Predicted accounting one-offs which impact significantly financial data presented in ORLEN Group consolidated financial report for the 4 quarters 2023

ORLEN S.A. („Company”) informs that in the ORLEN Group consolidated financial report for the 4 quarters 2023, it predicts the recognition of the finalization of accounting for business combination related to merger with PGNiG S.A. (“PGNiG”). It is an accounting non-cash one-off resulting from the International Financial Reporting Standard 3 Business Combinations, nevertheless it has a significant impact on the financial results of ORLEN and ORLEN’s Group (“Group”) for the period of 12 and 3 months ended on 31 December 2023.

 

On 2 November 2022, the merger of ORLEN with PGNiG was registered. The transaction of merger with PGNiG was subject to acquisition method in accordance with the IFRS 3 Business Combinations. In the consolidated financial statements for 2022 the Group presented the provisional values of the acquired assets and assumed liabilities that haven’t been changed during the subsequent reporting periods due to the ongoing measurement period.

 

On 19 February 2024 the Group has finally completed the process of identification and valuation to fair value of the acquired assets and assumed liabilities, which was carried out by independent experts. As a result of the finalization of accounting for business combination related to the merger with PGNiG transaction the gain on a bargain purchase has been reduced by PLN 1,5 bn in relation to the provisional value of PLN 8,2 bn presented in the consolidated financial statement for 2022 and amounted to PLN 6,7 bn.

 

Therefore, in accordance with the principles of IFRS 3, ORLEN Group retrospectively adjusted the provisional values of the net assets acquired to their fair values as if the accounting for the business combination with PGNiG was completed at the acquisition date. As a consequence the Group also revised the comparative information for the prior reporting periods, which also affected the financial figures of ORLEN Group for 2023.

 

Recognition of adjustments to the provisional values of net assets acquired to their fair values and their settlements in the subsequent reporting periods will increase the consolidated EBITDA of ORLEN Group for the period of 12 and 3 months ended on 31 December 2023, by ca. PLN 7,6 bn and PLN 2,2 bn respectively, the consolidated EBIT of ORLEN Group for the period of 12 and 3 months ended on 31 December 2023, by ca. PLN 4,7 bn and PLN 1,6 bn respectively, and consolidated net result of ORLEN Group for the period of 12 and 3 months ended on 31 December 2023, by PLN 3,6 bn and PLN 0,8 bn respectively, which is due in particular to:

-        recognition of contract assets and contract liabilities related to contracts mainly for the purchase and sale of gas, electricity and CO2 emission allowances of the former PGNiG Group measured at fair value as at the acquisition date, and settled in the profit and loss statement at the time of the actual execution of a given futures contract in 2023, in the amounts of PLN 8,3 bn and PLN 2,5 bn respectively.

-        remeasurement of the inventories as at the acquisition date, mainly gas inventories, which affected the value of cost of sales recognized in subsequent periods, including reversal of the previously recognized effects of establishment and reversal of impairments on gas inventories to their net realizable values, i.e. PLN 1,6 bn and PLN (0,1) bn respectively.

-        recognition of the additional impairments as a result of comparison, made by the Group, of the changed book values of non-financial non-current assets with their recoverable amounts estimated within the impairment tests carried out at the end of the 1 quarter 2023, particularly in upstream segment, what will negatively affect the presented result for the 12 months 2023, in the amount of PLN (1,8) bn.

-        recognition of the changes in amortization and depreciation as a result of determining the final fair values of fixed assets, intangible assets and right-of-use assets for the period of 12 and 3 months ended on 31 December 2023, in the amounts of PLN (2,9) bn and PLN (0,6) bn.

-        impact of changes in fair values of the assets and liabilities on deferred tax assets and deferred tax liabilities which affected the recognition of the deferred tax in the profit and loss statement in the period of 12 and 3 months ended on 31 December 2023, amounting to PLN (1,2) bn and PLN (0,8) bn respectively.

 

ORLEN will publish consolidated financial report of ORLEN Group for the 4 quarters 2023 on 22 February 2024.