28.1 Contingent liabilities

Contingent return of grants from environmental funds

The liabilities represent the value of possible future reimbursements of funds received by PGE Group companies from environmental funds for certain investment projects. The funds will be reimbursed if investment projects for which they were granted, do not bring the expected environmental effect.

Legal claims

Dispute with Worley Parsons

The contingent liability is mainly related to the dispute with WorleyParsons. WorleyParsons made a claim for payment of PLN 59 million due to the claimant and for the return of the amount that in the claimant’s opinion was unduly collected by PGE EJ 1 sp. z o.o. from a bank guarantee, and later the claim extended to PLN 104 million (i.e. by PLN 45 million). On March 31, 2018, the company filed a response to WorleyParsons’ expanded claim. The Group has not recognised the claims and believes that the court is unlikely to award them to the claimant.

Claims related to energy origin certificate sale contracts executed by Energa-Obrót S.A.

Since October 2017, PGE EO S.A. was a party to legal disputes in which Energa-Obrót S.A. demanded the annulment of a legal relation that were to arise as a result of the execution of master agreements to sell energy origin certificates resulting from electricity origin certificates at FW Kisielice in 2009, FW Koniecwałd (Malbork) and FW Galicja. Energa-Obrót S.A.’s demands in all of the lawsuits are based on the allegation that executory agreements (to sell specific energy origin certificates) were executed in a way that circumvented the Public Procurement Law. Alternatively, if the Agreement is considered as an agreement on award of a public procurement, Energa Obrót S.A. was claiming absolute invalidity of the Agreements due to them being executed in a way that circumvented the Public Procurement Law.

Having claimed that the agreements concluded in 2009 were invalid, Energa-Obrót S.A. refused to purchase the energy certificates of origin concerning electricity produced from renewable sources at FW Kisielice, FW Koniecwałd (Malbork) and FW Galicja, which constituted a breach of the agreements and resulted in contractual penalties of PLN 80 million being imposed (including PLN 35 million recognised as revenues in the current period and PLN 45 million recognised in previous years).

In addition, through motions filed in September 2017, Energa Obrót S.A. summoned PGE Energia Odnawialna S.A. and PGE Energia Natury sp. z o.o. (currently acquired by PGE Energia Odnawialna S.A.) for amicable resolution of disputes for the payment of claims concerning considerations paid on the basis of invalid contracts from 2009. The parties failed to reach agreement at the meetings that were held in November and December 2017.

Throughout the duration of the disputes, PGE Group did not recognize any claims made against it.

On February 27, 2020 a settlement was concluded between PGE EO S.A. and Energa-Obrót S.A., which amicably ended all disputes concerning framework agreements on sale of energy origin certificates. The settlement does not affect the results presented in the financial statements of PGE Group.

Bank guarantee liabilities

These liabilities comprise bank guarantees provided as collateral for settlements with the Warsaw Commodity Clearing House. As at December 31, 2019, the total amount of bank guarantees was PLN 1,846 million (PLN 177 million in the corresponding period).

Other contingent liabilities

Other contingent liabilities mainly comprise a potential claim by WorleyParsons (as described above), amounting to PLN 33 million.