Polskie Górnictwo Naftowe i Gazownictwo S.A. INTERIM REPORT for the six months ended June 30th 2017 prepared in accordance with International Financial Reporting Standards as endorsed by the European Union PGNiG GROUP Half-year report 2017 (in PLN million, unless stated otherwise) POLISH FINANCIAL SUPERVISION AUTHORITY Consolidated half-year report PSr 2017 (pursuant to Par. 82.2 and Par. 83.3 of the Regulation of the Minister of Finance of February 19th 2009 – Dz. U. of 2014, item 133, as amended) for issuers of securities in the manufacturing, construction, trade, and services sectors for the first half of the 2017 financial year, covering the period from January 1st to June 30th 2017, containing interim condensed consolidated financial statements prepared in the Polish zloty (PLN) in accordance with International Financial Reporting Standards, and interim condensed separate financial statements prepared in the Polish zloty (PLN) in accordance with International Financial Reporting Standards. August 18th 2017 (filing date) POLSKIE GÓRNICTWO NAFTOWE i GAZOWNICTWO SPÓŁKA AKCYJNA (company name) PGNiG Fuels (pal) (abbreviated name) (sector according to the WSE classification) 01-224 Warsaw (postal code) (city/town) Marcina Kasprzaka 25 (street) (number) +48 22 589 45 55 +48 22 691 82 73 (telephone) (fax) [email protected] www.pgnig.pl (email) (website) 525−000−80−28 012216736 (Tax Identification Number – NIP) (Industry Identification Number – REGON) PGNiG GROUP Half-year report 2017 (in PLN million, unless stated otherwise) Financial highlights Key data from the interim condensed consolidated PLNm EURm financial statements 6 months 6 months 6 months 6 months ended ended ended ended Jun 30 2017 Jun 30 2016 Jun 30 2017 Jun 30 2016 Revenue 18,817 17,349 4,430 3,961 Operating profit before depreciation and amortisation (EBITDA) 4,177 3,131 983 715 Operating profit (EBIT) 2,842 1,794 669 410 Profit before tax 2,859 1,733 673 396 Net profit attributable to owners of the parent 2,098 1,271 494 290 Net profit 2,098 1,271 494 290 Total comprehensive income attributable to owners of the parent 1,951 1,576 459 360 Total comprehensive income 1,951 1,576 459 360 Net cash flows from operating activities 3,932 3,776 926 862 Net cash flows from investing activities (2,076) (1,821) (489) (416) Net cash flows from financing activities (4,976) (65) (1,172) (15) Net cash flows (3,120) 1,890 (735) 431 Basic and diluted earnings per share (PLN) 0.36 0.22 0.09 0.05 As at As at As at As at Jun 30 2017 Dec 31 2016 Jun 30 2017 Dec 31 2016 Total assets 45,083 49,672 10,667 11,228 Total liabilities 12,272 17,656 2,904 3,991 Total non-current liabilities 7,037 7,303 1,665 1,651 Total current liabilities 5,235 10,353 1,239 2,340 Total equity 32,811 32,016 7,763 7,237 Share capital 5,778 5,778 1,367 1,306 Weighted average number of ordinary shares (million) 5,778 5,867 5,778 5,867 Book value per share and diluted book value per share (PLN/EUR) 5.68 5.46 1.34 1.23 Dividend per share declared or paid (PLN/EUR) 0.20 0.18 0.05 0.04 Key data from the interim condensed separate financial PLNm EURm statements 6 months 6 months 6 months 6 months ended ended ended ended Jun 30 2017 Jun 30 2016 Jun 30 2017 Jun 30 2016 Net revenue 9,645 8,864 2,271 2,024 Profit before tax 2,033 2,080 479 475 Net profit 1,827 1,974 430 451 Total comprehensive income 1,713 2,286 403 522 Net cash flows from operating activities 689 1,011 162 231 Net cash flows from investing activities (942) (859) (222) (196) Net cash flows from financing activities (4,399) 599 (1,036) 137 Net cash flows (4,652) 751 (1,095) 171 Earnings and diluted earnings per share attributable to holders of 0.32 0.33 0.07 0.08 ordinary shares (PLN/EUR) As at As at As at As at Jun 30 2017 Dec 31 2016 Jun 30 2017 Dec 31 2016 Total assets 33,338 35,769 7,888 8,085 Total liabilities 7,554 10,541 1,787 2,383 Total non-current liabilities 2,188 2,144 518 485 Total current liabilities 5,366 8,397 1,270 1,898 Equity 25,784 25,228 6,101 5,703 Share capital and share premium 7,518 7,518 1,779 1,699 Weighted average number of shares (million) 5,778 5,867 5,778 5,867 Book value per share and diluted book value per share (PLN/EUR) 4.46 4.30 1.06 0.97 Dividend per share declared or paid (PLN/EUR) 0.20 0.18 0.05 0.04 Average EUR/PLN exchange rates quoted by the NBP Jun 30 2017 Jun 30 2016 Dec 31 2016 Average exchange rate in period 4.2474 4.3805 4.3757 Exchange rate at end of period 4.2265 4.4255 4.4240 Items of the statement of profit or loss, statement of comprehensive income and statement of cash flows were translated at the EUR/PLN exchange rate computed as the arithmetic mean of mid rates quoted by the National Bank of Poland (NBP) for the last day of each calendar month in the reporting period. Items of the statement of financial position were translated at the mid rate for EUR/PLN quoted by the NBP at the end of the reporting period. PGNiG GROUP Half-year report 2017 (in PLN million, unless stated otherwise) TABLE OF CONTENTS 1. Interim condensed consolidated financial statements ............................................................................................................... 5 2. General information ...................................................................................................................................................................... 9 2.1. BASIC INFORMATION ABOUT THE GROUP ............................................................................................................................................. 9 2.2. BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS INCLUDED IN THE REPORT ............................................................................. 9 2.3. APPLIED ACCOUNTING POLICIES ....................................................................................................................................................... 10 2.4. EFFECT OF NEW STANDARDS ON THE FINANCIAL STATEMENTS OF THE PGNIG GROUP ......................................................................... 10 2.5. PRESENTATION CHANGES IN THE FINANCIAL STATEMENTS .................................................................................................................. 11 3. The Group and its reporting segments ..................................................................................................................................... 14 3.1. KEY DATA ON THE REPORTING SEGMENTS......................................................................................................................................... 16 4. Notes to the interim condensed consolidated financial statements ....................................................................................... 17 4.1. DEFERRED TAX ............................................................................................................................................................................... 17 4.2. IMPAIRMENT LOSSES/WRITE-DOWNS ................................................................................................................................................. 17 4.3. PROVISIONS ................................................................................................................................................................................... 18 4.4. REVENUE ....................................................................................................................................................................................... 19 4.5. OPERATING EXPENSES .................................................................................................................................................................... 19 4.6. OTHER INCOME AND EXPENSES ....................................................................................................................................................... 20 4.7. NET FINANCE INCOME/(COSTS) ........................................................................................................................................................ 20 4.8. INCOME TAX ................................................................................................................................................................................... 20 4.9. PROPERTY, PLANT AND EQUIPMENT.................................................................................................................................................. 21 4.10. DERIVATIVE FINANCIAL INSTRUMENTS ............................................................................................................................................... 22 4.11. CONTINGENT ASSETS AND LIABILITIES............................................................................................................................................... 25 5. Supplementary information........................................................................................................................................................ 26 5.1. KEY EVENTS RELATED IN THE REPORTING PERIOD ............................................................................................................................. 26 5.2. DIVIDEND ....................................................................................................................................................................................... 28 5.3. ISSUE, REDEMPTION, AND REPAYMENT OF DEBT SECURITIES .............................................................................................................. 28 5.4. SEASONALITY ................................................................................................................................................................................