorinated Greenhouse Gases (Journal of Laws 2019, Item Act of 19 July 2019 Amending the Act on o 2158) Sharing Information about the Environment and its Protection, Public Participation in o Regulation of the Minister of Environment of 22 Environmental Protection and Environmental July 2019 establishing criteria of environmental Impact Assessment and Certain Other Acts damage assessment (Journal of Laws 2019, Item (Journal of Laws 2019, Item 1712). 1383)

o publication of the consolidated text of the Act o Regulation of the Council of Ministers of 10 of 20 July 1991 on Environmental Protection September 2019 on projects that may have a Inspection (Journal of Laws 2019, Item 1355) significant environmental impact (Journal of Laws 2019, Item 1839) o publication of the consolidated text of the Act of 13 April 2007 on the Prevention of o Regulation of the Minister of Health of 17 Environmental Damage and its Repair (Journal December 2019 on permissible levels of of Laws 2019, Item 1862) electromagnetic fields in the environment (Journal of Laws 2019, Item 2448)

Waste Amendments to the Polish or EU legislation/best practices affecting the environmental and social aspects of the Polenergia Group’s activity and/or the development of new projects / o Act of 4 July 2019 Amending the Act on Waste o Regulation of the Minister of Climate of 2 and Certain Other Acts (Journal of Laws 2019, January 2020 on the waste catalog (Journal of functioning of the projects in operation: Item 1403) Laws 2020, Item 10)

108 109 Emissions trading Energy market

o Act of 4 July 2019 Amending the Act on Greenhouse Gas Emissions Trading and Certain Other Acts o publication of the consolidated text of the Act of o Act of 19 July 2019 on the Compensation (Journal of Laws 2019, Item 1501) 10 April 1997 Energy Law (Journal of Laws 2019, Scheme for Energy-Intensive Sectors and Item 755) Subsectors (Journal of Laws 2019, Item 1532)

o publication of the consolidated text of the Act of 11 January 2018 on Electromobility and Alternative Fuels (Journal of Laws 2019, Item Water, water management, water 1124) services

o publication of the consolidated text of the Act o publication of the consolidated text of the Bills of 21 March 1991 on Polish Marine Areas and Regulation of the Minister of Environment of Maritime Administration (Journal of Laws 2019, 30 October 2014 on the requirements for the Item 2169) measurement of emission volumes and water o Bill on the Promotion of Electricity Generation in Offshore Wind Farms (bill number: UD34) amount (Journal of Laws 2019, Item 2286) o Regulation of the Minister of Maritime Economy and Inland Navigation of 12 July 2019 on substances particularly harmful to the water environment and conditions to be met for introducing sewage into water or soil and for EU law/documents discharging rainwater or thaw water to water or water management structures (Journal of Laws 2019, Item 1311) o Commission Delegated Regulation (EU) o Communication from the Commission 2019/856 of 26 February 2019 supplementing – Guidelines on non-financial reporting: Directive 2003/87/EC of the European Supplement on reporting climate-related Parliament and of the Council with regard to information (2019/C 209/01) the operation of the Innovation Fund

110 111 Policies/plans

o On 8 November 2019, the Ministry of Energy respect to the draft published in November presented an updated and extended draft 2018. For instance, the findings from public of Poland’s Energy Policy until 2040 – Fuel and inter-ministerial consultations have been and Energy Sector Development Strategy. It taken into consideration, the objectives have responds to the biggest challenges to be faced been revised, new tasks have been introduced, by the Polish energy sector in the coming energy forecasts have been supplemented. The decades and sets the development directions document points to offshore wind energy as the for the sector taking into account the tasks key technology in the further RES development which need to be performed in the short term. in Poland. PEP2040 is supposed to be implemented National Plan for Energy and Climate for 2021- through eight directions of actions divided o 2030 into implementation tasks. The new document provides for a range of amendments with

Publications:

o Our Energy, Our Future – a publication by o publication by WindEurope Wind Energy in WindEurope on the potential of offshore wind Europe: Outlook to 2023 12 farms in the pursuit of climate neutrality by 2050 11

11 windeurope.org/about-wind/reports/our-energy-our-future/ 12 windeurope.org/about-wind/reports/wind-energy-in-europe-outlook-to-2023/.

112 113 Industry consultations

o a draft maritime spatial plan for Polish marine o a draft of the Natura 2000 “Słupsk Bank” marine transactions not only within Poland but also countries with a view to establish an integrated areas area protection plan with entities from all over Europe. Poland was cross-border intraday market. Trading is covered by the European mechanism of single possible through a platform developed by intraday market coupling. This gives the entities Deutsche Börse AG. operating in Poland even greater possibilities o Guarantees of origin of electricity from In 2019, through its special purpose vehicles executing offshore wind farm projects, Polenergia participated to participate in the European market and cogeneration on the PPE in the abovementioned social and inter-ministerial consultations. The Group cooperates with the Maritime contributes to increased liquidity of the

Authority e.g. by providing it with the studies carried out for the purpose of the projects. domestic market. On 2 October 2019, Polish Power Exchange has marketed guarantees of origin of electricity o Intraday Market SIDC (XBID) produced from high-efficiency cogeneration, thus expanding the functionality of the Register On 19 November 2019, PPE launched the of Guarantees of Origin European Intraday Electricity Market (SIDC) Amendments to law in 2019 The basis for putting the national Register of in the XBID model. It operates within the EU o Guarantees of Origin into operation was the (currently, it connects 21 countries) and enables – Polenergia Obrót amendment to the Energy Law in 2013. The cross-border trade in electricity. Trading on the first sell transactions for guarantees of origin SIDC takes the form of continuous trading 24/7. through the PPE were conducted in September Transactions on this market are concluded in 2015 and concerned production of renewable Electricity market Euro and the clearings between the exchange energy. and the Polish market participants are made by Izba Rozliczeniowa Giełd Towarowych S.A. in o TGE was designated by the President of Regulator accepted the application, which PLN. The Intraday Market XBID (Cross Border Energy Regulatory Office as the Nominated authorizes PPE for the single day-ahead market Intraday Coupling) model was launched in Electricity Market Operator again and the intraday market coupling for the 2018 as a joint initiative of energy exchanges successive four years and transmission system operators from 14 The Polish Power Exchange was designated The energy market coupling and unification as the Nominated Electricity Market Operator o in the EU Member States and Norway enables (NEMO) for the first time in 2015; in October commercial undertakings to conclude 2019, it applied to the President of Energy Regulatory Office for renomination. The

114 115 Gas market

o GAZ-SYSTEM became an operator of Transit Gas Pipeline System o The first platform for publishing inside information for natural gas under REMIT was On 19 December 2019, the President of Energy established Regulatory Office issued a decision determining the content of the entrustment contract Participants of the wholesale gas market may between GAZ-SYSTEM and TGPS EuRoPol GAZ. use GIIP (Gas Inside Information Platform), an In accordance with the terms and conditions open platform for publishing inside information. stipulated in the contract, after 31 December It permits the fulfillment of the obligations 2019, GAZ-SYSTEM will perform the obligations imposed by the Regulation on wholesale energy of the transmission system operator in the market integrity and transparency (REMIT). Polish section of the Yamal–Western Europe The platform was developed by GAZ-SYSTEM in Transit Gas Pipeline System owned by TGPS compliance with REMIT and recommendations EuRoPol GAZ. of the Agency for the Cooperation of Energy Regulators (ACER). o The transmission contract providing for gas

transportation through the Yamal pipeline The platform ensures all market participants system, which was concluded by EuRoPol the same access to the information regarding GAZ and Gazprom Export, will expire on 16 infrastructure availability and enables them to May 2020. For that reason, the full capacity make business decisions based on a reliable of the TGPS Mallnow exit point and the and verified knowledge that is available in one TGPS Kondratki entry point is offered at the place. intraday, daily, monthly, and quarterly product

auctions organized on the GSA platform by It offers free access to all published an independent operator of the Polish section communications. of the gas pipeline (i.e. GAZ-SYSTEM) in the gas year 2019/2020. Starting from the gas year 2020/2021, it will be possible to reserve the capacity also at annual product auctions.

116 117 Activity scale Supplementary – basic economic indicators plus power generation capacity and employment data: Basic economic indicators13 2019 Results [in thous. PLN]

tables with data Revenue from contracts with customers 2,491,086

Other revenues 105,491

Net profit / loss 109,036

Installed power by generating sources:

Production sources 2019 Results [in MWe]

Wind farms 249.3

CHPs 116

Power Plant 8

PV Farms 8

Generated power by generating sources:

Production sources 2019 Results [in MWh]

Renewable energy sources 737,788

CHPs 751,486.721

Power Plant 44,961

13 "Consolidated financial statements for the year ended on 31 December 2019 including the report of the independent auditor": https://www.polenergia.pl/pol/sites/default/files/reports/periodical/polenergia_s.a._group_consolidated_statements.pdf

118 119 Number of clients Energy industry - product responsibility – special indicators15 Polenergia Dystrybucja 2019 Results Clients Energy points The number of disconnections caused by non-payment of bills by customers 366

Individual 11,346 12,184 The number of disconnections caused by system failure 0 Business 960 2235

Industry 37 42 Energy industry- product responsibility 16 Polenergia Obrót – special indicators; frequency of power outage

Clients 2019 Results

Individual 17 SAIFI — Indicator of the average systemic frequency of long and short outages constituting the number of recipients exposed to the effects of all 0.51 Business 282 these outages during the year divided by the total number of recipients served Industry 25

Energy industry - product responsibility Energy industry - product responsibility – special indicators14 – special indicators; average power outage time17

2019 Results 2019 Results The number of people in the area of enterprise distribution 14,461 SAIDI — Indicator of the average systemic duration of a long and very long The number of people not served in the area of enterprise distribution 0 break, expressed in minutes per customer per year, constituting the sum of the products of its duration and the number of recipients exposed to the 38.25 effects of this interruption during the year divided by the total number of recipients served.

MAIFI — Average rate of short outages, which is the number of recipients exposed to the effects of all short outages during the year divided by the 0 total number of serviced recipients.

15 Polenergia Dystrybucja 15 Polenergia Dystrybucja 14 Polenergia Dystrybucja 15 Polenergia Dystrybucja

120 121 Employment (in full-time positions) Employees

2019 Results Workers Co-workers Voivodeship: Women Men Total Outside Outside Warsaw Warsaw Warsaw Warsaw Lower Silesia 0 19.50 19.50 Number of women employed in Warsaw 43 9 1 53 Kuyavia-Pomerania 0 1 1 / in the whole Group

Lubelskie 2.50 29.13 31.63 Number of men 41 102 4 147

Lubusz 0 0,50 0.50 Number of women in managerial 15 3 1 19 / directorial positions Lodzkie 0 0 0 Number of men in managerial Lesser Poland 0 0 0 19 22 4 45 / directorial positions Mazovian 43.88 37.13 81.01 Number of employees with disabilities 1 Opolskie 0 0 0

Subcarpathia 4 39.50 43.50

Podlaskie 0 2 2 Employees Pomerania 0 4 4

Silesia 0 0 0 Employees 2019 Results Świętokrzyskie 0 0 0 % of employees covered by a collective agreement 0 Warmia-Masuria 0 1 1

Greater Poland 0 0 0

West Pomerania 1 2 3 Basic raw materials, materials and fuels

Total 51.38 135.76 187.14 Type IU 2017 Results 2018 Results 2019 Results

Natural gas m3 164,977,791 166,841,930 163,148,009

Coke oven gas m3 45,460,100 45,401,300 25,133,000

122 123 Energy industry - organization profile Water

2019 Results 2019 Results 2016 Results 2017 Results 2018 Results 2019 Results

Sales Distribution Volume [m3] Volume [m3] Volume [m3] Volume [m3]

Quantity [MWh] 158,738.453 292,486.358 Water processed and reused 15,168 25,746 27,746 21,118

For individual clients 24,173.448 28,371.807

For business/ industrial clients 134,565.005 264,114.551

Occupational Health and Safety

CO2 emissions 2016 Results 2017 Results 2018 Results 2019 Results IU 2019 Results Number of accidents 3 1 1 2

Nowa Sarzyna CHP and Mercury Power Plant Mg 363,318 Number of accidents 0.1 0.01 0.01 0.002 per 1,000 employees

Number of days of absenteeism at 46.67 148 4 16.5 work per one accident Avoided Emissions [Mg CO2] Number of fatal accident 0 0 0 0

Emissions 2019 Results Number of cases of occupational 0 0 0 0 diseases Renewable energy sources 774,305 Number of employees exceeding CHP plants and Gas Power Plants 263,471 the maximum permissible 0 0 0 0 concentrations (dust level)

Emissions avoided as a result of producing electricity / heat compared to producing the same amount of electricity / heat from hard coal (WO=21,49 MJ/kg data: KOBIZE)

124 125 Trainings Complaints

2017 Results 2018 Results 2019 Results 2019 Results

BY SEX Number of complaints submitted 96

Number of hours of training in the year Percentage of complaints resolved in favor of the customer 83% 1489 1503 1276.5 attended by women Percentage of complaints submitted regarding breaches of privacy or loss of 0% Number of women 43 44 45 customer data

Number of hours of training in the year Percentage of overdue complaints 1% 4501 5407 4042 attended by men

Number of men 118 111 112

BY POSITION

Number of training hours in the year 3178 4141 2434 participated by directors/ managers

Number of directors/ managers 50 54 55

Number of training hours in the year 815 934.5 1374.5 participated by specialists

Number of specialists 36 42 51

Number of training hours in the year 2244 2091.5 1493 participated by other employees

Number of other employees 53 59 51

126 127 Area accor- GRI Indicator GRI Standards ding to ISO Comment / Description Page 26000 indicators 102-1 Organization’s Name - Polenergia S.A. Main brands, products and [Description of the Polenergia 102-2 6.7 22 / or services Group’s business]

Polenergia S.A. Location of the organization’s 6.2 102-3 ul. Krucza 24/26 headquarters 7.3.3 00-526 Warsaw

The number of countries in which the organization operates and providing the names of 6.2 those countries where the main The Polenergia Group conducts 102-4 7.3.2 operations of the organization are operations mainly in Poland 7.3.3 located or which are particularly relevant in the context of the content of the report

Joint-stock company, publicly listed on the Warsaw Stock Exchange. Form of ownership and legal The company was included in 102-5 6.2 structure of the organization the sWIG80 index. Shareholders http://www.polenergia.pl/pol/pl/ akcjonariat-0

Supported markets with geographical coverage, sectors 6.2 [Description of the Polenergia 102-6 served, characteristics of 7.2 22 Group’s business] customers / consumers and 7.3.3 beneficiaries

[Description of the Polenergia 6.2 102-7 Activity scale Group’s business] 22 7.3.2 [Supplementary tables with data]

Number of own and supervised 6.4. [Polenergia Group as an employer] 102-8 employees by sex and type of 6.4.3. 94 [Supplementary tables with data] contract 6.3.7

[Letter from the President] 4 102-9 Description of value chain 6.6.6 [Corporate governance] 84

Significant changes in the reporting period regarding the [CSR Strategy and key areas in the 102-10 6.2- 10 size, structure, ownership form Polenergia Group] or value chain

128 129 Area accor- Area accor- Indicator GRI Standards ding to ISO Comment / Description Page Indicator GRI Standards ding to ISO Comment / Description Page 26000 26000

To limited extent this rule refers to List of stakeholder groups 102-40 6.8.3 [Dialog with stakeholders] 90 the operations of the Polenergia engaged by the organization Group. At the same time, companies Explanation of whether and how always use the best available Percentage of employees covered 102-41 6.3.10 [Supplementary tables with data] 123 102-11 the organization applies the 6.2. techniques. However, of course, in by collective agreements precautionary principle case of any doubts as to the possible impact of a given technology, Basis for identifying and selecting companies will approach it with the 102-42 stakeholders engaged by the 6.8.3 [Dialog with stakeholders] 90 precautionary principle. organization External, accepted or supported An approach to engaging by the organization economic, 6.2. stakeholders including the 102-12 environmental and social [Corporate governance] 84 102-43 6.4.5 [Dialog with stakeholders] 90 6.4.5 frequency of involvement by type declarations, principles and other and group of stakeholders initiatives

Key issues and problems raised Membership in associations [CSR Strategy and key areas in the by stakeholders and the response 10 (such as industry associations) 102-44 6.4.5 Polenergia Group] 102-13 6.2. [Corporate governance] 84 from the organization, including 90 and/or in national/international [Dialog with stakeholders] reporting by them organizations

[Description of the Polenergia Statement issued by the top Group’s business] „Consolidated management (e.g. executive Financial Statements for the year director, board president or ended 31 December 2019 with the 102-14 other equivalent person) on 6.2. [Letter from the President] 4 Business units recognized in the 102-45 7.3.3 opinion of an independent certified 22 the importance of sustainable consolidated financial statement audito” https://www.polenergia.pl/pol/ development for the organization sites/default/files/reports/periodical/ and its strategy ey_19_polsa_sprawozdanie_zarzadu. pdf [Letter from the President] In addition, business risks, including The process of defining the [CSR Strategy and key areas in the Description of key influences, non-financial risks, can be found in 102-46 10 102-15 6.2. 4 content of the report Polenergia Group] opportunities and risks the Report on the Operations of the Polenergia Capital Group for the year Significant aspects of identified [CSR Strategy and key areas in the ended on December 31, 2019 102-47 7.3 10 social and environmental impact Polenergia Group] Organization values, principles, 6.2. [Corporate governance] 84 102-16 codes and standards of behavior 6.3 Explanations regarding the [Polenergia Group as an employer] 94 and ethic 6.6 effects of any adjustments to information contained in previous reports, giving reasons for their [Strategy and key corporate social 102-48 introduction and their impact (e.g. No adjustments responsibility areas] [Corporate mergers, acquisitions, change governance] Management The supervisory structure of in the year / base period, nature structures, including the approach the organization together with of operations, measurement to corporate governance issues, the committees subordinate to methods) are described in the Report on the 10 102-18 the highest supervisory body, 6.2. Operations of the Polenergia Group 84 responsible for particular tasks, for the year ended on 31 December such as creating a strategy or 2019 https://www.polenergia.pl/pol/ supervising the organization sites/default/files/reports/periodical/ ey_19_polsa_sprawozdanie_zarzadu. pdf

130 131 Area accor- Area accor- Indicator GRI Standards ding to ISO Comment / Description Page Indicator GRI Standards ding to ISO Comment / Description Page 26000 26000

Significant changes compared Energy (GRI 302) to the previous report regarding 102-49 No significant changes the scope, extent or methods of [Environmental protection – measurement used in the report 103-1 The nature of an important area 48 summary of activities in 2019]

Reporting period (e.g., fiscal year 102-50 - 01.01.2019 — 31.12.2019 [Environmental protection – / calendar year) 103-2 Management approach (DMA) summary of activities in 2019] 48 [Supplementary tables with data] Date of publication of the last 102-51 - March 2019 report (if published) 103-3 Measurement and evaluation [Supplementary tables with data] 119

Reporting cycle (annually, every 102-52 - Annually Direct and indirect energy two years, etc.) 302-1 consumption by primary energy 6.5.4 [Supplementary tables with data] 119 sources Marta Porzuczek Director of the Environment Protection Department/ EHS Plenipotentiary of the Board for Biodiversity (GRI 304) 102-53 Contact person 7.4.3 CSR Polenergia SA ul. Krucza 24/26 00- 526 Warsaw e-mail: Marta.Porzuczek@ [Environmental protection – 103-1 The nature of an important area 48 polenergia.pl summary of activities in 2019]

[CSR Strategy and key areas in the [Environmental protection – 102-54 Compliance with GRI Standards 7.7.2 10 103-2 Management approach (DMA) 48 Polenergia Group] summary of activities in 2019]

102-55 GRI content index 125 [Environmental protection – 103-3 Measurement and evaluation 48 summary of activities in 2019] Policy and current practice in the [CSR Strategy and key areas in the 102-56 field of external verification of the 7.5.3. 10 Location and area of owned, Polenergia Group] report leased or managed lands located in protected areas or areas of [Environmental protection – 304-1 6.5.6 48 Materials (GRI 301) high biodiversity value outside summary of activities in 2019] protected areas or adjacent to such areas [Description of the Polenergia 103-1 The nature of an important area 22 Group’s business] Description of the significant impact of activities, products [Values of the Polenergia Group] 16 and services on the biodiversity [Environmental protection – 103-2 Management approach (DMA) [Environmental protection 304-2 6.5.6 48 48 of protected areas and areas of summary of activities in 2019] – summary of activities in 2019] high biodiversity value outside protected areas [Environmental protection – 103-3 Measurement and evaluation summary of activities in 2019] 48 [Environmental protection – 304-3 Protected or revitalized habitats 6.5.6 48 [Supplementary tables with data] summary of activities in 2019]

Used raw materials/materials by 6.5. 301-1 [Supplementary tables with data] 123 weight and volume 6.5.4.

132 133 Area accor- Area accor- Indicator GRI Standards ding to ISO Comment / Description Page Indicator GRI Standards ding to ISO Comment / Description Page 26000 26000

Emissions (GRI 305) Indicator of injuries, occupational diseases, lost days and absences 6.4. 403-2 from work, as well as the number [Supplementary tables with data] 125 [Environmental protection – 6.4.6. 103-1 The nature of an important area 48 of work-related fatal accidents by summary of activities in 2019] region

[Environmental protection – 103-2 Management approach (DMA) 48 Employment in conditions of summary of activities in 2019] 6.4. 403-3 increased risk of occupational [Supplementary tables with data] 125 6.4.6. diseases [Environmental protection – 103-3 Measurement and evaluation summary of activities in 2019] 48 [Supplementary tables with data] Local community (GRI 413)

Total direct greenhouse gas 6.5. [Dialog with stakeholders] [Social 305-1 [Supplementary tables with data] 124 engagement and local community 90 emissions by weight (Scope 1) 6.5.5. 103-1 The nature of an important area development – Polenergia as a good 80 neighbor] Reduction of greenhouse gas 305-5 6.5.3 [Supplementary tables with data] 124 emissions [Dialog with stakeholders] [Social engagement and local community 90 103-2 Management approach (DMA) Sewage and waste (GRI 306) development – Polenergia as a good 80 neighbor] [Environmental protection – 103-1 The nature of an important area 48 summary of activities in 2019] [Dialog with stakeholders] [Social engagement and local community 90 103-3 Measurement and evaluation [Environmental protection – development – Polenergia as a good 80 103-2 Management approach (DMA) 48 summary of activities in 2019] neighbor]

[Environmental protection – The nature, scale and 103-3 Measurement and evaluation 48 summary of activities in 2019] effectiveness of programs and practices in assessing and 6.3.9 managing the impact of the 6.5.1 Total weight of waste by type [Environmental protection – 413-1 organization’s activities on the 6.5.2 48 306-2 of waste and method of waste 6.5. [Supplementary tables with data] 125 summary of activities in 2019] treatment local community, including 6.5.3 the impact of entering a 6.8 given market, conducting and Occupational health and safety (GRI 403) terminating operations

[Environmental protection – Activities with significant 6.3.9 48 [Environmental protection – 103-1 The nature of an important area summary of activities in 2019] 413-2 potential or existing negative 6.5.3 48 94 summary of activities in 2019] [Polenergia Group as an employer] impact on the local community 6.8

103-2 Management approach (DMA) [Polenergia Group as an employer] 94

[Polenergia Group as an employer] 103-3 Measurement and evaluation 94 [Supplementary tables with data]

134 135 Area accor- Indicator GRI Standards ding to ISO Comment / Description Page 26000

PROFILE INDICATORS FOR THE ENERGY INDUSTRY

Organization profile

Installed power generating EU1 capacity divided into generating [Supplementary tables with data] 119 sources

Net energy generated EU2 [Supplementary tables with data] 119 by generating sources

Number of individual and EU3 [Supplementary tables with data] 120 commercial clients

Environment

Actions protecting the environment Change in biodiversity of (biodiversity), description of good EU13 habitats before and after the 6.5.6 79 practices [Supplementary tables with implementation of investment data]

Society

There are no people who are physically displaced. Economic resettlements resulting from Number of people physically or damages in field crops that occurred 6.6.6 EU22 economically displaced, and due at the stage of construction or during 6.6.7 compensation failure with the necessity of getting access. Compensation is equal to the average yield per hectare for a given type of crop

Product responsibility

Number of accidents and EU25 6.4.6 [Supplementary tables with data] 125 fatalities

Percentage of people not EU26 served in the area of company 6.7.4 [Supplementary tables with data] 120 distribution

The number of disconnections EU27 caused by non-payment of bills by 6.7.6 [Supplementary tables with data] 121 customers or system failure

EU28 Frequency of power outage 6.7.8 [Supplementary tables with data] 121

EU29 Average time of power outage 6.7.8 [Supplementary tables with data] 121

136 137