47.1 Sureties and guarantees
The table below presents actual relevant bank guarantees under the agreements concluded with BZ WBK S.A. and Pekao S.A. as at 31 December 2016 to the limits specified therein:
|Date of guarantee||Guarantee period||Guarantee for||Bank - issuer||Guarantee value in PLN thousand|
|01.01.2016||11.08.2018||Górecka Projekt Sp. z o.o.||BZ WBK S.A.||1 662|
|21.12.2016||30.01.2018||Urząd Marszałkowski Województwa Zachodniopomorskiego in Szczecin||BZ WBK S.A.||1 325|
|Total of guarantees issued||2 987|
Guarantees as at 31 December 2015
|Date of guarantee||Guarantee period||Guarantee for||Bank - issuer||Guarantee value in PLN thousand|
|01.01.2015||31.12.2015||Górecka Projekt Sp. z o.o.||Pekao S.A.||1 600|
|Total of guarantees issued||1 600|
The value of other guarantees issued by Enea Group as at 31 Dcember 2016 amount of PLN 3 733 thousand (as at 31 December 2015 of PLN 5 076 thousand).
Guarantees of Lubelski Węgiel Bogdanka S.A.
|Date of guarantee||Guarantee period||Guarantee for||Bank - issuer||Guarantee value in PLN thousand|
|19.09.2012||30.09.2021||Ministry of Environment||PKO BP S.A.||19 0000|
|06.06.2013||30.09.2021||Ministry of Environment||PKO BP S.A.||1 500|
|27.10.2015||31.01.2018||UTA Polska Sp. z o.o.||PEKAO S.A.||50|
47.2 Pending proceedings before courts of general jurisdiction
Actions brought by the Group
Actions which Enea S.A. and Enea Operator Sp. z o.o. brought to courts of general jurisdiction refer to claims for receivables due to sale of electricity (the so–called electricity cases) and claims for other receivables – illegal consumption of electricity, connections to the grid and other specialized services (the so-called non-electricity cases).
Actions brought to courts of general jurisdiction by Enea Wytwarzanie Sp. z o.o. are connected mainly with claims for outstanding invoice payments and contractual penalties from the Company vendors.
As at 31 December 2016 the total of 16 487 cases brought by the Group were pending before common courts for the total amount of PLN 161 308 thousand (11 584 cases for the total amount of PLN 219 468 thousand as at 31 December 2015).
None of these cases can significantly affect the Group’s net profit.
Actions brought against the Group
Actions against the Group are brought both by natural and legal entities. They mainly refer to issues such as compensation for interrupted delivery of electricity, identification of illegal electricity consumption and compensation for use by the Group of real property where electrical devices are located. The Group considers actions concerning non-contractual use of real property as particularly important (Note 47.5).
As at 31 December 2016 there were 2 314 cases pending before common courts which have been brought against the Group for the total amount of PLN 368 702 thousand (as at 31 December 2015 2 282 cases for the total amount of PLN 301 815 thousand). Provisions related to the court cases are presented in note 32.
47.3 Arbitration proceedings
Proceeding brought by Mostostal Warszawa S.A. and Acciona Infraestructuras S.A. against Lubelski Węgiel Bogdanka S.A. is conducted before the Arbitration Court at the Polish Chamber of Commerce in Warsaw under file number SA 64/15. Arbitration proceeding was commenced on the basis of request for arbitration filed by the Consortium on 7 April 2015. The amount of consortium’s claim is approx. PLN 16.2 million (the above-mentioned claim includes the amount of the bank guarantee that was allegedly received unfoundedly by LWB, interest and costs borne by the consortium as a result of LWB benefitting from the guarantee). On 30 October 2016, the consortium submitted a reply. Currently, the works on rejoinder of LWB are underway. In the meantime, LWB brought action against the consortium before the Regional Court in Lublin for negative declaration on the absence on the part of the LWB of obligation to satisfy consortium’s claims resulting from the contract on extending Zakład Przeróbki Mechanicznej Węgla (the Court of Arbitration at the Polish Chamber of Commerce in Warsaw decided that it is non-competent in terms of the aforementioned claims). The claim is aimed at determining that the consortium implemented the contract on extending Zakład Przeróbki Mechanicznej Węgla unduly and, therefore, charging of contractual penalties by LWB was reasonable.
47.4 Proceedings before public administration bodies
Regarding Enea Wytwarzanie Sp. z o.o. before the public administration bodies and administrative courts are carried out proceedings on:
1) Application of Towarzystwo na rzecz Ziemi for annulment of an integrated permit. The Minister for the Environment refused to initiate proceedings. The Society lodged complaint with the Voivodeship Administrative Court in Warsaw with regard to the Minister’s decision. VAS rejected the complaint. Towarzystwo na rzecz Ziemi lodged a complaint in cassation to Supreme Administrative Court on 24 April 2014. On 2 February 2016, a hearing before SAC took place, due to irregularity in terms of notifying of the Minister of Environment the Court postponed the proceedings until 7 April 2016. SAC set aside the judgment of VAS and the decision of the Minister on refusal to initiate proceedings, the decision is a final decision. On 20 May 2016, the representative of Enea Wytwarzanie Sp. z o.o. was provided with the copy of the original of the judgment together with a substantiation. On 16 June 2016, the Minister of Environment was provided with the copy of the file relating to the proceeding. By the decision of 26 July 2016, the Minister of Environment refused to initiate proceedings. The decision was upheld by virtue of the decision of the Minister of 21 September 2016. Towarzystwo na rzecz Ziemi lodged a complaint to Voivodeship Administrative Court in Warsaw with regard to the decision of the Minister of Environment of 21 September 2016 upholding the decision of the Minister of Environment of 26 July 2016 on refusal to initiate proceedings on annulment of the decision of the Marshal of the Mazovian Voivodeship of 31 January 2011 – integrated permit for Block 11. The complaint was not submitted to the representative of the company,
2) Complaint filed by foundation ClientEarth Poland about permission to participate in administrative proceedings in case of emission of greenhouse gas, proceeded on the basis of art. 50 of Act on trading greenhouse gas emission privileges from 28 April 2011. The Supreme Administrative Court (NSA) repealed the WSA’s sentence. The Marshal of the Mazovian Voivodeship refused to admit the Foundation, which filed a complaint to the Minister of Environment. The Minister of Environment upholds the decision of the body of the first instance. The Foundation submitted complaint with regard to the decision of the Minister to VAC in Warsaw, VAC dismissed the complaint. The Supreme Administrative Court, by the judgment of 20 May 2015, set aside the judgment of the Voivodeship Administrative Court in Warsaw and referred the case back for reconsideration. The Voivodeship Court, by the judgment of 5 November 2015, set aside the decisions of the Minister and the Marshal on refusal to admit the Foundation to participate in the proceedings. Complaint in cessation was lodged by the company with regard to the judgment of VAC in Warsaw of 5 November. On 21 January 2016, the Minister of Environment lodged a complaint as well. Currently, the case was delegated to SAC, where it was assigned a case no. II OSK 552/16,
3) The proceedings conducted by the Regional Environmental Protection Directorate, case no. WPN-II.6334.1.2015/2016.AA.10, with regard to the activity carried out by Enea Wytwarzanie Sp. z o.o. consisting in construction of a temporary stabilising check dam at 426 kilometre of the coast of Vistula, between the cooling water intake and the cooling water discharge canal of the Kozienice Power Plant, in Świerże Górne. On 14 December 2016, the Regional Director for Environment Protection in Warsaw issued a decision by which it decided to dismiss the proceedings conducted in accordance with the procedure stipulated by Article 37 section 1. The parties are entitled to appeal against the decision,
Obtaining decision on environmental permits with regard to the stabilising check dam. The legal predecessor of Enea Wytwarzanie Sp. z .o.o. submitted an application for issuing decision on environment permits with regard to the stabilising check dam together with the corresponding infrastructure. The parties and participants to the proceedings are: Enea Wytwarzanie Sp. z o.o., Polish Society for the Protection of Birds, Society for Nature Protection, Society for Earth. The case is pending.
4) Proceedings conducted by public administration courts regarding company Lubelski Węgiel Bogdanka S.A. refer, inter alia, to disputes with local government units regarding real property tax. The question stems from the fact that the Company, drawing up the real property tax, did not take into account (similarly to other mining companies in Poland) the value of underground mining pits or the value of equipment included in them in the calculation of this tax. The suits refer to both the reimbursement of surplus payments, and the establishment of basis for taxation with real property tax for 2004-2007 in terms of surplus payments, and for 2008-2012. To cover possible claims in real property tax, the Company has established provisions of PLN 32 456 thousand.
Furthermore, a proceeding is conducted by the District Court in Lublin, regarding ZUS claims in accident insurance contribution – namely the legitimacy of requalification of accidents at work and the repeal of sanction imposed as a result of ZUS (Lublin Division) inspection of the Company. The company has provisions of PLN 20 042 thousand to cover any possible claims in this respect. On 7 February 2017, The District Court in Lublin issued a judgement in the proceedings against the Social Insurance Institute (ZUS) Lublin Branch requesting that the decision issued by the Social Insurance Institute (ZUS) Lublin Branch relating to the determination of the percentage share of the accident insurance ZUS contribution for the settlement period from 1 April 2013 to 31 March 2014 and from 1 April 2014 to 31 March 2015 and penalizing the Company by imposing sanctions constituting an increase in the rate referred to above by 50% be revoked or potentially amended. Based on the above judgement, the District Court changed the appealed decision so that the Company does not have to pay the ZUS accident insurance contribution at an interest rate increased by 50%, and the interest rate of the accident insurance contribution is to be the rate previously determined by the Company. The judgement is not yet final.
The contingent liability in reference to legal claims concerning the remuneration for the co-creators of inventions covered by patents No. 206048 and 209043, functioning in the Company, from which the Company does not create provisions, mainly may result from an inability to assess the merits of the amount of the claim and the discrepancy between the Company's position and the position of the co-creators of inventions, covered by aforementioned patents.
The value of potential liability at the date of publication these consolidated financial statements acqusition is PLN 48 million. The Company estimated the provision for the remuneration for the co-creators of inventions in accordance with their best knowledge and principles previously applied by the Company. In the position of provision for legal claims, the Company presents on the acquisition date, provision for claims relating to remuneration for the co-creators of inventions covered by patent No. 206048 and 209043, functioning in LWB. Remuneration’s value issue will be a subject to the work of court experts or experts mutually accepted by both parties, and it shall be carried out after drawing up of technical opinion on the inventions covered by a patent. On 24 March 2016, an expert witness drew up an opinion a number of reservations were made with regard to in the course of year 2016. The subsequent step shall be examination of the expert witness in terms of the drawn up opinion – the date for the hearing has not been selected yet, but it is expected that the hearing takes place in the first quarter of 2017. Related provision as at 31 December 2016 amounted to PLN 3 554 thousand.
47.5 Risk related to the legal status of property used by the Group
The risk related to the legal status of the property used by the Group results from the fact that the Group does not have all legal titles to use the land where transmission networks and the related devices are located. The Group may have to incur costs related to non-contractual use of property in the future.
Considering the legal status, there is a risk of incurring additional costs related to compensation claims for non-contractual use of land, rental fee or, rarely, claims related to the change of facility location (restoring land to its previous condition).
Decisions related to these issues are significant as they considerably affect both the Group’s strategy towards persons who raised pre-trial claims related to devices located on their land in the past and the approach to the legal status of devices in case of new investments.
The risk of loss of assets is low. The lack of legal status of the land where transmission networks are located does not constitute the risk of loss of Group’s assets, but generates potential additional costs to be incurred as a result of claims for non-contractual use of land, rental and easement fees or exceptionally, in individual cases, relocation of assets (restoration of the land to the original state). The relevant provisions for that purpose have been made by the Group.
Enea Group also recognized provision for the compensations for non-contractual use of the real properties on which the grid assets are located (power lines), in connection with transmission corridors and transmission easements on the above mentioned real properties.
As at 31 December 2016 the Group recognized the provision for non-contractual use of land in the amount of PLN 203 291 thousand.
47.6 Motions for settlement of not balanced energy trading in 2012
On 30 and 31 December 2014 Enea S.A. submitted motions for settlement to:
|Claimed amounts in PLN thousand|
|PGE Polska Grupa Energetyczna S.A.||7 410|
|PKP Energetyka S.A.||1 272|
|TAURON Polska Energia S.A.||17 086|
|TAURON Sprzedaż GZE Sp. z o.o.||1 826|
The subject of motions was claim for the payment for electric energy incorrectly settled under the system of energy balancing in 2012. Claimed companies earned unjustified benefits by refusing Enea S.A. to issue invoice corrections for 2012.
In the absence of amicable settlement of the above case, Enea S.A. filed the following lawsuits against above mentioned entities:
- FITEN S.A. - lawsuit of 24 November 2015,
- TAURON Polska Energia S.A. – lawsuit of 10 December 2015,
- TAURON Sprzedaż GZE Sp. z o. o. – lawsuit of 10 December 2015,
- PKP Energetyka S.A. – lawsuit of 28 December 2015,
- PGE Polska Grupa Energetyczna S.A. – lawsuit of 29 December 2015.
Two entities ie. PKP Energetyka S.A. and PGE Polish Energy Group S.A. have agreed for mediation, however no settlement of the dispute was reached. In the case against FITEN S.A. the court in the first instance issued a judgment dismissing the complaint of Enea S.A., from which the appeal will be filed. In other proceedings, there have been no settlement of disputes.
47.7 Dispute concerning energy origin certificate prices
Before the District Court in Poznań the proceeding brought by PGE Górnictwo i Energetyka Konwencjonalna S.A. is pending against the Company for the payment of PLN 42 351 thousand concerning purchased certificates of origin. Enea SA made a deduction from the payment for certificates of origin (by offsetting with invoices for certificates of origin) in respect of a damage caused by PGE GiEK S.A. to Enea S.A. The damage resulted from the fact that PGE GiEK S.A. did not fulfill the contractual obligation to accede to renegotiate long-term contracts for certificates of origin in accordance with the adaptive clause applicable to both Parties.
A reply to the action brought by PGE GIEK S.A. was made on 11 August 2016. In response to the lawsuit Enea SA made a motion to strike and dismiss the lawsuit in full. The mediation proceeding between the parties is currently in progress.
There are four another similar cases proceeded by the District Court in Poznan.
47.8 The contracts for the purchase of property rights from the certificates of energy origin from renewable sources
On 28 October 2016, Enea S.A. submitted representations, depending on the contract: notice of termination or withdrawal from long-term contracts for the purchase of property rights from the certificates of energy origin from renewable sources (the so-called green certificates) (the Contracts).
The Contracts were concluded in the years 2006-2014 with the counterparties listed below, who own the renewable energy generation plants (“Counterparties”):
- Farma Wiatrowa Krzęcin Sp. z o.o. with its registered office in Warsaw;
- Megawind Polska Sp. z o.o. with its registered office in Szczecin;
- PGE Górnictwo i Energetyka Konwencjonalna S.A. with its registered office in Bełchatów;
- PGE Energia Odnawialna S.A. with its registered office in Warsaw;
- PGE Energia Natury PEW Sp. z o.o. with its registered office in Warsaw;
- “PSW” Sp. z o.o. with its registered office in Warsaw;
- in.ventus Sp. z o.o. EW Śniatowo sp.k. with its registered office in Poznań;
- Golice Wind Farm Sp. z o.o. with its registered office in Warsaw.
As a rule, the Contracts were terminated as of the end of November 2016. The exact date of termination of particular Contracts followed from the contractual provisions.
The reason for the Company terminating/withdrawing from particular Contracts was the exhaustion of the possibilities of recovering the contractual balance and equivalence of the parties’ performance caused by amendments to the law.
Amendments to the law which occurred after the conclusion of the said Contracts, in particular:
- the Regulation of the Minister of Economy dated 18 October 2012 on the detailed scope of duties relating to obtaining certificates of origin and presenting them for redemption, paying the substitution fee, purchase of electric energy and heat generated from renewable sources and the duty to confirm data relating to the amount of electric energy generated from renewable sources (Journal of Laws of 2012, item 1229);
- the Act on renewable energy sources of 20 February 2015 (Journal of Laws of 2015, item 478) and the consecutive amendments to the law related to the Act, and draft amendments, in particular:
- the Act of 22 June 2016 on amending the Act on renewable energy sources and certain other acts (Journal of Laws of 2016, item 925); and
- the draft Regulation of the Minister of Energy on changing the share of electric energy resulting from the redeemed certificates of origin confirming the generation of electric energy from renewable sources, which is to be issued based on the authorization following from Article 12, section 5 of the Act of 22 June 2016 on amending the Act on renewable energy sources and certain other acts;
- caused an objective inability to prepare reliable price forecast models for green certificates.
The financial effect of the termination of the Contracts is that the Company avoided incurring a loss in the amount of the difference between the contractual prices and the market prices of the green certificates.
The estimated total non-discounted value of the contractual liabilities of Enea S.A. as at 31 December 2016 amounted to approx. PLN 1 187 million, net. The Company recognized provision for potential claims following from the terminated Contracts with reference to the requested transactions for the sale of property rights by counterparties presented until 31 December 2016.