Report on the Audit of the Consolidated Financial Statements of the PGNiG SA Capital Group for the 2011 Financial Year

I. General Information

1. Details of the audited Parent Company

The Parent Company of the Capital Group operates under the business name Polskie Górnictwo Naftowe i Gazownictwo SA. The Company’s registered office is located in Warsaw, at M. ­Kasprzaka Street 25.

The Company operates as a joint stock company established by a notarized deed on 21 October 1996 before Paweł Błaszczak, Notary Public in Warsaw (Repertory A No. 18871/96). The Company was recorded in the Commercial Register kept by the District Court, XVI Business-Registry Division in Warsaw, section B, under number 48382, based on the decision of 27 December 2001. Currently the Company is recorded in the Register of Entrepreneurs kept by the District Court, XII Business-Registry Division in Warsaw, under KRS number 0000059492.

The Company’s tax identification number NIP assigned by the Second Tax Office on 22 November 1996 is 525-000-80-28.

The REGON number assigned by the Statistical Office on 14 November 1996 is: 012216736.

The Company operates based on the provisions of the Code of Commercial Companies.

In accordance with the Company’s articles of association, the scope of its activities includes:

  • production of crude oil,
  • production of natural gas,
  • services related to exploration of crude oil and natural gas fields,
  • mining of sulphur-bearing materials,
  • other mining, n.e.c.,
  • production of crude oil and refined products,
  • reprocessing crude oil and refined products,
  • services related to installation, repair and maintenance of machines for mining and building industry,
  • production of electricity,
  • transmission of electricity,
  • distribution of electricity,
  • production of gas fuels,
  • distribution of gas fuels through the network,
  • production of heat (steam and hot water),
  • distribution of heat (steam and hot water),
  • geological and engineering excavations and drilling,
  • execution of general construction works in respect to line structures: pipelines, power lines, electrical traction lines as well as telecommunication and transmission lines,
  • central heating and ventilation installations,
  • gas installations,
  • service and repair of motor vehicles,
  • retail sale of fuels,
  • wholesale of solid, liquid and gas fuels and derivative products,
  • wholesale of semi-finished products,
  • other specialized wholesale trade,
  • hotels and motels with restaurant,
  • hotels and motels without restaurants,
  • cargo road transport by specialized vehicles,
  • cargo transport by road, using general-purpose vehicles,
  • pipeline transport,
  • warehousing and storage of goods in other storage areas,
  • travel agencies,
  • fixed line telephony and telegraphy,
  • mobile telephony,
  • data transmission, information and communication technology,
  • radio communications,
  • research and development work in technical sciences,
  • geological and exploration activity,
  • surveying and mapping,
  • rental of real property on own account,
  • management of residential real property,
  • management of non-residential real property,
  • purchase and sales of real property on own account,
  • non-public libraries,
  • archives,
  • museums,
  • technical tests and analyses,
  • leasing of the Company’s assets dedicated to transmission of energy and gas,
  • other financial brokerage services,
  • holdings,
  • other printing operations, not elsewhere classified,
  • DTP and typesetting services,
  • auxiliary graphics services,
  • service activity related to installation, repair and maintenance of measurement, control, research, testing and navigation instruments and equipment,
  • heating, water, ventilation and gas installations,
  • brokerage sales of fuels, ore, metals and industrial chemicals,
  • activities of agents involved in the sales of various goods,
  • wholesale trade of metal products and equipment as well as additional plumbing and heating equipment,
  • other retail sale in non-specialized stores,
  • finance lease,
  • auxiliary financial services related to insurance and pension-retirement funds,
  • rental of machines and equipment,
  • data processing,
  • activity related to databases,
  • other IT-related services,
  • accounting and bookkeeping services,
  • advertisement,
  • Call Center services,
  • other commercial activity, n.e.c.,
  • property management services,
  • other short-term accommodation, n.e.c.

In the audited period, the Company conducted the following business activities: exploration and exploitation of crude oil and gas fields, general construction work regarding pipelines and mines, sales of crude oil and natural gas, lease of the Company’s assets used for transmission of energy and gas.

As of 31 December 2011, the Company’s share capital amounted to PLN 5,900,000,000 and was divided into:

  • 4,250,000,000 A series bearer shares with face value of PLN 1 each,
  • 750,000,000 A1 series bearer shares with face value of PLN 1 each,
  • 900,000,000 B series bearer shares with face value of PLN 1 each.

As of 31 December 2011 the Company’s shareholders included:

  • State Treasury – 72.41% shares,
  • Publicly traded shares – 27.59% shares.

During the financial year the shareholding structure of the Company’s share capital and its amount did not undergo any changes.

After the balance-sheet date there were no changes in the Company’s share capital.

As of 31 December 2011, the Capital Group’s equity amounted to PLN 24,496,660 thousand.

The Capital Group’s financial year is the calendar year.

Composition of the Management Board as of the date of the opinion:

  • Radosław Dudziński – Vice Chairman of Management Board,
  • Sławomir Hinc – Vice Chairman of Management Board,
  • Mirosław Szkałuba – Vice Chairman of Management Board,
  • Marek Karabuła – Vice Chairman of Management Board.

Changes in the composition of the Management Board during the audited period:

  • On 12 January 2011 by the decision of the Supervisory Board the President and Members of the Management Board of ­PGNiG SA were re-elected for another term of office, which starts on 13 March 2011 and expires on 13 March 2014:
    • Michał Szubski – President of the Management Board,
    • Radosław Dudziński – Vice Chairman of Management Board,
    • Sławomir Hinc – Vice Chairman of Management Board,
    • Marek Karabuła – Vice Chairman of Management Board.
  • On 8 March 2011 the Supervisory Board of ­PGNiG appointed Mr Mirosław Szkałuba, a candidate elected by the Company›s employees, as Vice Chairman of the Management Board of ­PGNiG for another term of office starting on 13 March 2011.
  • On 19 December 2011 Mr Michał Szubski resigned from the position of ­PGNiG SA’s President, for personal reasons. Supervisory Board of ­PGNiG SA approved the resignation of Mr Michał Szubski with effect from 31 December 2011. In regard to the resignation of Mr Michał Szubski from the position of ­PGNiG SA’s President, the supervision of the activities within the responsibilities of the President of the Management Board of ­PGNiG, herein coordination of the activities of the Management Board, were assigned to Mr Marek Karabuła, the Vice Chairman of the Management Board responsible for Oil Mining, starting from 1 January 2012 until the conclusion of selection procedure for the position of the President of the Management Board.

The above changes have been reported and registered at a relevant court register. Till the opinion date there were no changes, other than mentioned above, in the composition of the Management Board.

Composition of the Capital Group as of 31 December 2011:

Parent – Polskie Górnictwo Naftowe i Gazownictwo SA, and:

  • Direct subsidiaries:
    • Poszukiwania Nafty i Gazu Jasło SA – 100% shares,
    • Poszukiwania Nafty i Gazu Kraków Sp. z o.o. – 100% shares,
    • Poszukiwania Nafty i Gazu NAFTA Sp. z o.o. – 100% shares,
    • GEOFIZYKA Kraków Sp. z o.o. – 100% shares,
    • GEOFIZYKA Toruń Sp. z o.o. – 100% shares,
    • Poszukiwania Naftowe Diament Sp. z o.o. – 100% shares,
    • Zakład Robót Górniczych Krosno Sp. z o.o. – 100% shares,
    • ­PGNiG Norway AS – 100% shares,
    • Polish Oil and Gas Company - Libya B.V. – 100% shares,
    • INVESTGAS SA – 100% shares,
    • Dolnośląska Spółka Gazownictwa Sp. z o.o. – 100% shares,
    • Górnośląska Spółka Gazownictwa Sp. z o.o. – 100% shares,
    • Karpacka Spółka Gazownictwa Sp. z o.o. – 100% shares,
    • Mazowiecka Spółka Gazownictwa Sp. z o.o. – 100% shares,
    • Pomorska Spółka Gazownictwa Sp. z o.o. – 100% shares,
    • Wielkopolska Spółka Gazownictwa Sp. z o.o. – 100% shares,
    • Geovita Sp. z o.o. – 100% shares,
    • ­PGNiG Technologie Sp. z o.o. – 100% shares,
    • ­PGNiG Energia SA – 100% shares,
    • BUD-GAZ P.P.U.H. Sp. z o.o. – 100% shares,
    • ­PGNiG Sales & Trading GmbH – 100% shares,
    • ­PGNiG Finance AB (publ) – 100% shares,
    • ­PGNiG SPV 1 Sp. z o.o. – 100% shares,
    • Operator Systemu Magazynowania Sp. z o.o. – 100% shares,
    • Polskie Elektrownie Gazowe Sp. z o.o. – 100% shares,
    • Biuro Studiów i Projektów Gazownictwa Gazoprojekt SA – 75% shares,
    • NYSAGAZ Sp. z o.o. – 66% shares.
  • Indirect subsidiaries :
    • Geofizyka Toruń Kish Ltd (Rial) – 100% shares,
    • Oil Tech International F.Z.E. – 100% shares,
    • Zakład Gospodarki Mieszkaniowej Sp. z o.o. (Piła) – 100% shares,
    • Biogazownia Ostrowiec Sp. z o.o. – 100% shares,
    • Powiśle Park Sp. z o.o. (Warszawa) – 100% shares,
    • Poltava Services LLC – 99% shares,
    • CHEMKOP Sp. z o.o. Kraków – 85% shares,
    • GAZ Sp. z o.o. (Błonie) – 51% shares,
    • GAZ MEDIA Sp. z o.o. (Wołomin) – 51% shares,
    • PT Geofizyka Toruń Indonezja – 55% shares.

Consolidated Financial Statements for the 2011 Financial Year