27.4 Other court cases and disputes
Matter of compensation for share conversion
On 12 November 2014 Socrates Investment S.A. (an entity that purchased claims from the former shareholders of PGE Górnictwo i Energetyka S.A.) filed a lawsuit requesting that the court award it compensation in the total amount of over PLN 493 million (plus interest) for damage incurred in respect of the incorrect (in its opinion) determination of the share exchange ratio applied in the merger of PGE Górnictwo i Energetyka S.A. and PGE S.A. The Company filed a response to the claim. On 15 November 2017, the Company received the plaintiff’s statement – an amendment to the claim – increasing the amount claimed in the lawsuit to PLN 636 million. The first-instance court proceedings are currently underway and an expert opinion on transfer pricing has been drawn up. No trial date has been set.
In addition, a similar claim was submitted by the company Pozwy Sp. z o.o., which had bought claims from the former shareholders of PGE Elektrownia Opole S.A. Pozwy sp. z o.o. filed a lawsuit to the Regional Court in Warsaw against PGE GiEK S.A., PGE S.A. and PwC Polska sp. z o.o. (hereinafter referred to as Respondents) requesting that the Respondents be ordered, in solidum, or jointly and severally, to pay for the benefit of Pozwa sp. z o.o. compensation in the total amount of over PLN 260 million with interest for the allegedly incorrect (in its opinion) determination of the exchange ratio of PGE Elektrownia Opole S.A. shares for PGE GiEK S.A. shares in the process of the merger of these companies. This lawsuit was served on PGE S.A. on 9 March 2017 and the deadline for filing a response to the lawsuit was set by the court at 9 July 2017. The companies PGE S.A. and PGE GiEK S.A. submitted a response to the claim on 8 July 2017. On 28 September 2018, the District Court in Warsaw ruled in the first instance and the lawsuit by Pozwy sp. z o.o. against PGE S.A., PGE GiEK S.A. and PWC Polska sp. z o.o. was dismissed. On 8 April 2019, PGE S.A. received a copy of the appeal filed by the claimant on 7 December 2018. PGE S.A. and PGE GiEK S.A.’s response to the appeal was prepared on 23 April 2019. The hearing was held on 21 December 2020. The Court of Appeal issued a verdict in which it overturned the appealed verdict of the District Court in its entirety and returned the case for re-examination to the District Court. On 22 January 2021 PGE S.A. together with PGE GiEK S.A. filed a complaint against the verdict to the Supreme Court, requesting that the verdict of the Court of Appeal be reversed in its entirety and the case be returned to the Court of Appeal for re-examination. At a closed session on 27 April 2021, the Supreme Court overturned the appealed verdict. Thus, the case was returned for re-examination by the Court of Appeal. In a verdict of 10 January 2024, the Court of Appeal upheld the claimant’s appeal and overturned the appealed verdict of the District Court and referred the case back to that court.
The PGE Group companies do not recognise the claims of Socrates Investment S.A. and Pozwy sp. z o.o. According to PGE S.A., these claims are groundless and the entire consolidation process was conducted in a fair and correct manner. The value of shares in the companies subject to consolidation had been determined by an independent company, i.e. PwC Polska sp. z o.o. Furthermore, the consolidation plan, including the ratio of converting shares in the acquired company into shares in the acquiring company was audited with respect to its correctness and reliability by an expert appointed by the court of registration, and no irregularities were identified. The court subsequently registered the merger of the aforementioned companies. The PGE Group did not establish any provision for the lawsuit.
Termination of agreements for the sale of origin energy rights by Enea S.A.
Due to the termination by Enea S.A. of long-term agreements for the sale of energy origin rights arising from certificates of origin of energy from renewable sources, the companies of the PGE Capital Group had been in litigation with Enea S.A. since 2016.
On 20 December 2022, an agreement was signed to settle all pending disputes amicably.
According to the agreement, the companies of the PGE Capital Group were to receive approximately PLN 287 million by the end of April 2023. The impact of the concluded agreement increased the PGE Capital Group’s pre-tax financial result for 2022 by approximately PLN 163 million.
By the end of April 2023, Enea S.A. had settled all liabilities under the concluded agreement.
Issues relating to the request by the Polimex-Mostostal consortium for an increase in remuneration for the construction of the Siechnice CHP plant
On 23 June 2021, a contract for the construction of CHP plant for the company Zespół Elektrociepłowni Wrocławskich KOGENERACJA S.A. in Siechnice was concluded with a consortium comprising Polimex Mostostal S.A. and Polimex Energetyka sp. z o.o. The current net value of the contractual remuneration is PLN 1,159 million.
Due to the occurrence – in the opinion of the Consortium – of an extraordinary change in economic relations, resulting in an increase in the prices of goods and materials as a consequence of the COVID 19 pandemic and a new phase of the armed aggression of the Russian Federation against Ukraine, the company received from the Consortium requests to increase the amount of the contractual remuneration for the above contract. The Company commissioned external experts to prepare a legal and technical opinion the results of which will form the basis for mediation aimed at resolving the disputes that have arisen concerning the existence of factual and legal grounds and the possible scope of a possible change in the amount of the remuneration. On 15 September 2023, the Parties entered into an agreement for mediation before a permanent mediator at the General Attorney’s Office of the Treasury of the Republic of Poland. In November 2023, the first mediation meetings were held. As at the date of publication of these financial statements, the mediation had not been completed. The Consortium estimated its indexation claim at a net amount of PLN 344 million. In the company’s opinion, the Consortium – at this point in time – has not demonstrated, in accordance with the distribution of the burden of proof, the factual and legal grounds for the claim.
On 20 and 26 September 2023 – at the Consortium’s request – the Regional Court in Wrocław issued a decision on granting security for the Consortium’s claim to shape the legal relationship and amend the contract. The value of the subject matter of the security was set by the Court at PLN 344 million.
Pursuant to the wording of the Court’s decision on the security, until the court proceedings concerning a change in the amount of the contractual remuneration end with a legally binding verdict, half of the net value of the subject of the security, i.e. the amount of PLN 172 million, will increase the existing value of the payments under the investment obligations indicated in the application and will be invoiced successively in parallel to the works performed by the Consortium. The establishment of the security is not legally binding. The decision was supplemented with an immediate enforceability clause.
On 2 November 2023, the company commenced a formal appeal procedure against the Court’s non-final order granting the security, said procedure aimed at challenging the rationale for the granting of the security with respect to both principle and amount. On 9 November 2023, the company sent a request to suspend the enforcement of the aforementioned decision to grant the security.
On 13 December 2023, KOGENERACJA S.A. received the decision of the Regional Court in Wrocław, 10th Commercial Division, dated 1 December 2023, concerning suspension of the enforceability of the decision of 20 September 2023 on granting the security for the claim until the complaint against this decision was resolved. Thus, the request of KOGENERACJA S.A. of 9 November 2023 was granted. The decision to stay the enforcement was supplemented with an immediate enforceability clause.
In these financial statements, no provision was recognised by the PGE Group for the aforementioned claim.
Environmental decision on the Turów Lignite Mine
On 31 May 2023, the Provincial Administrative Court in Warsaw suspended – pending an analysis of the relevant complaint – the enforceability of the environmental decision on lignite mining for the Turów Mine. The environmental decision sets out the conditions for the implementation of the project: “Continuation of the exploitation of the Turów lignite deposit, carried out in the commune of Bogatynia”. The complaint against the environmental decision was filed by, among others, the Frank Bold Foundation, Greenpeace and the EKO-UNIA Ecological Association.
On 12 June 2023, PGE GiEK S.A. filed a complaint with the Supreme Administrative Court in Warsaw against the decision concerning the Turów Mine and issued by the Provincial Administrative Court on 31 May 2023. This was the company’s response to the Provincial Administrative Court’s suspension of the enforceability of the environmental decision issued by the General Directorate of Environmental Protection in September 2022.
On 18 July 2023, the Supreme Administrative Court overturned the decision of the Provincial Administrative Court of 31 May 2023 to suspend the enforceability of the environmental decision concerning the Turów Mine. The complaints filed by the General Directorate of Environmental Protection, PGE GiEK S.A. and the National Public Prosecutor’s Office were taken into consideration.
On 31 August 2023, the Provincial Administrative Court suspended the proceedings on the environmental decision issued by the General Directorate of Environmental Protection and concerning the Turów Mine until the formal conclusion of the proceedings relating to the application of PGE GIEK S.A. for amending the environmental decision. At the request of PGE GIEK S.A. to amend the environmental decision, the proceedings ended with a final and legally binding decision to discontinue the proceedings.
On 13 March 2024, the Provincial Administrative Court overruled the decision of the General Directorate of Environmental Protection determining the environmental conditions for further exploitation of the lignite deposit in Turów. As the Court stressed, this did not mean either the closure or suspension of work at the Turów mine. The ruling is not legally binding.