In January 2014, the member companies of Enea Capital Group signed comprehensive banking service agreements with PKO BP SA and Pekao SA banks. The signed agreement warrant for the member companies of Enea Capital Group the comprehensive banking services as part of the product range available at these banks and overdraft availability as well as enable to perform joint management of cash with the use of cash pooling mechanism. The objectives of concluding the abovementioned agreements included, without limitation, ensuring the effective management of funds of the Group member companies and cost optimisation in the scope of expenses on banking services. Cash pooling services enable to consolidate bank accounts and, as a consequence, to perform netting of the balances of accounts of Enea Tax Capital Group (Enea TCG) member companies through covering any temporary shortage of funds with the surplus funds held by other member companies of Enea TCG.

The ongoing management of the companies’ liquidity focuses on the cash flows planning and on monitoring the current concentration of funds in bank accounts. Enea SA as the Pool Leader invests any surplus funds in current assets in the form of bank deposits. In order to make the liquidity and liquidity risk management process more uniform, the member companies of Enea TCG were covered by intra-Group regulations, i.e., the liquidity and liquidity risk management policy and procedure. In addition, in order to limit the risk of the lack of funds for purposes of timely repayment of accounts payable, the member companies of Enea Capital Group have access to intraday limits as part of the cash pooling services. If there is no sufficient balance of funds available under cash pooling, it is possible to use overdraft.

Entity authorised to audit financial statements

KPMG Audyt spółka z ograniczoną odpowiedzialnością sp. k. was chosen to conduct the financial revision operations referred to in the table below. The agreement with the abovementioned entity was signed on 6 May 2015. Information on the net fee for the entity conducting the financial revision operations for Enea SA in the years 2016-2017 is presented in the table below:

The remuneration for other services includes the fee for the audit of the regulatory statements for 2016 pursuant to Article 44 of the Power Law, the fee for performing the agreed procedures with respect to bank covenants for 2016, and the fee for verification of purchase price allocation (PPA) of Enea Elektrownia Połaniec S.A.

Detailed information on selecting and appointment of KPMG Audyt spółka z ograniczoną odpowiedzialnością sp. k. and a description of the services provided was published in the current report No. 38/2014 of 18 December 2014.

In 2017, the Mining Area of Enea Group recorded much higher results compared to the preceding year. It was possible to achieve this thanks to constant monitoring of operating costs of the mine, maintaining the unit cost of production at such a low level as in 2017 will be impossible, especially due to the labour situation in the mining industry, and as a result of the commencement of preparatory work towards Ostrów field. Two elements remain invariably a priority for this area: the optimal level of unit cost of extraction and the implementation of investment processes enabling coal extraction to comply with short- and long-term plans. The stability of the future results of Mining is positively affected by the inclusion of the Połaniec Power Plant in the Enea Group structure. Further development and operationality of the area was ensured by obtaining a mining licence in the new Ostrów field in 2017 which increased the LWB's operational resources and extended the prospects for the mine from 25 to 50 years.

The Generation Area, which is responsible for 27% of Enea's EBITDA, remains invariably influenced by the demanding situation on the energy market. Hard coal-based production involves exposure to the risk related to carbon dioxide emission costs. The major repairs of generation units planned for 2018-2019, which will enforce relatively long periods of suspension of electricity production, are important factors for the revenue of the Generation area. Lower production of current generation assets will be compensated by Unit 11, which was put into operation in December 2017 and through the optimal use of production capacities of two sets of generating sources - the Kozienice Power Plant and Połaniec Power Plant.

Distribution is the area that consistently stabilizes the predictability of financial flows as it is responsible for 40% of the EBITDA result of Enea Group. Two elements remain the factors affecting the results of this area: a decease in the average weighted cost of capital adopted by the Energy Regulatory Office (URE) for tariff calculations (WACC) - 7.197% in 2015, 5.675% in 2016, 5.633% in 2017. and the URE’s implementation of the so-called quality tariffs as of 2016. 3Q2017 turned out to be a real challenge for distribution network operators in Poland. Weather elements of unprecedented strength had a huge impact on the SAIDI and SAIFI indicators, which may significantly affect the EBITDA level in Distribution in 2019. In order to ensure the implementation of indicators determined by the President of the Energy Regulatory Office, the Group implements investments in the distribution area by enhancing security and stability of energy supplies.

In the area of ​​Trading, operational activities invariably concentrate on increasing revenue from the sales of electricity and gas fuel - thanks to the continuously developed product offer, new customers are gained, and the volume of energy and gas sold is also increased. The financial result of Trading is adversely affected by the growing competition on the market, exerting pressure on realized sales prices. The better y/y the results of the Trading area are mainly affected by the effects of termination of long-term contracts for the purchase of green property rights; the possible risk related to the impact of ongoing disputes with green energy producers on the results of subsequent periods is mitigated by the establishment of provisions for possible claims.

Despite difficult market and regulatory conditions, due to the consistent increase in the scale of the Group's operations, the search for synergies between its business areas, Enea Group generates financial results at the expected level, and the Group's liquidity standing is stable.

The financial standing of the Group remains safe, e.g. due to the relatively high amount of cash at the end of 2017, including short-term financial assets held to maturity and financial assets valued at fair value by the result of approximately PLN 2.6 billion. Thanks to constant discipline, search for cost optimization and care for the appropriate use of resources, the Group ensures that investments are financed from its own resources as well as from financing institutions.

Thanks to better results, a safe cash standing and the availability of financing, Enea Group can consistently implement the extensive CAPEX program (investment outlays) - in individual areas of activity.

Significant events after the balance sheet date

On 3 January 2018, a bilateral agreement was signed to purchase coal from Polska Grupa Górnicza sp. z o.o. in the term of 2018 - 2021. The contract was concluded for the needs of power units of Enea Elektrownia Połaniec SA, and the total net value of the Agreement is PLN 1.49 billion. In January 2018, an agreement was also signed under which PGG will provide Enea Wytwarzanie with a coal supply worth PLN 0.52 billion by the end of 2021.