2.4.1. Material restrictions of the ability to transfer earnings from interests in joint ventures to the Group
Polska Grupa Górnicza Sp. z o.o. (PGG)
Under PGG’s note issue programme agreement dividends may be paid only when all of the following conditions are met:
- A part of notes of individual tranches maturing in the period for which the dividend is to be paid are redeemed before dividend can be distributed;
- The following ratios are maintained within the permitted limits: net debt/EBITDA less replacement capital expenditure (for the last quarter), DSCR (ratio of cash available for debt servicing to mature debt – for the last year) and the Future Cash Flow Ratio (for the last quarter);
- The forecast values of the ratios will not exceed the permitted limits by the note redemption date as a result of the payment;
- The dividend will be paid to the shareholders and to the holders of participation notes in the proportion defined in the terms and conditions of participation notes.
Elektrociepłownia Stalowa Wola S.A. (ECSW)
Under ECSW’s financing agreement distribution of dividends and payments under subordinated loans are permitted only when there has been no default under the financing agreement, the financial ratios have been maintained within the permitted limits and the planned payments will not result in exceeding those limits, and the company maintains a certain contractually defined minimum reserve of cash available for the servicing of its debt.
As at the date of the consolidated financial statements of the PGNiG Group for 2016, ECSW’s construction project was in progress, and according to a directional decision of the Project sponsors (PGNiG and Tauron PE), it will be continued. Advanced negotiations with potential ldeners are under way to agree on details of a new credit facility agreement for refinancing of ECSW’s existing debt and further execution of the investment project. For more information on activities relating to ECSW’s operations, see Section 5.4.4. the Directors’ Report on the operations of PGNiG S.A. and the PGNiG Group in 2016.
SGT EUROPOL GAZ S.A. (EUROPOL GAZ)
In accordance with the agreement of May 20th 1997 between EUROPOL GAZ and its shareholders, which continued in force as at December 31st 2015, no decision on payment of dividend by EUROPOL GAZ could be made until EUROPOL GAZ fully discharged its liabilities under borrowings incurred in connection with construction of the gas pipeline.
As at December 31st 2016, there were no such restrictions at EUROPOL GAZ with respect to payment of dividend, repayment of borrowings, or payment of advances by the company.
The table below contains financial information relating to equity accounted investees.
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| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| Joint ventures | Joint venture | Associate | |||
| SGT EUROPOL GAZ S.A. | Polska Grupa Górnicza Sp. z o.o. | Elektrociepłownia Stalowa Wola S.A. | SGT EUROPOL GAZ S.A. | GAS – TRADING S.A. | |
| At beginning of period | 840 | – | – | 840 | 16 |
| Acquisition of shares | – | 444 | – | – | – |
| Acquisition of additional equity interest in SGT EUROPOL GAZ S.A. (1.44%) | – | – | – | 51 | – |
| Deconsolidation | – | – | – | – | (16) |
| Consolidation | – | – | 21 | – | – |
| Changes accounted for in profit/(loss) from equity-accounted investees, including: | |||||
| Share of net profit/(loss) | 64 | (55) | (47) | 44 | – |
| Elimination of unrealised profits between the Group and the joint venture | (2) | 2 | – | (1) | – |
| Write-off of goodwill from acquisition of additional equity interest in SGT EUROPOL GAZ S.A. | – | – | – | (6) | – |
| Reversal of negative value of shares accounted for with the equity method | – | – | 26 | – | – |
| Impairment losses | (62) | – | – | (88) | – |
| Changes accounted for in other comprehensive income from equity-accounted investees | – | (2) | – | – | – |
| At end of period | 840 | 389 | – | 840 | – |
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| 2016 | 2015 | ||
|---|---|---|---|
| SGT EUROPOL GAZ S.A.* | Polska Grupa Górnicza Sp. z o.o.** | SGT EUROPOL GAZ S.A.* | |
| PGNiG Group’s ownership interest | 51.18% | 16.63% | 51.18% |
| Description of business | Transmission of natural gas | Production of coal | Transmission of natural gas |
| Key financial data | |||
| Non-current assets | 2,201 | 6,277 | 2,465 |
| Current assets | 2,125 | 1,008 | 1,970 |
| including cash and cash equivalents | 1,900 | 310 | – |
| Non-current liabilities | 198 | 2,442 | 401 |
| including non-current financial liabilities | 115 | 1,148 | – |
| Current liabilities | 322 | 2,516 | 329 |
| including current financial liabilities | 229 | 92 | – |
| Net assets | 3,806 | 2,327 | 3,705 |
| Revenue | 1,120 | 3,828 | 1,225 |
| Depreciation and amortisation | 281 | 910 | 305 |
| Interest income | 23 | 9 | 27 |
| Interest expense | 18 | 48 | 22 |
| Income tax | 29 | 55 | 20 |
| Net profit/(loss) | 117 | (332) | 78 |
| Other comprehensive income | – | (11) | – |
| Carrying amount of the investment | |||
| Share of net assets | 1,948 | 387 | 1,896 |
| Adjustment to ensure consistency of accounting policies with those of the Group | (45) | – | (57) |
| Elimination of unrealised profits between the Group and the joint venture | (182) | 2 | (180) |
| Goodwill write-off | (6) | – | (6) |
| Impairment losses | (875) | – | (813) |
| Carrying amount of the investment in the consolidated statement of financial position | 840 | 389 | 840 |
*Resolutions are passed by a majority of three quarters of votes represented at the General Meeting. Resolutions may be passed if the General Meeting is attended by all founding shareholders, each of them holding 30% or more shares.
**Indirect interest held through PGNiG TERMIKA S.A., which is entitled to appoint one member of the Supervisory Board and can block material decisions.
