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ciech
CONSOLIDATED FINANCIAL
STATEMENTS
___________________
of the CIECH Group for 2022
KRS (National Court Register number) 0000011687
Statistical ID No (REGON): 011179878
Tax ID No (NIP): 118-00-19-377
Share capital: PLN 263,500,965.00 (paid up in full)
2022
ul. Wspólna 62, 00-684 Warsaw
Tel. +48 22 639 11 00
ciech@ciechgroup.com
We are providing a courtesy English translation of our consolidated financial statements which were originally written in Polish. We
take no responsibility for the accuracy of our translation. For an accurate reading of our consolidated financial statements, please
refer to the Polish language version of our consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
ciechgroup.com
2
THE CIECH GROUP – SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
in thousand PLN
in thousand EUR
12 months ended
31.12.2022
12 months ended
31.12.2021
12 months ended
31.12.2022
12 months ended
31.12.2021
Sales revenues on continued operations
5,415,459
3,483,713
1,155,101
761,051
Operating profit/(loss) on continued operations
590,177
340,504
125,883
74,386
Profit/(loss) before tax on continued operations
591,792
256,883
126,228
56,119
Net profit / (loss) for the period
564,701
281,085
120,449
61,405
Net profit/(loss) attributable to shareholders of
the parent company
566,937
281,866
120,926
61,576
Net profit/(loss) attributed to non-controlling
interest
(2,236)
(781)
(477)
(171)
Other comprehensive income net of tax
(167,670)
145,835
(35,763)
31,859
Total comprehensive income
397,031
426,920
84,686
93,264
Cash flows from operating activities
842,301
1,263,651
179,660
276,057
Cash flows from investment activities
(845,021)
(692,100)
(180,240)
(151,196)
Cash flows from financial activities
(109,590)
(221,542)
(23,375)
(48,398)
Total net cash flows
(112,310)
350,009
(23,955)
76,463
Earnings (loss) per ordinary share (in PLN/EUR)
10.76
5.35
2.30
1.17
as at 31.12.2022
as at 31.12.2021
as at 31.12.2022
as at 31.12.2021
Total assets
8,092,527
7,135,218
1,725,523
1,551,337
Non-current liabilities
2,181,430
2,542,124
465,134
552,708
Current liabilities
3,206,787
2,206,765
683,764
479,794
Total equity
2,704,310
2,386,329
576,625
518,835
Equity attributable to shareholders of the parent
2,710,221
2,390,105
577,885
519,656
Non-controlling interest
(5,911)
(3,776)
(1,260)
(821)
Share capital
287,614
287,614
61,326
62,533
The above selected financial data were converted into PLN in accordance with the following principles:
• items in the consolidated statement of financial position were converted using the average exchange rate determined by the National
Bank of Poland on the last day of the reporting period;
• items in the consolidated statement of profit or loss, consolidated statement of other comprehensive income and consolidated
statement of cash flows were converted using the exchange rate constituting the arithmetic mean of rates determined by the National
Bank of Poland on the last day of each calendar month of the reporting period.
as at 31.12.2022
as at 31.12.2021
12 months
ended 31.12.2022
12 months
ended 31.12.2021
EUR 1 = PLN 4.6899
EUR 1 = PLN 4.5994
EUR 1 = PLN 4.6883
EUR 1 = PLN 4.5775
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
ciechgroup.com
3
THE CIECH GROUP – SELECTED FINANCIAL DATA ................................................................................................................................... 2
CONSOLIDATED STATEMENT OF PROFIT OR LOSS OF THE CIECH GROUP ............................................................................................... 5
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME OF THE CIECH GROUP .................................................................. 6
CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE CIECH GROUP ....................................................................................... 7
CONSOLIDATED STATEMENT OF CASH FLOWS OF THE CIECH GROUP .................................................................................................... 8
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY OF THE CIECH GROUP ........................................................................................ 9
1 GENERAL INFORMATION ............................................................................................................................................................. 10
1.1 INFORMATION ON THE GROUP’S ACTIVITIES ........................................................................................................................... 10
1.2 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING PRINCIPLES .................................................... 11
1.2.1 REPRESENTATIONS BY THE MANAGEMENT BOARD ..................................................................................................... 11
1.2.2 BASIS OF PREPARATION ............................................................................................................................................... 11
1.3 FUNCTIONAL AND REPORTING CURRENCY ............................................................................................................................... 12
1.4 ACCOUNTING POLICIES ............................................................................................................................................................. 13
1.5 CHANGES IN ACCOUNTING POLICIES AND THE SCOPE OF DISCLOSURES ................................................................................. 13
1.5.1 ADJUSTMENT OF PRIOR PERIOD ERRORS AND CHANGES IN ACCOUNTING POLICY .................................................... 14
2 SEGMENT REPORTING ................................................................................................................................................................. 17
3 NOTES TO THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND CONSOLIDATED STATEMENT OF OTHER
COMPREHENSIVE INCOME ........................................................................................................................................................... 24
3.1 SALES REVENUES....................................................................................................................................................................... 24
3.2 COST OF SALES .......................................................................................................................................................................... 25
3.3 COSTS BY TYPE .......................................................................................................................................................................... 25
3.4 OTHER INCOME AND EXPENSES ............................................................................................................................................... 26
3.4.1 DETAILED INFORMATION ON SIGNIFICANT IMPAIRMENT LOSSES ............................................................................... 28
3.5 FINANCIAL INCOME AND EXPENSES ......................................................................................................................................... 29
3.6 COMPONENTS OF OTHER COMPREHENSIVE INCOME .............................................................................................................. 31
4 INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY.................................................................................................................... 32
4.1 MAIN COMPONENTS OF TAX EXPENSE ..................................................................................................................................... 32
4.2 EFFECTIVE TAX RATE ................................................................................................................................................................. 32
4.3 DEFERRED INCOME TAX ............................................................................................................................................................ 33
5 NOTES TO ASSETS REPORTED IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION ....................................................... 36
5.1 PROPERTY, PLANT AND EQUIPMENT ........................................................................................................................................ 36
5.2 RIGHT-OF-USE ASSETS .............................................................................................................................................................. 39
5.3 INTANGIBLE ASSETS – NON-CURRENT AND CURRENT .............................................................................................................. 40
5.4 GOODWILL IMPAIRMENT TESTING ........................................................................................................................................... 45
5.5 INVESTMENT PROPERTIES ........................................................................................................................................................ 45
5.6 LONG-TERM RECEIVABLES ........................................................................................................................................................ 46
5.7 LONG-TERM FINANCIAL ASSETS................................................................................................................................................ 47
5.8 SHARES IN JOINT VENTURES / INVESTMENTS IN ASSOCIATES .................................................................................................. 48
5.9 INVENTORIES ............................................................................................................................................................................ 48
5.10 SHORT-TERM RECEIVABLES ...................................................................................................................................................... 49
5.11 SHORT-TERM FINANCIAL ASSETS .............................................................................................................................................. 51
5.12 CASH AND CASH EQUIVALENTS ................................................................................................................................................ 51
5.13 DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE AND LIABILITIES
RELATED THERETO .................................................................................................................................................................... 52
6 EQUITY ........................................................................................................................................................................................ 55
6.1 CAPITAL MANAGEMENT ........................................................................................................................................................... 55
6.2 CONSOLIDATED EQUITY ............................................................................................................................................................ 55
6.3 DIVIDENDS PAID OR DECLARED ................................................................................................................................................ 58
6.4 BUSINESS COMBINATIONS ........................................................................................................................................................ 59
6.5 SIGNIFICANT SUBSIDIARIES WITH NON-CONTROLLING INTEREST ............................................................................................ 60
6.6 EARNINGS PER SHARE ............................................................................................................................................................... 60
7 LIABILITIES, PROVISIONS, EMPLOYEE BENEFITS ............................................................................................................................ 61
7.1 INFORMATION ABOUT SIGNIFICANT FINANCIAL LIABILITIES .................................................................................................... 61
7.2 OTHER NON-CURRENT LIABILITIES............................................................................................................................................ 62
7.3 CURRENT TRADE AND OTHER LIABILITIES ................................................................................................................................. 63
7.4 LEASES ....................................................................................................................................................................................... 64
7.5 PROVISIONS FOR EMPLOYEE BENEFITS .................................................................................................................................... 67
7.6 OTHER PROVISIONS .................................................................................................................................................................. 68
8 FINANCIAL INSTRUMENTS, FINANCIAL RISK MANAGEMENT AND IMPAIRMENT .......................................................................... 71
8.1 FINANCIAL INSTRUMENTS ........................................................................................................................................................ 71
8.2 FINANCIAL INSTRUMENTS DESIGNATED FOR HEDGE ACCOUNTING ........................................................................................ 73
8.3 FINANCIAL RISK MANAGEMENT ............................................................................................................................................... 76
8.4 DETERMINATION OF FAIR VALUE ............................................................................................................................................. 82
9 OTHER NOTES .............................................................................................................................................................................. 85
9.1 NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................................................. 85
9.2 INFORMATION ON CHANGES IN CONTINGENT ASSETS AND LIABILITIES AND OTHER MATTERS ............................................. 86
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
ciechgroup.com
4
9.3 INFORMATION ON TRANSACTIONS WITH RELATED PARTIES ................................................................................................... 98
9.3.1 TRANSACTIONS WITH RELATED PARTIES IN TOTAL ...................................................................................................... 98
9.3.2 SIGNIFICANT TRANSACTIONS CONCLUDED BY COMPANIES OR SUBSIDIARIES WITH RELATED PARTIES OTHER
THAN ON AN ARM’S LENGTH BASIS ............................................................................................................................. 99
9.3.3 DESCRIPTION OF NON-ROUTINE TRANSACTIONS WITH RELATED PARTIES ................................................................. 99
9.3.4 TRANSACTIONS CONCLUDED WITH KEY MANAGERIAL PERSONNEL ............................................................................ 99
9.4 INFORMATION ABOUT AGREEMENTS CONCLUDED WITH THE ENTITY AUTHORISED TO AUDIT THE CIECH GROUP’S
CONSOLIDATED FINANCIAL STATEMENTS .............................................................................................................................. 100
9.5 COMPOSITION OF THE GROUP ............................................................................................................................................... 101
9.6 INFORMATION ON THE IMPACT OF CLIMATE ISSUES ON THE OPERATIONS OF THE CIECH GROUP ...................................... 103
9.7 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE RUSSIAN INVASION OF
UKRAINE ON THE CIECH GROUP'S ACTIVITIES ........................................................................................................................ 103
9.8 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE COVID-19 CORONAVIRUS
PANDEMIC ON THE CIECH GROUP'S ACTIVITIES ..................................................................................................................... 106
9.9 EVENTS AFTER THE REPORTING DATE .................................................................................................................................... 106
REPRESENTATION BY THE MANAGEMENT BOARD ................................................................................................................................. 108
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
ciechgroup.com
5
CONSOLIDATED STATEMENT OF PROFIT OR LOSS OF THE CIECH GROUP

|  | 01.01.-31.12.2022 | 01.01.-31.12.2021
| Note |  |
CONTINUING OPERATIONS |  |  | restated
Sales revenues | 3.1 | 5,415,459 | 3,483,713
Cost of sales | 3.2 | (4,247,230) | (2,851,407)
Gross profit/(loss) on sales |  | 1,168,229 | 632,306
Other operating income | 3.4 | 100,948 | 238,395
Selling costs |  | (294,522) | (229,101)
General and administrative expenses |  | (295,508) | (243,319)
Other operating expenses | 3.4 | (88,970) | (57,777)
Operating profit/(loss) |  | 590,177 | 340,504
Financial income, including: | 3.5 | 187,934 | 26,714
Profit from financial instruments | 3.5 | 41,584 | 20,812
Financial costs, including: | 3.5 | (187,725) | (110,362)
Loss from financial instruments | 3.5 | (154,381) | (93,178)
Net financial income/(expenses) |  | 209 | (83,648)
Share of profit / (loss) of equity-accounted investees | 5.9 | 1,406 | 27
Profit/(loss) before tax |  | 591,792 | 256,883
Income tax | 4.1 | (27,091) | (37,666)
Net profit/(loss) on continuing operations |  | 564,701 | 219,217
DISCONTINUED OPERATIONS |  |  |
Net profit/(loss) on discontinued operations | 5.14 | - | 61,868
Net profit / (loss) for the period |  | 564,701 | 281,085
including: |  |  |
Net profit/(loss) attributable to shareholders of the parent |  | 566,937 | 281,866
company |  |  |
Net profit/(loss) attributed to non-controlling interest |  | (2,236) | (781)
Earnings per share (in PLN): |  |  |
Basic | 6.6 | 10.76 | 5.35
Diluted | 6.6 | 10.76 | 5.35
Earnings/(loss) per share (in PLN) from continuing operations: |  |  |
Basic |  | 10.76 | 4.17
Diluted |  | 10.76 | 4.17

The consolidated statement of profit or loss of the CIECH Group should be analysed together with the notes which constitute an integral part
of the consolidated financial statements.
For detailed information on the restatement of figures for the corresponding period, see Note 1.5.1 to this report.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
ciechgroup.com
6
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME OF THE CIECH GROUP

| Note | 01.01.-31.12.2022 | 01.01.-31.12.2021
|  |  | restated
Net profit/(loss) on continuing operations |  | 564,701 | 219,217
Net profit/(loss) on discontinued operations |  | - | 61,868
Net profit / (loss) for the period |  | 564,701 | 281,085
Other comprehensive income before tax that may be reclassified to the statement of profit | 3.6 | (259,262) | 216,385
or loss |  |  |
Currency translation differences (foreign companies) |  | 12,414 | (4,370)
Profit (loss) from costs of hedging reserve |  | (57,777) | (16,672)
Profit (loss) from cash flow hedge reserve |  | (213,899) | 237,461
Other components of other comprehensive income |  | - | (34)
Other comprehensive income before tax that may not be reclassified to the statement of profit or loss | 3.6 | 745 | (1,342)
Actuarial gains |  | 745 | (1,342)
Income tax attributable to other comprehensive income |  | 90,847 | (69,208)
Income tax attributable to other comprehensive income that may be reclassified to the statement of profit or loss | 4.1. | 90,983 | (69,463)
Income tax attributable to other comprehensive income that may not be reclassified to the statement of profit or loss | 4.1. | (136) | 255
Other comprehensive income net of tax |  | (167,670) | 145,835
TOTAL COMPREHENSIVE INCOME |  | 397,031 | 426,920
Shareholders of the parent company |  | 399,166 | 427,589
Non-controlling interest |  | (2,135) | (669)

The consolidated statement of other comprehensive income of the CIECH Group should be analysed together with the notes which constitute
an integral part of the consolidated financial statements.
For detailed information on the restatement of figures for the corresponding period, see Note 1.5.1 to this report.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
ciechgroup.com
7
CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE CIECH GROUP

| Note | 31.12.2022 | 31.12.2021 | 31.12.2020
ASSETS |  |  | restated |
Property, plant and equipment | 5.1 | 3,933,393 | 3,863,321 | 3,366,296
Rights to use an asset | 5.2 | 181,211 | 201,476 | 176,688
Intangible assets other than goodwill | 5.3 | 394,545 | 369,067 | 395,193
Goodwill | 5.4 | 151,852 | 149,270 | 149,709
Investment property | 5.5 | 40,181 | 32,839 | 40,948
Non-current receivables | 5.6 | 41,237 | 78,542 | 53,702
Investments in jointly-controlled entities measured under the equity | 5.8 | 7,033 | 5,655 | 5,646
method |  |  |  |
Long-term financial assets | 5.7 | 18,516 | 12,449 | 12,477
Deferred income tax assets | 4.3 | 132,774 | 74,984 | 50,688
Total non-current assets |  | 4,900,742 | 4,787,603 | 4,251,347
Inventory | 5.9 | 771,541 | 459,308 | 348,989
Short-term intangible assets other than goodwill | 5.3 | 515,934 | 403,434 | 185,220
Short-term financial assets | 5.11 | 359,634 | 102,382 | 19,863
Income tax receivables | 5.10 | 54,334 | 21,004 | 25,760
Trade and other receivables | 5.10 | 805,005 | 562,096 | 478,508
Cash and cash equivalents | 5.12 | 684,969 | 799,023 | 443,886
Non-current assets and groups for disposal held for sale | 5.13 | 368 | 368 | 161,970
Total current assets |  | 3,191,785 | 2,347,615 | 1,664,196
Total assets |  | 8,092,527 | 7,135,218 | 5,915,543
EQUITY AND LIABILITIES |  |  |  |
Share capital | 6.2 | 287,614 | 287,614 | 287,614
Share premium |  | 470,846 | 470,846 | 470,846
Cash flow hedge reserve | 8.2 | 35,848 | 158,763 | (9,393)
Profit (loss) from costs of hedging reserve |  | (78,108) | (20,331) | (3,659)
Actuarial gains |  | (973) | (1,582) | (495)
Other reserve capitals | 6.2 | 425,021 | 425,021 | 425,021
Currency translation reserve |  | (24,065) | (36,377) | (31,737)
Retained earnings |  | 1,594,038 | 1,106,151 | 982,418
Equity attributable to shareholders of the parent |  | 2,710,221 | 2,390,105 | 2,120,615
Non-controlling interest | 6.4 | (5,911) | (3,776) | (2,077)
Total equity |  | 2,704,310 | 2,386,329 | 2,118,538
Non-current loans, borrowings and other debt instruments | 7.1 | 1,671,280 | 1,854,154 | 360
Lease liabilities | 7.4 | 104,849 | 121,172 | 103,523
Other non-current liabilities | 7.2 | 228,645 | 231,752 | 82,028
Employee benefits reserve | 7.5 | 14,344 | 15,273 | 12,958
Other provisions | 7.6 | 137,189 | 270,649 | 153,261
Deferred income tax liability | 4.3 | 25,123 | 49,124 | 49,016
Total non-current liabilities |  | 2,181,430 | 2,542,124 | 401,146
Current loans, borrowings and other debt instruments | 7.1 | 193,844 | 5,287 | 1,911,115
Lease liabilities | 7.4 | 30,471 | 30,025 | 25,735
Trade and other liabilities | 7.3 | 2,793,303 | 1,956,407 | 1,286,256
Income tax liabilities |  | 67,224 | 128,592 | 47,918
Employee benefits reserve | 7.5 | 2,764 | 2,643 | 3,100
Other provisions | 7.6 | 119,181 | 83,811 | 95,237
Liabilities related to non-current assets and groups for disposal classified |  | - | - | 26,498
as held for sale |  |  |  |
Total current liabilities |  | 3,206,787 | 2,206,765 | 3,395,859
Total liabilities |  | 5,388,217 | 4,748,889 | 3,797,005
Total equity and liabilities |  | 8,092,527 | 7,135,218 | 5,915,543

The consolidated statement of financial position of the CIECH Group should be analysed together with the notes which constitute an integral
part of the consolidated financial statements.
For detailed information on the restatement of figures as at 31 December 2021, see Note 1.5.1 to these statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
ciechgroup.com
8
CONSOLIDATED STATEMENT OF CASH FLOWS OF THE CIECH GROUP
Note

|  | 01.01.-31.12.2022 | 01.01.-31.12.2021
Cash flows from operating activities |  |  | restated
Net profit/(loss) for the period |  | 564,701 | 281,085
Adjustments |  | 439,282 | 1,088,754
Amortisation/depreciation |  | 431,275 | 374,640
Recognition of impairment allowances |  | (6,387) | 79,115
Foreign exchange (profit) /loss |  | (7,943) | (3,007)
Investment property revaluation |  | (6,891) | 202
(Profit) / loss on investment activities |  | 7,530 | (158,018)
(Profit) / loss on disposal of property, plant and equipment |  | 28,654 | (4,157)
Dividends and interest |  | 56,977 | 39,741
Income tax |  | 27,091 | 39,190
(Profit) / loss on the settlement of construction contracts (caverns) |  | (2,354) | (22,732)
Share of (profit) / loss on equity accounted investees |  | (1,406) | (27)
Valuation of derivatives |  | (7,193) | 285
Other adjustments | 9.1 | (218,193) | 225,985
Change in receivables | 9.1 | (221,782) | (153,093)
Change in inventory | 9.1 | (308,704) | (106,638)
Change in current liabilities | 9.1 | 779,874 | 786,432
Change in provisions and employee benefits | 9.1 | (111,266) | (9,164)
Interest paid |  | (127,884) | (43,964)
Interest cost hedging effect |  | 62,456 | (13,110)
(Profit) / loss on the settlement of construction contracts (caverns) |  | 35,495 | -
Income tax (paid)/returned |  | (131,749) | (49,114)
Net cash from operating activities |  | 842,301 | 1,263,651
Cash flows from investment activities |  |  |
Disposal of a subsidiary |  | 50 | 66,954
Disposal of intangible assets and property, plant and equipment |  | 4,244 | 478
Disposal of investment property |  | - | 9,444
Interest received |  | 6,698 | 651
Subsidies received |  | 4,140 | 52,147
Proceeds from repaid borrowings |  | 95 | 67,259
Acquisition of a subsidiary (after deduction of acquired cash) |  | (4,920) | (5,105)
Acquisition of intangible assets and property, plant and equipment |  | (447,915) | (731,361)
Development expenditures |  | (29,793) | (18,574)
Expenditure on the purchase of emission rights |  | (372,348) | (133,939)
Other investment inflows (outflows) | 9.1 | (5,272) | (54)
Net cash from investment activities |  | (845,021) | (692,100)
Cash flows from financial activities |  |  |
Proceeds from loans and borrowings | 7.1 | 2,143 | 195,496
Dividends paid to parent company |  | (79,050) | (158,099)
Repayment of loans and borrowings | 7.1 | - | (231,801)
Payments of lease liabilities | 7.4 | (32,683) | (27,055)
Other financial inflows (outflows) |  | - | (83)
Net cash from financial activities |  | (109,590) | (221,542)
Total net cash flows |  | (112,310) | 350,009
Cash and cash equivalents as at the beginning of the period |  | 799,023 | 448,799
Impact of foreign exchange differences |  | (1,744) | 215
Cash and cash equivalents as at the end of the period | 5.12 | 684,969 | 799,023

The consolidated statement of cash flows of the CIECH Group should be analysed together with the notes which constitute an integral part
of the consolidated financial statements.
For detailed information on the restatement of figures for the corresponding period, see Note 1.5.1 to this report.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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STATEMENT OF CHANGES IN CONSOLIDATED EQUITY OF THE CIECH GROUP

|  |  |  | Profit (loss) |  |  | Currency |  | Equity | Non- |
| Share capital | Share | Cash flow | from costs of | Other reserve | Actuarial | translation | Retained | attributable to | controlling | Total equity
|  | premium | hedge reserve | hedging | capitals | gains | reserve | earnings | shareholders | interest |
|  |  |  | reserve |  |  |  |  | of the parent |  |
01.01.2022 restated | 287,614 | 470,846 | 158,763 | (20,331) | 425,021 | (1,582) | (36,377) | 1,106,151 | 2,390,105 | (3,776) | 2,386,329
Transactions with the owners | - | - | - | - | - | - | - | (79,050) | (79,050) | - | (79,050)
Dividend | - | - | - | - | - | - | - | (79,050) | (79,050) | - | (79,050)
Total comprehensive income for the period | - | - | (122,915) | (57,777) | - | 609 | 12,312 | 566,937 | 399,166 | (2,135) | 397,031
Net profit / (loss) for the period | - | - | - | - | - | - | - | 566,937 | 566,937 | (2,236) | 564,701
Other comprehensive income | - | - | (122,915) | (57,777) | - | 609 | 12,312 | - | (167,771) | 101 | (167,670)
31.12.2022 | 287,614 | 470,846 | 35,848 | (78,108) | 425,021 | (973) | (24,065) | 1,594,038 | 2,710,221 | (5,911) | 2,704,310
01.01.2021 | 287,614 | 470,846 | (9,393) | (3,659) | 425,021 | (495) | (31,737) | 982,418 | 2,120,615 | (2,077) | 2,118,538
Transactions with the owners | - | - | - | - | - | - | - | (158,099) | (158,099) | (1,030) | (159,129)
Dividend | - | - | - | - | - | - | - | (158,099) | (158,099) | - | (158,099)
Change in the Group’s structure | - | - | - | - | - | - | - | - | - | (1,030) | (1,030)
Total comprehensive income for the period | - | - | 168,156 | (16,672) | - | (1,087) | (4,640) | 281,832 | 427,589 | (669) | 426,920
Net profit / (loss) for the period | - | - | - | - | - | - | - | 281,866 | 281,866 | (781) | 281,085
Other comprehensive income | - | - | 168,156 | (16,672) | - | (1,087) | (4,640) | (34) | 145,723 | 112 | 145,835
31.12.2021 | 287,614 | 470,846 | 158,763 | (20,331) | 425,021 | (1,582) | (36,377) | 1,106,151 | 2,390,105 | (3,776) | 2,386,329

The consolidated statement of changes in consolidated equity of the CIECH Group should be analysed together with the notes which constitute an integral part of the consolidated financial statements.
For detailed information on the restatement of figures as at 1 January 2022, see Note 1.5.1 to these statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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1 GENERAL INFORMATION
1.1 INFORMATION ON THE GROUP’S ACTIVITIES
Parent company
CIECH S.A.
Legal form
Joint-stock Company
Registered office
Poland
Address
ul. Wspólna 62, 00-684 Warsaw, Poland
KRS (National Court Register number)
0000011687
(District Court for the capital city of Warsaw in Warsaw
12
th
Commercial Division of the National Court Register)
Country of registration
Poland
Statistical identification number (REGON)
011179878
Tax ID No (NIP)
118-00-19-377
BDO Registry Number
000015168
Website
www.ciechgroup.com
Branches held
CIECH S.A.’s Branch in Romania
CIECH S.A.’s Branch in Germany
Principal place of business
European Union
Ultimate parent company
KI Chemistry s. à r. l
(a subsidiary of Kulczyk Investments)
Ultimate parent company
Luglio Limited
CIECH is a diversified chemical group with a strong position on European markets. The group was founded in 1945 and currently employs
approximately
3,512 people. Since 2005, the shares of CIECH S.A. are listed on the Warsaw Stock Exchange, and from August 2016 also on the Frankfurt
Stock Exchange.
Products of the CIECH Group are manufactured in 9 production plants. The five largest production plants (2 in Poland, 2 in Germany and 1 in
Romania) operate in the Soda Segment and manufacture soda ash, soda derivatives and salt; the plant in Romania produces glassy sodium
silicate and sodium water glass. The remaining 4 plants operating in the Agro, Foams, Silicates and Packaging segments are located in Poland.
Soda production at the Romanian plant was suspended in the third quarter of 2019 (for more information, see current report No 40/2019).
In addition, Proplan outsources product formulation and packaging services to two plants.
CIECH Vitrosilicon
CIECH Vitro
CIECH Soda Romania
CIECH Sarzyna
Proplan
CIECH Soda Deutschland
Ciech Agro Romania
CIECH Soda Polska
CIECH Salz Deutschland
CIECH Pianki
Production
Distribution
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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The CIECH Group consists of domestic and foreign manufacturing, distribution and trade companies operating in the chemical industry. The
CIECH Group comprises CIECH S.A. as the parent company, and related companies located, inter alia, in Poland, Germany, Romania and
Spain.
The Parent company of the Group is CIECH S.A. It is a holding company that manages domestic and foreign manufacturing, trade and service
companies of the Group. CIECH S.A. also provides support services to key subsidiaries. Key products manufactured by the CIECH Group
include: soda ash, sodium bicarbonate, evaporated salt, agrochemical products, polyurethane foams, lanterns and jars, sodium and
potassium silicates.
The core sales market for the CIECH Group is the European Union, including mainly Poland, Germany and Central Eastern European countries.
Products manufactured by the CIECH Group are also exported to overseas markets.
The parent company of CIECH S.A. has a branch in Romania, a branch in Germany, and operates through its offices in Inowrocław and
Janikowo. CIECH Trading Sp. z o.o. subsidiary has a branch in Bydgoszcz.
A detailed description of the CIECH Group entities is provided in note 9.5 to these financial statements.
There have been no changes in the name of the reporting unit or other identification data since the end of the previous reporting period.
1.2 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING PRINCIPLES
1.2.1 REPRESENTATIONS BY THE MANAGEMENT BOARD
These consolidated financial statements of the CIECH Group for the period from 1 January 2022 to 31 December 2022, including comparative
data, were approved by the Management Board of CIECH S.A. on 23 March 2023.
The Management Board of CIECH S.A. represents that these consolidated financial statements of the CIECH Group for the current and
comparable period have been prepared in compliance with International Financial Reporting Standards approved by the European Union
and related interpretations issued by the European Commission in the form of Regulations (IFRS).
The Management Board of CIECH S.A. represents that to the best of its knowledge these consolidated financial statements, including
corresponding figures, have been prepared in accordance with the generally acceptable accounting principles and that they represent a true,
accurate and fair reflection of the CIECH Group’s financial position and the results of operations. Furthermore, the Management Board of
CIECH S.A. represents that the Directors’ report on operations of the CIECH Group and CIECH S.A. in 2022 contains a true image of the Group’s
developments, achievements, and condition, including the description of major risks and threats.
The Management Board of CIECH S.A. represents that BDO Spółka z ograniczoną odpowiedzialnością spółka komandytowa with its registered
office in Warsaw, entered into the list of entities authorised to audit financial statements under the registry No 3 355 kept by the National
Chamber of Statutory Auditors was chosen in accordance with the binding legal regulations for the auditor of these consolidated financial
statements. The above entity, including the certified auditors performing the audit, satisfy all the conditions required in order to issue an
unbiased and independent audit report, pursuant to the applicable domestic legal regulations.
1.2.2 BASIS OF PREPARATION
These consolidated financial statements have been prepared on the historical cost basis except for investment property as well as financial
assets and liabilities (derivative instruments) measured at fair value through profit or loss.
These consolidated financial statements have been prepared based on individual financial statements of the CIECH Group’s pare nt company
and its subsidiaries, prepared from the accounting ledgers maintained in accordance with the applicable accounting principles of their
respective countries of operation. For the purpose of these consolidated financial statements, adjustments have been made to the
accounting policies used in the preparation of the abovementioned individual financial statements for them to be aligned with International
Financial Reporting Standards.
Since 2007, the Parent Company, CIECH S.A., has been preparing separate financial statements in accordance with IFRS.
Major accounting principles applied in the preparation of these consolidated financial statements are listed in Note 1.4. These principles
have been applied on a continuous basis in all presented periods, except for changes described in Note 1.5.1.
These consolidated financial statements were prepared under the assumption that the CIECH Group will continue as a going concern in the
foreseeable future. As at the date of approval of these consolidated financial statements, no facts or circumstances are known that would
indicate any threat to the Group continuing as a going concern.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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All entities belonging to the CIECH Group operate according to the financial year corresponding to the calendar year.
These consolidated financial statements, except for the consolidated statement of cash flows, have been prepared on the accrual basis. The
consolidated statement of profit or loss of the CIECH Group is prepared in the cost by function format. The Group’s consolidate d statement
of cash flows is prepared under the indirect method.
Preparation of the financial statement in accordance with IFRS requires the Management Board to make own assessments and apply certain
assumptions and accounting estimates as part of the application of accounting principles adopted by the Group. Issues which require
significant assessments or areas where the assumptions and estimates made have a significant impact on these consolidated financial
statements have been described in Note 1.4.
1.3 FUNCTIONAL AND REPORTING CURRENCY
The Polish zloty (PLN) is the functional currency of the parent company, CIECH S.A., and the reporting currency of these consolidated financial
statements. Unless stated otherwise, all financial data in these consolidated financial statements have been presented in thousands of Polish
zlotys (PLN ’000).
The functional currencies for the significant foreign subsidiaries are as follows: SDC Group, Ciech Group Financing AB, Proplan Plant
Protection Company S.L. and CIECH Salz Deutschland GmbH – EUR, CIECH Soda Romania S.A. – RON. For the purpose of conversion into PLN,
the following foreign exchange rates determined on the basis of quotations announced by the National Bank of Poland (“NBP”) h ave been
applied for consolidation purposes:

NBP exchange rate as at the end day of the reporting period | 31.12.20221 | 31.12.20212
EUR | 4.6899 | 4.5994
RON | 0.9475 | 0.9293

| Average NBP rate for the reporting period | 12 months ended | 12 months ended
|  | 31.12.2022 3 | 31.12.2021 4
EUR |  | 4.6883 | 4.5775
RON |  | 0.9501 | 0.9293

1
NBP’s average foreign exchange rates table applicable as at 31 December 2022.
2
NBP’s average foreign exchange rates table applicable as at 31 December 2021.
3
According to the exchange rate constituting the arithmetic mean of average exchange rates quoted by NBP on the last day of each month of the period from
1 January 2022 to 31 December 2022.
4
According to the exchange rate constituting the arithmetic mean of average exchange rates quoted by NBP on the last day of each month of the period from
1 January 2021 to 31 December 2021.
For each of the foreign operations that prepare their financial statements in a currency other than the presentation currency, their results
and financial position must be translated into the presentation currency in accordance with the following procedure:
• all items of revenue and expenses in the functional currency of the subsidiary are translated into the presentation currency using the
mid exchange rate calculated as the arithmetic mean of mid exchange rates quoted by the National Bank of Poland on the last day of
each month in the reporting period,
• all assets and liabilities are translated into the presentation currency at the closing rate quoted by the National Bank of Poland for the
balance sheet date,
• individual components of equity are translated at historical exchange rates, e.g. share capital at the exchange rate of the date of
accounting for the merger, revenues and expenses recognised directly in equity are translated at the exchange rate prevailing on the
transaction date, as quoted by the National Bank of Poland, or, in a simplified manner, at the average rate for the period in question.
The difference resulting from the translation of equity at rates other than the closing rate prevailing at the balance sheet date applied to the
other items of the statement of financial position is recognised in equity under "Exchange differences on translation of foreign operations" .
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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1.4 ACCOUNTING POLICIES
To ensure more legible presentation and better understanding of the information disclosed in the consolidated financial statements, key
accounting policies applicable in the CIECH Group as well as judgements and estimates made have been presented in separate notes.

Note | Title | Accounting principles | Judgements and
|  |  | estimates
3.1 | Sales revenues | X |
3.2 | Cost of sales | X |
3.4 | Other operating income and expenses | X | X
3.5 | Financial income and expenses | X | X
4.1 | Main components of tax expense | X |
4.3 | Deferred income tax | X | X
5.1 | Property, plant and equipment | X | X
5.2 | Right-of-use assets | X | X
5.3 | Intangible assets | X | X
5.5 | Investment properties | X | X
5.6 | Long-term receivables | X | X
5.7 | Long-term financial assets | X | X
5.8 | Shares in joint ventures / investments in associates | X |
5.9 | Inventories | X | X
5.10 | Short-term receivables | X | X
5.11 | Short-term financial assets | X | X
5.12 | Cash and cash equivalents | X | X
5.13 | Discontinued operations, non-current assets and liabilities connected with non- | X | X
| current assets classified as held for sale |  |
6.2 | Consolidated equity | X | X
6.4 | Business combinations and acquisition of non-controlling interest | X |
6.6 | Earnings per share | X |
7.1 | Information on financial liabilities | X |
7.2 | Other non-current liabilities | X | X
7.3 | Current trade and other liabilities | X | X
7.4 | Leases | X | X
7.5 | Provisions for employee benefits | X | X
7.6 | Other provisions | X | X
8.1 | Financial instruments | X | X
8.2 | Financial instruments designated for hedge accounting | X | X
9.2 | Information on changes in contingent assets and liabilities and other matters | X | X
9.5 | Composition of the Group | X |

1.5 CHANGES IN ACCOUNTING POLICIES AND THE SCOPE OF DISCLOSURES
Amendments to IAS/IFRS and their potential impact on the Group’s financial statements are presented below:

New Standards, amendments to Standards and Interpretations: | Impact on the financial | Effective year in the EU
| statements |
Approved by the IASB for application as as at the balance sheet date |  |
Amendments to IFRS 3 “Business Combinations” – amendments to references in | No material impact on the |
the Conceptual Framework along with amendments to IFRS 3 | financial statements is | 2022
| estimated |
Amendments to IFRS 16 “Property, plant and equipment” | The effect of the amendment | 2022
proceeds before intended use | presented in Note 1.5.1 |
Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” – | No material impact on the |
onerous contracts – cost of fulfilling the contract | financial statements is | 2022
| estimated |
Annual Improvements to IFRSs, 2018–2020 Cycle – amendments in respect of | No material impact on the |
recognition and measurement: IFRS 1, IFRS 9, IAS 41 | financial statements is | 2022
| estimated |

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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New Standards, amendments to Standards and Interpretations: | Impact on the financial | Effective year in the EU
| statements |
New standards and interpretations entering into force after the balance sheet |  |
date | No material impact on the |
IFRS 17 “Insurance Contracts” | financial statements is | 2023
| estimated |
Amendments to IAS 1 “Presentation of financial statements” – disclosures of | No material impact on the |
accounting policies used in practice – the issue of materiality in relation to | financial statements is | 2023
accounting policies | estimated |
Amendments to IAS 8 “Accounting policies, changes in accounting estimates and | No material impact on the |
errors” – definition of accounting estimates | financial statements is | 2023
| estimated |
Amendments to IAS “12 Income Tax” – deferred tax related to assets and liabilities | No material impact on the |
arising from a single transaction | financial statements is | 2023
| estimated |
Amendments to IFRS 17 “Insurance contracts” – Initial Application of IFRS 17 and | No material impact on the |
IFRS 9 Financial Instruments – comparative information | financial statements is | 2023
| estimated |
Approved by the IASB for application after 1 January 2024 |  |
Amendments to IFRS 16 “Leases” - lease obligations in sale and leaseback | No material impact on the |
transactions | financial statements is | Not endorsed
| estimated |
Amendments to IAS 1 “Presentation of financial statements” – classification of | No material impact on the |
liabilities as current or non-current | financial statements is | Not endorsed
| estimated |
New standards and interpretations pending endorsement by the European Union | Impact on the financial | Effective year in the EU
| statements |
| No material impact on the | The effective date has been
IFRS 14 “Regulatory deferral accounts” | financial statements is | postponed
| estimated |
Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 | No material impact on the | The effective date has been
“Investments in Associates and Joint Ventures” – sale or contribution of assets | financial statements is | postponed
between an investor and its associate or joint venture, and further amendments | estimated |

1.5.1 ADJUSTMENT OF PRIOR PERIOD ERRORS AND CHANGES IN ACCOUNTING POLICY
The following changes were made relative to the previously published comparatives as at 31 December 2021:

of |
comparable data as at 31 |
December 2021 due to the | The change relates to the reclassification of part of the amounts advanced in one of the subsidiaries previously
reclassification of some amounts | presented as receivables to inventories of material in transit to conform to the presentation applied in 2022.
relating to materials in transit |
between receivables and inventories |
Change in the presentation of | In order to improve the presentation and ensure better information content for the recipient, the presentation of
comparable data on commissions | interest was changed (separating the interest cost hedging effect) and changes in liabilities due to the arrangement
and interest on loans in the Statement of cash flows | commission (moving to other adjustments).
| Until 31 December 2021, the value of fixed assets under construction included revenues and costs related to the
Amendments to IAS 16 “Property, | sale of test production of CIECH Salz Deutschland GmbH. Following the amendment to IAS 16 effective from
Plant and Equipment” – proceeds | 1 January 2022, proceeds and related expenses earned before a non-current asset is placed in service are
before intended use | recognised in profit or loss. The above change had no impact on other presented periods and comparatives.

The impact of the changes on the previously reported consolidated data as at 31 December 2021 is presented below:

| After adjustment as | Impact of | Presentation | Previously presented
| at 31.12.2021 | amendments | adjustment of | 31.12.2021
|  | to IAS 16 | materials in transit |
ASSETS |  |  |  |
Property, plant and equipment | 3,863,321 | (15,339) | - | 3,878,660
Deferred tax assets | 74,984 | 4,737 | - | 70,247
Total non-current assets | 4,787,603 | (10,602) |  | 4,798,205

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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| After adjustment as | Impact of | Presentation | Previously presented
| at 31.12.2021 | amendments | adjustment of | 31.12.2021
|  | to IAS 16 | materials in transit |
Inventories | 459,308 | - | 36,802 | 422,506
Trade and other receivables | 562,096 | - | (36,802) | 598,898
Total current assets | 2,347,615 | - | - | 2,347,615
Total assets | 7,135,218 | (10,602) | - | 7,145,820
EQUITY AND LIABILITIES |  |  |  |
Currency translation differences (foreign | (36,377) | (50) | - | (36,327)
companies) |  |  |  |
Retained earnings | 1,106,151 | (10,552) | - | 1,116,703
Equity attributable to shareholders of the parent | 2,390,105 | (10,602) | - | 2,400,707
Non-controlling interest | (3,776) | - | - | (3,776)
Total equity | 2,386,329 | (10,602) | - | 2,396,931
Total non-current liabilities | 2,542,124 | - | - | 2,542,124
Total current liabilities | 2,206,765 | - | - | 2,206,765
Total liabilities | 4,748,889 | - | - | 4,748,889
Total equity and liabilities | 7,135,218 | (10,602) | - | 7,145,820

| as at | Impact of amendments to | Previously presented
| 31.12.2021 | IAS 16 | 31.12.2021
Net sales revenues | 3,483,713 | 23,798 | 3,459,915
Cost of sales | (2,851,407) | (39,065) | (2,812,342)
Gross profit/(loss) on sales | 632,306 | (15,267) | 647,573
Other operating income | 238,395 | - | 238,395
Selling costs | (229,101) | - | (229,101)
General and administrative expenses | (243,319) | - | (243,319)
Other operating expenses | (57,777) | - | (57,777)
Operating profit/(loss) | 340,504 | (15,267) | 355,771
Net financial income/(expenses) | (83,648) | - | (83,648)
Share in net profit of subordinated entities accounted for with equity method | 27 | - | 27
Profit/(loss) before tax | 256,883 | (15,267) | 272,150
Income tax | (37,666) | 4,715 | (42,381)
Net profit/(loss) from continuing operations | 219,217 | (10,552) | 229,769
DISCONTINUED OPERATIONS |  |  |
Net profit/(loss) on discontinued operations | 61,868 | - | 61,868
Net profit/(loss) for the period | 281,085 | (10,552) | 291,637
including: |  | - |
Net profit/(loss) attributable to shareholders of the parent | 281,866 | (10,552) | 292,418
Net profit/(loss) attributable to non-controlling interest | (781) | - | (781)
Earnings/(loss) per share (in PLN): |  | - |
Basic | 5.35 | (0.2) | 5.55
Diluted | 5.35 | (0.2) | 5.55
Earnings/(loss) per share (in PLN) from continuing operations: |  | - |
Basic | 4.17 | (0.2) | 4.37
Diluted | 4.17 | (0.2) | 4.37

| Share capital | Currency | Equity |
| and other | translation | Retained | attributable | Non- |
| components | differences | earnings | to | controlling | Total equity
| of equity | (foreign |  | shareholders | interest |
|  | (unchanged) companies) |  | of the parent |  |
31.12.2021 | 1,320,331 | (36,327) | 1,116,703 | 2,400,707 | (3,776) | 2,396,931
(previously presented) |  |  |  |  |  |
Change in accounting principles – IAS 16 | - | (50) | (10,552) | (10,602) | - | (10,602)
31.12.2021 (after adjustments) | 1,320,331 | (36,377) | 1,106,151 | 2,390,105 | (3,776) | 2,386,329

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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|  | Impact of | Presentation | Presentation | Previously
|  | amendments to | adjustment of | adjustment of | presented
| After adjustment as at 31.12.2021 | IAS 16 | interest and loan | materials in transit | 31.12.2021
|  |  | arrangement fee |  |
Net profit/(loss) for the period | 281,085 | (10,552) | - | - | 291,637
Adjustments | 1,088,754 | (4,715) | 13,110 | - | 1,080,358
Dividends and interest | 39,741 | - | 13,110 |  | 26,631
Income tax | 39,190 | (4,715) | - | - | 43,905
Change in liabilities due to loan | - | - | 7,318 | - | (7,318)
arrangement fee |  |  |  |  |
Other adjustments | 225,985 | - | (7,318) | - | 233,302
Change in receivables | (153,093) | - | - | 36,802 | (189,895)
Change in inventory | (106,638) | - | - | (36,802) | (69,836)
Interest cost hedging effect | (13,110) | - | (13,110) | - | -
Net cash from investment activities | 1,263,651 | (15,266) | - | - | 1,278,917
Acquisition of intangible assets and property, plant and equipment | (731,361) | 15,266 | - | - | (746,627)
Net cash from investment activities | (692,100) | 15,266 | - | - | (707,366)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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2 SEGMENT REPORTING
The CIECH Group’s operating segments are designated on the basis of internal reports related to the components of the Group a nd are
regularly reviewed by the Management Board, which is responsible for operating decisions aimed at allocating resources to segments and
assessing the subsidiaries performance.
From the product perspective, the CIECH Group has been divided into the following operating segments:
Soda segment (comprising BU Soda and BU Salt)
The most important products manufactured in this Segment are: light and dense soda ash, evaporated salt, sodium bicarbonate a nd
calcium chloride. The products of this area are sold mainly by the parent company CIECH S.A. The Segment’s goods are produced in CIECH
Soda Polska S.A., the Romanian company CIECH Soda Romania S.A. (until September 2019) and in the German companies CIECH Soda
Deutschland GmbH&Co. KG and CIECH Salz Deutschland GmbH (the German companies also sell their products on their own). These
products are used in the glass, food, detergent and pharmaceutical industries. The Soda Segment (in the German company) also includes
the business of producing and selling electricity.
At the current stage of work on the reorganisation, performance figures for BU Soda and BU Salt are analysed jointly, and the performance
of BU Soda and BU Salt are closely linked due to sharing the same raw material, i.e. brine, fed jointly to the production facilities of Soda
and Salt, as well as a common power plant and combined heat and power plant providing heat and electricity, within CIECH Soda Polska
S.A. For this reason, it is not possible to allocate direct costs in an unambiguous way (mainly: coal, electricity, CO
2
, maintenance on shared
infrastructure). As a result, business decisions are made jointly for both BUs - e.g. in the case of limitations in the availability of raw
material or steam, the profitability analysis of all Soda and Salt products, rather than the fact of being part of a specific BU, determines
the production of particular products. A shared source of raw material, a shared infrastructure and practically indivisible costs mean that,
consequently, it is also not possible to allocate these values to the BU in question as regards liabilities and certain inventories. This all
makes the analysis of cash flow generating units at the BU level potentially inappropriate. Decisions on the above matters are made at
the level of the Management Board of CIECH S.A.
Agro Segment
The CIECH Group is a manufacturer of crop protection products used in agriculture and produced by the companies: CIECH Sarzyna S.A.
and Proplan Plant Protection Company, S.L.
Resins Segment (comparable figures)
The CIECH Group was a producer of a variety of organic compounds manufactured by CIECH Żywice Sp. z o.o. In the first quarter of 2021,
it produced, among other things, epoxy resins and polyester resins. These products are used in the following industries: automotive,
paints and electronics.
On 1 March 2021, CIECH Żywice Sp. z o.o. was sold to LERG S.A., and its figures are reported as discontinued operations.
Foams Segment
The CIECH Group is a producer of polyurethane foams manufactured by CIECH Pianki Sp. z o.o. These products are mainly used in the
furniture industry – for upholstered furniture and mattresses.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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18
Silicates Segment
It includes mainly the products of CIECH Vitrosilicon S.A. and CIECH Soda Romania S.A.
Products manufactured by Ciech Soda Romania S.A. are sold by CIECH S.A. The Segment manufactures sodium silicates (CIECH Vitrosilicon
S.A. and CIECH Soda Romania S.A.) and potassium silicates (CIECH Vitrosilicon S.A.). These products are used in the automotive, cosmetics
and construction chemicals industries.
Packaging Segment
It covers products of CIECH Vitro S.A. This Segment manufactures glass packaging – lanterns and jars, used in the food industry and for
the production of headstone lamps.
Other activities Segment
It covers mainly services rendered outside the Group and goods sold mainly by CIECH S.A., and within the Group, Ciech Serwis i Remonty
Sp. z o.o. provides maintenance services, as well as services are provided by Ciech R&D Sp. z o.o. and CIECH Services Sp. z o.o. that provides
support services in various areas.
As of 1 January 2022 (along with restatement of comparative data broken down by operating segments, as presented below), other
activities include the operations of CIECH Cargo Sp. z o.o. which renders rail transport services, mainly to companies within the CIECH
Group.
The Group financing is managed (including finance expenses and income with the exception of interest and exchange differences on trade
receivables and liabilities) and income tax is calculated on the Group level and they are not allocated to particular Segments.
The CIECH Group has been divided into the following geographical areas: Poland, European Union, Other European countries, Africa, Asia,
Other regions. Information on the Group geographical areas is established based on the Group’s assets location.
Revenues and costs, assets and liabilities of Segments are recognised and measured in a manner consistent with the method used in the
consolidated financial statements.
Operational Segments results are assessed by the CIECH S.A’s Management Board on the basis of sales revenue, operating profit, level of
EBITDA and adjusted EBITDA. No need to separate additional Segments under IFRS 8 regulations has been identified.
EBITDA should be viewed as a supplement not as a substitute for the business performance presented in accordance with IFRS.
EBITDA is a useful ratio of the ability to incur and service debt. EBITDA and adjusted EBITDA levels are not defined by the IFRS and can be
calculated in a different manner by other entities. The reconciliation and definitions applied by the CIECH Group when determining these
measures are presented below.
For discontinued operations, EBITDA and adjusted EBITDA figures are as follows:

| 01.01.-31.12.2022 | 01.01.-31.12.2021 1
Net profit/(loss) on continuing operations | 564,701 | 219,217
Income tax | 27,091 | 37,666
Share of profit / (loss) of equity-accounted investees | (1,406) | (27)
Financial expenses | 187,725 | 110,362
Financial income | (187,934) | (26,714)
Amortisation/depreciation | 431,275 | 374,640
EBITDA on continued operations | 1,021,452 | 715,144
EBITDA on discontinued operations | - | 6,928
EBITDA on continued and discontinued operations | 1,021,452 | 722,072

1
Restated data. For detailed information on the restatement, see Note 1.5.1 to this report.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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19

| 01.01.-31.12.2022 | 01.01.-31.12.2021
EBITDA on continued operations | 1,021,452 | 715,144
One-offs including: | 11,739 | (3,796)
Impairment (a) | 2,821 | 262
Cash items (b) | 7,476 | (4,195)
Non-cash items (without impairment) (c) | 1,442 | 137
Adjusted EBITDA on continued operations | 1,033,191 | 711,348
Adjusted EBITDA on discontinued operations | - | 6,951
Adjusted EBITDA on continued and discontinued operations | 1,033,191 | 718,299

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Operating profit/(loss) | - | 6,928
Amortisation and depreciation | - | -
One-offs |  | 23
EBITDA from discontinued operations | - | 6,928
Adjusted EBITDA on discontinued operations | - | 6,951

The catalogue of items for adjusting adjusted EBITDA for the purposes of these financial statements is as follows:
(a) Impairment losses are associated with the recognition/reversal of impairment losses on property, plant and equipment and intangible assets.
(b) Cash items: gain/loss of the sale of property, plant and equipment, fines and compensations received or paid, donations given, fortuitous events.
(c) Non-cash items: fair value measurement of investment properties, costs of liquidation of property, plant and equipment, the costs of suspended investments,
restructuring costs, environmental provisions, provisions for liabilities and compensation and other items (including extraordinary costs and other provisions).
Adjusted EBITDA may be adjusted for other untypical non-recurring events not listed above.
Additional information on adjustments has been presented under tables presenting the consolidated statement of profit or loss by operating
segments.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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20
OPERATING SEGMENTS OF THE CIECH GROUP
Revenue and costs data as well as assets, equity and liabilities data of particular CIECH Group operating segments for periods disclosed in statements are presented in the tables below:

|  |  | Foams | Silicates | Packaging | Other | Corporate | Eliminations |
OPERATING SEGMENTS 01.01.-31.12.2022 | Soda Segment | Agro Segment | Segment | Segment | Segment | operations | functions | (consolidation | TOTAL
|  |  |  |  |  | Segment |  | adjustments) |
Revenues from third parties | 3,869,009 | 560,126 | 336,660 | 528,998 | 104,584 | 16,082 | - | - | 5,415,459
Revenue from inter-segment transactions | 168,835 | - | 369 | 528 | 1,589 | 131,392 | - | (302,713) | -
Total sales revenues | 4,037,844 | 560,126 | 337,029 | 529,526 | 106,173 | 147,474 | - | (302,713) | 5,415,459
Cost of sales | (3,208,034) | (366,470) | (268,308) | (408,380) | (85,072) | (136,444) | - | 225,478 | (4,247,230)
Gross profit /(loss) on sales | 829,810 | 193,656 | 68,721 | 121,146 | 21,101 | 11,030 | - | (77,235) | 1,168,229
Selling costs | (230,393) | (58,229) | (12,541) | (39,357) | (9,233) | (246) | - | 55,477 | (294,522)
General and administrative expenses | (136,992) | (38,515) | (5,551) | (7,450) | (4,510) | (13,183) | (107,307) | 18,000 | (295,508)
Result on management of receivables | 8,545 | (610) | 69 | (1) | (482) | (690) | 188 | (332) | 6,687
Result on other operating activities | 4,675 | (3,002) | 909 | (2,559) | 112 | 10,448 | (899) | (4,393) | 5,291
Operating profit /(loss) | 475,645 | 93,300 | 51,607 | 71,779 | 6,988 | 7,359 | (108,018) | (8,483) | 590,177
Exchange differences and interest on trade settlements | (7,674) | (15,148) | 7,869 | 112 | 81 | (50) | 1,827 | - | (12,983)
Group borrowing costs | - | - | - | - | - | - | (35,131) | - | (35,131)
Result on financial activity (non-attributable to segments) | - | - | - | - | - | - | 48,323 | - | 48,323
Share of profit / (loss) of equity-accounted investees | 1,406 | - | - | - | - | - | - | - | 1,406
Profit /(loss) before tax | 469,377 | 78,152 | 59,476 | 71,891 | 7,069 | 7,309 | (92,999) | (8,483) | 591,792
Income tax | - | - | - | - | - | - | - | - | (27,091)
Net profit /(loss) on continuing operations | - | - | - | - | - | - | - | - | 564,701
Net profit /(loss) for the period | - | - | - |  |  |  | - | - | 564,701
Amortization/depreciation | 313,259 | 45,057 | 4,653 | 17,714 | 4,270 | 27,971 | 18,351 | - | 431,275
EBITDA from continuing operations | 788,904 | 138,357 | 56,260 | 89,493 | 11,258 | 35,330 | (89,667) | (8,482) | 1,021,452
Adjusted EBITDA from continuing operations 1 | 795,545 | 144,422 | 55,492 | 92,618 | 12,386 | 30,794 | (89,281) | (8,785) | 1,033,191
ASSETS | 4,885,306 | 897,548 | 74,655 | 239,292 | 66,748 | 156,980 | 1,881,428 | (109,430) | 8,092,527
LIABILITES | 785,819 | 123,615 | 65,372 | 69,328 | 13,910 | 32,330 | 4,395,189 | (97,346) | 5,388,217
Investment outlays | 299,988 | 36,165 | 5,741 | 45,046 | 7,741 | 16,996 | 19,754 | - | 431,431

1
Adjusted EBITDA for the 12-month period ended 31 December 2022 is calculated as EBITDA adjusted for untypical one-off events, including: impairment losses: PLN -2.8 million; change in provisions: PLN -6.4 million; liquidation of fixed
assets: PLN -2.0 million; disposal of fixed assets: PLN 1.7 million; fines and compensation: PLN 2 million; other: PLN -0.2 million.
The value of investments in equity-accounted entities occurs only for the assets of the soda segment and amounts to PLN 7,033 thousand as at 31 December 2022 (PLN 5,655 thousand as at
31 December 2021).
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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21

OPERATING SEGMENTS |  | Foams | Silicates | Packaging | Other | Corporate | Eliminations |
01.01.-31.12.2021 | Soda Segment | Agro Segment | Segment | Segment | Segment | operations | functions | (consolidation | TOTAL 1
|  |  |  |  |  | Segment |  | adjustments) |
Revenues from third parties | 2,210,325 | 486,925 | 389,953 | 237,958 | 73,652 | 84,900 | - | - | 3,483,713
Revenue from inter-segment transactions | 76,926 | 64 | 84 | 197 | 1,134 | 108,626 | - | (187,031) | -
Total sales revenues | 2,287,251 | 486,989 | 390,037 | 238,155 | 74,786 | 193,526 | - | (187,031) | 3,483,713
Cost of sales | (1,925,127) | (340,374) | (310,676) | (185,191) | (52,361) | (181,214) | - | 143,536 | (2,851,407)
Gross profit /(loss) on sales | 362,124 | 146,615 | 79,361 | 52,964 | 22,425 | 12,312 | - | (43,495) | 632,306
Selling costs | (180,863) | (43,822) | (10,937) | (27,428) | (7,140) | (1,205) | - | 42,294 | (229,101)
General and administrative expenses | (84,201) | (33,876) | (6,332) | (6,412) | (3,699) | (9,094) | (103,799) | 4,096 | (243,317)
Result on management of receivables | (4,587) | 2,536 | 24 | (5) | (3) | 996 | - | 54 | (985)
Result on other operating activities | 176,914 | 5,197 | (555) | 1,261 | 601 | 4,897 | (1,161) | (5,553) | 181,601
Operating profit /(loss) | 269,387 | 76,650 | 61,561 | 20,380 | 12,184 | 7,906 | (104,960) | (2,604) | 340,504
Exchange differences and interest on trade settlements | (48) | (3,643) | 190 | 1,013 | 29 | (638) | 179 | - | (2,918)
Group borrowing costs | - | - | - | - | - | - | (44,294) | - | (44,294)
Result on financial activity (non-attributable to segments) | - | - | - | - | - | - | (36,436) | - | (36,436)
Share of profit / (loss) of equity-accounted investees | 27 | - | - | - | - | - | - | - | 27
Profit /(loss) before tax | 269,366 | 73,007 | 61,751 | 21,393 | 12,213 | 7,268 | (185,511) | (2,604) | 256,883
Income tax | - | - | - | - | - | - | - | - | (37,666)
Net profit /(loss) on continuing operations | - | - | - | - | - | - | - | - | 219,217
Net profit /(loss) on discontinued operations | - | - | - | - | - | - | - | - | 61,868
Net profit /(loss) for the period | - | - | - |  |  |  | - | - | 281,085
Amortization/depreciation | 278,628 | 39,110 | 3,679 | 9,537 | 5,983 | 22,831 | 14,872 | - | 374,640
EBITDA from continuing operations | 548,015 | 115,760 | 65,240 | 29,917 | 18,167 | 30,737 | (90,088) | (2,604) | 715,144
Adjusted EBITDA from continuing operations 2 | 546,084 | 114,901 | 65,331 | 30,375 | 16,929 | 28,314 | (87,986) | (2,600) | 711,348
ASSETS 3 | 4,120,352 | 783,143 | 62,300 | 171,139 | 36,973 | 47,179 | 1,962,473 | (48,341) | 7,135,218
LIABILITES 3 | 381,282 | 138,122 | 69,371 | 49,100 | 6,819 | 12,164 | 4,135,863 | (43,832) | 4,748,889
Investment outlays | 598,697 | 29,579 | 4,133 | 71,145 | 5,194 | 3,728 | 29,910 | - | 742,386

1
Restated data. For information on the restatement of comparative data by segment, see Note 2 and Note 1.5.1 above.
2
Adjusted EBITDA for the 12-month period ended 31 December 2021 is calculated as EBITDA adjusted for untypical one-off events, including: change in provisions: PLN 4.1 million; liquidation of fixed assets: PLN -1.2 million; fortuitous
events: PLN -1.4 million; disposal of fixed assets: PLN 6.2 million; restructuring costs: PLN -1.8 million; costs of past operations: PLN -1.6 million, other: PLN -0.5 million.
3
Restated data. For detailed information on the restatement, see Note 1.5.1 to these statements. Also, short-term intangible assets have been allocated to individual segments accordingly. They were presented as unallocated items in
the Consolidated Financial Statements for 2021.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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22
SALES REVENUES — BUSINESS SEGMENTS

| 01.01.-31.12.2022 | 01.01.-31.12.2021 1 | Change 2022/2021 | Change %
Soda segment, including: | 4,037,844 | 2,287,251 | 1,750,593 | 76.5%
Dense soda ash | 2,122,815 | 1,104,737 | 1,018,078 | 92.2%
Light soda ash | 504,104 | 357,574 | 146,530 | 41.0%
Salt | 385,302 | 207,265 | 178,037 | 85.9%
Sodium bicarbonate | 329,135 | 219,135 | 110,000 | 50.2%
Energy | 462,360 | 210,472 | 251,888 | 119.7%
Calcium chloride | 24,171 | 30,889 | (6,718) | (21.7%)
Other products | 41,122 | 80,253 | (39,131) | (48.8%)
Revenues from inter-segment transactions | 168,835 | 76,926 | 91,909 | 119.5%
Agro segment, including: | 560,126 | 486,989 | 73,137 | 15.0%
Agro products | 560,126 | 486,925 | 73,201 | 15.0%
Revenues from inter-segment transactions | - | 64 | (64) | -
Foams segment, including: | 337,029 | 390,037 | (53,008) | (13.6%)
Polyurethane foams | 336,660 | 389,953 | (53,293) | (13.7%)
Revenues from inter-segment transactions | 369 | 84 | 285 | 339.3%
Silicates segment, including: | 529,526 | 238,155 | 291,371 | 122.3%
Sodium silicates | 511,313 | 228,099 | 283,214 | 124.2%
Potassium silicates | 17,405 | 9,750 | 7,655 | 78.5%
Other products | 280 | 109 | 171 | 156.9%
Revenues from inter-segment transactions | 528 | 197 | 331 | 168.0%
Packaging segment, including: | 106,173 | 74,786 | 31,387 | 42.0%
Glass packaging | 104,584 | 73,652 | 30,932 | 42.0%
Revenues from inter-segment transactions | 1,589 | 1,134 | 455 | 40.1%
Other segment, including: | 147,474 | 193,526 | (46,052) | (23.8%)
Revenues from third parties | 16,082 | 84,900 | (68,818) | (81.1%)
Revenues from inter-segment transactions | 131,392 | 108,626 | 22,766 | 21.0%
Consolidation adjustments | (302,713) | (187,031) | (115,682) | (61.9%)
TOTAL | 5,415,459 | 3,483,713 | 1,931,746 | 55.5%

1
Restated data. For information on the restatement of comparative data by segment, see Note 1.5.1 to the report.
For detailed information on the recognition of sales revenue, please refer to Note 3.1 to these financial statements.
INFORMATION ON GEOGRAPHICAL AREAS
Information on the CIECH Group geographical areas is established based on the Group’s assets location.

| Non-current assets | Deferred income tax |
ASSETS DIVIDED ON GEOGRAPHICAL REGIONS | other than financial | assets | Other assets | Total assets
| instruments |  |  |
31.12.2022 |  |  |  |
Poland | 2,566,831 | 56,923 | 2,129,152 | 4,752,906
European Union (excluding Poland) | 2,196,909 | 75,851 | 1,056,375 | 3,329,135
Other European countries | - | - | 180 | 180
Africa | - | - | 1,693 | 1,693
Asia | - | - | 6,257 | 6,257
Other regions | - | - | 2,356 | 2,356
TOTAL | 4,763,740 | 132,774 | 3,196,013 | 8,092,527
31.12.2021 1 |  |  |  |
Poland | 2,489,645 | 64,707 | 2,019,215 | 4,573,567
European Union (excluding Poland) | 2,223,317 | 10,277 | 307,415 | 2,541,009
Other European countries | - | - | 2,432 | 2,432
Africa | - | - | 2,313 | 2,313
Asia | - | - | 7,022 | 7,022
Other regions | - | - | 8,875 | 8,875
TOTAL | 4,712,962 | 74,984 | 2,347,272 | 7,135,218

1
Restated data. For detailed information, see Note 1.5.1 to this report.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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23
SALES REVENUES – GEOGRAPHICAL STRUCTURE OF MARKETS

| 01.01.-31.12.2022 | 01.01.-31.12.2021 1 | Change 2022/2021
Poland | 2,588,860 | 1,748,175 | 48.1%
European Union (excluding Poland) | 2,542,937 | 1,571,718 | 61.8%
Germany | 1,365,964 | 805,723 | 69.5%
Romania | 40,002 | 53,060 | (24.6%)
Czech Republic | 288,933 | 166,908 | 73.1%
Italy | 42,181 | 27,744 | 52.0%
The Netherlands | 258,219 | 139,952 | 84.5%
Finland | 110,537 | 50,060 | 120.8%
Sweden | 3,289 | 23,560 | (86.0%)
Belgium | 36,479 | 35,435 | 2.9%
Denmark | 72,546 | 42,388 | 71.1%
Spain | 128,772 | 107,588 | 19.7%
Austria | 29,953 | 39,737 | (24.6%)
France | 21,301 | 21,426 | (0.6%)
Luxembourg | 61,730 | 398 | 15410.1%
Lithuania | 19,683 | 16,331 | 20.5%
Other EU countries | 63,348 | 41,408 | 53.0%
Other European Countries | 166,073 | 77,334 | 114.7%
Switzerland | 20,948 | 10,815 | 93.7%
Norway | 78,033 | 44,375 | 75.8%
United Kingdom | 4,776 | 4,896 | (2.5%)
Russia 2 | 1,177 | 5,985 | (80.3%)
Other European countries | 60,848 | 11,263 | 440.2%
Africa | 16,671 | 17,286 | (3.6%)
Asia | 58,375 | 37,855 | 54.2%
China | 762 | 4,474 | (83.0%)
Singapore | 1,368 | 6,819 | (79.9%)
Turkey | 39,828 | 6,169 | 545.6%
Other Asian countries | 16,417 | 20,393 | (19.5%)
Other regions | 13,503 | 26,383 | (48.8%)
Cash flow hedge adjustment | 29,040 | 4,962 | -
TOTAL | 5,415,459 | 3,483,713 | 55.5%

1
Restated data. For detailed information, see Note 1.5.1 to this report.
2
Sales carried out until 24 February 2022, after 24 February 2022 the contracts have been discontinued.
Sales revenues
01.01.-31.12.2022
Sales revenues
01.01.-31.12.2021
Poland
47,80%
European
Union
(excluding
Poland)
46,96%
Other European
countries
3,07%
Africa
0,31%
Asia
1,08%
Other regions and
adjustments
0,79%
Poland
50,18%
European
Union
(excluding
Poland)
45,12%
Other European
countries
2,22%
Africa
0,50%
Asia
1,09%
Other regions
0,90%
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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24
3 NOTES TO THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
3.1 SALES REVENUES
Accounting policy
The Group recognises revenues based on the so-called 5-step model – when it satisfies a performance obligation by transferring a
promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Group recognises as revenues the amount of the transaction price that is allocated
to that performance obligation.
At the CIECH Group, sales revenues are recognized upon the provision of services or delivery of products or goods in accordance with
INCOTERMS terms and conditions contained in contracts with customers. The company usually sells using the following delivery bases:
DAP, FCA, EXW, CPT, DDP, CIF.
The CIECH Group enters into agreements with counterparties concerning the provision of the Group’s products through consignment
warehouses owned by the counterparties. Control of delivered products is passed to the customer when they are accepted for storage
and at that point in time sales revenues are recognised along with the corresponding cost of sales.
Moreover, the Group, in accordance with IAS 15 Revenue from contracts with customers, attributes revenues and costs connected with
contracts concerning cavern desalination to particular periods in which the works were conducted. For more detailed information, see
Note 5.6 to these statements.
CIECH Group companies grant discounts to selected customers, and the value of these discounts reduces the value of consolidated sales
revenues.
For detailed information on sales revenues by operating segment and by geographical market, please refer to Note 2 to these financial
statements.
Payment terms
Commercial contracts concluded by the CIECH Group include various terms of payment of trade receivables depending on the type of
transaction, market characteristics and trade conditions. The most common payment terms are: 14, 30 and 60 days.
The CIECH Group companies use non-recourse factoring and detailed information is provided in Note 5.10 to these financial statements.
SALES REVENUES

| 01.01.-31.12.2022 | 01.01.-31.12.2021 1
Revenues from sales of products and services | 5,329,436 | 3,424,904
- products | 5,286,420 | 3,352,202
- services | 43,016 | 72,702
Revenues from sales of goods and materials | 86,023 | 58,809
- goods | 83,347 | 57,067
- materials | 2,676 | 1,742
Net sales of products, goods and materials | 5,415,459 | 3,483,713

1
Restated data. For detailed information, see Note 1.5.1 to this report.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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25
3.2 COST OF SALES
Accounting policy
Expenses are probable decreases in economic benefits in the form of outflows or depletions of assets or increases in liabilities and
provisions.
Cost of sales comprises the production cost of products and services sold and the value of sold goods and materials.
Selling costs include, among others: sales commissions and the costs of advertising, promotion and distribution.
General and administrative expenses are expenses associated with activities of the entity’s management or those of general functions.
Provisions for liabilities to employees arising from the employment relationship (salaries, bonuses, holiday entitlements, etc.) are
recognised in costs of sales/general and administrative expenses/in selling expenses.
Provisions for liabilities to former key employees (compensation for termination of contracts, non-competition clauses, etc.) are
recognised in general and administrative expenses or selling expenses.
Provisions for length-of-service awards, retirement and disability benefits are recognised in other operating expenses.
Amortisation and depreciation
In this item, the Group recognises the cost of accrued depreciation charges on property, plant and equipment, amortisation charges on
intangible assets, and depreciation charges on right-of-use assets. Depreciation and amortisation charges are recognised as operating
expenses depending on where they arise.

COST OF SALES | 01.01.-31.12.2022 | 01.01.-31.12.2021 1
Cost of manufacture of products and services sold | (4,163,334) | (2,808,359)
Cost of sold goods and materials sold | (57,356) | (31,420)
Reversal of impairment losses on inventory | 8,364 | 7,169
Recognition of impairment losses on inventory | (14,830) | (5,792)
Write off / liquidation of materials | (199) | (457)
Costs of idle assets and production capacity | (19,875) | (12,548)
TOTAL | (4,247,230) | (2,851,407)

1
Restated data. For detailed information, see Note 1.5.1 to this report.
3.3 COSTS BY TYPE

COST BY KIND (SELECTED) | 01.01.-31.12.2022 | 01.01.-31.12.2021 1
Amortisation | (416,508) | (357,319)
Consumption of materials and energy | (3,069,495) | (1,785,929)
Employee benefits, including: | (540,649) | (391,895)
- payroll | (447,153) | (323,669)
- social security and other benefits | (87,168) | (63,416)
- expenditure on retirement benefit and jubilee awards (including provisions) | (462) | (695)
- expenditure on pension schemes with defined benefits | (1,073) | (1,069)
- other | (4,794) | (3,046)
External services | (561,165) | (550,771)

1
Restated data. For detailed information, see Note 1.5.1 to this report .
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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26
3.4 OTHER INCOME AND EXPENSES
Accounting policy
The reporting period’s results are also affected by other operating income and expenses indirectly related to the Group's core operations.
The key items include:
• gains/ losses on disposal and liquidation of non-financial non-current assets,
• gains/ losses on sales of emission rights,
• recognition/ reversal of impairment losses (including allowances for doubtful receivables),
• recognition / reversal of provisions, such as for liabilities, employee benefits,
• income from rental of investment property is recognised in profit or loss on a straight-line basis over the lease term. Any lease
incentives granted are an integral part of the net consideration agreed for the use of the asset,
• gains/losses on valuation of fair value of investment property,
Subsidies
Government subsidies are recognised when there is reasonable assurance that the subsidy will be received and that the entity will comply
with all relevant conditions of the subsidy. If the subsidy relates to an expense item, it is recognised as a reduction in the costs that the
subsidy is intended to compensate.
Government subsidies related to assets, including non-monetary subsidies at fair value, are presented in the balance sheet by setting up
the subsidy as deferred income. It is recognised as income over the useful life of the asset. Repayment of a subsidy related to income
should be applied first against any unamortised deferred credit set up in respect of the subsidy. To the extent that the repayment exceeds
any such deferred credit, or where no deferred credit exists, the repayment should be recognised immediately in profit or loss. Repayment
of a subsidy related to an asset should be recorded by increasing the carrying amount of the asset or reducing the deferred income balance
by the amount repayable.
In connection with the implementation of investment projects to improve energy efficiency, the Group companies receive energy
efficiency certificates which are recognised at market value in the statement of financial position as a subsidy. If the value of certificates
received exceeded the value of expenditures incurred on the implementation of projects, this amount is recognised on a one-off basis in
profit or loss as other operating income.
Judgements and estimates
Impairment of non-financial assets
The carrying amounts of the company’s non-financial assets, other than inventory and deferred tax assets, are reviewed at reporting date
to determine whether there is any indication of impairment. If any such indication exists, then the company estimates the recoverable
amount of the respective cash-generating unit.
For intangible assets that have indefinite lives, goodwill or intangible assets that are not yet available for use, the recoverable amount is
estimated at each reporting date, irrespective of the existence of the aforesaid indications.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. The
recoverable amount is determined for individual assets, unless the asset does not generate cash inflows that are largely independent of
the cash inflows from other assets or groups of assets. If the asset's carrying amount exceeds its recoverable amount, an impairment loss
is recognised against the carrying amount of the asset. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to
the asset.
Impairment losses are recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to the unit (group of units) and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata
basis. Impairment losses are recognised in profit or loss. Impairment losses in respect of assets are recognised in those expense categories
that correspond to the function of the asset to which they relate.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
OTHER OPERATING INCOME
01.01.-31.12.2022

|  | 01.01.-31.12.2021
Subsidies | 14,095 | 7,500
The right to emit greenhouse gases | - | 145,411
Rents/lease income | 4,238 | 4,536
Gain on disposal of non-financial non-current assets | 1,605 | 6,210
Reversal of impairment allowances on receivables | 13,601 | 7,381
Reversal of impairment losses on property, plant and equipment and intangible assets | 7,506 | 315
Reversal of provisions on employee benefits | 1,210 | 2,037
Reversal of provisions for compensation – changing the base | 772 | 3,229
Reversal of provisions for environmental protection – changing the base | - | 3,844
Reversal of provisions for liabilities – changing the base | 6,168 | 5,126
Penalty fees and compensations received | 2,598 | 10,785
Refund of taxes and charges | 23,128 | 18,273
Valuation of investment property in fair value | 6,891 | -
Other services | 5,120 | 3,177
Settlement of inventory taking | 4,111 | 1,331
Other | 9,905 | 19,240
TOTAL | 100,948 | 238,395

Reimbursement of costs and fees in the amount of PLN 23,128 thousand results, among others, from compensation received by CIECH Soda
Polska S.A. for the costs of purchase of emission allowances in the amount of PLN 15,653 thousand (in the comparable period it was PLN
15,773 thousand), a correction of the real estate tax for the years 2017-2021 made by CIECH Soda Polska S.A. in 2022 in the amount of 3,647
thousand PLN and a reimbursement of VAT sanction in the amount of 2,632 thousand PLN received by CIECH Trading.
The main item of other operating income in the corresponding period was the gain on the sale of unused CO2
emission allowances earned in
the SDC Group (PLN 96,371 thousand) and CIECH Soda Romania (PLN 49,040 thousand).
Subsidies and other forms of State aid
Subsidies recognised in the statement of profit or loss in the reporting period amounted to PLN 14,095 thousand (PLN 7,500 thousand in the
comparable period) settled over time in proportion to the depreciation/amortisation of non-current assets to which they relate. Subsidies
included in liabilities as at 31 December 2022 amounted to PLN 120,969 thousand (compared to PLN 113,181 thousand as at 31 December
2021). The CIECH Group companies receive subsidies for research and development activities, purchase of property, plant and equipment
and for adapting investment projects to environmental requirements. The subsidies are mainly received by the CIECH Group companies from
the National Centre for Research and Development, the National Fund for Environmental Protection and Water Management and Ministry
of Development.
In 2022, the CIECH Group companies continued publicly subsidised projects launched in previous years, which made it possible to receive
subsidies in the amount of:
• PLN 798 thousand by CIECH Sarzyna S.A. for the implementation of the project entitled: “Development and field verification of a more
efficient and energy-saving manufacturing technology for a novel herbicide with reduced active ingredient content”.
• PLN 455 thousand by Smart Fluid S.A. as part of the project entitled: “Development and validation of real-world technology for the
production of impact-absorbing smart materials by exploiting the properties of shear thickening fluids (STF)”.
• PLN 3,158 thousand by CIECH R&D Sp. z o.o. as part of the completed project entitled: Establishment of a Research and Development
Center of Ciech R&D Sp. z o.o.
• PLN 526 thousand by CIECH R&D Sp. z o.o. as part of the completed project entitled: “Optimisation of the production of soda a sh and
soda-based products by using concentrated CO2
waste streams, together with carbon dioxide chemisorption in the post-distillation
suspension, to improve the properties of lime”.
In 2022, CIECH Group companies also received de minimis aid for training and aid in the form of greenhouse gas emission allowance schemes.
The CIECH Group companies also benefit from the corporate income tax exemption for projects implemented on the basis of permits to
operate in Special Economic Zones or on the basis of support decisions issued within the Polish Investment Zone.
27
ciechgroup.com
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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28

OTHER OPERATING EXPENSES | 01.01.-31.12.2022 | 01.01.-31.12.2021
Costs related to investment property | (5,113) | (4,442)
Recognition of impairment losses on receivables | (6,913) | (8,366)
Recognition of impairment losses on property, plant and equipment and intangible assets | (10,327) | (577)
Recognition of provisions on employee benefits | (1,774) | (3,089)
Recognition of provisions for compensation – changing the base | - | (395)
Recognition of provisions for environmental protection – changing the base | (1,608) | (828)
Recognition of provisions for liabilities and anticipated losses | (9,113) | (5,538)
Liquidation costs of property, plant and equipment | (2,047) | (1,209)
Costs of remediating the effects of fortuitous events | (1,743) | (1,494)
Valuation of investment property at fair value | - | (202)
Penalties and compensations paid | (3,216) | (1,252)
Fortuitous events | (4,355) | (5)
Inventory differences | (6,993) | (1,042)
Costs of idle assets and production capacity | (14,666) | (16,718)
Other | (21,102) | (12,620)
TOTAL | (88,970) | (57,777)

Other operating expenses in 2022 and 2021 include an amount of PLN 14,666 thousand and PLN 16,718 thousand, respectively, related to
the costs of idle assets and production capacity in CIECH Soda Romania S.A. due to the hibernation of the plant as of September 2019.
For the remaining CIECH Group companies engaged in production activities, these expenses are reported in the core business and affect the
level of cost of sales.
3.4.1 DETAILED INFORMATION ON SIGNIFICANT IMPAIRMENT LOSSES
In connection with the suspension of production by a subsidiary, CIECH Soda Romania S.A. in 2019, resulting from the discontinuation of
supplies of process steam by its supplier, S.C. CET Govora S.A., the CIECH Group evaluated the evidence of impairment of assets, based on
possible scenarios of actions. Following the analysis, the Group recognised an impairment loss on property, plant and equipment in the total
amount of PLN 73,486 thousand as at 31 December 2019. The decision to recognise the impairment loss was made as a result of:
• failure to reach agreement between the CIECH Soda Romania S.A. and the sole provider of steam – S.C. CET Govora S.A. based in Romania
in composition bankruptcy (“CET”), as to the level of the price of process steam, as confirmed by CET in its letter with in formation on
the inability to supply the steam at the price agreed in the terminated contract,
• analysis of possible steam delivery options from a new source, the probability of which, as at the date of decision making, was assessed
as insufficiently high.
The amount of the impairment loss on property, plant and equipment was determined in accordance with IAS 36 “Impairment of assets”.
The following assumptions were adopted to determine the value of particular groups of fixed assets:
• for land – the value from market valuations was used as the selling price,
• for fixed assets and fixed assets under construction that could potentially be used by other CIECH Group companies and relocated there
– the book value was used,
• for vehicles and other fixed assets – it was assumed that the book value reflected the market value,
• for other fixed assets not included above – the price of scrap less the costs of disassembly was used as the selling price.
The impairment loss was recognised for buildings, premises, civil and marine engineering structures, technical equipment and machinery,
fixed assets under construction.
The impairment loss (recognised as other operating expenses in the period from 1 January to 31 December 2019), calculated on the basis of
the above assumptions, was PLN 73,486 thousand.
The amount of the impairment loss was allocated to the profit or loss of the industry segments in which CIECH Soda Romania S.A. conducts
its operations. The impact on the operating profit or loss of particular segments in 2019 was as follows:
• Soda Segment: PLN 70,986 thousand,
• Silicates Segment: PLN 2,500 thousand.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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29
As at the balance sheet date, the analysis of the situation in CIECH Soda Romania S.A. has been performed. To date, the situation has not
changed – possible scenarios are still being analysed.
In addition, the Group analysed the list fixed assets and fixed assets under construction that could potentially be used by other CIECH Group
companies and relocated there, and confirmed its validity. In addition, the financial statements for 2022 include a depreciation charge that
takes into account the wear and tear of these fixed assets in the amount of PLN 7,364 thousand, which is presented under other operating
expenses as the cost of idle capacity which, in the opinion of the Management Board, reflects the status of the above-mentioned fixed assets.
The status of the Romanian plant has not changed compared to the status at the end of 2019. In 2022, the Group continues to identify the
reasons for the decision to recognise an impairment loss. At the end of 2022, the fixed assets held were measured at fair value by an
independent valuer to determine whether the value of the assets recognised in the Company's accounting records exceeds the value
determined by the valuer. Based on the valuation it was determined that no additional impairment losses were necessary.
As a result, the amount of impairment losses on fixed assets in CIECH Soda Romania S.A. did not change. The net carrying amount of the
company's fixed assets is PLN 46,100 thousand as at 31 December 2022.
At the same time, the Group continues analyses of the possibility of obtaining a new source of steam at a reasonable cost and long-term
cooperation in the supply of other raw materials necessary for production (guaranteeing cost predictability in subsequent years). The result
of these analyses may affect the amount of impairment losses recognised in the consolidated financial statements of the CIECH Group for
subsequent reporting periods.
3.5 FINANCIAL INCOME AND EXPENSES
Accounting policy, judgements and estimates
Financial income and expenses relate to an entity’s financing activities including the acquisition and disposal of equity, securities, drawing
of loans and borrowings, issuance of debt securities. Accordingly, key items of financing activities include:
• interest on borrowings determined based on the effective interest method,
• interest earned by the Group on cash and cash equivalents (bank deposits and accounts loans granted and receivables) – accounted
for in the profit and loss on accrual basis using the effective interest method,
• dividend income – recognised in profit or loss when the Group’s right to receive payment is established,
• write-downs on investments,
• net foreign exchange gains or losses,
• gains/ losses on sales of financial assets,
• gains/losses on valuation of financial instruments not designated for hedge accounting and the ineffective portion relating to financial
instruments designated for hedge accounting.
FINANCIAL INCOME

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Interest | 36,884 | 1,204
Dividends and shares in profit | 216 | -
Net foreign exchange gains | 13,105 | -
Reversal of impairment losses | 3,000 | 1,397
Decrease in provisions due to change in discount rate | 99,588 | 1,685
Profits on financial instruments | 34,969 | 18,064
Other | 172 | 4,364
TOTAL | 187,934 | 26,714

The interest item shows interest in the amount of PLN 30,797 thousand in connection with the received judgments of the Suprem e
Administrative Court (a detailed description of tax audits and the status of cases is presented in note 9.2.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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30

FINANCIAL EXPENSES | 01.01.-31.12.2022 | 01.01.-31.12.2021
Total interest | (76,363) | (37,482)
Net foreign exchange losses | - | (1,870)
Recognition of other impairment losses | (203) | (448)
Factoring commissions | (17,582) | (2,364)
Bank fees and commissions | (5,536) | (8,569)
Recognised provisions | - | (903)
Costs of discounting of liabilities | (1,400) | (427)
Losses on financial instruments | (80,694) | (55,696)
Increase in provisions due to change in discount rates | (2,558) | (70)
Other | (3,389) | (2,533)
TOTAL | (187,725) | (110,362)

The item in the statement of profit or loss “Gains/losses on financial instruments” comprises the following values:
Finance income

| 01.10.-31.12.2022 | 01.01.-31.12.2021
Profit on financial instruments | 41,584 | 20,812
Interest | 6,087 | 1,203
Profit on derivatives | 34,969 | 19,404
Odpisy aktualizujące | 528 | 204
Net profit/(loss) attributable to shareholders of the parent company | 01.10.-31.12.2022 | 01.01.-31.12.2021
Loss on financial instruments | (154,381) | (93,178)
Interest | (73,687) | (37,482)
Loss on derivatives | (80,694) | (55,696)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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31
3.6 COMPONENTS OF OTHER COMPREHENSIVE INCOME
Tax effect of each component of other comprehensive income of the CIECH Group

Tax effect of each component of other comprehensive income of | 01.01.-31.12.2022 |  | 01.01.-31.12.2021 1 |
the CIECH Group | Before tax | Tax | After tax | Before tax | Tax | After tax
Net currency at translation differences | 12,414 | - | 12,414 | (4,370) | (226) | (4,596)
Cash flow hedge reserve | (213,899) | 90,983 | (122,916) | 237,461 | (69,237) | 168,224
Profit (loss) from costs of hedging reserve | (57,777) | - | (57,777) | (16,672) | - | (16,672)
Valuation of actuarial provisions | 745 | (136) | 609 | (1,342) | 255 | (1,087)
Other components of other comprehensive income | - | - | - | (34) | - | (34)
TOTAL | (258,517) | 90,847 | (167,670) | 215,043 | (69,208) | 145,835

1
Restated data. For detailed information, see Note 1.5.1 to this report.
Income tax and reclassification adjustments in other comprehensive income

Other comprehensive income before tax | 01.01.-31.12.2022 | 01.01.-31.12.2021 1
Currency translation differences (foreign companies) | 12,414 | (4,370)
remeasurement for the current period | 12,414 | (4,370)
reclassification to profit or loss | - | -
Profit (loss) from cash flow hedge reserve | (213,899) | 237,461
fair value remeasurement in the period | 6,032 | 237,529
reclassification to profit or loss | (219,931) | (68)
Profit (loss) from costs of hedging reserve | (57,777) | (16,672)
fair value remeasurement in the period | (57,777) | (20,345)
reclassification to profit or loss | - | 3,673
Valuation of actuarial provisions | 745 | (1,342)
remeasurement for the current period | 745 | (1,342)
reclassification to profit or loss | - | -
Other components of other comprehensive income | - | (34)
remeasurement for the current period | - | (34)
reclassification to profit or loss | - | -
Income tax attributable to other components of other comprehensive income | 90,847 | (69,208)
accrued for the current period | 25,628 | (67,285)
reclassification to profit or loss | 65,219 | (1,923)
Other comprehensive income net of tax | (167,670) | 145,835

1
Restated data. For detailed information, see Note 1.5.1 to this report.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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32
4 INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY
4.1 MAIN COMPONENTS OF TAX EXPENSE
Accounting policy
Current tax
Current tax receivables and liabilities for the current and prior periods are measured in the amount of the expected tax amount to be paid
to tax authorities (recoverable from tax authorities) using tax rates and tax laws that are legally or substantively enacted at the reporting
date.
The main components of tax expense include:

THE MAIN COMPONENTS OF TAX EXPENSE (TAX INCOME) | 01.01.-31.12.2022 | 01.01.-31.12.2021 1
Current income tax | (76,401) | (69,257)
Income tax for the reporting period | (136,458) | (72,496)
Adjustment to tax for previous years | 60,057 | 3,239
Deferred income tax | 53,068 | 31,591
Origination/reversal of temporary differences | 36,876 | 45,178
Recognition of tax losses not recognized in previous years | 16,192 | (33,445)
Unrecognized deferred tax assets | - | 19,858
INCOME TAX RECOGNISED IN STATEMENT OF PROFIT OR LOSS | (27,091) | (37,666)

1
Restated data. For detailed information, see Note 1.5.1 to this report.
For a detailed description of proceedings concerning tax settlements, see Note 9.2 to these financial statements.

INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME | 01.01.-31.12.2022 | 01.01.-31.12.2021
Current income tax | 58,992 | (61,540)
Cash flow hedge | 58,992 | (61,540)
Deferred income tax | 31,855 | (7,668)
Cash flow hedge | 31,991 | (7,697)
Valuation of actuarial provisions | (136) | 255
Net currency at translation differences | - | (226)
TOTAL | 90,847 | (69,208)

4.2 EFFECTIVE TAX RATE
The following represents a reconciliation of income tax calculated by applying the currently enacted statutory tax rate to th e Group’s pre-
tax financial result to income tax calculated based on the effective tax rate:

EFFECTIVE TAX RATE | 01.01.-31.12.2022 | 01.01.-31.12.2021
Profit/(loss) before tax | 591,792 | 256,883
Tax calculated at the applicable tax rate | (112,440) | (48,808)
Difference resulting from the application of tax rates applicable in other countries | (4,174) | (2,868)
Tax effect of revenues adjusting profit (loss) before tax (permanent difference) | 15,282 | (4,830)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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33

EFFECTIVE TAX RATE | 01.01.-31.12.2022 | 01.01.-31.12.2021
Effect of interest in entities accounted for using the equity method | (267) | (27)
Tax effect of expenses adjusting profit (loss) before tax (permanent difference) | (25,769) | 14,937
Adjustment of current income tax for previous years | 60,057 | (2,796)
Reversal impairment losses on deferred tax asset for tax losses carried forward | 21,208 | (1,197)
Tax losses for the reporting period for which a deferred tax asset has not been recognised | (3,866) | (11,446)
Special economic zone | 20,831 | 23,170
Tax credits | 401 | 1,151
Settlement of deferred tax asset | - | (1,048)
Other | 1,646 | (3,904)
Income tax recognised in statement of profit or loss | (27,091) | (37,666)
EFFECTIVE TAX RATE | 4.6% | 15.6%

The CIECH Group's effective tax rate in 2022 was largely driven by:
• adjustment (reduction) of current income tax for previous years in the total amount of PLN 60,057 thousand (including PLN 36,559
thousand in CIECH S.A.), comprising in particular the expected refund of overpaid income tax in connection with the judgments of the
Supreme Administrative Court (for a detailed description of tax audits and the status of cases, see Note 9.2),
• inclusion of costs listed in Articles 15c and 15e of the Corporate Income Tax Act in the total amount of PLN 99,249 thousand that were
not accounted for in previous years and for which no deferred tax asset was recognised in the amount of PLN 18,857 thousand in
tax-deductible expenses in 2022 in CIECH S.A.,
• increase in the amounts of relief for operating in the Special Economic Zone.
4.3 DEFERRED INCOME TAX
Accounting policy
Deferred tax
Deferred tax is recognised in respect of temporary differences between the tax values of assets and liabilities and the carrying amounts
recognised in the financial statements.
Deferred tax liability is recognised for all taxable temporary differences, unless the deferred tax liability arises from:
• the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination
and at the time of the transaction affects neither accounting profit nor taxable profit, or
• unless the investor is able to control the timing of the reversal of temporary differences in respect of investments in subsidiaries,
associates and joint ventures, and it is probable that the temporary differences will not reverse in the foreseeable future.
A deferred tax asset is recognised for all deductible temporary differences and for unused tax credits and tax losses carried forward to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences and losses can be utilised:
• unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business
combination and at the time of the transaction affects neither accounting profit nor taxable profit, and
• deductible temporary differences in respect of investments in subsidiaries, associates and joint ventures are recognised in statement
of financial position only to the extent that it is probable that the temporary difference will reverse in the foreseeable future and
taxable profit will be available against which the temporary difference can be utilised.
The carrying amount of a deferred tax asset is reviewed at the end of every reporting period and is reduced to the extent that it is no
longer probable that sufficient taxable income will be available against which the asset can be utilised. Any previously unrecognised
deferred tax asset is reassessed at each reporting date and is recognised to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to the temporary differences when they
reverse, based on the tax rates and laws that have been enacted at the reporting date or whose application in the future is certain at the
reporting date.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Accounting policy
Income tax related to items recognised outside profit or loss statement is itself recognised outside profit or loss: either in other
comprehensive income, when it relates to items recognised in other comprehensive income, or directly in equity, when it relates to items
recognised directly in equity.
Deferred tax assets and liabilities are offset solely if there is a legally enforceable right to offset current tax assets and liabilities, and they
relate to income taxes levied by the same tax authority on the same taxable entity.
Judgements and estimates
Deferred tax
Deferred income tax asset is based on the assumption that future taxable profit will allow for its usage. In determining the amount of
deferred tax assets, the CIECH Group subsidiaries base their calculations on estimates related to the term and amount of future taxable
income.
Deferred income tax is attributable to the following items:

DEFERRED INCOME TAX ASSETS AND DEFERRED |  | 31.12.2022 |  |  | 31.12.2021 |
INCOME TAX LIABILITY |  |  |  |  |  |
| Total asset | Total liability | Net value | Total asset | Total liability | Net value
Property, plant and equipment | 9,053 | 174,229 | (165,176) | 3,129 | 172,484 | (169,355)
Intangible assets | 1,451 | 21,541 | (20,090) | 2,237 | 20,945 | (18,708)
Rights to use an asset | - | 4,551 | (4,551) | - | 4,619 | (4,619)
Investment property | 2,861 | 1,106 | 1,755 | 1,507 | 1,106 | 401
Long term receivables | 796 | 1,928 | (1,132) | 796 | 3,551 | (2,755)
Financial assets | 437 | 83,497 | (83,060) | 768 | 7,401 | (6,633)
Inventory | 4,516 | 116 | 4,400 | 1,840 | 331 | 1,509
Trade and other receivables | 4,837 | 387 | 4,450 | 3,480 | 2 | 3,478
Provisions for employee benefits | 3,881 | - | 3,881 | 3,618 | - | 3,618
Other provisions | 40,373 | 2 | 40,371 | 68,407 | - | 68,407
Tax losses carried forward | 130,881 | - | 130,881 | 83,194 | - | 83,194
Foreign exchange differences | - | 2,183 | (2,183) | 400 | 1,665 | (1,265)
Liabilities | 197,808 | 5,427 | 192,381 | 48,171 | 2,812 | 45,359
Special economic zone | 56,864 | - | 56,864 | 101,341 | - | 101,341
Other | 2,657 | 1,130 | 1,527 | (978) | 8,276 | (9,254)
Deferred tax assets/liability | 456,415 | 296,097 | 160,318 | 317,910 | 223,192 | 94,718
Set - off of deferred tax assets/ liability | (270,974) | (270,974) | - | (174,068) | (174,068) | -
Unrecognized deferred tax assets | (52,667) | - | (52,667) | (68,858) | - | (68,858)
Deferred tax assets/liability recognised in the statement of financial position | 132,774 | 25,123 | 107,651 | 74,984 | 49,124 | 25,860

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Change recognized in the statement of profit or | 49,310 | 31,590
loss |  |
Change recognized in other comprehensive income | 31,855 | (7,668)
Foreign exchange differences | 626 | 266
Total change of deferred tax | 81,791 | 24,188

The Group estimates that within more than 12 months from the period of the consolidated financial statements presentation the deferred
tax asset will be utilised in the amount of PLN 146,901 thousand (this amount does not include the unrecognised amount of the deferred tax
asset). In the same period, the estimated amount of settlement of the deferred tax liability will be PLN 214,962 thousand.
The Group recognises deferred tax liabilities and deferred tax assets on the basis of temporary differences between the carrying amounts of
assets and liabilities and their tax bases and tax losses deductible in the future as well as other unused tax credits relating to corporate
income tax. Temporary differences can be:
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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• taxable, resulting in taxable amounts to be included in the determination of taxable income (tax loss) in future periods when the carrying
amount of the asset or liability is recovered or settled, or
• deductible, resulting in deductible amounts in the determination of taxable income (tax loss) in future periods when the carrying amount
of the asset or liability is recovered or settled.
Dividend payment to the shareholders of the CIECH Group has no effect on deferred tax.
The CIECH Group companies who recognised deferred tax assets in respect of tax loss carried forward, on the basis of their tax budgets,
predict that sufficient taxable profits will be realised in the period when losses can be utitlised against which the Group can fully utilise the
benefits therefrom.
The CIECH Group companies did not recognise a deferred tax asset of PLN 52,667 thousand as they assessed that recovery of this asset over
the next five years was less than likely. The largest item related to the non-recognition of a deferred tax asset in respect of a tax loss on a
capital source in 2019-2022 (total loss of PLN 161,966 thousand) at CIECH S.A.
In the CIECH Group, CIECH Soda Polska S.A. and CIECH Vitrosilicon S.A. benefit from income tax exemptions for conducting business in Special
Economic Zones. At the end of the current reporting period, the net asset resulting from operations carried out in the Special Economic Zone
was PLN 56,864 thousand.
As of 1 September 2016, CIECH Soda Polska S.A. started to take advantage of its exemption from the corporate income tax on account of
operations carried out in the Pomeranian Special Economic Zone in accordance with the Zone Permit No 126/PSSE dated 23 May 20 14
(as amended by the Decision of the Minister of Economy No 252/IW/15 dated 21 July 2015).
At the end of the current reporting period, the net asset resulting from operations carried out in the Special Economic Zone at CIECH Soda
Polska S.A. was PLN 38,968 thousand.
In 2021, CIECH Vitrosilicon S.A. obtained Support Decision No 11/2021 of 23 February 2021 issued by the Kostrzyn-Słubice Special Economic
Zone to conduct business in the special economic zone.
As of 1 December 2021, the Company began to recognise the exemption from corporate income tax under Article 17(1)(34a) in connection
with the incurring eligible costs to qualify for the exemption.
As at 1 December 2021, the Company has determined that the amount of state aid available in respect of the above tax credit i s
PLN 19,890 thousand, and recognised a deferred tax asset in this amount. In 2022, the value of the exemption was increased by
PLN 6,445 thousand. In the same period, PLN 8,408 thousand was used (in 2021, a tax relief of PLN 31.8 thousand was used).
At the end of the current reporting period, the net asset resulting from operations carried out in the Special Economic Zone at
CIECH Vitrosilicon S.A. was PLN 17,896 thousand.
In the light of provisions of the General Anti-Avoidance Rule (“GAAR”), applicable as of 15 July 2016 and aimed at preventing the origination
and use of factitious legal structures designed to avoid payment of taxes in Poland, the Management Board of CIECH S.A. considered the
impact of transactions which could potentially be subject to the GAAR regulations on the deferred tax, tax value of assets and deferred tax
provisions. In the opinion of the Management Board, the analysis conducted did not demonstrate the need to adjust the reported current
and deferred income tax items. However, in the opinion of the Management Board, there is an inherent uncertainty arising from GAAR that
tax authorities will interpret these provisions differently, will change their approach to their interpretation or the rules themselves will
change, which may affect the ability to utilise the deferred tax assets in future periods and the possible payment of an additional tax for past
periods.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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5 NOTES TO ASSETS REPORTED IN THE CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
5.1 PROPERTY, PLANT AND EQUIPMENT
Accounting policy
Own property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The
cost of an item of property, plant and equipment comprises its purchase price and all other costs directly attributable to the acquisition
of the asset and bringing it to a working condition for its intended use. The cost also includes the cost of replacing components of
machinery and equipment when incurred if the recognition criteria are met.
Property, plant and equipment used under lease agreements
As of 1 January 2019, property, plant and equipment used under lease agreements are reported in the statement of financial position as
right-of-use assets.
Subsequent expenditure
The cost of replacing a part of an item of property, plant and equipment are capitalised. Other costs are capitalised only to the extent that
it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably.
Other subsequent costs are recognised in the profit or loss statement as incurred expenses.
A separate component of an item of property, plant and equipment, requiring replacement at regular intervals, is depreciated over its
economic useful life.
The Group increases the value of property, plant and equipment by the value of outlays for periodic major overhauls, necessary for the
functioning of a given item of property, plant and equipment. These expenditures are treated as a separate item of property, plant and
equipment and depreciated through the anticipated period to the next planned overhaul. Upon capitalisation of new costs of overhauls,
the non-depreciated value of previous repairs is allocated to operating expenses.
Upon the acquisition or creation of an item of property, plant and equipment, the Group separates from the cost a value equal to the
expenditures that need to be made during the next overhaul of a given item of property, plant and equipment and depreciates it through
the anticipated period left until the next planned overhaul.
Amortisation and depreciation
Items of property, plant and equipment, and also their significant and separate components, are depreciated on a straight-line basis over
their respective estimated useful lives, with the exception of the salt caverns, which are depreciated using the method based on the
quantity of products manufactured (the amount of salt extracted or the volume used, depending on their use). Land is not depreciated.
The estimated useful lives are as follows:

Fixed assets | Useful lives
Buildings | 2-50 years
Machinery and equipment | 2-20 years
Means of transport | 2-20 years
Other | 1-15 years

Borrowing costs
For qualifying assets, the borrowing costs that otherwise would have been avoided if the expenditure on the qualifying asset has not been
made are included in purchase price of these assets. The amount of borrowing costs eligible for capitalisation is defined as the appropriate
portion of loan interest, the cost of arranging financing and respectively foreign exchange differences on foreign currency loans.
Judgements and estimates
Amortisation rates. These are determined on the basis of the expected useful lives of property, plant and equipment and are subject to
annual verification. Any adjustments resulting from the verification are made prospectively as a change in estimate.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Accounting policy
Impairment losses on non-financial assets — detailed principles of estimation of impairment losses are described in accounting policies,
in note 3.4.

|  | Buildings |  |  |  |  |
|  | offices and | Machinery | Other | Tangible |
01.01.-31.12.2022 | Land | land and | and | Means of | tangible | fixed assets | TOTAL
|  | water | equipment | transport | fixed assets | under |
|  | engineering |  |  |  | construction |
Gross value of property, plant and equipment at the |  | facilities |  |  |  |  |
beginning of the period | 90,153 | 1,412,756 | 3,962,341 | 96,890 | 67,740 | 1,185,058 | 6,814,938
Purchase | - | - | - | - | - | 388,436 | 388,436
Reclassification | - | 350,621 | 719,021 | 13,330 | 9,695 | (1,081,221) | 11,446
Capitalised borrowing costs | - | - | - | - | - | 11,575 | 11,575
Exchange differences | 1,746 | 7,520 | 28,433 | 422 | 313 | 18,948 | 57,382
Sales | - | (78) | (7,157) | (1,491) | (1,540) | - | (10,266)
Liquidation | - | (991) | (20,606) | (853) | (367) | (1,027) | (23,844)
Transfer to intangible assets | - | - | - | - | - | (7,400) | (7,400)
Other | - | 139 | (1,152) | (43) | (245) | (1,837) | (3,138)
Gross value of property, plant and equipment at the end of the period | 91,899 | 1,769,967 | 4,680,880 | 108,255 | 75,596 | 512,532 | 7,239,129
Accumulated depreciation at the beginning of the period | (16,977) | (674,901) | (2,066,890) | (68,243) | (47,247) | - | (2,874,258)
Depreciation for the period | (889) | (69,642) | (266,153) | (6,408) | (4,836) | - | (347,928)
Annual depreciation charge | (555) | (67,038) | (276,385) | (8,424) | (5,588) | - | (357,990)
Sales | - | 276 | 3,964 | 1,548 | 278 | - | 6,066
Liquidation | - | 590 | 20,397 | 749 | 356 | - | 22,092
Exchange differences | (334) | (3,484) | (15,099) | (325) | (229) | - | (19,471)
Reclassification | - | (58) | - | - | 58 | - | -
Other | - | 72 | 970 | 44 | 289 | - | 1,375
Accumulated depreciation at the end of the period | (17,866) | (744,543) | (2,333,043) | (74,651) | (52,083) | - | (3,222,186)
Impairment losses at the beginning of the period | - | (43,109) | (15,979) | - | 98 | (18,369) | (77,359)
Recognition | - | - | - | - | - | (4,686) | (4,686)
Exchange differences | - | (845) | (315) | - | 1 | (346) | (1,505)
Other | - | - | 99 | - | (99) | - | -
Impairment losses at the end of the period | - | (43,954) | (16,195) | - | - | (23,401) | (83,550)
Carrying amount of property, plant and equipment | 73,176 | 694,746 | 1,879,472 | 28,647 | 20,591 | 1,166,689 | 3,863,321
at the beginning of period |  |  |  |  |  |  |
Carrying amount of property, plant and equipment | 74,033 | 981,470 | 2,331,642 | 33,604 | 23,513 | 489,131 | 3,933,393
at the end of the period |  |  |  |  |  |  |

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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38

|  | Buildings |  |  |  |  |
|  | offices and | Machinery | Other | Tangible |
01.01.-31.12.2021 | Land | land and | and | Means of | tangible | fixed assets | TOTAL
|  | water | equipment | transport | fixed assets | under |
|  | engineering |  |  |  | construction |
Gross value of property, plant and equipment at the |  | facilities |  |  |  |  |
beginning of the period | 90,702 | 1,320,662 | 3,583,261 | 83,462 | 62,698 | 898,999 | 6,039,784
Purchase | - | 24,138 | 102,633 | 9,307 | 850 | 799,090 | 936,018
Reclassification | - | 78,464 | 302,315 | 6,347 | 4,722 | (528,777) | (136,929)
Capitalised borrowing costs | - | - | - | - | - | 18,538 | 18,538
Exchange differences | (549) | (2,095) | (7,883) | (332) | (108) | (1,069) | (12,036)
Sales | - | (1,812) | (5,585) | (265) | (276) | (80) | (8,018)
Liquidation | - | - | (7,939) | (1,531) | (178) | (1,326) | (10,974)
Other | - | (6,601) | (4,998) | (98) | 32 | (317) | (11,982)
Gross value of property, plant and equipment at the end of the period | 90,153 | 1,412,756 | 3,962,341 | 96,890 | 67,740 | 1,185,058 | 6,814,938
Accumulated depreciation at the beginning of the period | (16,487) | (624,805) | (1,848,560) | (63,902) | (40,727) | - | (2,594,481)
Annual depreciation charge | (542) | (64,247) | (237,055) | (6,163) | (7,046) | - | (315,053)
Sales | - | 6,297 | 879 | 86 | 273 | - | 7,535
Liquidation | - | - | 7,629 | 1,401 | 174 | - | 9,204
Exchange differences | 52 | 1,189 | 5,102 | 252 | 81 | - | 6,676
Reclassification | - | - | 16 | - | - | - | 16
Other | - | 6,664 | 5,467 | 83 | (2) | - | 12,212
Accumulated depreciation at the end of the period | (16,977) | (674,901) | (2,066,890) | (68,243) | (47,247) | - | (2,874,258)
Impairment losses at the beginning of the period | - | (43,972) | (16,304) | - | 101 | (18,832) | (79,007)
Reversal | - | - | - | - | - | 105 | 105
Exchange differences | - | 863 | 320 | - | (3) | 358 | 1,538
Other | - | - | 11 | - | - | - | 11
Impairment losses at the end of the period | - | (43,109) | (15,979) | - | 98 | (18,369) | (77,359)
Carrying amount of property, plant and equipment | 74,215 | 651,885 | 1,718,397 | 19,560 | 22,072 | 880,167 | 3,366,296
at the beginning of period |  |  |  |  |  |  |
Carrying amount of property, plant and equipment | 73,176 | 694,746 | 1,879,472 | 28,647 | 20,591 | 1,166,689 | 3,863,321
at the end of the period |  |  |  |  |  |  |

In 2022, the capitalisation rate applied to determine the amount of borrowing costs to be capitalised was approx. 3.0%, whereas in 2021 it
amounted to approx. 2.4%. In 2022, there were no significant impairment losses on property, plant and equipment.
Depreciation of property, plant and equipment was charged to the following line items in the consolidated statement of profit or loss:

PROPERTY, PLANT AND EQUIPMENT DEPRECIATION CHARGES | 01.01.-31.12.2022 | 01.01.-31.12.2021
Cost of sales | (331,870) | (286,423)
Selling costs | (4,949) | (102)
General and administrative expenses | (6,363) | (6,235)
Other operating expenses | (14,808) | (22,293)
TOTAL | (357,990) | (315,053)

Purchases of property, plant and equipment were made with own financial resources. The increase in the value of property, plant and
equipment is related to investment projects carried out in the CIECH Group, mainly in the production companies of the Group.
As of 1 January 2019, the value of fixed assets accounted for in accordance with IFRS 16 Leases is reported in the statement of financial
position as right-of-use assets.
In the reporting period the CIECH Group received compensation from third parties for impaired tangible fixed assets in the amount of
PLN 11 thousand (PLN 1,574 thousand in the comparable period).
As at 31 December 2022, all items of property, plant and equipment at CIECH S.A. were pledged as collateral for financial liabilities on account
of the term loan, revolving facility and overdraft facilities.
Future commitments arising from agreements concerning acquisition of property, plant and equipment amounted to PLN 134,638 thousand
in 2022 (in the comparable period: PLN 171,655 thousand).
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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5.2 RIGHT-OF-USE ASSETS
Accounting policy
Initial measurement of right-of-use assets
At the commencement date, the Group measures the right-of-use asset at cost. The cost of the right-of-use asset comprises:
• the amount of the initial measurement of the lease liability,
• any lease payments made at or before the commencement date, less any lease incentives received;
• any initial direct costs incurred by the lessee; and
• an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is
located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are
incurred to produce inventories.
Subsequent measurement of right-of-use assets
After initial recognition, the Group measures the right-of-use asset at cost less any accumulated depreciation and any accumulated
impairment losses, and adjusted for any remeasurement of the lease liability.
In the case of leasehold improvements, expenditures on the purchase or production of third-party fixed assets, once incurred, do not
result in the necessity to make payments in the future, and therefore do not meet the definition of lease. The recognition of these
expenditures is regulated by IAS 16.
If the lease transfers ownership of the underlying asset to the Group by the end of the lease term or if the cost of the right-of-use asset
reflects that the Group will exercise a purchase option, the Group depreciates the right-of-use asset from the commencement date to the
end of the useful life of the underlying asset. Otherwise, the Group depreciates the right-of-use asset from the commencement date to
the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The Group applies IAS 36 Impairment of Assets to determine whether the right-of-use asset is impaired and to account for any impairment
loss identified.
Changes in carrying amounts of right-of-use assets in the period of 12 months ended 31 December 2022 are as follows:

|  | Buildings |  |  |  |
|  | offices and | Machinery | Other |
01.01.-31.12.2022 | Land | land and | and | Means of | tangible | TOTAL
|  | water | equipment | transport | fixed assets |
|  | engineering |  |  |  |
Gross value of rights to use an asset at the beginning of the |  | facilities |  |  |  |
period | 72,466 | 56,499 | 32,970 | 147,781 | 1,210 | 310,926
Reclassifications | - | - | 1,472 | (1,472) | - | -
Adopted on the basis of a finance lease agreement | - | 170 | - | 3,342 | - | 3,512
Modifications to leasing contracts | (26) | 4,352 | - | (4,174) | - | 152
New leasing agreements | - | - | - | 5,705 | - | 5,705
Closing the contract | - | - | - | (42) | - | (42)
Exchange differences | 98 | 409 | 640 | 109 | 7 | 1,263
Other | (91) | 1,383 | - | (2,528) | 98 | (1,138)
Gross value at the end of the period | 72,447 | 62,813 | 35,082 | 148,721 | 1,315 | 320,378
Accumulated amortisation at the beginning of the period | (12,675) | (12,419) | (21,453) | (61,851) | (1,052) | (109,450)
Amortisation for the period | (995) | (4,308) | (1,619) | (24,323) | (344) | (31,589)
Exchange differences | - | (34) | (421) | (41) | (8) | (504)
Other | 17 | 451 | - | 1,819 | 89 | 2,376
Accumulated depreciation at the end of the period | (13,653) | (16,310) | (23,493) | (84,396) | (1,315) | (139,167)
Net value of rights to use an asset at the beginning of the period | 59,791 | 44,080 | 11,517 | 85,930 | 158 | 201,476
Net value of rights to use an asset at the end of the period | 58,794 | 46,503 | 11,589 | 64,325 | - | 181,211

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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40

|  | Buildings |  |  |  |
|  | offices and | Machinery | Other |
01.01.-31.12.2021 | Land | land and | and | Means of | tangible | TOTAL
|  | water | equipment | transport | fixed assets |
|  | engineering |  |  |  |
Gross value of rights to use an asset at the beginning of the |  | facilities |  |  |  |
period | 71,428 | 50,404 | 35,110 | 104,199 | 874 | 262,015
Reclassifications | - | - | (1,076) | - | - | (1,076)
Adopted on the basis of a finance lease agreement | - | - | 483 | 1,654 | - | 2,137
Modifications to leasing contracts | 1,158 | 1,206 | - | 375 | 99 | 2,838
New leasing agreements | - | 4,960 | - | 40,206 | 246 | 45,412
Closing the contract | (417) | (713) | - | (576) | - | (1,706)
Exchange differences | (16) | (71) | (109) | 6 | (9) | (199)
Other | 313 | 713 | (1,439) | 1,918 | - | 1,505
Gross value at the end of the period | 72,466 | 56,499 | 32,969 | 147,782 | 1,210 | 310,926
Accumulated amortisation at the beginning of the period | (11,665) | (7,998) | (22,697) | (42,182) | (785) | (85,327)
Amortisation for the period | (1,027) | (4,423) | (1,216) | (19,877) | (276) | (26,819)
Reclassifications | - | - | 422 | - | - | 422
Exchange differences | - | 1 | 61 | 2 | 9 | 73
Closing the contract | 28 | 321 | 368 | 32 | - | 749
Other | (11) | (320) | 1,609 | 174 | - | 1,452
Accumulated depreciation at the end of the period | (12,675) | (12,419) | (21,453) | (61,851) | (1,052) | (109,450)
Net value of rights to use an asset at the beginning of the period | 59,763 | 42,406 | 12,413 | 62,017 | 89 | 176,688
Net value of rights to use an asset at the end of the period | 59,791 | 44,080 | 11,516 | 85,931 | 158 | 201,476

In 2019, the CIECH Group implemented IFRS 16 “Leases”. Under this standard, leases and rentals, leases of passenger cars, rai lcars and
locomotives, and perpetual usufruct rights were identified in the Group as lease agreements.
CIECH S.A. is a lessee of office and warehousing space, in which the largest item (approx. 2 thousand m
2
) is the office in Warsaw at Wspólna
Street, where the Company’s registered office is located. The term of the lease agreemen t expires in 2028.CIECH S.A. also leases passenger
cars.
Some agreements are denominated in foreign currencies and indexed to price indices. Some agreements contain an extension option.
For detailed information on lease liabilities, see Note 7.4.
5.3 INTANGIBLE ASSETS – NON-CURRENT AND CURRENT
Accounting policy
Goodwill
Goodwill arises on a combination of two separate entities or businesses into one reporting entity. It specifically relates to the acquisitions
of subsidiaries, associates, or jointly controlled entities. All business combinations of unrelated entities are recognised using the
acquisition method.
The Group initially measures goodwill as the difference between the total value:
• the acquisition-date fair value of the consideration transferred,
• the amount of any non-controlling interest in the acquiree measured either at fair value or at their proportionate share in the fair
value of the acquiree's net assets, and
• in a business combination achieved in stages the acquisition-date fair value of the acquirer’s previously held equity interest in the
acquire
and the net recognised amounts (fair value) of the identifiable assets acquired and liabilities assumed measured at the acquisition date.
Occasionally, a bargain purchase may occur, i.e. a business combination in which the net recognised amounts of the identifiable assets
acquired and liabilities assumed measured at the acquisition date exceed the aggregate of the acquisition-date fair value of the
consideration transferred, the amount of any non-controlling interest measured at fair value or at their proportionate share in the
acquiree's net assets, and in a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously held
equity interest in the acquire. Before recognising a gain on a bargain purchase, the acquirer reassesses whether it has correctly identified
and measured the amounts of assets acquired and liabilities assumed, non-controlling interest, consideration transferred, and in a
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Accounting policy
business combination achieved in stages, the acquirer’s previously held equity interest in the acquiree. The purpose of the reassessment
is to ensure that the measurements appropriately reflect consideration of all available information as of the acquisition date. Any
remaining gain from a bargain purchase after completing the reassessment is recognised in profit or loss at the acquisition date (as other
operating income).
At the date of an acquisition, any goodwill acquired in a business combination is allocated to the cash-generating units that are expected
to benefit from the synergies of the combination. Each cash-generating unit or a group of units to which the goodwill was allocated:
• is the lowest level within the Group at which goodwill is monitored for internal management purposes,
• is not larger than an operating segment as defined in IFRS 8 “Operating Segments”.
Goodwill represents an asset with indefinite useful life and as such is subject to annual impairment tests. Goodwill is tested at a minimum
at the operating segment level.
Goodwill related to investments in associates is reflected in their carrying amounts in the Group’s consolidated financial st atements.
Consequently, any investments in associates and the related goodwill are analysed for impairment on a combined basis .
Other intangible assets
Other intangible assets that are acquired by the Group are measured at cost less accumulated amortisation and accumulated impairment
losses. Any expenditure on internally generated goodwill and brands, is recognised in the profit or loss as incurred.
The costs of registering a substance in the REACH system, such as participation in research, consulting services linked to a specific
registration, costs of preparing the registration documents and Chemical Safety Reports, registration fees and authorisation, are
capitalised as intangible assets.
CO
2
emission allowances
In the event of a purchase of additional allowances on the market, the allowances are measured at cost and presented as intangible
assets.
The acquired emission allowances are not amortised as their residual value corresponds to the purchase price. In the event of allowances
purchased being used to cover a shortfall occurring at the date of the annual limit settlement, the allowances used at book value are
settled against a provision recognised previously to cover the shortfall.
In 2021, the Group revised its Accounting policy in respect of recognition of emission allowances granted and the measurement principles
for the disposal of rights.
Following the revision, the emission allowances granted are recognised in the statement of financial position as assets when credited to
the account at their fair value determined at that date. At the same time, the same amount is recognised in an accrued income account
(as a subsidy for production costs, regulated in IAS 20 Government Grants and Disclosure of Government Assistance). The entity receiving
the allowances accounts for them as intangible assets. When emissions covered by the allowances received occur, the corresponding
value recognised in the deferred income account is deducted from the operating expenses related to the emission.
If there were no emissions for which the entity received the allowances, then the part of the deferred income relating to them remains
in the balance until the allowances are disposed of. If the allowances are used to cover the emission in the following year (years), the
relevant part of the deferred income reduces the operating costs of the emission in the year in which the allowances are used, and if such
allowances are sold, the deferred income reduces the cost of the allowances sold.
In the event of a purchase of additional allowances on the market, the allowances are measured at cost and presented as intangible
assets.
The entity recognises a provision for the cost of covering CO
2
emissions into the atmosphere in the amount of the product of the quantity
of CO
2
emitted (in thousand tonnes, equivalent to one EUA) and the unit price of the emission allowances. The emission costs are covered
by allowances held in a brokerage account at the balance sheet date in accordance with the detailed identification principle. If insufficient
allowances are held, the missing portion of the provision is measured at the allowance price of the futures contracts open on the balance
sheet date, in accordance with the detailed identification principle. If insufficient allowances have been contracted, the provision for the
costs of covering emissions is measured at the current (as at the balance sheet date) market price of the EUA.
Until 2020, emission allowances granted were not subject to recognition on the statement of financial position when granted and in
subsequent periods. The entity receiving the allowances entered them in the off-balance sheet records.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Accounting policy
Subsequent expenditure
Subsequent expenditure on existing intangible assets is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other subsequent expenditure is expensed as incurred.
Amortisation and depreciation
Intangible assets are amortised on a straight-line basis over their estimated useful lives. The estimated useful lives of intangible assets are
as follows:

Intangible assets | Useful lives
Development costs | 2-5 years
Patents and licences | 2–10 years
Other | 2-12 years

Amortisation periods and residual values are reviewed. Any adjustments resulting from the verification are made prospectively as a
change in estimate.
Amortisation of intangible assets related to the costs incurred in respect of registration in the REACH system begins in the month following
the month of proper registration of a given substance. The amortisation period is 12 years with amortisation charged to cost of sales.
Costs of completed development activities
Research activities represent an innovative and scheduled search for solutions, undertaken with the prospect of gaining new scientific or
technical knowledge. Development activities are understood as a practical application of discoveries or achievements of other knowledge
in planning and designing the production of new or considerably improved materials, devices, products, technological processes, systems
or services, taking place prior to starting mass production or prior to their application.
All expenditure on research activities is recognised in profit or loss as incurred. Whenever a clear distinction between research and
development activities cannot be made, the Group treats the related expenditure as though it were incurred in the research phase only.
Development expenditure is capitalised as part of intangible assets only if the Group is able to prove:
• that the product or process is technically and commercially feasible (assessed from a technical perspective),
• its intent to complete development and to use or sell the asset,
• the ability to use or sell the asset,
• the manner in which the asset will bring future economic benefits (i.e., the entity should prove the existence of a market for new
products created by the asset or a market for the asset itself, or – if the asset is to be used by the Group – the usefulness of the
intangible asset to the Group),
• the availability of appropriate technical, financial and other resources required to complete development activities and then use or
sell the asset, and,
• its ability to reliably measure development costs attributable to the asset.
Internally generated trademarks, magazine titles, editorial titles, customer lists and other items of similar nature are not recognised in
the financial statements.
The amortisation periods of capitalised development costs should reflect their estimated useful lives.
Judgements and estimates
Amortisation rates.They are determined on the basis of the expected useful lives of intangible assets, and are subject to periodical
verification. Any adjustments resulting from the verification are made prospectively as a change in estimate.
Impairment losses on non-financial assets — detailed principles of estimation of impairment losses are described in accounting policies,
in note 3.4.

| Development | Licences,patents, | Other | Intangible |
01.01.-31.12.2022 | costs | Goodwill | permits, etc. |  | intangible assets under | TOTAL
|  |  | obtained | assets | development |
Gross value of intangible assets at the beginning of the period | 77,141 | 586,868 | 295,945 | 102,334 | 142,038 | 1,204,326
Investment outlays | - | - | - | - | 51,392 | 51,392
Reclassifications | 5,571 | - | 23,290 | 846 | (20,258) | 9,449

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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| Development | Licences,patents, | Other | Intangible |
01.01.-31.12.2022 | costs | Goodwill | permits, etc. |  | intangible assets under | TOTAL
|  |  | obtained | assets | development |
Exchange differences | - | 10,880 | 3,335 | 1,939 | 6 | 16,160
Sales | - | - | - | - | (146) | (146)
Liquidation | - | - | (270) | - | (313) | (583)
Other | - | - | - | - | (339) | (339)
Gross value of intangible assets at the end of the period | 82,712 | 597,748 | 322,300 | 105,119 | 172,380 | 1,280,259
Accumulated amortisation at the beginning of the period | (24,640) | - | (114,822) | (57,582) | - | (197,044)
Amortisation for the period | (15,037) | - | (25,733) | (1,287) | - | (42,057)
Annual amortisation charge | (15,037) | - | (25,160) | (230) | - | (40,427)
Exchange differences | - | - | (843) | (1,057) | - | (1,900)
Liquidation | - | - | 270 | - | - | 270
Accumulated amortisation at the end of the period | (39,677) | - | (140,555) | (58,869) | - | (239,101)
Impairment losses at the beginning of the period | - | (437,598) | (3,258) | (44,669) | (3,420) | (488,945)
Recognition | - | - | 911 | - | (5,641) | (4,730)
Reversal | - | - | - | 7,478 | 28 | 7,506
Exchange differences | - | (8,298) | - | (880) | - | (9,178)
Other | - | - | - | 376 | 210 | 586
Impairment losses at the end of the period | - | (445,897) | (2,347) | (37,696) | (8,823) | (494,761)
Net value of intangible assets at the beginning of the period | 52,501 | 149,270 | 177,865 | 83 | 138,618 | 518,337
Net value of intangible assets at the end of the period | 43,035 | 151,852 | 179,398 | 8,555 | 163,557 | 546,397

| Development | Licences,patents, | Other | Intangible |
01.01.-31.12.2021 | costs | Goodwill | permits, etc. |  | intangible assets under | TOTAL
|  |  | obtained | assets | development |
Gross value of intangible assets at the beginning of the period | 19,855 | 589,940 | 273,617 | 143,783 | 173,821 | 1,201,016
Purchase | - | - | 5,651 | - | 5,651 | 11,302
Investment outlays | - | - | - | - | 43,882 | 43,882
Reclassifications | 57,286 | - | 17,261 | (31,312) | (80,248) | (37,013)
Transferred from/to assets classified as held for sale | - | - | - | - | - | -
Exchange differences | - | (3,072) | (538) | (409) | 1 | (4,018)
Sales | - | - | - | (9,728) | (194) | (9,922)
Liquidation | - | - | (46) | - | - | (46)
Cancellation of CO 2 emission rights | - | - | - | - | - | -
Change in the Group’s structure | - | - | - | - | - | -
Other | - | - | - | - | (875) | (875)
Gross value of intangible assets at the end of the period | 77,141 | 586,868 | 295,945 | 102,334 | 142,038 | 1,204,326
Accumulated amortisation at the beginning of the period | (12,867) | - | (94,388) | (57,498) | - | (164,753)
Amortisation for the period | (11,773) | - | (20,434) | (84) | - | (32,291)
Annual amortisation charge | (11,773) | - | (20,532) | (264) | - | (32,569)
Transferred from/to assets classified as held for sale | - | - | - | - | - | -
Exchange differences | - | - | 52 | 180 | - | 232
Sales | - | - | - | - | - | -
Liquidation | - | - | 46 | - | - | 46
Other | - | - | - | - | - | -
Accumulated amortisation at the end of the period | (24,640) | - | (114,822) | (57,582) | - | (197,044)
Impairment losses at the beginning of the period | - | (440,231) | (3,258) | (44,452) | (3,420) | (491,361)
Recognition | - | - | - | (572) | - | (572)
Exchange differences | - | 2,633 | - | 145 | - | 2,778
Other | - | - | - | 210 | - | 210
Impairment losses at the end of the period | - | (437,598) | (3,258) | (44,669) | (3,420) | (488,945)
Net value of intangible assets at the beginning of the period | 6,988 | 149,709 | 175,971 | 41,833 | 170,401 | 544,902
Net value of intangible assets at the end of the period | 52,501 | 149,270 | 177,865 | 83 | 138,618 | 518,337

The largest item in the Company’s intangible assets is the SAP accounting system with the gross carrying amount of PLN 58,968 thousand
(net carrying amount: PLN 40,826 thousand).
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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In CIECH Sarzyna S.A., the most significant intangible assets under development concern product registrations (including Chwastox, Halvetic,
Nikosar, Azoxar, Labrador, Faworyt), which will allow further manufacture of crop protection chemicals (PLN 113,565 thousand).
In CIECH R&D Sp. z o.o., the most significant intangible assets under development concern research and development projects on
optimisation of soda production and innovative technology for carbonation of brine. As at 31 December 2022, the value of these projects is
PLN 16,615 thousand.
In CIECH S.A., intangible assets under development concern work related to the implementation of IT systems in the amount of
PLN 31,475 thousand. Other intangible assets of the CIECH Group include mainly IT systems, licences and patents, other software,
development works and other intangible assets. All intangible assets belong to the CIECH Group.
Current intangible assets represent CO
2
emission allowances received and purchased to cover gas emissions for 2022. Until 2020, emission
allowances granted were not subject to recognition on the statement of financial position when granted and in subsequent periods. The
entity receiving the allowances entered them in the off-balance sheet records. Below are the amounts recognised in the statement of
financial position.

Short-term intangible assets | 01.01.-31.12.2022 | 01.01.-31.12.2021
Gross value of intangible assets at the beginning of the period | 403,434 | 185,220
Purchase | 357,734 | 124,212
Reclassifications | - | 31,362
Exchange differences | 958 | (935)
Sales | (188,691) | (105,051)
Cancellation of CO 2 emission rights | (615,284) | (240,382)
Received emission rights | 557,783 | 409,008
Gross value of intangible assets at the end of the period | 515,934 | 403,434

Amortisation of intangible assets was included in the following line items of the consolidated statement of profit or loss:

AMORTISATION CHARGES ON INTANGIBLE ASSETS | 01.01.-31.12.2022 | 01.01.-31.12.2021
Cost of sales | (22,302) | (18,564)
Selling costs | (7,782) | (6,495)
General and administrative expenses | (10,343) | (7,510)
TOTAL | (40,427) | (32,569)

As at 31 December 2022, all intangible assets at CIECH S.A. were pledged as collateral for financial liabilities on account of the term loan,
revolving facility and overdraft facilities.
An increase in capital expenditure in 2022 was driven by expenditure related to the implementation of the SAP system.
In the current period changes in accounting estimates did not have a material impact and it is not expected that they will have a material
impact in future periods.
As at 31 December 2022, future commitments arising from agreements concerning acquisition of intangible assets amounted to
PLN 443 thousand (in the comparable period: PLN 4,598 thousand).
Apart from goodwill, the CIECH Group does not have other intangible assets with an indefinite useful life. Additional information about the
goodwill is presented in Note 5.4.
Development works
Development works carried out by the CIECH Group are aimed at increasing economic potential; and are related mainly to the modernisation
of technological processes, reduction of manufacturing costs and optimisation of technical and technological parameters. The Group
continues the development of the R&D area to support the development of products being a response to growing needs of the market.
The total amount of expenditure on research and development expensed in the period, as not meeting the capitalisation criteria, amounted
to PLN 1,821 thousand (PLN 1,488 thousand in the comparable period). Research and development work in progress charged to profit or loss
as impairment losses amounted to PLN 3,442 thousand.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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5.4 GOODWILL IMPAIRMENT TESTING
In preparing the consolidated financial statements of the CIECH Group, impairment tests were carried out for goodwill recognised in the
consolidated financial statements in relation to:
• CIECH Sarzyna S.A.,
• SDC Group, CIECH Salz Deutschland GmbH,
• Proplan Plant Protection Company, S.L.,
• Smart Fluid Sp. z o.o.
The recoverable amount was calculated based on the value in use. The value in use of the cash-generating units to which goodwill has been
allocated has been calculated based on the Group's five-year plans. In 2022, no impairment of goodwill was identified for any of the above
entities.
The following assumptions were applied in the impairment tests:
• the weighted average cost of capital for CIECH Sarzyna S.A. was: 11.9% – for cash flows in PLN, 8.8% – for cash flows in EUR and 9.8% –
for cash flows in USD;
• the weighted average cost of capital for the SDC Group and CIECH Salz Deutschland GmbH for cash flows in EUR was 7.5%;
• the weighted average cost of capital for Proplan Plant Protection Company, S.L. was 8.6% – for cash flows in EUR and 9.9% – for cash
flows in USD;
• the weighted average cost of capital for Smart Fluid Sp. z o.o. for cash flows in PLN was 18.5%;
• the assumed growth rate for the residual period was 2.0% for all companies.
According to the Management Board's estimates, for CIECH Sarzyna S.A., the SDC Group, Smart Fluid Sp. z o.o. and Proplan Plant Protection
Company, S.L. an increase in the weighted average cost of capital of 1 p.p. for each currency without changing other factors would not lead
to any change in the carrying amount of goodwill.
Goodwill is the most valuable component of intangible fixed assets and is presented at the level of the CIECH Group and on the lower tier
group level – the SDC Group. Goodwill presented in consolidated financial statements was recognised as a result accounting for acquisition
of companies in 2006 and 2007 and acquisition of companies in 2018.
Goodwill presented in the consolidated financial statements as at 31 December 2022 amounted to PLN 151,852 thousand:
• Soda Segment PLN 52,038 thousand: SDC Group – PLN 52,022 thousand, CIECH Salz Deutschland GmbH: PLN 16 thousand,
• Silicates Segment: PLN 39 thousand – CIECH Vitrosilicon S.A.,
• Agro Segment PLN 96,821 thousand; CIECH Sarzyna S.A. – PLN 15,070 thousand; Proplan Plant Protection Company SL –
PLN 81,751 thousand,
• Other Segment: PLN 2,954 thousand – Smart Fluid Sp. z o.o.
As compared to 2021, goodwill increased by PLN 2,582 thousand as a result of:
• change in the EUR exchange rate used to translate the goodwill recognised on acquisition of Proplan Plant Protection Company, S.L.
in 2022 – an increase by PLN 1,578 thousand,
• change in the EUR exchange rate used to translate the goodwill recognised in the statements of the lower tier group, the SDC Group,
in 2022 – an increase by PLN 1,004 thousand.
5.5 INVESTMENT PROPERTIES
Accounting policy
Investment property is held to earn rentals or for capital appreciation (or both). Investment property is remeasured at fair value. At initial
recognition, investment property is accounted for in accordance with policies applicable for property, plant and equipment i.e. purchase
price or cost. In subsequent reporting periods change in fair value of investment property is recognised in profit or loss in the period when
change occurred and is presented in other operating expenses.
Judgements and estimates
Investment property valuation. The CIECH Group presents investment property at fair value, recognising the fair value valuation in the
statement of profit or loss. Investment property valuation is performed using the comparative method based on observable market data,
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Accounting policy
including the price of comparable investment properties and adjusted with the specific factors such as the capability of the property, its
location and condition.

INVESTMENT PROPERTIES | 01.01.-31.12.2022 | 01.01.-31.12.2021
Carrying amount at the beginning of period | 32,839 | 40,948
Sales | - | (7,907)
Goodwill valuation | 6,891 | (202)
Modernisation | 451 | -
Gross value at the end of the period | 40,181 | 32,839

The item “Investment property” presented by the CIECH Group includes land, buildings and structures that have been acquired only in order
to achieve economic benefits from rents or for the increase of their value.
As at 31 December 2022, the CIECH Group held the following investment property:
CIECH Nieruchomości
Sp. z o.o.
At CIECH Nieruchomości Sp. z o.o., as at 31 December 2022, the investment property line item for CIECH
Nieruchomości S.A. included real property located in Bydgoszcz. The real property was acquired from
Infrastruktura Kapuściska S.A in liquidation bankruptcy.
CIECH Soda Polska S.A.
Buildings acquired by CIECH Soda Polska S.A. as a result of a merger with Soda Med. Sp. z o.o.
These are buildings leased for medical outpatient, clinics, nursing and treatment rooms as well as private
doctor’s and dentist’s consulting rooms.
CIECH Sarzyna S.A.
23 buildings and structures located on the premises of CIECH Sarzyna S.A. In the past, they were used by
the company for its own needs, currently they are leased to generate rental income.

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Rental income from investment property | 3,827 | 3,175
Operating expenses relating to investment property that generated rental income during the period | 3,264 | 2,758
in question |  |

5.6 LONG-TERM RECEIVABLES
Accounting policy
Contract assets resulting from transactions that are within the scope of IFRS 15 – receivables in relation to caverns (a salt cavern is a
void in the rock most often used to store gases).
If an entity performs by transferring goods or services to a customer before the customer pays consideration or before payment is due,
the entity presents the contract as a contract asset, excluding any amounts presented as a receivable. A contract asset is an entity's right
to consideration in exchange for goods or services that the entity has transferred to a customer.
For these categories of assets, the Group chose a simplified approach to estimating impairment due to expected credit losses, whereby
lifetime expected credit losses are always estimated from the moment of initial recognition of exposures, whether or not an evidence of
a significant increase in credit risk exists.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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NON-CURRENT RECEIVABLES | 31.12.2022 | 31.12.2021
Receivables in relation to caverns | 41,103 | 76,222
Other | 134 | 2,320
Net non-current receivables | 41,237 | 78,542
Write-down on receivables | (66) | (198)
Gross non-current receivables | 41,303 | 78,740

CHANGE IN IMPAIRMENT ALLOWANCES ON LONG-TERM RECEIVABLES | 01.01.-31.12.2022 | 01.01.-31.12.2021
Opening balance | (198) | (1,015)
Reversed | 136 | 810
Exchange differences | (4) | 7
Closing balance | (66) | (198)

Impairment losses on long-term receivables are calculated using the default rate determined on the basis of the counterparty’s rating and
the long-term receivable payment schedule.
Desalination of caverns
Pursuant to IFRS 15 Revenue from Contracts with Customers, the SDC Group recognises revenue from cavern desalination contracts over
time according to the stage of completion of the work.
Project 2 (Project 1 has been completed) – the Contract includes the sale of mining rights, land and preparation of four gas caverns (S113 to
S116). The stage of completion is determined as a proportion between the costs incurred for work performed to date and the estimated
total contract costs or completion of a physical proportion of the contract work.
Revenue recognised in statement of profit or loss represent the amount of the expected sales revenues multiplied by the percentage of
completion of the contract in the accounting period, less the amount of revenue recognised in prior years. In 2 022, the Group’s revenues
from the cavern desalination contract amounted to PLN 2,354 thousand (EUR 502 thousand). In the corresponding period, the income
amounted to PLN 19,267 thousand (EUR 4,209 thousand).
The receivables relating to the cavern desalination contracts (Project 2) recognised in assets as long-term receivables amounted to
PLN 41,103 thousand (EUR 8,764 thousand) as at the end of 2022. As at 31 December 2021, it amounted to PLN 76,222 thousand
(EUR 16,572 thousand). The total amount of costs incurred and profits recognised (less recognised losses) due to ongoing contracts for the
period of duration of these contracts amounted to PLN 301,042 thousand.
Due to the nature of the transaction, the long-term receivable reported in the statement of financial position will not be fully repaid until
Innogy Gas Storage NWE GmbH actually fills the caverns with gas to test the density of the gas, which is planned for no earlier than 2023.
5.7 LONG-TERM FINANCIAL ASSETS
Accounting policy
Shares are stated at purchase price less any impairment losses.
Accounting policy concerning derivative financial instruments is presented in Note 8.1 .

NON-CURRENT FINANCIAL ASSETS | 31.12.2022 | 31.12.2021
Shares | 14,194 | 11,684
Derivatives | 4,233 | 662
Other | 89 | 103
TOTAL | 18,516 | 12,449

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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CHANGE IN IMPAIRMENT ALLOWANCES ON LONG-TERM FINANCIAL ASSETS | 01.01.-31.12.2022 | 01.01.-31.12.2021
Opening balance | (2,420) | (2,415)
Recognized | - | (115)
Reversed / released | 2,200 | -
Used | 214 | 110
Other | (496) | -
Closing balance | (502) | (2,420)

5.8 SHARES IN JOINT VENTURES / INVESTMENTS IN ASSOCIATES
Accounting policy
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Joint
venture is a contractual arrangement whereby two or more parties undertake an economic activity subject to joint control and have rights
to the net assets of the arrangement.
The consolidated financial statements include the Group's share of the income and expenses of equity accounted associates and joint
ventures from the date that significant influence or joint control commences until the date that significant influence or joint control
ceases. The Group also measures impairment of the share in the net assets of associates and joint ventures and creates appropriate
allowance. When the Group’s share of losses exceeds the carrying amount of its interest in an associate or a join t venture, such carrying
amount is reduced to nil and the recognition of further losses is discontinued if the Group is not obliged to cover the m .
The CIECH Group holds a 50% share in Kaverngesellschaft Stassfurt mbH. It is a jointly-controlled company measured under the equity
method at the lower-tier group level – the SDC Group (50% direct share in Kaverngesellschaft Stassfurt mbH). This company is not listed on
the stock market so the fair value of this investment is not available. Balance sheet days and reporting periods of Kaverngesellschaft Stassfurt
mbH are the same as those adopted by the Group.
The following table presents the carrying amounts of investments in equity-accounted jointly-controlled entities:

INVESTMENTS IN ASSOCIATES AND JOINTLY-CONTROLLED ENTITIES | 31.12.2022 | 31.12.2021
Investments in associates and jointly-controlled entities | 7,033 | 5,655
| 01.01.-31.12.2022 | 01.01.-31.12.2021
Share in net profit of associated entities measured under the equity method | 1,406 | 27

5.9 INVENTORIES
Accounting policy
Raw materials and goods are measured at cost being the purchase price increased by other costs incurred in bringing the asset to its
present location and condition or place on the market but not higher than the selling price possible to achieve.
Finished goods and work in progress are measured at cost including direct manufacturing costs and reasonable portion of costs indirectly
connected with the manufacturing process, but not higher than the selling price possible to achieve. The cost of inventory is measured
using the weighted average method.
Judgements and estimates
The CIECH Group companies recognise inventory impairment allowances for damaged and slow moving inventory. Inventory impairment
allowances are also recognised for inventory with a carrying amount that exceeds the realisable net selling price. Reversal occurs as a
result of the use or sales of inventory in the course of business activities while usage is the result of inventory being scrapped.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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INVENTORY | 31.12.2022 | 31.12.2021
Materials | 394,839 | 296,124
Semi-finished products and work in progress | 73,954 | 40,515
Finished products | 291,321 | 114,572
Goods | 11,427 | 8,097
TOTAL | 771,541 | 459,308

CHANGE OF INVENTORY IMPAIRMENT WRITE-DOWNS | 01.01.-31.12.2022 | 01.01.-31.12.2021
Opening balance | (34,932) | (38,303)
Recognized | (16,971) | (5,595)
Reversed / released | 9,700 | 6,948
Used | - | 1,856
Exchange differences | (140) | 162
Closing balance | (42,343) | (34,932)

As at 31 December 2022, all inventories at CIECH S.A. were pledged as collateral for financial liabilities on account of the term loan, revolving
facility and overdraft facilities.
5.10 SHORT-TERM RECEIVABLES
Accounting policy
Short-term trade and other receivables are measured at the amount receivable less allowance for expected credit losses.
Receivables denominated in foreign currencies are recognised at the average NBP exchange rate effective on the working day immediately
preceding the date of the transaction, unless a different exchange rate was indicated in the customs declaration or another binding
document.
At the reporting date, receivables denominated in foreign currencies are translated at the average exchange rate established for that date
by the NBP except for prepayments made for deliveries, which are translated using sell exchange rate of the bank effective on the payment
date.
Factoring
The Group companies use non-recourse factoring services. The factor transfers advance payments to the company’s account in the full
amount of invoices accepted for financing. The financing of receivables transferred is provided in various timeframes, therefore, as at the
balance sheet date, there may be receivables which have not been financed yet and are reported as factoring receivables. Advance
payments received are posted as factoring liabilities. In the statement of financial position, factoring receivables and liabilities are
recognised on a net basis up to approx. 95% of the value of advance payments received from the factor (the approx. 95% limit results
from the level of the receivables insurance). The remaining 5% of receivables value is reported as factoring receivables, and 5% of the
value of advance payments received is reported as factoring liabilities.
Judgements and estimates
Impairment allowances are recognised on interest receivable on late payments of receivables, in the full amount of interest accrued.
These allowances are recognised upon accrual, as at the due date or balance sheet date, and deducted from finance income from interest
accrued.
The Group estimates allowances always at the amount of long-term expected credit losses, regardless of whether there is an evidence of
a material increase in credit risk.
At each balance sheet date, the Entity estimates allowances for all receivables regardless of their repayment status. The Group estimates
impairment allowances primarily on the basis of portfolio PD ratios estimated on the basis of historical observations for debt portfolios
with similar characteristics. If it is not possible to estimate portfolio ratios, the Group permits the use of individual parameters (benchmark
or expert parameters).
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Accounting policy
In addition, regardless of the foregoing, the Group recognises impairment allowances in respect of receivables:
• from debtors in liquidation or bankruptcy, up to the amount not guaranteed or secured in another manner, as reported to a receiver
or judge-commissioner during bankruptcy proceedings;
• from debtors where a bankruptcy petition has been dismissed, if the debtor's assets are not sufficient to cover the cost of bankruptcy
proceedings – in full;
• contested by debtors (disputed receivables) and where payments due are delayed and either the debtor’s financi al standing makes
the collection no longer probable – up to the amount of receivables not guaranteed or secured in another manner;
• receivables claimed in court.
Moreover, allowances in the full amount of receivables are recognised in relation to receivables that are more than 180 days past their
maturity as at the balance sheet date.
The amount established as a result of the abovementioned allowances may be decreased if the Management Board is in possession of
reliable documents, indicating that the receivables were secured and their payment is highly probable.
Impairment allowances on receivables are charged to other operating expenses.

TRADE AND OTHER RECEIVABLES | 31.12.2022 | 31.12.2021
Trade receivables, including: | 376,319 | 218,284
- up to 12 months | 370,982 | 208,603
- over 12 months | 303 | 628
- prepayments for inventory | 5,034 | 9,053
Prepayments for non-current assets | 5,664 | 5,142
Public and legal receivables (excluding income tax) | 215,562 | 163,345
Factoring receivables | 55,872 | 33,660
Należności z tytułu instrumentów finansowych | 104,116 | -
Other receivables | 47,472 | 141,665
NET TRADE AND OTHER RECEIVABLES | 805,005 | 562,096
Impairment allowances with respect to trade receivables including | (43,700) | (46,614)
- impairment allowance recognized in the current reporting period | (5,924) | (3,844)
Impairment allowances with respect to other current receivables including | (20,852) | (22,664)
- impairment allowance recognized in the current reporting period | (1,159) | (4,592)
GROSS TRADE AND OTHER RECEIVABLES | 869,557 | 631,374

Fair value of trade receivables and other receivables does not differ significantly from their carrying value.
As at the balance sheet date, continuing involvement is reported. It is calculated as a product of the financing received, interest and the
maximum period of delay in payments. As at 31 December 2022, the asset from continuing involvement amounted to PLN 13,514 thousand
(presented under other receivables). As at 31 December 2022, trade receivables assigned to the factor (and financed) amounted to
PLN 675,158 thousand (PLN 454,816 thousand as at 31 December 2021).
At the end of 2022, receivables from financial instruments represent SDC Group's receivables in the total amount of EUR 22,200 thousand
(PLN 104,116 thousand) for deposits for the future settlement of hedging transactions.
The other receivables item at the end of the comparable period represents SDC Group's receivables in the total amount of EUR 24,437
thousand (PLN 112,396 thousand) from the settlement of the gas supply option for 2022 in December 2021.

CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM RECEIVABLES | 01.01.-31.12.2022 | 01.01.-31.12.2021
Opening balance | (69,278) | (66,632)
Recognized | (7,083) | (8,436)
Reversed | 13,559 | 6,997
Used | 464 | 456
Exchange differences | (2,221) | (1,071)
Change in the Group’s structure | - | (11)
Other | 7 | (581)
Closing balance | (64,552) | (69,278)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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The principles for recognising impairment allowances for short-term receivables are described above, in the “Accounting Policy” section.
Terms of transactions with related entities have been presented in note 9.3.
Commercial contracts concluded by the CIECH Group include various terms of payment of trade receivables depending on the type of
transaction, market characteristics and trade conditions. The most common payment terms are: 14, 30 and 60 days.
As at 31 December 2022, all receivables (both long- and short-term) at the CIECH Group were pledged as collateral for financial liabilities on
account of the term loan, revolving facility and overdraft facilities.
Income tax receivables related to the proceedings described in note 9.2 were estimated in accordance with IFRIC 23.
5.11 SHORT-TERM FINANCIAL ASSETS
Accounting policy
Accounting policy concerning financial instruments is presented in note 8.1.

SHORT-TERM FINANCIAL ASSETS | 31.12.2022 | 31.12.2021
Derivatives | 359,359 | 102,220
Loans granted | 246 | 133
Other | 29 | 29
Total (net) short-term financial assets | 359,634 | 102,382
Impairment of short-term financial assets | (28,354) | (28,354)
Total (gross) short-term financial assets | 387,988 | 130,736

| CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM FINANCIAL ASSETS | 01.01.-31.12.2022 | 01.01.-31.12.2021
Opening balance |  | (28,354) | (28,343)
Recognized |  | - | (12)
Reversed |  | - | 1
Closing balance |  | (28,354) | (28,354)

5.12 CASH AND CASH EQUIVALENTS
Accounting policy
Cash and cash equivalents include cash in hand and bank deposits repayable on demand. Current investments that are not subject to
significant changes in value and that may be easily exchanged for a determinable amount of cash and that form an integral part of the
Group cash management are recognised as cash and cash equivalents for the purposes of the statement of cash flows.
At the reporting date, any foreign currencies in bank accounts and on hand are measured at the average exchange rate for a given
currency, quoted by the President of the NBP.
For cash and cash equivalents, impairment allowances are estimated using individual parameters determined on the basis of benchmarks
(using information on bank ratings).
For cash and cash equivalents for which there is evidence of impairment due to credit risk, the Group analyses recoveries using probability-
weighted scenarios.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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CASH AND CASH EQUIVALENTS | 31.12.2022 | 31.12.2021
Bank accounts | 492,284 | 541,146
Short-term deposits | 192,833 | 258,304
Cash in hand | 63 | 23
Impairment of cash and cash equivalents | (211) | (450)
Cash and cash equivalents | 684,969 | 799,023
Cash and cash equivalents – presented in the cash flow statement | 684,969 | 799,023

CHANGE IN IMPAIRMENT CASH AND CASH EQUIVALENTS | 01.01.-31.12.2022 | 01.01.-31.12.2021
Opening balance | (450) | (316)
Recognized | (43) | (316)
Reversed | 331 | 182
Exchange differences | (2) | -
Other | (47) |
Closing balance | (211) | (450)

The effective interest rates of short-term bank deposits are similar to the nominal interest rates, and fair value of short-term bank deposits
is not significantly different from carrying value.
Cash and cash equivalents are covered only by an allowance for expected credit losses in accordance with IFRS 9.
The value of restricted cash
As at 31 December 2022, all cash and cash equivalents in Polish companies (CIECH S.A., CIECH Soda Polska S.A. CIECH Sarzyna S.A., CIECH
Pianki Sp. z o.o, CIECH Cargo Sp. z o.o., CIECH Vitrosilicon S.A., CIECH Vitro Sp. z o.o.), German companies (CIECH Soda Deutschland GmbH &
Co. KG, CIECH Energy Deutschland GmbH, CIECH Salz Deutschland GmbH), who are guarantors of the term loan, revolving credit facilities and
overdraft facilities, were pledged as collateral for financial liabilities on account of the term loan, revolving facility and overdraft facilities
As at 31 December 2022, the balance of cash restricted due to a deposit placed for transactions concluded with the PGE Brokerage House
(futures contracts for the purchase of CO
2
certificates) amounted to PLN 92 thousand (EUR 20 thousand) (as at 31 December 2021:
PLN 36,179 thousand (EUR 7,866 thousand)).
In addition, restricted cash represented the funds in the VAT account due to the introduction of "split payment" procedures.
As at 31 December 2022 and 31 December 2021, it amounted to PLN 36,706 thousand and PLN 16,205 thousand, respectively.
5.13 DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR
SALE AND LIABILITIES RELATED THERETO
Assets and liabilities classified as held for sale
Accounting policy
Non-current assets are classified as held for sale when their carrying amounts are expected to be recovered primarily through a sale
transaction and when they are available for sale in their current condition with such transaction being highly probable.
As at 31 December 2022 and 31 December 2021, the CIECH Group presented the following assets under the item “Non-current assets and
groups held for sale”:
• CIECH Vitrosilicon S.A. presented property, plant and equipment in the amount of PLN 368 thousand (land located in the town of Iłowa)
redundant from the point of view of the enterprise; a potential buyer of the land is now being sought. These assets are included in the
Silicates Segment.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Discontinued operations
In 2022, there were no discontinued operations at the CIECH Group. In the corresponding period, there was a discontinued operation
concerning the sale of shares in CIECH Żywice Sp. z o.o,
On 1 March 2021, CIECH S.A. entered into an agreement for the sale of 74,677 shares in CIECH Żywice Sp. z o.o. with LERG S.A. with its
registered office in Pustków-Osiedle, accounting for 100% of shares in the share capital of CIECH Żywice Sp. z o.o. The value of the Agreement
(equal to the enterprise value being sold) is PLN 157,410 thousand. The final price of the Shares being sold was determined in accordance
with the rule arising from the Agreement and amounted to PLN 74,289 thousand. For details of the transaction, see current reports
No 27/2020 and 4/2021.

Cash received from sale of shares | 74,289
Cash received from repayment of debt (including loans repaid 1 ) | 83,121
TOTAL Value of the Agreement | 157,410

1
Loan previously disclosed as intercompany loan and eliminated at the level of the consolidated statements; following the sale, disclosed in the consolidated
figures as a loan to a third party. The loan of PLN 27 million was repaid on 30 July 2021.
The accounting principles applied in the preparation of the statement of profit or loss for discontinued operations are consistent with the
Group's accounting policy. The results of discontinued operations include (for the period from 1 January to 31 December 2021):
• results of CIECH Żywice Sp. z o.o. for the period of being in a subsidiary of the Group – in connection with the planned sale of the
company and the conclusion of the agreement for the sale of 74,677 shares in CIECH Żywice Sp. z o.o. to LERG S.A. – activities presented
in the Resins Segment,
• elimination of results on transactions between consolidated entities of the CIECH Group and the entity reported under discontinued
operations,
• results of the CIECH Group companies (including CIECH S.A.) generated from transactions with the entity reported under discontinu ed
operations.
Below is the consolidated result on discontinued operations ( in the resins area) for 2021, which includes the figur es of CIECH Żywice
Sp. z o.o. and CIECH S.A.

CIECH Group | 01.01.-31.12.2021
Net sales revenues | 69,898
Cost of sales | (56,858)
Gross profit/(loss) on sales | 13,040
Other operating income | 385
Selling costs | (1,130)
General and administrative expenses | (4,945)
Other operating expenses | (422)
Operating profit/(loss) | 6,928
Financial income | 1,864
Financial expenses | (319)
Net financial income/(expenses) | 1,545
Profit/(loss) before tax | 8,473
Income tax | (1,524)
Net profit/(loss) (1) | 6,949
Income form the sale of CIECH Żywice Sp. z o.o. | 74,289
Net assets | (19,370)
Tax | -
Gain on the sale of CIECH Żywice Sp. z o.o. (2) | 54,919
Total net profit/(loss) on discontinued operations (1+2) | 61,86 8

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Analysis of assets and liabilities over which control was lost – CIECH Żywice Sp. z o.o.
1
:

in thousand PLN | 01.03.2021
ASSETS |
Property, plant and equipment | 62,787
Right-of-use assets | 894
Intangible assets | 14,611
Investment properties | 199
Deferred tax assets | 1,508
Total non-current assets | 79,999
Inventories | 30,174
Trade and other receivables | 54,392
Cash and cash equivalents | 7,335
Total current assets | 91,901
Total assets | 171,900
LIABILITIES |
Lease liabilities | 47
Provisions for employee benefits | 457
Total non-current liabilities | 504
Loans, borrowings and other debt instruments | 57,373
Lease liabilities | 72
Trade and other liabilities | 91,356
Income tax liabilities | 1,575
Provisions for employee benefits | 1,620
Other provisions | 30
Total short-term liabilities | 152,026
Total liabilities | 152,530
NET ASSETS | 19,370

1
Assets and liabilities of the company prior to the date of sale were reported under assets held for sale.
Cash flows from discontinued operations for CIECH Żywice Sp. z o.o.:

| 01.01.-01.03.2021
Cash as at 01.01.2021 | 4,913
Net cash from operating activities | 1,445
Net cash from investing activities | (704)
Net cash from financing activities | 1,681
Total net cash flows | 2,422
Cash over which control was lost at the time of sale | 7,335

The following table presents information about the consideration received for the sale of discontinued operations (in PLN ‘00 0):

Cash received from sale of shares | 74,289
Cash over which control was lost | (7,335)
Consideration received (value reported in cash flows as “Disposal of a subsidiary”) | 66,954

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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6 EQUITY
6.1 CAPITAL MANAGEMENT
Capital structure management
The capital structure of the Group consists of debt comprising the credit facilities, cash and cash equivalents and equity attributable to
shareholders of the parent, including shares issued, reserve capital and retained earnings.
The Group manages its capital in order to ensure that subsidiaries are able to continue their activity and at the same time maximise returns
for stakeholders by optimising the debt to equity ratio.
In 2021-2022 there were no changes in aims, principles and processes of capital management.
The Group monitors the effectiveness and stability of capitals using the debt ratio calculated based on the net debt value in relation to
EBITDA. The consolidated net debt of the Group calculated as the sum of non-current and current liabilities for credits, loans and other debt
instruments (lease liabilities + liabilities for net loss on derivatives calculated separately for each instrument + factoring liabilities) less cash.
EBITDA is calculated as operating profit plus amortisation and depreciation.

| 31.12.2022 | 31.12.2021
Loans, borrowings and other debt instruments | 1,865,124 | 1,859,441
Lease liabilities | 135,320 | 151,197
Factoring liabilities | 28,769 | 23,078
Net measurement of derivative financial liabilities | 20,597 | 66,093
Gross financial liabilities | 2,049,810 | 2,099,809
Cash and cash equivalents | 684,969 | 799,023
Net financial liabilities | 1,364,841 | 1,300,786
| 01.01.- 31.12.2022 | 01.01. - 31.12.2021
Operating profit for continuing operations | 590,177 | 340,504
Depreciation and amortisation for continuing operations | 431,275 | 374,640
EBITDA for continuing operations | 1,021,452 | 715,144
Debt ratio | 1.3 | 1.8

As at 31 December 2022, net debt to EBITDA stood at 1.3 and was lower than as at the end of 2021 by 0.5. The improvement in this ratio
was driven by a significant increase in operating profit. Detailed information on the operating results achieved presented in the Directors’
Report for the CIECH Group and CIECH S.A. for 2022 published on 23 March 2023 in Section 4.
6.2 CONSOLIDATED EQUITY
Accounting policy
The total consolidated shareholders’ equity includes equity attributable to shareholders of the parent company and non-controlling
interest.
The Group’s share capital is represented by the share capital of the parent company and is accounted for at its no minal value adjusted by
the effects of hyperinflation in the years 1989–1996.
Post-acquisition changes in the equity of subsidiaries are recognised in the Group’s equity to the extent of the parent company’s interest
in those subsidiaries. The remaining equity of the consolidated entities is recognised in non-controlling interest, described below.
When a foreign operation is disposed of, the relevant amounts in the currency translation differences are transferred to profit or loss.
When shares are repurchased by the parent company or a consolidated subsidiary, the amount of the consideration paid, which includes
directly attributable costs, is recognised as a change in equity. The purchased shares are presented as a deduction from total equity.
A liability for a dividend payable is recognised when authorised.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Accounting policy
Dividends payable from pre-acquisition profits do not reduce the acquisition price of the shares, however, they may provide evidence of
impairment.
The consolidated net profit (loss) attributable to shareholders of the parent company is presented in shareholders’ equity within retained
earnings and represents the sum of the net profit (loss) of the parent company, its share in net profit (loss) of equity accounted investees,
net profit (loss) of fully-consolidated subsidiaries.
Non-controlling interest
Non-controlling interest represents interest in a subsidiary’s equity which is not directly or indirectly attributable to the parent company.
Non-controlling interest is measured:
• at the amount of proportionate interest in subsidiary's net assets, or
• at fair value,
for each business combination separately at the time of initial recognition.
The carrying amount of non-controlling interest should correspond to the amount calculated by adding changes in the current period to
the carrying amount of non-controlling interest at the end of the preceding period. These changes may result from:
• changes in the percentage share of interest held by non-controlling shareholders – e.g. purchase, sale, increase or decrease of share
capital;
• changes in equity not related to the changes in the interest held – e.g. increase or decrease of equity with no effect on shareholding,
additional equity contributions made by non-controlling shareholders, net result of the current year, transactions recognised directly
in other comprehensive income, dividends paid.
Profit or loss as well as any component of other comprehensive income are attributable to the shareholders of the parent company and
to non-controlling interest even where the attribution results in a negative carrying amount of non-controlling interest.
As at 31 December 2022, the carrying amount of the share capital of the parent company CIECH S.A. amounted to PLN 287,614 thousand
and comprised the share capital from the share issues and from the hyperinflation adjustment.
The shares of CIECH S.A. are listed on Warsaw Stock Exchange and on Frankfurt Stock Exchange. The share capital of CIECH S.A. amounts to
PLN 263,500,965 and is divided into 52,699,909 shares with a nominal value of PLN 5 each, including:
• 20,816 A-series ordinary bearer shares,
• 19,775,200 B-series ordinary bearer shares,
• 8,203,984 C-series ordinary bearer shares,
• 23,000,000 D-series ordinary bearer shares,
• 1,699,909 E-series ordinary bearer shares.
The shares of all series are ordinary shares and do not carry any additional rights, preferences or restrictions as to dividend distribution or
return of capital.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Shareholder structure of CIECH S.A. as at the date of approval of the report (according to the best knowledge of the Company):
To the best knowledge of the Company, as at the day of approving this report, entities holding significant blocks of shares (at least 5%) are
the entities listed below:
Shareholder

|  |  | Number of | Share in the |
|  |  | votes at the | total number of |
| Type of shares | Number of | General | votes at the | Stake in share
|  | shares | Meeting of | General | capital (%)
|  |  | Shareholders | Meeting of |
|  |  |  | Shareholders |
KI Chemistry s. à r. l. with its registered office in Luxembourg 1 | Ordinary bearer | 26,952,052 | 26,952,052 | 51.14% | 51.14%
Nationale-Nederlanden Otwarty Fundusz | Ordinary bearer | 2,729,507 | 2,729,507 | 5.18% | 5.18%
Emerytalny 2 |  |  |  |  |
Drugi Allianz Polska Otwarty Fundusz | Ordinary bearer | 3,389,024 | 3,389,024 | 6.43% | 6.43%
Emerytalny 3 |  |  |  |  |
Other | Ordinary bearer | 19,629,326 | 19,629,326 | 37.25% | 37.25%

1
In accordance with information dated 9 June 2014 provided by Shareholder under Article 77(7) and Article 69(1)(1) of the Act of 29 July 2005 on Public Offering
and Conditions Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies (CR 26/2014).
2
On the basis of the list of shareholders holding at least 5% of votes at the Annual General Meeting of Shareholders of CIECH S.A. on 28 April 2022, Current
Report 16/2022 prepared and published pursuant to Article 70(3) of the Act of 29 July 2005 on public offering and conditions governing the introduction o f
financial instruments to organised trading, and on public companies (Journal of Laws of 2009, No 185, item 1439).
3
In accordance with information provided by Shareholder (CR 1/2023).
On 10 January 2023, CIECH S.A. announced that it had received notification of the merger of Polskie Towarzystwo Emerytalne Allianz Polska
S.A. with Aviva Powszechne Towarzystwo Emerytalne Aviva Santander S.A., as a result of which the total shareholding in the Allianz OFE,
Allianz DFE and Drugi Allianz OFE managed by them increased to 3,389,024 shares representing 6.43% of the Company's share capital.
Other reserve capital
The table below presents the balances of other reserve capital, consisting of the following items:

OTHER RESERVE CAPITAL BY PURPOSE | 31.12.2022 | 31.12.2021
Commercial risk fund | 3,330 | 3,330
Fund for purchasing soda companies | 15,200 | 15,200
Development fund | 57,669 | 57,669
Fund for the purchase of treasury shares | 346,500 | 346,500
Other | 2,322 | 2,322
TOTAL | 425,021 | 425,021

KI Chemistry s. a r.l.
51,14%
PTE Allianz Polska
6,43%
Nationale-Nederlanden OFE
5,18%
Other
37,25%
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Treasury shares
In 2022 and in the comparable period, CIECH S.A. did not purchase treasury shares.
Share premium
The share premium arose from the surplus in excess of nominal value achieved upon the issue of C, D and E series shares.
Cash flow hedge reserve
The cash flow hedge reserve reflects the valuation and settlement of hedging instruments to which the hedge accounting applies. Detailed
information is presented in note 8.2.
Hedge cost reserve
The hedge cost reserve includes the value of the basis currency spread for the CIRS transaction (PLN 78,108 thousand as at the end of 2022
and PLN 5,475 thousand as at the end of 2021) which was excluded from hedge accounting.
As at the end of 2021, this item also comprises the time value of the gas and energy purchase option which, in accordance with IFRS 9,
has been left outside hedge accounting by the Group (PLN 14,856 thousand).
Actuarial gains
Actuarial valuation reserve comprises actuarial gains or losses, i.e. the effects of differences between the previous assumptions made in the
valuation of employee benefit provisions and what has actually occurred and the effects of changes in assumptions for these provisions,
including change in discount rate.
Currency translation differences (foreign companies)
The balance of this equity item is adjusted by exchange differences on the translation of the financial statements of foreign subsidiaries, i.e.
CIECH Soda Romania S.A., SDC Group, Ciech Group Financing AB, Proplan Plant Protection Company, S.L., CIECH Salz Deutschland GmbH and
CIECH Agro Romania S.R.L.
The balance of this item of equity also represents accumulated exchange differences on the measurement of net investments in a foreign
entity and effective part of profit and losses from measurement of an instrument used for hedging shares in net assets of foreign companies.
6.3 DIVIDENDS PAID OR DECLARED
Until the date of approval of the financial statements for publication, the Management Board of CIECH SA has not adopted a resolution on
the proposed distribution of net profit for 2022.
The Management Board of CIECH S.A. decided on the distribution an interim dividend for 2022, in accordance with Article 349 § 1 of the
Commercial Companies Code, out of the net profit reported for the period from 1 January to 30 September 2022. The interim dividend for
2022 amounted to a total of PLN 79,050 thousand, representing an amount of PLN 1.50 per share. The Interim dividend record date was
22 December 2022, and the interim dividend was paid on 29 December 2022. For details, see current reports No 32/2022 and 40/2022.
On 28 April 2022, the Ordinary General Meeting resolved to distribute CIECH S.A.’s net profit for the financial year 2021, am ounting to
PLN 133,206 thousand, and to allocate the entire profit to CIECH S.A.’s supplementary capital.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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6.4 BUSINESS COMBINATIONS
Basis of consolidation
The subsidiaries’ net equity in the amount as at the acquisition date, in the part corresponding to Group’s share in the shar e capital, is
compensated with acquisition value of the shares included in statement of financial position of the parent company at the date of
acquisition. Consolidation adjustments, depending on their nature, are recorded against appropriate items of equity. Changes in the
parent company's ownership interest that do not result in a loss of control of the subsidiary are accounted for as equity transactions.
Subsidiaries of the CIECH Group are fully consolidated from the date on which control is transferred to the Group, and cease to be
consolidated from the date such control ends.
Balances, revenues and costs, unrealized profits or losses from transactions between the Group subsidiaries are eliminated in the process
consolidation.
There were no significant business combinations in the presented periods.
In 2022, the following changes occurred in relation to the companies in which CIECH S.A. held shares, either directly or indirectly.
These changes translated into changes in the structure of the CIECH Group.
CIECH Transclean Sp. z o.o.
The Court, in its decision of 3 February 2022, registered the reduction in the share capital of CIECH
Transclean Sp. z o.o. resulting from the cancellation of shares, which was carried out on 21 July 2021 at the
Extraordinary Shareholders' Meeting of CIECH Transclean Sp. z o.o. by deciding on the cancellation of
shares against consideration and amending the Articles of Association of the Company:
• 8,548 shares in the Company's share capital with a total nominal value of PLN 4,274 thousand were
cancelled in exchange for consideration of PLN 506.56 per canceled share, i.e. for total consideration
amounting to PLN 4,330 thousand by way of purchase of the above shares on the basis of an
agreement to sell the shares by the Company against the above consideration,
• The Management Board of the Company was authorised to purchase the shares (conclude an
agreement) in order to cancel them, The agreement for the purchase of shares for cancellation against
consideration was concluded on 10 November 2021; according to this agreement, the consideration
was transferred within 14 days from the date on which the reduction of capital was registered by the
court,
• following the cancellation of shares, the share capital was reduced from PLN 4,322 thousand (by PLN
4,274 thousand) to PLN 48 thousand through the cancellation of 8,548 shares with a total value of
PLN 4,274 thousand.
As a result of the decrease, the share capital of CIECH Transclean Sp. z o.o. is divided into 96 shares,
with a total nominal value of PLN 48 thousand (the nominal value for 1 share is PLN 500).
CIECH Sól Sp. z o.o.
On 13 December 2021, the Deed of Incorporation of CIECH Sól sp. z o.o., with a share capital of PLN 5
thousand, divided into 100 shares with a nominal value of PLN 50 each, was drawn up. The share capital
was fully covered with cash, all shares were taken up by CIECH S.A. The court, by decision of 7 February
2022, registered CIECH Sól Sp. z o.o. CIECH S.A. is the sole shareholder of the Company.
CIECH Soda Romania S.A.
As of 1 March 2022, a reduction in the share capital resulting from the cancellation of 26,819 treasury
shares of CIECH Soda Romania S.A. effected by resolution of the General Meeting held on 7 December
2021 became effective.
Following the cancellation, the share capital amounts to RON 111,573 thousand and is divided into
796,951,188 shares with a nominal value of RON 0.14 each. The number of shares held by CIECH S.A.
remains unchanged - 786,912,905 shares; their proportion in the share capital changes from 98.737% to
98.740%.
CIECH Nieruchomości
Rolne Sp. z o.o.
The court, in its decision of 22 August 2022, registered CIECH Nieruchomości Rolne Sp. z o.o., established
on 26 May 2022 with a share capital of PLN 5 thousand, which is divided into 100 shares, with a nominal
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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value of PLN 50 each. The Company’s share capital was paid in full in cash. CIECH S.A. is the sole shareholder
of the Company.
CIECH Ventures Sp. z o.o.
On 27 October 2022 and 23 November 2022, the Extraordinary Shareholders' Meeting of CIECH Ventures
Sp. z o.o. adopted resolutions to make additional contributions to the share capital by the sole shareholder
of the company, i.e. CIECH S.A., in the total amount of PLN 4,500 thousand.
6.5 SIGNIFICANT SUBSIDIARIES WITH NON-CONTROLLING INTEREST
In 2022 and 2021, there was no significant non-controlling interest in any of the significant subsidiaries of the CIECH Group.
6.6 EARNINGS PER SHARE
Accounting policy
Basic earnings per share is the net profit for the year attributable to ordinary shareholders of the parent entity divided by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share is the net profit for the year attributable to ordinary shareholders of the parent entity divided by the weighted
average number of ordinary shares outstanding during the year adjusted for the effects of all dilutive potential ordinary shares.
The table below presents profit and shares data used in the calculation of the basic and diluted earnings per share:

in PLN | 01.01.-31.12.2022 | 01.01.-31.12.2021
Basic and diluted earnings per share (continuing operations) | 10.76 | 4.17
Basic and diluted earnings per share (discontinuing operations) | 0.00 | 1.18

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Net profit (loss) from continuing operations attributable to the shareholders of the parent | 566,937 | 219,998
Net profit (loss) from discontinued operations attributable to the shareholders of the parent | - | 61,868
Weighted average number of issued ordinary shares used in calculation of basic and diluted earnings | 52,699,909 | 52,699,909
per share |  |
Dividends recognised as distributions to owners per share | 1.5 | 3.0

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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7 LIABILITIES, PROVISIONS, EMPLOYEE BENEFITS
7.1 INFORMATION ABOUT SIGNIFICANT FINANCIAL LIABILITIES
Accounting policy
Financial liabilities are an entity’s liabilities to deliver financial assets to another entity or to exchange a financial instrument with another
entity under conditions that are unfavourable. When a financial liability is recognised initially, an entity shall measure it at its fair value
plus, in the case of a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the
acquisition or issue of the financial liability. Interest accrued is recognised under finance costs or, if it is subject to capitalisation, to
property, plant and equipment or intangible assets.

LOANS, BORROWINGS AND OTHER DEBT INSTRUMENTS | 31.12.2022 | 31.12.2021
LONG-TERM | 1,671,280 | 1,854,154
Loans and borrowings | 1,671,280 | 1,854,154
SHORT-TERM | 193,844 | 5,287
Loans and borrowings | 193,844 | 5,287
TOTAL | 1,865,124 | 1,859,441

Reconciliation of changes in liabilities resulting from financing activities – liabilities in respect of credits and loans:

| 01.01.- 31.12.2022 | 01.01.- 31.12.2021
Opening balance | 1,859,441 | 1,911,475
Proceeds from debt incurred | 2,143 | 195,493
Accrual of interest | 119,916 | 32,771
Repayment of debt, including: | (120,236) | (268,829)
repayment of principal | - | (231,801)
interest paid | (120,236) | (37,028)
Realised exchange differences | 3 | 18,998
Foreign exchange differences on measurement of liabilities | 1,374 | (22,927)
Other | 2,483 | (7,540)
Closing balance | 1,865,124 | 1,859,441

Debt financing of the Group
As at the end of 2022, the CIECH Group's debt financing was secured mainly through facilities made available to CIECH S.A. under facilities
agreements:
• The Facilities Agreement signed with a banking syndicate dated 16 March 2021 with the total value of approx. PLN 2,116,810 thousand:
o amortised term facility in tranches in PLN and EUR in the amount of PLN 540,700 thousand and EUR 4,231 thousand (the facility
is fully drawn down),
o non-amortised term facility in tranches in PLN and EUR in the amount of PLN 1,260,100 thousand and EUR 9,844 thousand
(the facility is fully drawn down),
o revolving credit facility in the amount of up to PLN 250,000 thousand (the amount of used credit as at 31 December 2022 was
PLN 0),
• Overdraft facilities up to PLN 100,000 thousand and EUR 10,000 thousand granted under agreements dated 28 and 29 August 2018
(as at 31 December 2022, the amount used was PLN 0 thousand).
The total value of facilities available under the aforesaid agreements is PLN 2,236,709 thousand; the limits are drown down in the amount
of PLN 1,866,810 thousand. at CIECH S.A. (PLN 1,874,009 thousand at the CIECH Group – Proplan Plant Protection Company, S.L. has also
external debt on account of loans).
Detailed information about loan liabilities is disclosed in the Directors’ Report for the CIECH Group and CIECH S.A. for 2022 published on
23 March 2023 in Section 4.6.
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Interest rate:
The Loans bear interest at a floating rate determined on the basis of the WIBOR / EURIBOR base rate, plus margin, the level of which depends
on the level of the net debt to EBITDA, such that if the level of the ratio is lower, the margin applied will also be lower. The financial terms of
the Facilities Agreement do not differ from those commonly used for this type of agreements.
Information about the financial covenants included in loan agreements
During the period covered by these financial statements, no loan agreement was called to maturity and there were no violations of payment
terms for repayment of principal or interest due in relation to financial liabilities recognised in the statement of financial position. Under the
Facilities Agreement dated 16 March 2021, CIECH S.A. and its selected subsidiaries were obliged to, among others, maintain a certain level
of:
• net leverage ratio for the Group specified in the Facilities Agreement (the ratio of the CIECH Group’s consolidated net debt to
consolidated EBITDA of the CIECH Group calculated according to the guidelines) in the amount of at least 4.0x,, measured at t he end of
a year and first six months of a year. As at the balance sheet date, i.e. 31 December 2022, this ratio was maintained and amounted to
1.2.
• the guarantor coverage ratio (share of subsidiaries being guarantors in the consolidated EBITDA of the CIECH Group, calculated
according to the guidelines) at a level of at least 80%; this ratio was met as at the balance sheet date and amounted to 93.0%.
7.2 OTHER NON-CURRENT LIABILITIES
Accounting policy
Accounting policy concerning financial instruments is presented in note 8.1.
The accounting policy for grants received is presented in Note 3.4.

OTHER NON-CURRENT LIABILITIES | 31.12.2022 | 31.12.2021
Subsidies | 116,496 | 108,525
Derivatives | 86,207 | 91,857
Other | 25,942 | 31,370
TOTAL | 228,645 | 231,752

Other long-term liabilities primarily include the value of liabilities under the CIECH Group's three-year Long-Term Incentive Plans for 2019-
2021 and 2022-2024 for the key management personnel of the CIECH Group (the short-term portion of the Plans is presented in Note 7.3
under other short-term liabilities). The intention behind the introduction of the Plans is to harmonise the activities of key managers of the
CIECH Group with the achievement of the objectives set out in the CIECH Group Strategy. The main criterion is the achievement by the CIECH
Group in a given three-year period of the specified increase in value in relation to the reference year (for the 2019-2021 Programme at the
level of not less than 11% in relation to 2018 - this has been met and for the 2022-2024 Programme at the level of not less than 20.5% in
relation to 2021). The increase in value is measured using the TSR (Total Shareholder Return) ratio, with an additional 10% of the pool for
the 2022-2024 Plan subject to meeting 4 ESG targets.
The discounted value of the liabilities of the 2019-2021 Plan amounted to PLN 15,318 thousand for the long-term portion and
PLN 18,205 thousand for the short-term portion, while for the 2022-2024 Plan the long-term portion stood at PLN 10,636 thousand.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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7.3 CURRENT TRADE AND OTHER LIABILITIES
Accounting policy
Trade and other liabilities are classified as current or non-current based on the following principles:
• trade liabilities are reported as current liabilities, regardless of maturity,
• other liabilities due to be settled within 12 months of the balance sheet date are classified as current liabilities,
• other payables, which do not meet the current liability conditions, are classified as non-current liabilities.
Liabilities denominated in foreign currencies are recognised at the NBP’s average exchange rate effective on the last working day before
the date of transaction.
At the reporting date foreign currency denominated liabilities are translated at the average exchange rate announced for that day by the
NBP except for received prepayments. Currency translation differences arising upon the repayment of a liability (realised) or its valuation
(unrealised) are presented within financial income or expense. Prepayments for deliveries denominated in foreign currencies are
recognised at the exchange rate applicable as at the transaction day.
Judgements and estimates
At the reporting date trade payables are measured at amortised cost (i.e. they are discounted using the effective interest method) and
increased by any applicable late interest accrued.
Late interest is not accrued when a formal waiver is received from the counterparty. In all other cases such interest is accrued and
recognised in accordance with the following principles:
• on an ongoing basis, based on interest notes received;
• in estimated amounts, with such estimates based on comparison of interest charged in the past by a counterparty to the relate d
amounts owed.

CURRENT TRADE AND OTHER LIABILITIES | 31.12.2022 | 31.12.2021
Trade liabilities and advances taken | 993,942 | 615,770
- in up to 12 months | 992,968 | 612,643
- above 12 months | 747 | 1,953
- prepayments received for supplies | 227 | 1,174
Public and legal liabilities (excluding income tax) | 47,807 | 52,936
Liabilities for purchase of property, plant and equipment | 102,573 | 143,427
Financial instruments liabilities | 375,890 | 59,843
Liabilities due to settlement of futures contracts | - | 138,861
Liabilities to employees | 20,779 | 21,145
Payroll liabilities | 46,251 | 45,634
Holiday leave accrual | 13,400 | 12,920
Taxes and charges | 925,301 | 647,621
Materials and energy consumption | 69,650 | 34,327
Subsidies | 4,473 | 4,656
Environmental charges | 9,054 | -
Factoring liabilites | 28,769 | 23,078
Liabilities due to the purchase of CO 2 emission rights | 21,635 | 35,553
Received CO 2 emission rights | 53,830 | 50,940
Other | 79,949 | 69,696
TOTAL | 2,793,303 | 1,956,407

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Terms of transactions with related entities have been presented in note 9.3.
Trade liabilities do not bear interest. Commercial contracts concluded by the CIECH Group include various terms of payment of trade liabilities
depending on the type of transaction, market characteristics and trade conditions. The standard payment term is 60 days.
The largest year-on-year increases in current liabilities were recorded in the following items:
• trade liabilities due to an increase in the level of reverse factoring and higher purchase costs for raw materials,
• taxes and fees in connection with the presentation under this item of provisions for CO 2 emission costs,
• valuations of financial instruments, mainly on account of gas and electricity price index swaps in the SDC Group.
7.4 LEASES
Accounting policy
On 1 January 2019, the CIECH Group adopted a new financial reporting standard, IFRS 16 Leases.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration.
The Group combines two or more contracts entered into at or near the same time with the same counterparty (or related parties of the
counterparty), and account for the contracts as a single contract if one or more of the following criteria are met:
• the contracts are negotiated as a package with an overall commercial objective that cannot be understood without considering the
contracts together;
• the amount of consideration to be paid in one contract depends on the price or performance of the other contract; or
• the rights to use underlying assets conveyed in the contracts (or some rights to use underlying assets conveyed in each of th e
contracts) form a single lease component.
A contract contains a lease if:
• it concerns an identified asset that is explicitly specified in the contract (e.g. using an inventory number, address (for premises), etc.))
or implicitly specified at the time that the asset is made available for use by the customer, and the supplier does not have the
substantive right to substitute the asset throughout the period of use and
• the lessee receives essential all of the economic benefits from such assets during the period of use, i.e. both basic benefits and the
benefits derived from it (if any); and
• the lessee has the right to specify the method in which it uses the identified asset.
Initial measurement of the lease liability
The lease payments included in the measurement of the lease liability comprise the following payments that are not paid:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease and
it is highly likely that this option will be exercised.
Subsequent measurement of the lease liability
After the commencement date, the Group measures the lease liability by:
• increasing the carrying amount to reflect interest on the lease liability;
• reducing the carrying amount to reflect the lease payments made; and
• remeasuring the carrying amount to reflect any reassessment or lease modifications.
The Group, as a lessee, recognises in profit or loss of the current period both:
• interest on the lease liability; and
• variable lease payments not included in the measurement of the lease liability in the period in which the event or condition that
triggers those payments occurs, unless these costs are included in the carrying amount of another asset in accordance with th e
accounting policy for property, plant and equipment.
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Accounting policy
In-substance fixed lease payments
In-substance fixed lease payments are payments that may, in form, contain variability but that, in substance, are unavoidable.
In-substance fixed lease payments exist, for example, if:
• payments are structured as variable lease payments, but there is no genuine variability in those payments. Those payments contain
variable clauses that do not have real economic substance. Examples of those types of payments include:
• payments that must be made only if an asset is proven to be capable of operating during the lease, or only if an event occurs
that has no genuine possibility of not occurring; or
• payments that are initially structured as variable lease payments linked to the use of the underlying asset but for which the
variability will be resolved at some point after the commencement date so that the payments become fixed for the remainder
of the lease term. Those payments become in-substance fixed payments when the variability is resolved,
• there is more than one set of payments that a lessee could make, but only one of those sets of payments is realistic. In this case, an
entity considers the realistic set of payments to be lease payments.
• there is more than one realistic set of payments that a lessee could make, but it must make at least one of those sets of payments.
In this case, an entity considers the set of payments that aggregates to the lowest amount (on a discounted basis) to be leas e
payments.
Variable lease payments
Variable lease payments that depend on an index or a rate include, for example, payments linked to a consumer price index, payments
linked to a benchmark interest rate (such as WIBOR) or payments that vary to reflect changes in market rental rates (e.g. periodical
changes in perpetual usufruct rates, in connection with the revision of a valuation report).
Variable lease payments that do not depend on an index or a rate, i.e. depend on the use, are not included in the measurement of lease
liabilities (e.g. fees for exceeding the mileage limit).
Exemptions/ simplifications applied
The Group applies the simplifications for short-term leases and low-value asset leases provided for in the standard. It is assumed that
assets whose unit value does not exceed approximately PLN 20 thousand, which corresponds to approximately USD 5 thousand, are low-
value assets. Short-term leases are those whose term is shorter than 12 months. The Group also benefits from the practical exemption
regarding the lack of separation of non-lease components.
Judgements and estimates
Adoption of IFRS 16 entailed also the need to make estimates and judgments which are reflected in the measurement of lease liabilities
and right-of-use assets, including:
• assessing whether a contract contains a lease in accordance with IFRS 16,
• determining the duration of contracts (including contracts with an indefinite term or with an extension option):
With respect to contracts for an indefinite term, the Group, when estimating the irrevocable lease term, assumed the period in which it
intends to use the underlying assets, also taking into account the rights of termination of the parties and the existence of significant
penalties. The lease term over which the lease liability is recognised also includes any periods resulting from an extension or early
termination if any of the above scenarios is sufficiently certain in the entity's judgement. In the case of contracts with an extension option,
the lease liability would be respectively higher, while termination options resulted in a reduction in the liability amount, that is:
• assessing lease payments as either fixed or variable,
• determining depreciation and amortisation rates.
• determining the interest rate to be used in discounting future cash flows:
Discount rate
The present value of future lease payments is calculated using the lease rate. If the lease rate is not known, the Group applies the
incremental borrowing rate for a given lease agreement, i.e. the rate of interest that the Group would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic
environment.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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The largest leased asset in the CIECH Group is the right of perpetual usufruct of land obtained by administrative decision. No conditions for
extending lease agreements or purchasing the subject of lease have been included in administrative decisions concerning the right of
perpetual usufruct of land. Price indexation may occur in relation to land revaluation. Furthermore, the SDC Group recognises a long-term
sewage system agreement effective until 2095 as a lease. Group companies also report liabilities under property lease agreements (office
and warehouse space).
The CIECH Group also uses property, plant and equipment (mainly means of transport, including railcars and locomotives, and various types
of machinery and equipment) pursuant to lease agreements. Some of the agreements include the return option, extension of the agreement
or the option to buy all or a part of the equipment after the lease period.
To calculate discount rates for the purposes of IFRS 16, the Group assumes that the discount rate should reflect the cost that it would have
to pay to borrow the funds necessary to purchase the leased asset. The calculation of interest rates took account of credit risk (reflected in
the margin assumed), economic conditions in which the transactions took place (country, currency of the contract) and the duration of the
contract (preparation of calculations for the relevant periods within which the Company holds lease contracts). Interest rates range from
0.81% to 9.39% (for PLN 2.34%-9.39%; for EUR 0.81%-5.48% for RON 4.00%-5.00%). A single discount rate was applied to the entire contract
portfolio.
The nominal value and the value lease interest are as follows:

LEASE LIABILITIES | Nominal payments | Effective interest | Discounted lease
|  |  | liability
31.12.2022 |  |  |
0–6 months | 17,944 | 612 | 17,332
Up to 1 year | 13,796 | 657 | 13,139
1–2 years | 34,454 | 2,755 | 31,699
2–5 years | 24,003 | 3,377 | 20,626
More than 5 years | 169,199 | 116,675 | 52,524
TOTAL | 259,396 | 124,076 | 135,320
31.12.2021 |  |  |
0–6 months | 16,371 | 393 | 15,978
Up to 1 year | 14,416 | 369 | 14,047
1–2 years | 45,177 | 1,887 | 43,290
2–5 years | 29,363 | 2,751 | 26,612
More than 5 years | 166,914 | 115,644 | 51,270
TOTAL | 272,241 | 121,044 | 151,197

Reconciliation of changes in liabilities resulting from financing activities – lease liabilities

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Opening balance | 151,197 | 129,258
Modifications of agreements | (416) | 6,165
Signing new agreements | 10,062 | 40,820
Interest accrued | 5,248 | 3,951
Repayment of liability | (32,542) | (29,633)
Foreign exchange differences | - | 634
Other | 1,771 | 2
Closing balance | 135,320 | 151,197

The total outflow of funds related to lease liabilities is respectively:

| 01.01-31.12.2022 | 01.01.-31.12.2021
Payment of liabilities, including: | 38,287 | 40,693
Principal amount | 27,412 | 25,669
Interest | 5,129 | 4,192
Variable payments other than those linked to an index/rate | 2,248 | 8,153
Short-term leases | 2,552 | 1,801
Low-value leases | 945 | 879

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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The following table presents lease costs not included in the calculation of carrying amounts in accordance with IFRS 16 for the period:

| 01.01-31.12.2022 | 01.01-31.12.2021
Costs of short-term leases (concluded for a period of up to 12 months), | 1,857 | 1,411
Costs of lease of low-value assets | 829 | 832
Costs related to variable lease payments not included in the measurement of lease liabilities | 2,248 | 8,123

For details of the right-of-use assets resulting from leases see Note 5.2.
7.5 PROVISIONS FOR EMPLOYEE BENEFITS
Accounting policy
Jubilee awards, retirement benefits pays and disability pay
Based on the Group’s remuneration plan, the employees of its companies are entitled to retirement benefits. The Group’s oblig ations in
respect of the above benefits is the amount of benefit entitlement that employees have earned as a result of their service in the current
and prior years.
Net defined benefit liabilities are calculated separately for each plan by estimation of future payments required to settle the obligation
resulting from employee service in the current and prior periods (discounted to its present value). The discount rate is the rate of return
for low-risk debt securities with similar maturity date as the Group’s liabilities as at the end of the reporting period. An appropri ate
estimation is made by an authorised actuary with the application of forecast discounted unit right method.
The use of such provisions results in a decrease in the provision, while the reversal of the said provision increases other operating income.
The increase in the provision for employment costs is recognised respectively in other operating expenses. Changes in provisions resulting
from the passage of time (i.e. the unwinding of the discount) and the effect resulting from changes in discount rates are always presented
in financing activities.
The Company recognises in other comprehensive income actuarial gains and losses – changes in provisions for retirement benefits
resulting differences between the previous actuarial assumptions and what has actually occurred and the effects of changes in actuarial
assumptions and change in discount rate.
Judgements and estimates
The amount of the provision for employee benefits is determined based on actuarial valuations performed by independent professional
firms. By actuarial valuation estimates are made regarding the rotation in employment, wage growth, discount rates and inflation.
PROVISIONS FOR EMPLOYEE BENEFITS

| LONG-TERM | LONG-TERM | SHORT-TERM | SHORT-TERM
| 01.01.-31.12.2022 | 01.01.-31.12.2021 | 01.01.-31.12.2022 | 01.01.-31.12.2021
Opening balance | 15,273 | 12,958 | 2,643 | 3,100
Recognition | 1,886 | 2,832 | 636 | 1,117
Use and reversal | (1,352) | (1,635) | (1,040) | (1,473)
Foreign exchange differences | 100 | (18) | 35 | (27)
Other | (1,563) | 1,136 | 490 | (74)
Closing balance | 14,344 | 15,273 | 2,764 | 2,643

In 2022, a change in provision for retirement benefits in the amount of PLN 745 thousand was recognised in other comprehensive income
(PLN -1,342 thousand in the comparable period). This is a change resulting from differences between the previous actuarial assumptions
and what has actually occurred as well as from changes in the parameters and assumptions used in the calculations, such as the discount
rate, the salary growth rate, and assumptions concerning the future mobility of employees.
Employee benefits are measured on the basis of actuarial valuations and including provision for retirement and disability benefits. A discount
rate of 6.61% p.a. was applied in order to determine the current value of future liabilities due to employee benefits. The discount rate applied
is established in nominal value. The remuneration growth rates of 5.0% were applied for 2023 and subsequent years. Staff turnover ratio is
established based on historic data, adjusted for employment restructuring plans. According to the Company’s estimations, a ch ange in
actuarial assumptions will not have a significant impact on financial results.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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7.6 OTHER PROVISIONS
Accounting policy
A provision is recognised if, as a result of a past event, the Group has a present obligation and it is probable that an outflow of economic
benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Provision for environmental protection
In accordance with the Group’s published and currently enforced environmental policy and applicable legal requirements, a provision for
site restoration in respect of contaminated land, and the related expense, is recognised. The provision is recognised in the amount of the
expected future restoration costs discounted to present value.
Judgements and estimates
For measurement of the provisions, the Group is required to make estimates, assumptions regarding discount rates, expected costs and
payment terms.

| Provision for liabilities | Provision for |  |
CHANGE IN OTHER LONG-TERM PROVISIONS | (costs) | environmental | Provision for bonuses | TOTAL
|  | protection |  |
01.01.-31.12.2022 |  |  |  |
Opening balance | 42,406 | 226,972 | 1,271 | 270,649
Recognition | 3,497 | 185 | 52 | 3,734
Use and reversal | (21,113) | - | (14) | (21,127)
Foreign exchange differences | - | 4,334 | - | 4,334
Change in discount rate | - | (97,848) | - | (97,848)
Reclassification to) short-term provisions | (25,632) | - | (49) | (25,681)
Other | 1,084 | 2,018 | 26 | 3,128
Closing balance | 242 | 135,661 | 1,286 | 137,189
01.01.-31.12.2021 |  |  |  |
Opening balance | 40,776 | 112,485 | - | 153,261
Recognition | 2,029 | - | 1,271 | 3,300
Use and reversal | (2,030) | (3,696) | - | (5,726)
Foreign exchange differences | - | 225 | - | 225
Change in discount rate | - | (1,685) | - | (1,685)
Reclassification from (to) long-term provisions | 1,631 | (1,838) | - | (207)
Update of the amount of the provision for environmental protection 1 | - | 121,481 | - | 121,481
Closing balance | 42,406 | 226,972 | 1,271 | 270,649

1
Relates to the provision for environmental protection in the SDC Group. The value of the provision was included in the value of fixed assets.

CHANGE IN OTHER SHORT-TERM | Provision for |  | Provision for | Provision for | Provision for |  |
PROVISIONS | restructuring |  | liabilities (costs) | environmental | bonuses |  | TOTAL
|  |  |  | protection |  |  |
01.01.-31.12.2022 |  |  |  |  |  |  |
Opening balance |  | 111 | 82,003 | 1,663 |  | 34 | 83,811
Recognition |  | - | 20,914 | 1,529 |  | - | 22,443
Use and reversal |  | - | (11,456) | (2,361) |  | (59) | (13,876)
Foreign exchange differences |  | - | 566 | (2) |  | - | 564
Reclassification from (to) long-term |  | - | 25,632 | - |  | 49 | 25,681
provisions |  |  |  |  |  |  |
Other |  | - | 773 | (215) |  | - | 558
Closing balance |  | 111 | 118,432 | 614 |  | 24 | 119,181
01.01.-31.12.2021 |  |  |  |  |  |  |
Opening balance |  | 111 | 94,199 | 889 |  | 38 | 95,237

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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CHANGE IN OTHER SHORT-TERM | Provision for |  | Provision for | Provision for | Provision for |  |
PROVISIONS | restructuring |  | liabilities (costs) | environmental | bonuses |  | TOTAL
|  |  |  | protection |  |  |
Recognition |  | - | 7,207 | 827 |  | - | 8,034
Use and reversal |  | - | (17,642) | (1,891) |  | (4) | (19,537)
Foreign exchange differences |  | - | (130) | - |  | - | (130)
Reclassification from (to) long-term |  | - | (1,631) | 1,838 |  | - | 207
provisions |  |  |  |  |  |  |
Closing balance |  | 111 | 82,003 | 1,663 |  | 34 | 83,811

Material items of provisions for expected losses and liabilities in the CIECH Group
CIECH S.A.
Short-term provisions of PLN 48,073 thousand are related to potential claims (principal liability plus
interest payable) resulting from litigation. The increase in provisions during 2022 is mainly associated with
the tax settlement audits pending at the company.
CIECH Sarzyna S.A.
Provision for potential tax liability and related interest in the amount of PLN 9,879 thousand. In 2022,
PLN 4,971 thousand of the provision was utilised through payment of the liability.
CIECH Vitrosilicon S.A.
Recognition of a provision for interest in relation to a potential tax liability in the amount of
PLN 1,896 thousand (the total balance of provisions for tax liabilities is PLN 20,117 thousand).
CIECH Pianki Sp. z o.o.
Reversal of a provision in relation to a potential tax liability in the amount of PLN 9,809 thousand (the total
balance of provisions for tax liabilities is PLN 0 thousand).
CIECH Cargo Sp. z o.o.
Reversal of a provision in relation to a potential tax liability in the amount of PLN 10,780 thousand
(the total balance of provisions for tax liabilities is PLN 0 thousand).
SDC Group
Short-term provision of PLN 14,895 thousand (EUR 3,176 thousand) related to a potential claim from the
water management authority and a provision of PLN 15,008 thousand (EUR 3,200 thousand) related to a
potential tax liability.
CIECH Trading Sp. z o.o.
A provision for VAT and interest in relation to a potential tax liability in the amount of PLN 3,906 thousand.
CIECH Soda Polska S.A.
Long-term provision in the amount of PLN 242 thousand for potential environmental fees resulting from
exceeded emission limits. In addition, provisions of PLN 482 thousand, related to customers' claims in
connection with defective deliveries of products and the resulting losses, were recognised. During 2020,
a provision for possible penalties in the amount of PLN 3,985 thousand relating to the termination of the
agreement with a counterparty was recognised. In 2022, a cross-claims agreement was signed and at the
end of 2022 a provision of PLN 3,985 thousand was reversed.
CIECH Soda Romania S.A.
Short-term provision in the amount of PLN 7,477 thousand. PLN, are related to potential claims
(principal amount plus interest liabilities) due to disputes with employees.
Detailed information on pending tax proceedings in CIECH Group companies is provided in note 9.2 to this report, Section “Aud its of tax
settlements at the CIECH Group and related contingent liabilities”.
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Provisions for environmental protection
SDC Group
A long-term provision for environmental protection in the amount of PLN 130,340 thousand
(EUR 27,804 thousand), covering, among others:
• reclamation of tailing ponds in Unseburg – provision of EUR 5,980 thousand (PLN 28,046 thousand)
as at 31 December 2022 and EUR 8,379 thousand (PLN 35,538 thousand) as at 31 December 2021 –
the schedule provides for work for a maximum of 17 years from 2008 (ponds 1-6) and a maximum of
14 years from 2015 (pond 7),
• restoration activities in the limestone mine – provision of EUR 2,079 thousand (PLN 9,748 thousand)
at 31 December 2022 and EUR 2,995 thousand (PLN 13,775 thousand) at 31 December 2021 – the
schedule provides for work until 2052 starting in 2015,
• restoration of the remains of old limestone quarries – provision of EUR 1,534 thousand
(PLN 7,194 thousand) as at 31 December 2022 and EUR 3,278 thousand (PLN 15,077 thousand) as at
31 December 2021 – the schedule provides for work over a period of 4 years,
• closure of caverns – provision of EUR 17,493 thousand (PLN 82,040 thousand) as at 31 December 2022
and EUR 29,453 thousand (PLN 135,466 thousand) as at 31 December 2021 – the schedule provides
for work in the period from 10 to 75 years.
The provisions were calculated based on reports from independent environmental engineering advisors.
CIECH Soda Polska S.A.
Provision for land reclamation costs, calculated in accordance with expenditure planned until 2042, in line
with the expected inflation rate: 10.2% in 2023, 5.7% in 2024 and 5.3% thereafter, adjusted by a discount
factor, calculated as the average of the discount factor at the beginning and end of every annual period.
The amount of the respective provision recognised in the statements amounts to PLN 4,847 thousand;
CIECH Sarzyna S.A.
A provision for the costs of water and soil reclamation in the amount of PLN 1,027 thousand. The provision
was estimated based on a technical and financial project including a schedule of works for the years 2022-
2026 of expenses to be incurred.
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8 FINANCIAL INSTRUMENTS, FINANCIAL RISK MANAGEMENT AND IMPAIRMENT
8.1 FINANCIAL INSTRUMENTS
Accounting policy
Principles of measurement after initial recognition/at the end of reporting period and presentation of financial instruments in financial
statements

Category of assets or liabilities | Measurement | Recognition
|  | Remeasurement changes adjust the
Assets at fair value through profit or loss | At fair value | carrying amount of the asset and are
|  | recognised in current period profit or loss.
Financial assets measured at amortised | At amortised cost using the effective | Remeasurement changes adjust the
cost | interest rate (EIR) | carrying amount of the asset and are
|  | recognised in current period profit or loss.
|  | Changes from remeasurement at fair value
Financial assets at fair value through other |  | are recognised in other comprehensive
comprehensive income | At fair value | income. For debt instruments interest is
|  | recognised directly in profit or loss under
|  | finance income.
Liabilities at fair value through profit or |  | Remeasurement changes adjust the
loss | At fair value | carrying amount of the asset and are
|  | recognised in current period profit or loss.
| At amortised cost using the effective | Remeasurement changes adjust the
Liabilities measured at amortised cost | interest rate (EIR) | carrying amount of the liability and are
|  | recognised in current period profit or loss.
Financial liabilities at fair value through |  | Changes from remeasurement at fair value
other comprehensive income | At fair value | are recognised in other comprehensive
|  | income.

Impairment of financial assets
At each balance sheet date, the Group assesses whether there has been a significant increase in credit risk for a single financial asset
(financial instrument) since its initial recognition (not applicable to assets measured through profit or loss or equity investments
designated as measured at fair value through other comprehensive income).
The Group assumes that in the case of financial instruments that meet the definition of a low credit risk instrument as at a given balance
sheet date, there has been no significant increase in credit risk and therefore the allowance is estimated at the amount of 12-month
expected credit losses. The credit risk on a financial instrument is considered low for these purposes, if:
• the financial instrument has a low risk of default,
• the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and
• adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of t he
borrower to fulfil its contractual cash flow obligations.
The Group considers that there has been a significant increase in credit risk for a given financial instrument, if there has been a delay in
contractual payments of more than 30 days.
For a financial asset that is credit-impaired at the reporting date, but that is not a purchased or originated credit-impaired financial (POCI)
asset, the Group measures the expected credit losses as the difference between the asset's gross carrying amount and the present value
of estimated future cash flows discounted at the financial asset's original effective interest rate. Any adjustment is recognised in profit or
loss as an impairment gain or loss.
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that
financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:
• significant financial difficulty of the issuer or the borrower;
• a breach of contract, such as a default or past due event;
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Accounting policy
• the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to
the borrower a concession(s) that the lender(s) would not otherwise consider;
• it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
• the disappearance of an active market for that financial asset because of financial difficulties; or
• the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
It may not be possible to identify a single discrete event—instead, the combined effect of several events may have caused financial assets
to become credit-impaired. Regardless of the above criteria, the Group considers that there has been an impairment loss in the event of
a delay in payment of more than 180 days, as it believes that the risk of default by counterparties increases significantly after that date.
The amount established as a result of the abovementioned allowances may be decreased if the Management Board is in possession of
reliable documents, indicating that the receivables were secured and their payment is highly probable.
Impairment allowances are estimated using individual parameters determined on the basis of benchmarks (using information on bank
ratings) or values provided by experts.
For trade receivables and contract assets arising from transactions that fall within the scope of IFRS 15, the Group has opted for a simplified
approach whereby impairment losses are estimated over the lifetime of the asset, already from the initial recognition of the exposure in
the accounting records.
The main financial instruments disclosed in the statement of financial position of the CIECH Group as at 31 December 2022 include:
Financial assets:
• financial instruments with positive valuation,
• trade receivables and factoring receivables,
• cash and cash equivalents.
Financial liabilities:
• term loan liabilities, revolving facility liabilities and overdraft liabilities,
• trade liabilities and factoring liabilities,
• lease agreements,
• financial instruments with negative valuation.
Carrying amount of financial instruments

Classes of financial instruments | note | 31.12.2022 | 31.12.2021 | Categories of financial instruments
Cash and cash equivalents | 5.12 | 684,969 | 799,023 | Financial assets measured at amortised cost
Loans granted | 5.11 | 246 | 133 | Financial assets measured at amortised cost
Trade receivables | 5.10 | 371,285 | 209,231 | Financial assets measured at amortised cost
Factoring receivables | 5.10 | 55,872 | 33,660 | Financial assets measured at amortised cost
Hedging derivatives with positive value | 5.7;5.11 | 354,070 | 101,672 | Hedging instruments
Derivatives with positive value | 5.7;5.11 | 9,522 | 1,210 | Financial assets measured at fair value through profit
|  |  |  | or loss
ASSETS |  | 1,475,964 | 1 144 929 |
Trade liabilities | 7.3 | (993,715) | (614,596) | Financial assets measured at amortised cost
Credits and loans | 7.1 | (1,865,124) | (1,859,441) | Financial assets measured at amortised cost
Factoring liabilities | 7.3 | (28,769) | (23,078) | Financial assets measured at amortised cost
Lease liabilities | 7.4 | (135,320) | (151,197) | Financial liabilities excluded from IFRS 9
Hedging derivatives with negative value | 7.2;7.3 | (462,097) | (138,485) | Hedging instruments
Derivatives with negative value | 7.2;7.3 | - | (13,215) | Financial liabilities measured at fair value through
|  |  |  | profit or loss.
LIABILITIES |  | (3,485,025) | (2,800,012) |

In the CIECH Group selected trade receivables are subject to factoring. This is factoring with the assumption of insolvency risk whereby the
factor assumes the risk in the amount specified in the insurance policy.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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The CIECH Group also uses reverse factoring. Due to the terms of the agreements, these liabilities are reported as trade liabilities or
investment liabilities, depending on which liabilities the factoring relates to.
Revenues, costs, profit and loss recognised in the income statement by the category of financial instruments for continuing operations

Revenues, costs, profit and loss recognised in | 01.01.-31.12.2022 | 01.01.- 31.12.2021 | Categories of financial instruments
the income statement |  |  |
Interest income/(expenses), including |  |  |
calculated using the effective interest rate | (130,057) | (22,026) |
method | 6,087 | 1,203 | Financial assets measured at amortised cost
| (131,079) | (19,774) | Financial liabilities measured at amortised cost
| (5,064) | (3,456) | Financial liabilities excluded from IFRS 9
Foreign exchange gains/(losses) | 13,105 | (1,870) |
| 13,612 | (1,823) | Financial assets /(liabilities) measured at amortised cost
| (507) | (47) | Financial liabilities excluded from IFRS 9
Recognition of impairment losses | (7,065) | (8,804) | Financial assets measured at amortised cost
Reversal of impairment losses | 14,390 | 7,802 | Financial assets measured at amortised cost
Income/expenses from use of derivative | 45,771 | (44,439) |
financial instruments | (45,725) | (36,291) | Financial assets/liabilities measured at fair value through
|  |  | profit or loss
| 91,496 | (8,148) | Hedging instruments
TOTAL | (63,856) | (69,337) |

8.2 FINANCIAL INSTRUMENTS DESIGNATED FOR HEDGE ACCOUNTING
Accounting policy
Hedge accounting recognises the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and the hedged
item. Derivatives such as options, forwards, swaps are held to hedge the fair value of assets or liabilities or expected future cash flows.
For the hedging instruments, the Group may apply hedge accounting if, and only if, all the following conditions are met:
• the hedging relationship consists only of eligible hedging instruments and eligible hedged items.
• at the inception of the hedging relationship there is formal designation and documentation of the hedging relationship and the
entity's risk management objective and strategy for entity the hedge. That documentation shall include identification of the hedging
instrument, the hedged item, the nature of the risk being hedged and how the entity will assess whether the hedging relationship
meets the hedge effectiveness requirements (including its analysis of the sources of hedge ineffectiveness and how it determines
the hedge ratio).
• the hedging relationship meets all of the following hedge effectiveness requirements:
• there is an economic relationship between the hedged item and the hedging instrument;
• the effect of credit risk does not dominate the value changes that result from that economic relationship; and
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entit y
actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item.
However, that designation shall not reflect an imbalance between the weightings of the hedged item and the hedging
instrument that would create hedge ineffectiveness (irrespective of whether recognised or not) that could result in an
accounting outcome that would be inconsistent with the purpose of hedge accounting.
Cash flow hedge:
A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a
component of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable
forecast transaction, and could affect profit or loss. Cash flow hedge shall be accounted for as follows:
a) the separate component of equity associated with the hedged item (cash flow hedge reserve) is adjusted to the lower of the
following (in absolute amounts):
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Accounting policy
o the cumulative gain or loss on the hedging instrument from inception of the hedge; and
o the cumulative change in fair value (present value) of the hedged item (i.e. the present value of the cumulative change in
the hedged expected future cash flows) from inception of the hedge.
b) the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge (i.e. the portion that is
offset by the change in the cash flow hedge reserve calculated in accordance with (a)) shall be recognised in other
comprehensive income.
c) any remaining gain or loss on the hedging instrument (or any gain or loss required to balance the change in the cash flow hedge
reserve calculated in accordance with (a)) is hedge ineffectiveness that shall be recognised in profit or loss.
The effective portion of the hedge is transferred to profit or loss as a reclassification adjustment in the period or periods when the hedged
expected future cash flows affect profit or loss.
Hedges of a net investment in a foreign operation
Hedges of a net investments in a foreign operation shall be accounted for as follows:
• It is a hedge of a net investment in foreign operations with functional currency different than the one of the parent entity, by
foreign currency liabilities.
• revaluation of foreign currency liabilities designated for hedge accounting is recognised in other comprehensive income and
offset with the opposite revaluation of net investments in foreign operation in consolidated financial statements.
Accumulated amount in other comprehensive income is transferred to the profit or loss statement in the case of partial or ove rall sale of
shares in a foreign entity.
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The table below presents a summary of specific groups of relationships existing in 2022, designated for hedge accounting:

|  |  | Nominal value/ | Average price obtained on the |  | 31.12.2022 |  | 31.12.2021
Type of instrument | Hedged item |  | Volume | contract (outstanding | Maturity |  |  |  |
|  |  | (as at 31.12.2022) | transactions as at 31.12.2022) |  | Assets | Liability | Assets | Liability
Derivative instruments – cash flow hedge |  |  |  |  |  |  |  |  |
Currency risk and interest rate risk | Interest payments on debt in PLN bearing |  |  | Average EURPLN CIRS exchange |  |  |  |  |
| interest at WIBOR 6M with semi-annual |  |  | rate: 4.49 |  |  |  |  |
Currency and interest swap (CIRS) | interest periods until March 2026. |  | EUR 343 million | Weighted average (by initial | 2026 | 96,376 | (86,207) | 85,607 | (138,350)
| Sales revenues of the CIECH Group in EUR in |  |  | nominal weighting) conversion |  |  |  |  |
| the years |  |  | rate of WIBOR 6M to a fixed rate |  |  |  |  |
| 2023 – 2027 |  |  |  |  |  |  |  |
|  |  |  | in EUR: -0.09% |  |  |  |  |
Currency risk | Future cash flows from realisation of sales |  |  |  |  |  |  |  |
Currency forwards EUR/PLN | revenues denominated in EUR or indexed to |  | - | n.a. | 2022 | - | - | 1,966 | -
| EUR exchange rate |  |  |  |  |  |  |  |
|  |  |  | Weighted average hedged |  |  |  |  |
Currency forwards EUR/PLN | Exchange rate for purchase of EUA units in EUR |  | EUR 14 million | EURPLN purchase rate (spot | 2023 | - | (2,832) | - | -
|  |  |  | without forward points): 4.66 |  |  |  |  |
Interest rate risk |  |  |  |  |  |  |  |  |
Interest rate swaps – 6M WIBOR | Interest payments on term loan contracted by |  |  | n.a. | 2022 |  |  |  |
to fixed rate | CIECH S.A. with initial nominal amount of |  | - |  |  | - | - | 13,437 | -
| PLN 1,212,520 thousand |  |  |  |  |  |  |  |
| Interest payments on debt in EUR with a |  |  |  |  |  |  |  |
Interest rate swap – 6M EURIBOR | maximum nominal amount of EUR 14,075 |  | EUR 14 million | Fixed rate paid in EUR for | 2026 | 6,494 | - | 526 | -
to fixed rate | thousand |  |  | EURIBOR 6M: -0.28% |  |  |  |  |
Raw material price risk | Natural gas purchased at the spot market price |  |  |  |  |  |  |  |
Gas and electricity price index | by CIECH Energy Deutschland GmbH | 985 | GWh of natural gas | n.a. | 2023 | 251,200 | (373,058) | - | -
swaps | Electricity sold at the spot market price by | 187 | GWh of electricity |  |  |  |  |  |
| CIECH Energy Deutschland GmbH |  |  |  |  |  |  |  |
| Gas supplied according to the option contract |  |  |  |  |  |  |  |
Collar option structures for gas | after elimination of the intrinsic value of the |  | - | n.a. | 2021 | - | - | 18,427 | -
supply | option or gas purchased at the month-ahead |  |  |  |  |  |  |  |
| market price if the option is not exercised |  |  |  |  |  |  |  |

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Amounts recognised in the cash flow hedge reserve are presented below:

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Opening balance | 158,763 | (9,393)
Change in fair value of the hedging instrument recognised in other comprehensive income | 5,995 | 237,529
Income tax on the effective portion | 25,764 | (67,314)
Reclassification of hedge effect to profit or loss | (219,930) | (135)
Transfer to income tax result | 65,219 | (1,923)
Ineffectiveness | 37 | -
Closing balance | 35,848 | 158,763

The aim of the Group when taking the decision concerning the implementation of the principles of cash flow hedging was to reduce the
influence of interest rate and exchange rate movements, exchange rates differences due to incurred liabilities, (e.g. loans, bonds) and the
impact of changes in raw material prices (gas, CO
2
, energy) on the statement of profit or loss by reflecting their hedging nature in the financial
statements.
The result of the settlement of the effective portion of hedging instruments is reclassified from equity to the statement of profit or loss upon
the realisation of the hedged item and recognition of its effect in the statement of profit or loss.
Sales revenues designated to hedge accounting are considered as highly probable. Their occurrence is anticipated in the Group’s long-term
financial forecast. Additionally, to a large extent, these transactions are concluded with regular customers of the Group Companies, which
supports the probability of their occurrence. The effect of the cash flow hedge accounting and the net investment hedges in foreign entities
was presented in the consolidated statement of other comprehensive income of the Group.
In IRS transactions, in order to identify sources of ineffectiveness of the hedge, key parameters of the hedged credit and IRS transactions
(nominal amount, interest rate, interest periods) were compared. Credit risk is considered negligible. No sources of ineffectiveness were
identified.
In the CIRS transaction, in order to identify sources of ineffectiveness of the hedge, key parameters of the hedged currency cash flows and
the hedging transaction were compared: nominal amount, timing of cash flows.
The ineffectiveness of the hedge is influenced by:
• differences in the settlement dates of forward hedges and the timing of realisation of the hedged currency cash flows,
• differences in individual forward rates within a forward series vs. hypothetical forward transactions in which the individual transactions
have market levels at the time the transaction is designated. Credit risk is considered negligible given the financial status of the
counterparty.
8.3 FINANCIAL RISK MANAGEMENT
Risk management principles
The CIECH Group actively manages operational and financial risk, striving to reduce the fluctuation of cash flows and maximise the companies’
market value.
The CIECH Group's policy is to use natural hedging (net exposure is taken into account) and to hedge of up to 90% of the projected annual
net exposure to risk of changes in exchange rates, CO
2
emission allowance prices, natural gas prices and electricity prices by using derivatives
and 100% exposure to interest rate risk.
The following types of transactions were concluded (or continued but concluded in previous years) in the Group in 2022 : contracts to hedge
currency risk and interest rate risk (IRSs and CIRSs), contracts to hedge the risk of prices of CO
2
emission certificates (forwards, futures),
contracts to hedge the risk of gas prices (forwards, options, commodity swap), and contracts to hedge the risk of electricity prices (forwards,
commodity swap).
Cash management
The CIECH Group cooperates with bank service providers of high credit rating. Surplus cash is held in the form of deposits with short maturities
with banks with investment grade credit ratings. Allocation of financial resources to the Group companies is performed through the use of
intra-group loans, dividends payout by subsidiaries, participation in a cash management system (cashpooling) and increase of share capital
in the subsidiaries.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Quantitative and qualitative information on financial risks
The CIECH Group manages financial risks based on, among others, the developed and adopted market risk hedging strategy. The aim of the
financial risk management policy is to identify areas requiring risk analysis to determine methods to identify and measure it, to determine
activities undertaken in relation to identified risk areas and to define organisational solutions in the risk management proc ess.
In fulfilling its strategic goals, the Group aims to avoid excessive market risk. This goal is realised by identifying, monitoring and hedging cash
flow fluctuation risk and monitoring the size and costs of CIECH Group debt. When assessing risk, the Group takes into account the risk
portfolio effect resulting from the variety of conducted business activities. Risk effects are materialised in the cash flow statement, statement
of financial position and the statement of profit or loss.
Interest rate risk
The Group finances its activity mainly through term loans and bonds. The amount of the costs of interest-bearing debt held by the Group
depends on the reference rate. This refers to term loans made available under a facilities agreement dated 16 March 2021 in the amount of
PLN 1,801 million and EUR 14 million, a revolving credit facility in the amount of up to PLN 250 million (as at the end of 2022, the debt
amounted to PLN 0), overdraft facilities (as at the end: PLN 0 thousand) and a part of lease and factoring contracts.
Therefore, the Group is exposed to risk of change in finance costs due to changing interest rates on existing debt. This may result in increased
financial costs and, consequently, deterioration of the Group financial result. The risk is partially reduced by:
• assets owned by the CIECH Group companies (bank deposits), earning interest at variable interest rate,
• hedging transactions concluded.
In 2022, the CIECH Group used the following interest rate hedging transactions:
• interest rate swap transaction to hedge the variable interest rate levels applicable to the calculation of interest on the term loan made
available in March 2021. The transaction hedges indebtedness in the amount of EUR 14 million (as as at 31 December 2022), amortised
in accordance with the schedule of the IRS transaction;
• currency and interest rate swap transactions to hedge the variable interest rate levels applicable to the calculation of interest on the
term loan made available in March 2021. The transaction hedges indebtedness in the nominal amount of 1,538 million
(as as at 31 December 2022), amortised in accordance with the schedule of the CIRS transaction.
The table below presents the consolidated statement of financial position items (without derivative instruments) exposed to interest rate
risk:

Total carrying amount 31.12.2022 | 31.12.2021
Fixed interest rate instruments | - | -
Floating interest rate instruments | (1,344,244) | (1,234,693)
Financial assets | 684,969 | 799,023
Financial liabilities | (2,029,213) | (2,033,716)

The table below shows the effects of a change in the interest rate by 100 basis points in relation to the floating interest rate instruments
presented in the statement of financial position.

| Statement of | Statement of | Equity | Equity
| profit or loss | profit or loss | (impact of profit/loss on | (impact of profit/loss on
|  |  | equity is not included) | equity is not included)
| Increase by 100 bp | Decrease by 100 bp | Increase by 100 bp | Decrease by 100 bp
31.12.2022 |  |  |  |
Floating interest rate instruments | 13,442 | (13,442) | - | -
Interest rate swaps |  |  | 45,794 | (47,697)
Sensitivity of cash flows (net) | 13,442 | (13,442) | 45,794 | (47,697)
31.12.2021 |  |  |  |
Floating interest rate instruments | 12,347 | (12,347) | - | -
Interest rate swaps | 1,166 | (1,182) | 56,358 | (59,597)
Sensitivity of cash flows (net) | 13,513 | (13,529) | 56,358 | (59,597)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Currency risk
Currency risk is an inevitable component of commercial activity denominated in foreign currencies. Due to the nature of conducted trading
operations, the CIECH Group is subject to currency exposure related to the significant lead of export over import. The exposure value is also
affected by investment projects implemented in foreign currencies and the structure of external financing. Sources of currency risk which
exposed companies within the CIECH Group in 2022 included: sales of products, purchases (raw materials, expenditure related to investment
projects), loans taken out and cash in foreign currencies. Unfavourable changes in currency exchange rates may worsen the CIECH Group's
financial results.
Foreign exchange risk analysis is focused on the level of operating cash flows. The SDC Group, CIECH Salz Deutschland GmbH and Proplan
were excluded from the analysis since their functional currency is EUR and all reported operating cash flows of these companies are
performed in this currency.
In 2022, the CIECH Group used hedging contracts, such as forward options, to partially cover currency risk. The CIECH Group tries to naturally
hedge the foreign currency exposure, including matching of currency flows arising from sales and purchases as well as strategic debt
denominated in EUR, in order to fit it to the expected exposure to currency risk in operations.
The table below presents the estimated currency exposure of the CIECH Group in EUR (excluding figures concerning the SDC Group,
CIECH Salz Deutschland GmbH and Proplan) and in USD as at 31 December 2022 and 2021 due to financial instruments:

|  |  | Impact on the | Impact on the
Exposure to currency risk in EUR | 31.12.2022 | 31.12.2021 | statement of profit or | statement of other
(figures in '000 EUR) |  |  | loss | comprehensive
|  |  |  | income
Assets |  |  |  |
Loans granted sensitive to FX rate changes | 297,700 | 224,000 | x |
Trade and other receivables | 4,307 | 3,168 | x |
Cash including bank deposits | 43,829 | 12,076 | x |
Liabilities |  |  |  |
Trade and other liabilities | (22,078) | (18,568) | x |
Term loan liabilities | (14,075) | (14,075) |  | x
Hedging instruments: Forward | - | (73,900) |  | x
Forward (not designated to hedge accounting) | (257,713) | (119,013) | x |
CIRS (not designated to hedge accounting) | - | (60,000) | x |
Hedging instruments: CIRS (forward transactions | (342,249) | (343,590) |  | x
isolated as part of decomposition of CIRS) |  |  |  |
Total exposure | (290,278) | (389,902) |  |

|  |  | Impact on the | Impact on the
Exposure to currency risk in USD | 31.12.2022 | 31.12.2021 | statement of profit or | statement of other
(figures in '000 USD) |  |  | loss | comprehensive
|  |  |  | income
Assets |  |  |  |
Trade and other receivables | 1,175 | 1,426 | x |
Cash including bank deposits | 2,285 | 1,957 | x |
Liabilities |  |  |  |
Trade and other liabilities | (11,098) | (1,916) | x |
Total exposure | (7,638) | 1,467 |  |

Measurement of financial instruments designated for hedge accounting is referred to other comprehensive income while ineffectiveness is
recognised in the profit or loss statement.
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The table contains an analysis of the sensitivity of individual statement of financial position items to exchange rate changes as at
31 December 2022.

|  |  | Impact on the | Impact on the
Analysis of sensitivity to currency risk – EUR | ('000 | EUR) | statement of profit or | statement of other
(Increase of EUR/PLN exchange rate by 1 grosz) |  |  | loss | comprehensive
|  |  |  | income
31.12.2022 |  |  |  |
Foreign-currency balance sheet items |  | 3,097 | 3,097 | -
Hedging instruments: Forward and CIRS |  | (6,000) | - | (6,000)
31.12.2021 |  |  |  |
Foreign-currency balance sheet items |  | 2,066 | 2,066 | -
Hedging instruments: Forward and CIRS |  | (5,965) | (1,790) | (4,175)

Analysis of sensitivity to currency risk – USD
(Increase of USD/PLN exchange rate by 1 grosz)

|  | Impact on the | Impact on the
| '000 USD) | statement of profit or | statement of other
|  | loss | comprehensive
|  |  | income
31.12.2022 |  |  |
Foreign-currency balance sheet items | (76) | (76) | -
31.12.2021 |  |  |
Foreign-currency balance sheet items | 15 | 15 | -

Raw material price risk
In the course of its operations, the CIECH Group is exposed to the risk of changes in prices of energy commodities (e.g. coal, natural gas, CO
2
emission certificates) and the risk of changes in electricity prices.
The CIECH Group reduces market risk related to raw materials through concluding agreements with suppliers and customers containing
appropriate price formulas or through forward transactions. In addition, due to the occurrence of significant changes in the prices of energy
raw materials, resulting in significant changes in manufacturing costs, the Group actively reacted to fluctuating raw material prices and
renegotiated sales prices with its customers as they increased.
Credit risk
Credit risk means a threat of the counterparty not fulfilling the obligations stipulated in the agreement, exposing the lender to financial loss.
From the CIECH Group's point of view, credit risk is linked to:
• trade receivables from customers,
• cash and bank deposits.
The CIECH Group is exposed to credit risk connected with the credit rating of customers being parties to products and goods sales
transactions. That risk is limited by using internal procedures to establish amounts of credit limits for customers and to manage trade
receivables (the Group uses securities in the form of a letter of credit, bank guarantees, mortgages, receivables insurance and non-recourse
factoring; approx. 8% of receivables is not insured). Customers’ creditworthiness is assessed and appropriate collateral is obtained from the
customers, allowing for a reduction of potential losses in the case of failure to repay the debt. Credit risk assessment for customers is
performed prior to concluding an agreement and periodically at subsequent deliveries of goods in accordance with the binding procedures.
On selected markets, where more risky payment deadlines are applied, the Group’s companies make use of services provid ed by companies
specialising in insuring receivables.
Credit risk connected with cash in bank and bank deposits is low as the CIECH Group enters into transactions with high-rating banks with
stable market position.
The table below presents the maximum exposure of financial assets to credit risk as at the end of reporting period.

| 31.12.2022 | 31.12.2021
Cash and cash equivalents | 684,969 | 799,023
Loans and receivables | 427,403 | 243,024
Financial assets from valuation of derivatives | 363,592 | 102,882
TOTAL | 1,475,964 | 1,144,929

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The CIECH Group has no material items which would be uncollectible as at the reporting date and not covered by an impairment allowance.

| Trade receivables |  | Loans advanced |
| 31.12.2022 | 31.12.2021 | 31.12.2022 |  | 31.12.2021
Soda segment | 360,237 | 187,203 |  | - | -
Agro Segment | 45,558 | 38,118 |  | - | -
Foams Segment | 3,300 | 3,635 |  | - | -
Silicates Segment | 20,897 | 19,923 |  | - | -
Packaging Segment | 940 | 2145 |  | - | -
Other Segment | 39,039 | 21 496 |  | 246 | 133
Consolidation adjustments | (98,686) | (63,289) |  | - | -
TOTAL | 371,285 | 209,231 |  | 246 | 133

Below is a reconciliation of impairment allowances for trade receivables in accordance with IFRS 9.

| ECL – not | Lifetime ECL – | TOTAL
| impaired | impaired |
Trade receivables, gross, as at 01.01.2022 | 209,501 | 46,344 | 255,845
Recognised | 2,658,302 | 13,978 | 2,672,280
Repaid | (2,503,150) | (9,990) | (2,513,140)
Gross carrying amount as at 31.12.2022 | 364,653 | 50,332 | 414,985
01.01.2022 | 6,622 | 39,992 | 46,614
Recognition of impairment losses | 1,385 | 4,539 | 5,924
Reversal of unused allowances | (3,717) | (6,543) | (10,260)
Utilisation | (36) | (9) | (45)
Foreign exchange differences | 507 | 964 | 1,471
Other | - | (4) | (4)
31.12.2022 | 4,761 | 38,939 | 43,700
Trade receivables, net, as at 31.12.2022 | 359,892 | 11,392 | 371,285

| ECL – not | Lifetime ECL – | TOTAL
| impaired | impaired |
Trade receivables, gross, as at 01.01.2021 | 175,408 | 48,804 | 224,212
Recognised | 2,688,465 | 4,465 | 2,692,930
Repaid | (2,654,372) | (6,925) | (2,661,297)
Gross carrying amount as at 31.12.2021 | 209,501 | 46,344 | 255,845
01.01.2021 | 4,861 | 43,654 | 48,515
Recognition of impairment losses | 1,902 | 1,942 | 3,844
Reversal of unused allowances | (141) | (6,583) | (6,724)
Utilisation | - | (26) | (26)
Foreign exchange differences | - | 413 | 413
Other | - | 592 | 592
31.12.2021 | 6,622 | 39,992 | 46,614
Trade receivables, net, as at 31.12.2021 | 202,879 | 6,352 | 209,231

Calculation of impairment allowances for trade receivables
The following tables present the reconciliation of impairment allowances for financial assets in accordance with IFRS 9. Default rates and
calculation of impairment allowances as at 31 December 2021 and 31 December 2021 are presented in the following tables.

| Total | Non past due | Not past due, | 30-90 days | 90-180 days | > 180 days
|  |  | 0-30 days |  |  |
Trade receivables, gross, as at 31.12.2022 | 414,985 | 367,800 | 7,077 | 634 | 1,020 | 38,454
Default rate |  | 0.28% | 0.59% | 40.06% | 46.86% | 97.21%
Expected credit losses in accordance with IFRS 9 | 4,761 | 1,045 | 42 | 254 | 478 | 2,942
Total expected losses | 43,700 | 5,542 | 42 | 254 | 478 | 37,384
from collective analysis | 4,761 | 1,045 | 42 | 254 | 478 | 2,942
from case-by-case analysis | 38,939 | 4,497 | - | - | - | 34,442

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Total

|  | Non past due | Not past due, | 30-90 days | 90-180 days | > 180 days
|  |  | 0-30 days |  |  |
Trade receivables, gross, as at 31.12.2021 | 255,845 | 183,260 | 11,096 | 4,239 | 702 | 56,548
Default rate |  | 0.35% | 0.27% | 9.17% | 82.89% | 79.47%
Expected credit losses in accordance with IFRS 9 | 6,622 | 634 | 29 | 389 | 582 | 4,988
Total expected losses | 46,613 | 664 | 38 | 389 | 582 | 44,941
from collective analysis | 6,622 | 634 | 29 | 389 | 582 | 4,988
from case-by-case analysis | 39,992 | 30 | 9 | - | - | 39,953

Liquidity risk
The CIECH Group is exposed to risk connected with maintaining liquidity due to the considerable value of external financing (due to the term
loans, working capital facilities and lease and factoring agreements), the limited ability to obtain new financing in the event of a deterioration
in market conditions and due to the existing high level of indebtedness and the risk of losing the existing long-term financing as a result of
violating covenants stipulated in the bond issue terms and loan agreements.
The following measures are applied to reduce liquidity risk:
• current monitoring of liquidity and net debt of the CIECH Group,
• cash flow planning in the short and medium term, taking into account debt maturities
• diversification of external funding sources
• monitoring and optimisation of the level of working capital,
• adjusting the level and schedule of capital expenditure,
• intragroup borrowings and sureties for the liabilities of the Group’s companies,
• current monitoring of the settlement of liabilities under the loan agreements conditions.
The Group’s debt financing is ensured primarily by the term loans. In addition, a revolving credit facility in the amount of PLN 250 million,
constituting an additional source of current liquidity and working capital financing (as at 31 December 2022, the facility was drawn down in
the amount of PLN 0 million), and overdraft facilities in the total amount of PLN 159 million (as at the end of 2022, they were drown down
in the amount of PLN 7 million) have been made available to the Group.
The table below presents financial liabilities at face value grouped by maturity.

31.12.2022 | Carrying | Contractual | Less than | up to 12 | 1-2 years | 3-5 years | More than
| amount | cash flows |  | months |  |  | 5 years
Other financial liabilities: | (2,887,608) | (3,330,761) | (1,194,766) | (169,245) | (326,012) | (1,640,739) | -
Trade liabilities | (993,715) | (993,715) | (993,715) | - | - | - | -
Credits and loans | (1,865,124) | (2,308,277) | (172,282) | (169,245) | (326,012) | (1,640,739) |
Factoring | (28,769) | (28,769) | (28,769) | - | - | - | -
Lease liabilities | (135,320) | (259,396) | (17,944) | (13,796) | (34,454) | (24,003) | (169,199)
Hedging derivatives with negative value | (462,097) | (630,567) | (291,429) | (84,463) | - | (254,675) | -
TOTAL | (3,485,025) | (3,025,958) | (1,504,139) | (267,504) | (360,466) | (1,919,416) | (169,199)

31.12.2021 | Carrying | Contractual | Less than | up to 12 | 1-2 years | 3-5 years | More than
| amount | cash flows |  | months |  |  | 5 years
|  |  | 6 months |  |  |  |
Other financial liabilities: | (2,497,115) | (2,428,894) | (657,082) | (19,623) | (112,782) | (1,639,406) | -
Trade liabilities | (614,596) | (614,596) | (614,596) | - | - | - | -
Credits and loans | (1,859,441) | (1,791,220) | (19,408) | (19,623) | (112,782) | (1,639,406) | -
Factoring | (23,078) | (23,078) | (23,078) | - | - | - | -
Lease liabilities | (151,197) | (272,241) | (16,371) | (14,416) | (45,177) | (29,363) | (166,914)
Hedging derivatives with negative value | (138,485) | (255,399) | (39) | (30) | (15) | (255,315) |
Derivatives with negative value | (13,215) | (16,215) | (16,215) | - | - | - | -
TOTAL | (2,800,012) | (2,972,748) | (689,707) | (34,069) | (157,974) | (1,924,084) | (166,914)

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Detailed information concerning revenues and costs pertaining to financial instruments, recognised in the statement of profit or loss has
been presented in note 8.1.
Liquidity of the CIECH Group
Liquidity ratios as at 31 December 2022 decreased slightly as compared to their level as at 31 December 2021. The current ratio, calculated
as the ratio of total current assets to total current liabilities, amounted to 1.00 as at 31 December 2022, while the quick liquidity ratio
amounted to 0,76.

| 31.12.2022 | 31.12.2021
Current ratio | 1,00 | 1,06
Quick ratio | 0,76 | 0,86

8.4 DETERMINATION OF FAIR VALUE
The following list presents the fair value of financial instruments.

| 31.12.2022 | 31.12.2022 | 31.12.2021 | 31.12.2021
| Carrying amount | Fair value | Carrying amount | Fair value
Cash and cash equivalents | 684,969 | 684,969 | 799,023 | 799,023
Loans granted | 246 | 246 | 133 | 133
Trade receivables | 371,285 | 371,285 | 209,231 | 209,231
Hedging derivatives with positive value | 354,070 | 354,070 | 101,672 | 101,672
Derivatives with positive value | 9,522 | 9,522 | 1,210 | 1,210
Factoring receivables | 55,872 | 55,872 | 33,660 | 33,660
ASSETS | 1,475,964 | 1,475,964 | 1,144,929 | 1,144,929
Credits and loans | (1,865,124) | (1,873,993) | (1,859,441) | (1,870,822)
Trade liabilities | (993,715) | (993,715) | (614,596) | (614,596)
Hedging derivatives with negative value | (462,097) | (462,097) | (138,485) | (138,485)
Derivatives with negative value | - | - | (13,215) | (13,215)
Factoring liabilities | (28,769) | (28,769) | (23,078) | (23,078)
LIABILITIES | (3,349,705) | (3,358,574) | (2,648,815) | (2,660,196)

The fair value of financial assets and liabilities corresponds with the amounts for which these instruments may be exchanged in a market
transaction between well informed parties. The following assumptions were made in establishing the fair value:
• cash, trade receivables and liabilities are not measured at fair value – it is assumed that the carrying amount is the closest to fair value
due to the short maturities of these instruments,
• fair value of financial assets and liabilities recognised in the statement of financial position at amortised cost for which no active market
exists was established as the present value of future cash flows discounted at market interest rate.
Measurement at fair value is grouped according to three-level hierarchy:
• Level 1 – fair value based on market listing stock exchange prices (unadjusted) offered for identical assets or liabilities on active markets.
• Level 2 – the CIECH Group values derivatives at fair value by using measurement models for financial instruments and applying generally
available interest rates, currency exchange rates and adjusting for estimated own credit risk.
• Level 3 – fair value estimated on the basis of various evaluation techniques which are not based on observable market inputs.
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Assets and liabilities measured at fair value

Assets and liabilities measured at fair value | 31.12.2022 | 31.12.2022 | 31.12.2021 | 31.12.2021
| Level 2 | Level 3 | Level 2 | Level 3
ASSETS | 363,592 | 40,181 | 102,882 | 32,839
Investment properties | - | 40,181 | - | 32,839
Hedging instruments | 354,070 | - | 101,672 | -
Derivative instruments with positive valuation | 9,522 | - | 1,210 | -
LIABILITIES | (462,097) | - | (151,700) | -
Hedging instruments | (462,097) | - | (138,485) | -
Derivative instruments with negative valuation | - | - | (13,215) | -
TOTAL | (98,505) | 40,181 | (48,818) | 32,839

CIECH Soda Polska S.A. holds futures contracts for the purchase of emission allowances, which represent a financial instruments but are not
measured at fair value. This is because futures contracts on CO
2
emission allowances purchased for own use (surrender in connection with
the release of CO
2
into the atmosphere) are excluded from the scope of IFRS 9.
Due to the specific nature of futures contracts (transactions concluded on regulated markets), cash flows are generated from the current
market valuation. Notwithstanding the exclusion or inclusion of the instrument within the scope of IFRS 9, these cash flows are accounted
for, in corresponding records, as settlement with the Clearing House.
As at 31 December 2022, the balance of settlements on this account amounted to PLN 4.4 million (receivable), which resulted from negative
market valuation of the contracts and debiting the account of CIECH Soda Polska S.A.; as at 31 December 2021, the balance amounted to
PLN 138.9 million (liability).
As at 31 December 2022, the CIECH Group held the following types of financial instruments measured at fair value:
• concluded by the parent company, CIECH S.A.: interest rate swap contracts, currency and interest rate swaps EUR/PLN — Level 2,
according to the fair value hierarchy,
• currency forwards concluded by CIECH S.A. — Level 2, according to the fair value hierarchy,
• gas and electricity price index swaps concluded by CIECH Energy Deutschland GmbH to hedge the risk of rising gas and energy prices –
Level 2, according to the fair value hierarchy,
• EUR/PLN currency forwards concluded by CIECH Soda Polska S.A. to hedge changes in the purchase value ofCO2 emission allowances
depending on the EUR/PLN exchange rate - Level 2, according to the fair value hierarchy,
In 2022, there were no transfers within the fair value hierarchy of instruments measured at fair value. There were no changes in the
classification of financial instruments, or in business conditions that could affect the fair value of financial assets or liabilities.
The fair value of instruments concluded is determined in the following manner:
• the fair value of the interest rate swap contract is determined as a difference in the discounted interest rate cash flow (cash flow based
on a floating rate, the so-called floating leg, and a fixed rate, the so-called fixed leg). The input data for the method is the market data
for interest rates provided by Reuters.
• the fair value of the CIRS contract is determined as a difference in discounted interest and capital cash flows. The input data for the
method is the market data for interest rates and cross currency basis-swaps quotations provided by Reuters.
• the fair value of the currency forward is determined as a difference between the transaction rate and the forward rate at the valuation
date multiplied by the nominal value of the contract in the foreign currency. The input data for the method is the market data for
interest rates and cross currency basis-swaps quotations provided by Reuters.
• Futures contracts for the purchases of CO
2
certificates are settled on a daily basis according to quotations published on ICE Endex and
EEX’s stock exchange.
• the fair value of commodity swaps for natural gas and electricity is determined as the difference between the fixed transaction price in
the exchange period and the forward market price for a given exchange period, as at the valuation date, multiplied by the com modity
swap volume and the appropriate discount factor. The input data for the valuation are market data on forward prices of natural gas and
electricity from Reuters.
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value of | Long-term financial | Short-term financial | Other long-term | Trade and other |
derivative | assets | assets | liabilities | liabilities | TOTAL
instruments |  |  |  |  |
31.12.2022 |  |  |  |  |
IRS EUR | 4,233 | 2,261 | - | - | 6,494
CIRS | - | 96,376 | (86,207) | - | 10,169
Forward EUR/PLN | - | 9,522 | - | (2,832) | 6,690
Gas/energy SWAP | - | 251,200 | - | (373,058) | (121,858)
TOTAL | 4,233 | 359,359 | (86,207) | (375,890) | (98,505)
31.12.2021 |  |  |  |  |
IRS EUR | 662 | - | - | (136) | 526
IRS PLN | - | 13,437 | - | - | 13,437
CIRS | - | 85,607 | (91,857) | (59,707) | (65,957)
Forward EUR/PLN | - | 3,176 | - | - | 3,176
TOTAL | 662 | 102,220 | (91,857) | (59,843) | (48,818)

Investment properties are also measured at the fair value in the financial statements. According to the fair value hierarchy, it is Level 3.
Investment real estate portfolio is evaluated by an external, independent property appraiser or based on a preliminary sale agreement. In
measuring the fair value of land used under the perpetual usufruct in Bydgoszcz, a comparative method was applied. The comparative
approach means measuring the value through an analysis of recent sales or listings of comparable assets. These transactions or offers are
adjusted in order to take into account differences of the valuated assets and comparable assets on the day of their sale, for example date of
sale, location, area, technical status and other. According to the method of average price adjustments, estimating the property value that is
the subject of valuation is based on the average price adjustment of similar properties, that form the base for the comparison creating
adjustment coefficients corresponding to different characteristics of these properties. The calculations are based on comparative properties,
described by attributes influencing the level of properties prices and transaction prices of these properties.
Valuation of buildings located in Bydgoszcz and tangible assets identified as technical infrastructure (including assets that are necessary to
keep properties operational but which are not traded on the secondary market) is synthetically included in the total value of land valuated
under the comparative approach method. Buildings and structures located on plots of land in Bydgoszcz have no impact on the market value
of this land, therefore, for accounting purposes, the value of this group of assets was determined based on their book value. Finally, in the
statement of financial position, the value of buildings and structures was deducted from the value of land.
The measurement of the fair value of investment property does not include transaction costs, which the entity might additionally bear, future
capital expenditures regarding development or improvement of the investment property, as well as future benefits regarding those
expenditures.
The verification of the fair value of investment properties is conducted at least once a year at the balance sheet date ending the financial
year.
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9 OTHER NOTES
9.1 NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
The tables below present the reasons for the differences between the changes of particular items of the consolidated statement of financial
position and changes resulting from the consolidated cash flows statement

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Other adjustments to operating activities | (218,193) | 225,985
Change in liabilities due to the arrangement fee | 2,514 | (7,318)
Early settlement in 2021 of financial instruments (options) | (221,522) | 216,287
securing revenues in 2022 |  |
Other | 815 | 17,016

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Inventory change presented in consolidated statement of financial position | 312,233 | 110,319
Currency translation reserve | (2,582) | 940
Change in Group’s composition | - | (4,621)
Other | (947) | -
Inventory change in consolidated statement of cash flows | (308,704) | (106,638)

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Provision change presented in consolidated statement of financial position | (98,908) | 107,820
Income tax provision | (7,196) | -
Currency translation reserve | (5,060) | (48)
Change in Group’s composition | - | 985
Change in reserves related to caverns | - | (118,745)
Other | (102) | 824
Provisions change in consolidated statement of cash flows | (111,266) | (9,164)

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Receivables change presented in consolidated statement of financial position | 238,395 | 71,381
Change in investment receivables | (3,200) | 4,046
Change in income tax receivables | (33,329) | 15,165
Change in receivables from caverns | 35,119 | (4,965)
Change in Group’s composition | - | 62,762
Currency translation reserve | (15,160) | (3,928)
Other | 582 | 8,633
Receivables change presented in consolidated statement of cash flows | (221,782) | (153,093)

| 01.01.-31.12.2022 | 01.01.-31.12.2021
Change of liabilities presented in consolidated statement of financial position | 762,225 | 845,080
Change in investment liabilities | 45,767 | 84,894
Change in financial liabilities | (310,397) | (69,994)
Change in income tax liabilities | 61,368 | (80,673)
Currency translation reserve | 2,383 | (8,838)
Change in Group’s composition | - | 88,817
Change in lease liabilities and loans | 10,192 | 30,097
Donations | (2,505) | (51,751)
Emission rights | 210,841 | (51,531)
Liabilities change presented in consolidated statement of cash flows | 779,874 | 786,432

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| 01.01.-31.12.2022 | 01.01.-31.12.2021
Other investment inflows (outflows) | (5,272) | (54)
Acquisition of financial assets | (4,785) | -
Acquisition of investment properties | (605) | -
Borrowings paid out | (239) | -
Disposal of financial assets | - | 86
Dividends received | 357 | -
Other | - | (140)

9.2 INFORMATION ON CHANGES IN CONTINGENT ASSETS AND LIABILITIES AND OTHER
MATTERS
Accounting policy
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic
benefits to the Group. An example is a claim that the Group is pursuing through legal processes, where the outcome is uncertain.
Contingent assets are not recognised in the statement of financial position since this could result in the recognition of income that may
never be realised.
A contingent liability is a possible future obligation, whose existence will be confirmed by the occurrence or non-occurrence of uncertain
future events not wholly within the Group’s control. These are also liabilities that arose from past events but were not reco gnised in the
financial statements because it is not probable that an outflow of resources embodying economic benefits will be required to settle the
obligation, or the amount of obligation cannot be measured with sufficient reliability. Contingent liabilities are not recognised in the
statement of financial position.
Significant disputed liabilities of the CIECH Group
As at 31 December 2022, the CIECH Group did not have any significant disputed liabilities of CIECH S.A. and CIECH S.A.’s subsidiaries, pursued
in all types of proceedings before court, body appropriate for arbitration proceedings or public administration bodies, except for the cases
described below, in “Audits of tax settlements at the CIECH Group and related contingent liabilities”.
Significant disputed receivables of the CIECH Group
As at 31 December 2022, the CIECH Group did not hold any significant disputed receivables of CIECH S.A. and CIECH S.A.’s subsidiaries,
pursued in all types of proceedings before court, body appropriate for arbitration proceedings or public administration bodies, except for
the case described in “Contingent assets and liabilities including guarantees and sureties, excluding liabilities related to proceedings before
administrative authorities” .
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Contingent assets and liabilities including guarantees and sureties, excluding liabilities related to proceedings
before administrative authorities
The amounts of contingent liabilities related to proceedings before administrative authorities and changes therein in 2022 are described in
the note below under the heading: “Audits of tax settlements at the CIECH Group and related contingent liabilities”.

| 31.12.2022 | 31.12.2021
Contingent assets | 38,283 | 21,933
Other contingent receivables | 38,283 | 21,933
Contingent liabilities | 428,823 | 427,034
Tax liabilities (including interest) | 68,822 | 89,299
Letters of support | 254,662 | 214,792
Emission allowances | 50,000 | 48,905
Promissory notes | 22,610 | 42,859
Other | 32,730 | 31,179

The value of contingent assets comprises:
• contingent asset in the amount of PLN 18,864 thousand related to the action against GZNF “FOSFORY” Sp. z o.o. for the payment of
compensation for making an alleged untrue declaration by GZNF “FOSFORY” Sp. z o.o. to CIECH S.A. about the condition of Agroc hem
Człuchów Sp. z o.o. with its registered office in Człuchów.
• contingent asset in the amount of PLN 17,914 thousand related to the value of potential interest to be returned from the tax office in
relation to the payment by CIECH S.A., C IECH Soda Polska S.A, CIECH Cargo Sp. z o.o. and CIECH Pianki Sp. z o.o. of the additional income
tax liability with interest for 2012 and 2015 following the decision of the 2
nd
instance authority. The contingent asset relates to interest
for the period from the date of payment of tax plus interest to 31 December 2022.
• a contingent asset in the amount of PLN 1,504 thousand – it is the value of energy efficiency certificates received by CIECH Soda Polska
S.A. from the President of the Energy Regulatory Office in previous years that have not been recorded yet in the account kept by the
Polish Power Exchange.
As at 31 December 2022, contingent liabilities amounted to PLN 428,823 thousand and increased by PLN 1,789 thousand compared to the
level recorded on 31 December 2021. The change was mainly as a result of payments received for the caverns covered by the Letter of
support.
Other contingent liabilities mainly include the amount of potential environmental penalties in CIECH Soda Polska S.A. in the amount of
PLN 26,605 thousand.
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Sureties granted as at 31 December 2022

|  |  | Total amount of | Total amount of
| Principal |  | liabilities covered by | liabilities covered by
Beneficiary’s name |  | Financial terms, including surety fee due to the company; surety period | surety in whole or in | surety in whole or in
|  |  | specific part | specific part (PLN)
|  |  | (currency) |
CIECH S.A. |  |  |  |
Landesamt fuer Geologie und | CIECH Soda Deutschland GmbH&Co. KG. | Commission of 0.97% p.a. of the guaranteed liability; collateral pertaining to | EUR 8,403 thousand | 39,411 thousand
Bergwesen Sachsen-Anhalt | (subsidiary) | liability; no time limit |  |
Axpo Solutions AG | CIECH Energy Deutschland GmbH | Commission of 0.57% p.a. of the guaranteed liability; collateral pertaining to | EUR 46,000 | 215,735 thousand
| (subsidiary) | claims related to the agreement; until 31 December 2023 | thousand |
Investitionsbank_Sachsen-Anhalt | CIECH Salz Deutschland GmbH | Commission of 0.97% p.a. of the guaranteed liability; collateral pertaining to | EUR 11,250 | 52,761 thousand
(IBSA) | (subsidiary) | claims related to the subsidy; | thousand |
| CIECH Salz Deutschland GmbH | Commission of 0.97% p.a. of the guaranteed liability; collateral pertaining to | EUR 21,900 |
Evatherm AG |  | liability; until the liabilities arising from the agreement between Evatherm | (subsidiary) thousand | 102,709 thousand
|  | AG and CIECH Salz Deutschland GmbH have been settled |  |
BNP Paribas S.A. | CIECH Soda Deutschland GmbH & Co. KG; CIECH | Commission of 0.97% p.a. of the guaranteed liability; ISDA agreement – | EUR 200,000 | 937,980 thousand
| Energy Deutschland GmbH (subsidiaries) | liabilities under the agreement; indefinite term | thousand |
| CIECH Soda Deutschland GmbH & Co. KG; | Commission of 0.55% p.a. of the guaranteed liability; supplier financing | PLN 62,500 |
BNP Paribas S.A. | CIECH Energy Deutschland GmbH (subsidiaries) | agreement; until all obligations have been repaid no later than 36 months | thousand | 62,500 thousand
|  | after the date of termination |  |
| CIECH S.A., CIECH Sarzyna S.A., CIECH Pianki Sp. z |  |  |
BNP Paribas Faktoring Sp. z o.o. | o.o., CIECH Soda Polska S.A., CIECH Vitrosilicon | Commission of 0.55% p.a. of the guaranteed liability; supplier financing | PLN 150,000 | 150,000 thousand
| S.A. (subsidiaries) | agreement; indefinite term | thousand |
|  | Commission of 0.57% p.a. of the guaranteed liability; collateral pertaining to |  |
mBank S.A. | CIECH Sarzyna S.A. (subsidiary) | claims under the Guarantee agreement; until 30 June 2023 | PLN 3,000 thousand | 3,000 thousand
| CIECH S.A., CIECH Sarzyna S.A., CIECH Pianki Sp. z |  |  |
CITI Handlowy (reverse factoring) | o.o., CIECH Soda Polska S.A., CIECH Vitrosilicon | Commission of 0.55% p.a. of the guaranteed liability; 12 March 2022 | PLN 162,422 | 162,422 thousand
| S.A. (subsidiaries) | (automatically extended) | thousand |
SEFE Marketing & Trading Ltd. | CIECH Energy Deutschland GmbH |  |  |
(formerly: Gazprom Marketing & | (subsidiary) | Commission 0.97%p.a. of the average outstanding balance; open-ended | EUR 9,475 thousand | 44,435 thousand
Trading Limited) |  |  |  |
Vitol S.A. | CIECH Soda Polska S.A. (subsidiary) | Commission of 0.18% p.a. of the guaranteed liability; until 31 May 2023 | PLN 20,000 | 20,000 thousand
|  |  | thousand |
IKS Solino S.A. | CIECH Soda Polska S.A. (subsidiary) | Commission of 0.57% p.a. of the guaranteed liability; until 31 December | PLN 220,000 | 220,000 thousand
|  | 2028 | thousand |
PGNiG Obrót Detaliczny Sp. z o.o. | CIECH Vitro Sp. z o.o. (subsidiary) | Commission of 0.57% p.a. of the guaranteed liability; until 30 June 2024 | PLN 10,176 | 10,176 thousand
|  |  | thousand |
Total nominal amount of contractual |  |  |  | PLN 2,021,130
commitments for which sureties were granted |  |  |  | thousand

In 2022, the CIECH Group companies did not receive any guarantees from third parties.
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Letters of support
As at 31 December 2022, CIECH S.A. was the obliged party in the letter of support (Patronatserklärung) regarding CIECH Soda D eutschland
GmbH&Co. KG seated in Staßfurt (CSD) granted to Innogy Gas Storage NWE GmbH (“Innogy”) relating to liabilities of CSD resulting from the
agreement dated 5 May 2009 on salt caverns construction for the purpose of natural gas storage on the Staßfurt mining field a ccording to
which CSD received payments of EUR 54.3 million from Innogy by 31 December 2022. In the letter of support, CIECH S.A. has committed,
among other things, to ensure that CSD will have sufficient funds to fulfil its financial commitments against Innogy resulting from the above-
mentioned agreement.
Audits of tax settlements at the CIECH Group and related contingent liabilities
In 2022, the CIECH Group companies were at various stages of proceedings, including inspections, tax proceedings or administrative court
cases concerning the settlement of corporate income tax (CIT) and value added tax (VAT).
The CIECH Group companies were subject to CIT proceedings concerning the following years:

Year | Company
2012 | CIECH S.A.
2013 | CIECH S.A.
2014 | CIECH S.A.
2015 | CIECH Soda Polska S.A., CIECH Pianki Sp. z o.o., CIECH Cargo Sp. z o.o., CIECH Sarzyna S.A., CIECH Vitrosilicon S.A.
2016 | CIECH Sarzyna S.A., CIECH S.A.

CIT audit for 2012
at CIECH S.A.
Was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków on 5 Apr il 2018.
CIECH S.A. received the outcome of the audit on 4 July 2018. The tax authority challenged the transaction
concerning the capital increase in the former subsidiary. In the opinion of the authority, making a cash
contribution by means of a contractual set-off of mutual receivables gives rise to income on the part of the
Company for which, according to the auditors, the company cannot recognise a cost. The company's
management board and its tax advisors do not agree with the findings made by the auditors.
In December 2018, the company received a decision of the Head of the Małopolskie Province Customs and
Tax Office in Kraków, upholding the previous position of the authority. The Company contested the
position and filed an appeal.
In April 2019, the Company received a decision of the second instance, upholding the decision of the first
instance. In April and May 2019, the Company paid up the outstanding tax along with interest in three
tranches in the total amount of PLN 66.4 million (tax: PLN 43.7 million, interest: PLN 22.7 million). The
disputed amount of tax and interest were covered by the provision recognised in 2018, which was used as
a result of their payment. CIECH S.A. appealed against the decision of the second instance to the Provincial
Administrative Court (“PAC”) in Kraków. On 9 October 2019, the Provincial Administrative Court issued a
ruling in which it confirmed the approach presented by the authority. The court indicated that the company
was obliged to recognise the income and did not have the right to recognise the tax deductible cost. After
receipt of a written statement of reasons, the company lodged a cassation complaint with the Supreme
Administrative Court on 23 December 2019. On 8 December 2022, the Supreme Administrative Court
issued a judgement in which it overturned the judgment of the Provincial Administrative Court. The
Supreme Administrative Court also overturned the decision of the Second Instance Authority and the case
was referred back to that Authority for reconsideration. On 8 February 2023, the Company received a
written statement of reasons for the SAC's judgement. In its statement of reasons, the Supreme
Administrative Court indicated that the Authority, when re-examining the case, would be obliged to follow
the court's interpretation of the law. The attached ruling is final and not subject to appeal. Currently,
the Company is waiting for the decision of the tax authorities in accordance with the judgment of the
Supreme Administrative Court, after which it should receive a refund of the overpaid tax liability, interest
paid for late payment, interest for the period when the paid funds were at the disposal of the tax authority
and reimbursement of court costs.
CIT audit for 2013 at CIECH
S.A.
It was initiated by the Tax Audit Office in Warsaw on 30 November 2016. The tax audit report was issued
on 16 May 2017. The authority claims that the Company has overestimated the tax deductible cost of
interest on cash obtained as a result of the issue of bonds and allocated to the reserve capital of CIECH
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Soda Deutschland GmbH & Co. KG. Moreover, the authority is of the opinion that the fee for the “CIECH”
trademark should not be recognised by CIECH S.A. as a tax deductible cost.
The tax base challenged by the authority is PLN 9.4 million (after taking into account the tax loss incurred
in the audited year), which translates into a tax of PLN 1.8 million.
The company and its advisors did not agree with the findings of the auditors and as a result of the tax
proceedings, the Decision of the First Instance was issued, against which the company filed an appeal in
2017. On 14 March 2018 CIECH S.A. received the decision of the Second Instance in which the auditors
upheld their findings contained in the Decision of the First Instance.
The company appealed to the Provincial Administrative Court against this decision. Despite this, the
company decided to pay tax in the amount of PLN 1.8 million and interest (PLN 0.3 million) on 10 April
2018. The Court made its decision on 6 June 2019. The Court complied with the CIECH S.A. appeal as
regards the costs of trademark fees, repealing the decision of the second instance. However, as regards
the costs of consulting and financing of Soda Deutschland, the Court adjudicated that said costs could not
constitute tax costs. After receipt of a written statement of reasons, the company lodged a cassation
complaint with the Supreme Administrative Court (hereinafter referred to as the “SAC”) in September
2019. On 6 July 2022, the SAC rendered a judgement in which it dismissed the Company's cassation
complaint. The court upheld the auditors’ position and denied the Company the right to recognise interest
on external financing earmarked for the reserve capital in CIECH Soda Deutschland GmbH & Co. KG and
the expense in relation to tax consultancy as tax costs. As far as the fee for the use of the CIECH trademark
is concerned, the SAC found that the office that had carried out the audit did not clarify the matter in depth
and, therefore, the SAC referred the matter for reconsideration by the office. On 26 July 2022, the
Company received a written statement of reasons for the SAC's judgement. In view of the content of the
aforementioned statement of reasons, the Company intends to reiterate and expand on the arguments
supporting its position. The case was returned to the Director of the Tax Administration Chamber in
Warsaw. On 27 February 2023, the Company received the Decision of DIAS in Warsaw of February 14,
2023. In the decision, DIAS will determine the amount of the tax liability at PLN 1.4 million. The Office
refrained from questioning trademark fees as tax deductible costs. The Office, however, did not take into
account the additional evidence submitted by the Company regarding interest on external financing
allocated to the reserve capital of CIECH Soda Deutschland GmbH & Co. KG. and expenses related to tax
consultancy and refused to recognize them as tax costs. The Company and its advisors do not agree with
the issued Decision and intend to sue it in court.
CIT audit for 2014 at CIECH
S.A.
It was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków (hereinafter:
Head of the Małopolskie Province Customs and Tax Office in Kraków) on 13 November 2019. The Company
received the outcome of the audit on 22 May 2020. The authority claims that the Company has
overestimated the tax deductible cost by including interest on external financing contributed to the capital
reserves of Soda Deutschland CIECH GmbH (hereinafter: SDC) and the costs of obtaining this financing in
tax deductible costs. Moreover, the authority is of the opinion that expenses incurred on account of trade
mark fees paid to the CIECH Group company should not be recognised by CIECH S.A. as a tax deductible
cost. The taxable amount challenged by the authority is PLN 32.5 million which translates into a potential
tax liability of PLN 6.2 million. The Company does not agree with the findings made by the auditors As a
result, the customs and fiscal audit was converted into tax proceedings.
On 15 October 2020, the Company received a report on the audit of the books in which the Head of the
Małopolskie Province Customs and Tax Office leaves only the charge that the company overestimated the
tax deductible cost by including interest on external financing contributed to the capital reserves of SDC
and the costs of obtaining this financing in tax deductible costs (the taxable amount is PLN 22.6 million
which translates into a potential tax liability of PLN 4.3 million). Thus, the office has refrained from
questioning the expenses incurred for trade mark fees as a tax deductible cost. In the same month, the
company submitted objections to the report on the audit of the books.
In addition, on 6 October 2020 the company received from the Head of the Małopolskie Province Customs
and Tax Office a notice of suspension, as of 1 September 2020, of the statute of limitations for tax liabilities
for 2014 due to initiation of proceedings for fiscal offences.
On 28 February 2022, the Company received t he Order of the Head of the Małopolskie Province Customs
and Tax Office to suspend the Tax proceedings, in which the Auditing Authority indicates that the
consideration of the case and the issue of the decision depends on the resolution of the preliminary issue
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by another authority or court, and the proceedings before the Supreme Administrative Court regarding
the dispute on the settlement of the corporate income tax for 2013 is directly related to the correct
settlement of corporate income tax for 2014.
CIT audit for 2015 at CIECH
Soda Polska S.A.
It was initiated by the Head of the Kujawsko-Pomorskie Province Tax Office in Bydgoszcz on 10 October
2016. On 7 March 2017, the tax office issued the tax audit report. The irregularities found result primarily
from the fact that the auditors challenged the company's right to settle the loss from participation in a
partnership – as was the case for CIECH Pianki Sp. z o.o., CIECH Cargo Sp. z o.o., CIECH Vitrosilicon S.A.,
CIECH Sarzyna S.A. The Company and its tax advisors do not agree with the position of the auditors. In June
2019, CIECH Soda Polska S.A. received a decision of the Kujawsko-Pomorskie Tax Office Head in Bydgoszcz
(decision of the First instance), according to which the company had understated - due to its participation
in a partnership - its tax obligations in the amount of PLN 3.9 million. The Company appealed against said
decision. On 9 September 2019, the company received a decision (decision of the Second instance) issued
by the Head of the Tax Administration Chamber in Bydgoszcz, in which the latter upheld the findings of the
decision of the First instance. The decision issued by the second instance authority is enforceable.
Therefore, the company was obliged to pay the overdue tax (as per the tax auditors) in the amount of PLN
3.9 million (the tax base challenged by the tax authorities was PLN 20.4 million) plus the interest due in the
amount of PLN 1 million. On 9 October 2019, the company appealed to the Provincial Administrative Court
in Bydgoszcz against the decision of the Second Instance. At a hearing on 11 December 2019, after
considering the appeal filed by the Company, the Provincial Administrative Court issued a ruling annulling
the decision issued by the Head of the Tax Administration Chamber in Bydgoszcz in its entirety. In February
2020, Head of the Tax Administration Chamber in Bydgoszcz lodged a cassation complaint with the
Supreme Administrative Court in Warsaw. On 14 December 2022, the Supreme Administrative Court
announced a judgment dismissing the cassation complaint of the Head of the Tax Administration Chamber
and thus, upheld the judgment of the Provincial Administrative Court. The ruling is final and not subject to
appeal. On 30 January 2023, the Company received a written statement of reasons for the judgment of
the Supreme Administrative Court. The Company is currently awaiting a decision from the Head of the Tax
Administration Chamber in line with the ruling of the Supreme Administrative Court, after which it should
receive a refund of the overpaid tax liability, interest paid on arrears, interest for the period when the
funds paid were at the disposal of the tax authority and reimbursement of court costs.
CIT audit for 2015 at CIECH
Pianki Sp. z o.o.
It was initiated by the Head of the Kujawsko-Pomorskie Province Tax Office in Bydgoszcz on 22 November
2016. On 3 March 2017, the tax office issued the tax audit report. As was the case for CIECH Soda Polska
S.A., CIECH Cargo Sp. z o.o., CIECH Vitrosilicon S.A., CIECH Sarzyna S.A., the authority challenged the
company's right to settle the loss from participation in a partnership.
The Company and its tax advisors do not agree with the position of the auditors. In June 2019, CIECH Pianki
Sp. z o.o. received a decision of the Head of the Kujawsko-Pomorskie Tax Office in Bydgoszcz (decision of
the first instance), according to which the company had understated - due to its participation in a
partnership - its tax liabilities by PLN 2.6 million. The Company appealed against said decision. On 9
September 2019, the company received a decision (decision of the Second instance) issued by the Head of
the Tax Administration Chamber in Bydgoszcz, in which the latter upheld the findings of the decision of the
First instance. The decision issued by the second instance authority is enforceable. Therefore, the company
was obliged to pay the overdue tax (as per the tax auditors) in the amount of PLN 2.6 million (the tax base
challenged by the tax authorities was PLN 13.8 million) plus the interest due in the amount of PLN 0.7
million. On 9 October 2019, the company appealed to the Provincial Administrative Court in Bydgoszcz
against the decision of the Second Instance. At a hearing on 11 December 2019, after considering the
appeal filed by the Company, the Provincial Administrative Court issued a ruling annulling the decision
issued by the Head of the Tax Administration Chamber in Bydgoszcz in its entirety. In February 2020, Head
of the Tax Administration Chamber in Bydgoszcz lodged a cassation appeal with the Supreme
Administrative Court. On 14 December 2022, the Supreme Administrative Court announced a judgment
dismissing the cassation complaint of the Head of the Tax Administration Chamber and thus, upheld the
judgment of the Provincial Administrative Court. The ruling is final and not subject to appeal. On 30 January
2023, the Company received a written statement of reasons for the judgment of the Supreme
Administrative Court. The Company is currently awaiting a decision from the Head of the Tax
Administration Chamber in line with the ruling of the Supreme Administrative Court, after which it should
receive a refund of the overpaid tax liability, interest paid on arrears, interest for the period when the
funds paid were at the disposal of the tax authority and reimbursement of court costs.
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CIT audit for 2015 at CIECH
Cargo Sp. z o.o.
It was initiated by the Head of the Kujawsko-Pomorskie Province Tax Office in Bydgoszcz on 23 January
2017. On 14 June 2017, the tax office issued the tax audit report. As was the case for CIECH Pianki Sp. z
o.o., CIECH Soda Polska S.A., CIECH Vitrosilicon S.A., CIECH Sarzyna S.A., the authority challenged the
company's right to settle the loss from participation in a partnership. The Company and its tax advisors do
not agree with the position of the auditors. In June 2019, CIECH Cargo Sp. o.o. received a decision of the
Kujawsko-Pomorskie Tax Office Head in Bydgoszcz (decision of the First instance), according to which the
company had understated - due to its participation in a partnership - its tax obligations in the amount of
PLN 1.7 million. The Company appealed against said decision. On 9 September 2019, the company received
a decision (decision of the Second instance) issued by the Head of the Tax Administration Chamber in
Bydgoszcz, in which the latter upheld the findings of the decision of the First instance. The decision issued
by the second instance authority is enforceable. Therefore, the company was obliged to pay the overdue
tax (as per the tax auditors) in the amount of PLN 1.7 million (the tax base challenged by the tax authorities
was PLN 8.8 million) plus the interest due in the amount of PLN 0.5 million. On 9 October 2019, the
Company appealed to the Provincial Administrative Court in Bydgoszcz against the decision of the Second
Instance. At a hearing on 11 December 2019, after considering the appeal filed by the Company, the
Provincial Administrative Court issued a ruling annulling the decision issued by the Head of the Tax
Administration Chamber in Bydgoszcz in its entirety. In February 2020, Head of the Tax Administration
Chamber in Bydgoszcz lodged a cassation appeal with the Supreme Administrative Court. On 14 December
2022, the Supreme Administrative Court announced a judgment dismissing the cassation complaint of the
Head of the Tax Administration Chamber and thus, upheld the judgment of the Provincial Administrative
Court. The ruling is final and not subject to appeal. On 30 January 2023, the Company received a written
statement of reasons for the judgment of the Supreme Administrative Court. The Company is currently
awaiting a decision from the Head of the Tax Administration Chamber in line with the ruling of the Supreme
Administrative Court, after which it should receive a refund of the overpaid tax liability, interest paid on
arrears, interest for the period when the funds paid were at the disposal of the tax authority and
reimbursement of court costs.
CIT audit for 2015 at CIECH
Vitrosilicon S.A.
It was initiated by the Head of the Lubuskie Province Customs and Tax Office in Gorzów Wielkopolski on
19 April 2018. The company received the outcome of the audit on 4 January 2019. As was the case for
CIECH Soda Polska S.A., CIECH Cargo Sp. z o.o., CIECH Pianki Sp. z o.o., CIECH Sarzyna S.A., the authority
challenged the company's right to settle the loss from participation in a partnership.
The Company and its tax advisors do not agree with the position of the auditors. If the unfavourable
position of the authority is upheld, an obligation may arise to pay tax arrears in the amount of PLN 2.7
million (the tax base challenged by the authority is PLN 14.4 million) plus with interest due. Tax proceedings
are currently underway.
In addition, on 12 March 2021 the company received from the Head of the Lubuskie Province Customs and
Tax Office a notice of suspension, as of 01 February 2021, of the statute of limitations for tax liabilities for
2015 due to the initiation of proceedings for a fiscal offence.
On 1 June 2022, the Company received a Decision of the Head of the Lubuskie Province Customs and Tax
Office in Gorzów Wielkopolski dated 31 May 2022, in which the authority determined the amount of
corporate income tax liability for 2015, namely PLN 2.7 million. On 15 June 2022, the Company sent an
appeal against the decision of the Head of the Lubuskie Province Customs and Tax Office. The company is
currently awaiting the decision of the second instance authority.
CIT audit for 2015 at CIECH
Sarzyna S.A.
It was initiated by the Head of the Podkarpackie Province Tax Office in Reszów on 6 February 2017. On 7
November 2017, the tax office issued the audit report. As was the case for CIECH Pianki Sp. z o.o., CIECH
Soda Polska S.A., CIECH Vitrosilicon S.A., CIECH Cargo Sp. z o.o., the authority challenged the company's
right to settle the loss from participation in a partnership. In addition, the authority challenged the
company's right to include the fee for the trademark and interest on loans paid in advance in tax deductible
costs. The Company and its tax advisors do not agree with the position of the auditors. On 2 December
2021, the Company received the Decision of the Head of the Podkarpackie Province Tax Office in Reszów
of 19 November 2021. In the Decision issued, the Office further questions the company's right to settle the
loss from participation in a partnership and the right to include the trademark fee as a tax deductible cost.
The Office, on the other hand, upheld the Company's arguments and abandoned the questioning of loan
interest as a tax deductible cost. Although the Decision is not due, on 2 December 2021 the company paid
tax and interest (tax in the amount of PLN 6.4 million, interest of PLN 1 million). On 16 December 2021 ,
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the Company filed an appeal against the Decision of the Head of the Podkarpackie Province Tax Office in
Reszów. The company is currently awaiting the decision of the second instance authority.
In addition, on 21 December 2021 the company received from the Head of the Podkarpackie Province Tax
Office in Rzeszów a notice of suspension, as of 3 December 2021, of the statute of limitations for tax
liabilities for 2015 due to the initiation of penal-fiscal proceedings (Penal Fiscal Code).
CIT audit for 2016 at CIECH
Sarzyna S.A.
It was initiated by the Head of the Podkarpackie Province Tax Office in Reszów on 26 February 2018. On 11
January 2019, the tax office issued the audit report. According to the authority, the expenses incurred by
the company in 2016 for the use of Chwastox trademarks cannot be classified as tax deductible costs.
Additionally, the authority claims that the company may not offset the loss for 2015 in the annual return
for 2016. On 17 November 2022, the Company received the Decision of the Head of the Podkarpackie
Province Tax Office in Reszów of 4 November 2022. In the Decision, the Office questioned the settlements
concerning the Chwastox trademark between Algete Sp. z o.o. and Ciech Sarzyna, the settlement of the
loss on the sale of shares in Ciech Cerium Sp. z o.o. SK and the inclusion of the settlement of the tax loss
arising in 2015 in connection with the Decision of the Head of the Podkarpackie Province Tax Office in
Rzeszów issued on 19 November 2021. Although the Decision is not due, on 18 November 2022 the
company paid tax and interest (tax in the amount of PLN 4.7 million, interest of PLN 0.8 million). The
Company and its tax advisors do not agree with the position of the auditors and appealed against the
Decision received. The company is currently awaiting the decision of the second instance authority.
In addition, on 7 December 2022 the company received from the Head of the Podkarpackie Province Tax
Office in Rzeszów a notice of 23 November 2022 of suspension, as of 26 October 2022, of the statute of
limitations for CIT 2016 due to the initiation of penal-fiscal proceedings (Penal Fiscal Code).
CIT audit for 2016 at CIECH
S.A.
On 25 May 2021, CIECH S.A. received an authorisation from the Head of the Małopolskie Province Customs
and Tax Office in Kraków to carry out a cu stoms and fiscal audit with regard to corporate income tax (CIT)
for 2016. On 25 July 2022, the Company received a decision of the Head of the Małopolskie Province
Customs and Tax Office to suspend the tax proceedings, in which the Auditing Authority indicates that the
dispute between CIECH S.A. and the Head of the Tax Administration Chamber in Warsaw regarding the
settlement of corporate income tax for 2013 is directly related to the correct settlement of corporate
income tax for 2016. In view of the above, the Head of the Małopolskie Province Customs and Tax Office
in Kraków suspended the customs and fiscal audit. In addition, on 2 September 2022 the company received
from the Head of the Małopolskie Province Customs and Tax Office a notice of suspension, as of 19 August
2022, of the statute of limitations for tax liabilities for 2016 due to the initiation of proceedings for a fiscal
offence.
The total amount of possible tax burden is PLN 41.9 million. From which, following the decision of the second instance regarding CIT 2013 in
CIECH S.A., as well as in the case of CIECH Sarzyna S.A. following the decision of the first instance regarding CIT 2015 and CIT 2016, a total tax
amount of PLN 12.8 million was paid despite further litigation (of which an amount of PLN -0.4 million should be returned by the Tax Office
after issuing a new decision in which a smaller tax liability was determined) and interest in the total amount of PLN 2.1 million.
A provision has been recognised to cover a potential tax liability in the amount of PLN 28.4 million. The remaining amount, i.e. PLN 1.1 million
and potential interest thereon is not covered by a provision and constitutes a contingent liability.
On the other hand, of the PLN 12.8 million paid, PLN 1.8 million is reported as a receivable from the Tax Office, an impairment loss was
recognised for the entire amount.
After the case is won before the Supreme Administrative Court by CIECH S.A. (in the CIT 2012 case) and CIECH Soda Polska S.A, CIECH Cargo
Sp. o.o. and CIECH Pianki Sp. z o.o. (in the CIT 2015 case), the companies should receive a refund of the overpaid tax liability in the amount
of PLN 51.9 million and a refund of the interest paid in the amount of PLN 24.9 million.
The CIECH Group companies were subject to VAT audits/proceedings concerning the following years:

Year | Company
Fourth quarter of 2013 | Verbis KAPPA Sp. z o.o. S.K.A.
Fourth quarter of 2013 | Verbis ETA Sp. z o.o. S.K.A.
December 2014 | Cerium Finance Sp. z o.o.
January-June 2018 | CIECH Trading Sp. z o.o.
September 2022 | CIECH Cargo Sp. z o.o.

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VAT audit for the fourth
quarter of 2013 at Verbis
Kappa Sp. z o.o. S.K.A.
It was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków on 6 April 2018.
The company received the outcome of the audit on 11 June 2018. The authority challenged the right to
deduct VAT on part of the contribution in kind made to the share premium. According to the authority, th e
taxable amount of the contribution received is the amount equal to the nominal value of the shares
acquired. The market value of the in-kind contribution less the amount of VAT was recognised as the
taxable amount in the invoice received by the company.
Consequently, according to the authority, the company deducted the input tax in the amount to which it
was not entitled. The taxable amount challenged by the authority is PLN 35.7 million which translates into
a tax of PLN 8.2 million.
The Company and the other party to the transaction, i.e. CIECH Sarzyna S.A., filed motions for tax rulings.
The Director of the National Revenue Information agreed with the position of CIECH Sarzyna S.A. presented
in the motion that the taxable amount of the in-kind contribution made in 2013 was the value of the
contribution, i.e. the market value of the in-kind contribution less the amount of VAT. Taking into account
the positive interpretation concerning the taxable amount (an interpretation received after the event that
is the subject of the dispute) and the case-law line that existed until the end of 2013, the issuer of the
invoice, i.e. CIECH Sarzyna S.A., and its advisors believe that the taxable amount should be the market
value of the in-kind contribution less the amount of VAT. Therefore, the company did not make a VAT
correction, considering that the tax treatment of the in-kind contribution made in 2013 was correct. On 7
August 2019, the company received the decision of the Head of the Małopolskie Province Customs and Tax
Office in Kraków, upholding the previous position of the authority, that the company had no right to deduct
VAT in the amount of PLN 8.2 million. The Company and its advisors do not agree with the findings set
forth in the Decision and have appealed against it. On 14 November 2019, the company received the
Decision of the second instance, where the Head of the Małopolskie Province Customs and Tax Office
upheld the decision of the first instance in its entirety. The decision issued by the second instance authority
is enforceable. Therefore, the company was obliged to pay the overdue VAT (as per the tax auditors) in the
amount of PLN 8.2 million plus the interest due in the amount of approx. PLN 3.9 million. On 13 December
2019, the Company appealed against the decision of the second instance to the Provincial Administrative
Court in Kraków. At a hearing on 22 July 2020, after considering the appeal filed by the Company, the
Provincial Administrative Court issued a ruling dismissing the complaint filed by the Company, accepting
the position of the Małopolskie Province Customs and Tax Office in Kraków. The company received a
written statement of reasons for the judgment and lodged a cassation complaint with the Supreme
Administrative Court in November 2020. At present, the company is waiting for the date of the hearing to
be set.
VAT audit for the fourth
quarter of 2013 at Verbis
ETA
Sp. z o.o. S.K.A.
It was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków on 5 April 2018.
The company received the outcome of the audit on 16 June 2018. The authority challenged the right to
deduct VAT on part of the contribution in kind made to the share premium. According to the authority, the
taxable amount of the contribution received is the amount equal to the nominal value of the shares
acquired. The market value of the in-kind contribution less the amount of VAT was recognised as the
taxable amount in the invoice received by the company. Consequently, according to the authority, th e
company deducted the input tax in the amount to which it was not entitled. The taxable amount challenged
by the authority is PLN 133.5 million which translates into a tax of PLN 30.8 million.
The Company and the other party to the transaction, i.e. CIECH S.A., filed motions for tax rulings.
The Director of the National Revenue Information agreed with the CIECH S.A.’s position that the company
had determined the taxable amount in a correct manner, i.e. the taxable amount of the in-kind
contribution made in 2013 should have been the value of the contribution, i.e. the market value of the in-
kind contribution less the amount of VAT. Taking into account the positive interpretation concerning the
taxable amount (an interpretation received after the event that is the subject of the dispute) and the case-
law line that existed until the end of 2013, the Company and its advisors believe that the taxable amount
should be the market value of the in-kind contribution less the amount of VAT. Therefore, the company
and, accordingly, the other party to the transaction complied with the ruling.
On 17 July 2019, the company received the decision of the Head of the Małopolskie Province Customs and
Tax Office in Kraków, upholding the previous position of the authority, that t he Company had no right to
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deduct VAT in the amount of PLN 30.8 million. The Company and its advisors do not agree with the findings
set forth in the Decision and have appealed against it. On 6 August 2019, the company received an order
of the Head of the Third Tax Office for Warszawa-Śródmieście to make the Decision of the Head of the
Małopolskie Province Customs and Tax Office in Krakow, issued in connection with the tax proceedings
conducted against the company, immediately enforceable. The Company filed a complaint against said
decision. Irrespective of the complaint, the company applied to the Head of the Third Tax Office for
crediting the overpaid VAT in the amount of PLN 30.8 million resulting from the correction of the VAT
settlement for July 2018 to wards the arrears indicated in the Decision of the Małopolskie Province Customs
and Tax Office in Krakow, and repaid interest in the amount of PLN 12.4 million. In its decision, the Head
of the Third Tax Office agreed to the company's request. Thus, no enforcement proceedings were initiated.
On 24 October 2019, the company received the Decision of the second instance, where the Head of the
Małopolskie Province Customs and Tax Office upheld the decision of the first instance in its entirety. On 13
November 2019, the company received the decision issued by the Head of the Tax Administration Chamber
in Warsaw concerning the upholding of the decision of the Third Tax Office to make the non-final decision
of the first-instance authority immediately enforceable. Due to the fact that the company had received the
decision of the second instance earlier, it did not file a complaint to the Provincial Administrative Court in
Warsaw against the decision received. On 25 November 2019, however, the Company appealed against
the decision of the second instance to the Provincial Administrative Court in Kraków. At a hearing on 29
July 2020, after considering the appeal filed by the Company, the Provincial Administrative Court issued a
ruling dismissing the complaint filed by th e Company, accepting the position of the Małopolskie Province
Customs and Tax Office in Kraków. The company received a written statement of reasons for the judgment
and lodged a cassation complaint with the Supreme Administrative Court on 20 January 2021. At present,
the company is waiting for the date of the hearing to be set.
In total, in the two aforementioned disputes concerning VAT in Verbis Kappa Sp. z o.o. and Verbis ETA Sp.
z o.o. S.K.A., despite the continuation of the dispute, PLN 39 million of VAT and PLN 16.3 million of interest
were paid after the decisions of the second instance. These amounts are reported as public-law receivables
in the financial statements. The companies did not create provisions for the above tax cases, because the
companies and their tax advisors estimate the chances of final winning these disputes at over 50%. At the
same time, due to the continuing uncertainty as to the direction of the dispute resolution by the Supreme
Administrative Court, these amounts are also reported as contingent liabilities.
VAT audit for December
2014 at Cerium Finance Sp.
z o.o.
It was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków on 5 April 2018.
The company received the outcome of the audit on 19 June 2018. The authority challenged the right to
deduct VAT on part of the contribution in kind made to the share premium. According to the authority, the
taxable amount of the contribution received is the amount equal to the nominal value of the shares
acquired. The market value of the in-kind contribution less the amount of VAT was recognised as the
taxable amount in the invoice received by the company.
Consequently, according to the authority, the company deducted the input tax in the amount to which it
was not entitled. The taxable amount challenged by the authority is PLN 110 million which translates into
a tax of PLN 25.3 million. Guided by the outcome of the audit, the other party to the in-kind contribution
transaction, i.e. CIECH Soda Polska S.A., issued a correction to the invoice, specifying the taxable amount
of the in-kind contribution as the nominal value of the shares acquired. Cerium Finance Sp. z o.o. included
the correction of the invoice in the current tax return and paid the tax. CIECH Soda Polska S.A. received a
refund of overpaid VAT.
The Company and CIECH Soda Polska S.A. filed motions for tax rulings. The Director of the National Revenue
Information agreed with the position of the companies with respect to the recognition of a VAT correction
in the current period – the companies had already received the interpretations after the event that is the
subject of the dispute. Additionally, in turn, CIECH Soda Polska S.A. received a reply that the taxable
amount of the in-kind contribution made in 2014 was the nominal value of the shares acquired. Taking into
account the ruling concerning the taxable amount and the regulations, as amended in 2014, according to
which the taxable amount should be the value contributed to the share capital, the company is of the
opinion that the correction made (included in the current period) is correct.
On 17 July 2019, CIECH Soda Polska S.A. (CSP), as the legal successor of Cerium Finance Sp. z o.o., received
the Accounting Books’ Audit Report, in which the auditors upheld their position, that the Company had no
right to deduct VAT in the amount of PLN 25.3 million, without referring to the correction of VAT submitted
by the Company in the current period and payment of this tax.
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On 11 September 2019, the CSP received the decision of the Head of the Małopolskie Province Customs
and Tax Office in Kraków, u pholding the previous position of the authority, that Cerium Finance Sp. z o.o.
had no right to deduct VAT in the amount of PLN 25.3 million. CSP appealed against the decision of the
first instance. On 7 January 2020, the company received the Decision of the second instance, where the
Head of the Małopolskie Province Customs and Tax Office in Kraków upheld the decision of the first
instance in its entirety. The decision issued by the second instance authority was enforceable. Therefore,
despite the fact that the amount of VAT has already been paid to the relevant tax office in connection with
the correction of VAT settlement submitted in the current period, according to the received individual
ruling, the company decided to pay again the same amount of VAT of PLN 25.3 million and interest of PLN
10 million. The VAT paid again will be recovered by CSP at the latest after the completion of the court and
administrative proceedings (for December 2014), if any, or after the completion of the overpayment
proceedings for July 2018. On 6 February 2020, the Company appealed against the decision of the second
instance to the Provincial Administrative Court in Kraków. At a hearing on 22 September 2020, after
considering the appeal filed by the Company, the Provincial Administrative Court issued a ruling dismissing
the complaint filed by the Company, accepting the position of the Małopolskie Province Customs and Tax
Office in Kraków. The company received a written statement of reasons for the judgment and lodged a
cassation complaint with the Supreme Administrative Court on 13 January 2021. At present, the company
is waiting for the date of the hearing to be set.
The amount of interest paid, i.e. PLN 10 million, is reported in the financial statements as public-law
receivables. The company did not create provisions for above mentioned vale of interests as company and
its tax advisors estimate the chances of final winning the dispute to be above 50%. At the same time, due
to the continuing uncertainty as to the direction of the dispute resolution by the Supreme Administrative
Court, this amount is also reported as a contingent liability.
VAT audit for the period
from January to June 2018
at CIECH Trading S.A.
It was commenced by the Head of the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń (for
the period from January to April 2018) – commenced on 20 June 2018, and by the Head of the Śląskie
Province Customs and Tax Office in Katowice (for the period from May to June 2018) – commenced on 19
September 2018. On 13 September 2019, the Company received a report on the audit of the books and
the outcome of the audit from the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń.
According to the auditors, the company overstated the input tax by PLN 1.4 million, deducting the tax
resulting from invoices issued by two contractors who, according to the authority, committed tax fraud at
an earlier stage of trade. According to the authority, the company failed to exercise due diligence when
entering into transactions with these entities. The Company does not agree with the position of the
auditors. However, given the lack of clear legal guidelines as to the scope of due diligence and following
the prudence principle, the company decided to correct the VAT return for the period from January to April
2018 in the amount indicated by the authority, i.e. PLN 1.4 million. In addition, following the prudence
principle in order to prevent a possible additional tax liability in the form of VAT sanctions, the company
corrected its VAT settlements for 2017 and for the period from July to November 2018, excluding from its
settlements the input VAT on invoices issued by the same two counterparties for whom the authority
refuses to deduct input VAT for the period from January to June 2018. The amount of the corrected VAT is
PLN 7.5 million. As a result of corrections made to VAT returns and their settlement with the tax office, the
company paid PLN 0.5 million in interest. On 10 February 2020, the Company received the decision of the
Head of the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń concerning the determination
of an additional VAT liability in relation to the audit for the period from January to April 2018. The amount
of sanctions indicated in the Decision is PLN 1.4 million. The Company lodged an appeal against the
Decision received with the Head of the Kujawsko-Pomorskie Province Customs and Tax Office. Regardless
of the appeal filed, in order to avoid further accrual of interest, on 5 June 2020 the Company paid the
amount of this additional tax liability together with interest. On 21 July 2020, the Company received the
decision of the Head of the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń (appeal body).
The decision upholds the decision of the first instance authority to set the additional VAT liability in CIECH
Trading Sp. z o.o. at 100%, i.e. in the amount of PLN 1.4 million. This Decision is final. On 19 August 2020,
the Company appealed against the decision of the second instance to the Provincial Administrative Court
in Bydgoszcz. At a hearing on 18 November 2020, after considering the appeal filed by the Company, the
Provincial Administrative Court issued a ruling dismissing the complaint filed by the Company, accepting
the position of the Head of the Kujawsko-Pomorskie Province Customs and Tax Office. The company
received a written statement of reasons for the judgment and lodged a cassation complaint with the
Supreme Administrative Court on 28 January 2021. On 22 October 2021 the Supreme Administrative Court
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overturned the appealed verdict of the Provincial Administrative Court in its entirety and overturned the
appealed decision of the Head of the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń (2
nd
instance authority) on the additional tax liability in VAT at the rate of 100%. The case will now be referred
back to the Head of the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń who will reconsider
it, taking into account the statement of reasons of the Supreme Administrative Court. In the statement of
reasons for the judgment, the Supreme Administrative Court ruled on the non-applicability of the sanction
at the 100% rate in the present case. However, there is no guidance on setting the sanction at a different
amount or not setting it at all. Ciech Trading Sp. z o.o. will be entitled to appeal against the new decision
of the Customs and Tax Office. On 29 March 2022, the Company's attorney received the decision of the
Head of the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń concluding once again the
appeal proceedings for the period from January to April 2018 (after CIECH Trading Sp. z o.o. won before
the Supreme Administrative Court). The decision in question revokes the previous decision in its entirety
(both in the part concerning the determination of the sanction of 100% and 15%) and determines a new
amount of additional VAT liability for this period, i.e. 20% (instead of 100%) in the amount of PLN 0.29
million and additional VAT liability for the period from January to February 2018 and April 04.2018 at the
rate of 15% in the same amount as in the previous decision, i.e. PLN thousand (the appeal filed did not
cover this part of the decision). Thus, the case was closed and the company received a refund of PLN 1.1
million (80% of the 100% sanction amount) together with interest accrued over nearly 2 years.
In case of the audit of VAT settlements for the period of May and June 2018 carried out by the Head of the
Silesian Customs and Tax Office in Katowice, in September 2020 the company received the results of the
audit relating to each of the months audited, in which the office refused the company the right to deduct
input tax in the amount of PLN 1.5 million. In October 2020, the company paid the disputed amount of tax
plus interest. The company recognised a provision for possible VAT arrears, interest and a sanction for the
period of May-June 2018 in the amount of PLN 3.8 million. In December 2020, the Company received two
Decisions issued by the Head of the Silesian Customs and Tax Office on the transformation of the customs
and fiscal audit into tax proceedings on the determination of the additional VAT tax liability for May and
June 2018. On 13 January 2021, the Head of the Silesian Customs and Tax Office in Katowice issued a
decision on determining the additional VAT liability in the amount of PLN 1.5 million. The Company lodged
an appeal against the Decision received with the Head of the Silesian Customs and Tax Office. Regardless
of the appeal filed, in order to avoid further accrual of interest, on 11 February 2021 the Company paid the
amount of this additional tax liability together with interest. On 25 February 2022, the Company received
two Decisions of the Head of the Silesian Customs and Tax Office in Katowice concluding the appeal
proceedings for May and June 2018. The decisions in question revoke previous decisions setting a sanction
of 100% and set a new sanction of 20%. As Ciech Trading Sp. z o.o. made a sanction payment of 100%, it
was eligible for a refund of PLN 1.2 million, which it received (80% of the amount paid) together with
interest. Ciech Trading Sp. z o.o. will not appeal against the decisions issued. This concluded the dispute
concerning the period from May to June 2018.
VAT audit for September
2022 at CIECH Cargo Sp. z
o.o.
It was initiated by the Kujawsko-Pomorskie Province Tax Office on 28 October 2022.
The audit is pending. On 9 December 2022, the Company received the Tax Audit Report. The Kujawsko-
Pomorskie Tax Office in Bydgoszcz stated in the Report that CIECH Cargo Sp. z.o.o. fulfilled its obligation
under the VAT Act and submitted its tax return on time, and paid the amount in respect of the liability
resulting from the return on 25 October 2022. Therefore, despite the error made in the return submitted,
in the auditors' opinion, this cannot be treated as a deliberate fraud resulting in the loss of a budget
receivable. In the opinion of the auditors, the accounts were kept fairly and without defect and were
therefore accepted as evidence.
Audit at the Ciech Group in
Germany
It concerns income tax and VAT settlements at the following companies: Sodawerk Staßfurt Verwaltungs
GmbH (hereinafter: “SWS”), CIECH Soda Deutschland GmbH & Co. KG, Sodawerk Holding Staßfurt G mbH,
SDC GmbH (hereinafter: “SDC”), CIECH Energy Deutschland GmbH, Kaverngesellschaft Stassfurt mbH and
a branch of CIECH SA, Zweigniederlassung Deutschland. The audits, initiated in previous years, cover
settlements for 2007-2009 and 2010-2015 and concern various factual and legal matters. In addition, on
28 October 2021, the the audit for the period 2016-2019 was initiated.
As regards the audit for 2007-2009, the Staßfurt Tax Office issued decisions for SWS on 9 September 2022
and for SDC on 12 January 2023 following a tax audit carried out against the German companies of the
CIECH Group with regard to the audit of corporate income tax settlements. In the decisions, the Office
questioned, among other things, the manner in which the shareholding in the capital of the SWS subsidiary
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was reduced, which took place in 2007, and, in the case of SDC, the possibility of including financial costs
exceeding the so-called thin capitalisation limits in tax costs. Decisions in respect of the amount of the tax
liability plus interest of EUR 8.8 million (PLN 41.3 million) are not final. SWS, SDC and their advisers do not
agree with the decisions made – the appeals are pending. Both companies requested a deferral of payment
of the amount of the tax liability pending a final ruling and received a positive decision in this regard.
As at the balance sheet date, the outcome of the audit for 2010-2019 is not known.
In case of a different assessment of economic events (occurring during the aforementioned periods for
which audits are pending) by audit authorities, an obligation may arise to recalculate and potentially
increase the tax liability and to pay interest on tax arrears. Guided by the prudence principle, the
companies recognised provisions for potential tax liabilities and interest in the total amount of EUR 15.5
million (after conversion into PLN according to the exchange rate quoted on the balance sheet date – about
PLN 72.6 million) Of the reported EUR 15.5 million, the provision recognised in previous years is EUR 14.1
million (about PLN 66.1 million).
9.3 INFORMATION ON TRANSACTIONS WITH RELATED PARTIES
9.3.1 TRANSACTIONS WITH RELATED PARTIES IN TOTAL
Transactions between the parent, CIECH S.A., and its subsidiaries were eliminated during consolidation and have not been presented in this
note.
Detailed information about transactions between the CIECH Group and other related entities (i.e. companies controlled by the parent
company at the high level in relation to CIECH S.A. — Kulczyk Investments S.A. and non-consolidated companies of the CIECH Group, and
with the Polenergia Group companies - linked via a personal relationship with the ultimate parent company of CIECH S.A.) is presented below:

TRANSACTIONS BETWEEN CONSOLIDATED ENTITIES AND OTHER RELATED PARTIES | 01.01.-31.12.2022 | 01.01.-31.12.2021
Revenues from sales of products and services, including: | 730 | 3,125
associates | - | 2,291
Revenues from sales of goods and materials, including: | 47,910 | 34,729
associates | 42,599 | 16,976
Other operating income, including: | - | 15
associates | - | 15
Financial income, including: | 254 | -
associates | 246 | -
Purchase of services, including: | 44,891 | 49,353
KI One S.A. | 200 | 199
associates | 26,708 | 32,465
Purchases of products, goods and materials, including: | 155,410 | 58,202
associates | - | -
Other operating expenses | - | -
Financial expenses, including: | 2,532 | 223
associates | 139 | 2
TRANSACTIONS BETWEEN CONSOLIDATED ENTITIES AND OTHER RELATED PARTIES | 31.12.2022 | 31.12.2021
Trade receivables, including: | 14,428 | 5,834
associates | 13,481 | 1,206
Trade liabilities, including: | 36,294 | 45,919
associates | 4,930 | 3,094

Terms of transactions with related entities
CIECH Group‘s companies, to the best of their knowledge and belief, did not conclude significant transactions on the terms ot her than market
ones. Sales to and purchases from related e ntities are carried out on terms which do not differ from arm’s length terms. Overdue liabilities
and receivables are not secured and are settled through bank transfers. Receivables from related entities have not been secured by any
guarantees granted or received besides those described in note 9.2.
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In the presented period, the key management personnel of CIECH S.A. did not conclude any material transactions with related parties within
the CIECH Group.
9.3.2 SIGNIFICANT TRANSACTIONS CONCLUDED BY COMPANIES OR SUBSIDIARIES WITH RELATED PARTIES
OTHER THAN ON AN ARM’S LENGTH BASIS
To the best of the Group’s judgement, there were no transactions with related entities in the CIECH Group on other than marke t conditions
in 2022.
9.3.3 DESCRIPTION OF NON-ROUTINE TRANSACTIONS WITH RELATED PARTIES
Information on significant transactions with related parties is provided in note 6.4 to these financial statements.
9.3.4 TRANSACTIONS CONCLUDED WITH KEY MANAGERIAL PERSONNEL
Key managerial personnel comprises persons who are authorised to and are responsible for direct and indirect planning, managing and
controlling the activities of CIECH S.A.
Remuneration of the Management Board of CIECH S.A.
The following table presents the amount of remuneration and additional benefits payable to particular Members of the Management Board
in 2022 and in the comparable period. In the years 2021-2022, members of the Management Board of CIECH S.A. did not receive any
remuneration for holding a position in the Supervisory Boards or any other functions performed in the subsidiaries of the CIECH Group,
except for Mr Mirosław Skowron, who served on the Management Board of Ciech Salz Deutchland Gmbh, and Mr Kamil Majczak, who serves
on the Management Board of CIECH Ventures Sp. z o.o.

| Short-term | Long-term | Post-employment | Termination | TOTAL
| employee benefits | Incentive Plan | benefits | benefits |
31.12.2022 |  |  |  |  |
Management Board | 13,485 | 8,808 | - | - | 22,293
Former members of the Management | - | - | - | - | -
Board |  |  |  |  |
TOTAL | 13,485 | 8,808 | - | - | 22,293
31.12.2021 |  |  |  |  |
Management Board | 9,368 | - | - | - | 9,368
Former members of the Management | - | - | 524 | - | 524
Board |  |  |  |  |
TOTAL | 9,368 | - | 524 | - | 9,892

Members of the Management Board are employed based on employment contracts. Remuneration of the Management Board Members are
set out in individual employment contracts. Members of the Management Board are also entitled to:
• discretionary bonus in the amount determined by the Supervisory Board of CIECH S.A.;
• annual bonus determined in individual employment contracts
• payments from the Long-Term Incentive Plan for three subsequent years, adopted on the basis of a decision of the Supervisory Board,
with payments in three consecutive years after the end of the reference period.
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Remuneration of the Managing Director
The following table presents the amount of remuneration and additional benefits payable to the Managing Director in 2022.
During this period, the Managing Director received remuneration for serving on the Supervisory Boards of: Polsin Overseas Shipping Ltd.
Sp. z o.o. and Proplan Plant Protection Company S.L.

Managing Director | 01.01 – 31.12.2022 | 01.06 – 31.12.2021
Short-term employee benefits | 817 | 1,019
Long-term Incentive Plan | 1,807 | -
TOTAL | 2,624 | 1,019

The Managing Director is employed under an employment contract which specifies the basic remuneration and the applicable rules of the
bonus system.
Remuneration of the Supervisory Board of CIECH S.A.

Short-term employee benefits | Remuneration due from | Remuneration due from
| CIECH S.A. in 2022 | CIECH S.A. in 2021
Sebastian Kulczyk | - 1 | - 1
Natalia Scherbakoff 2 | 510 | 39
Artur Olech | 1,607 | 447
Marek Kośnik | 1,554 | 476
Łukasz Rędziniak | 1,168 | 368
Martin Laudenbach | 1,003 | 209
Piotr Augustyniak 3 | - | 108
TOTAL | 5,842 | 1,647

1
From 1 April 2016, Chairman of the Supervisory Board, Mr. Sebastian Kulczyk does not receive any remuneration due to the waiver of the claim for
remuneration for the position of the Chairman of the Supervisory Board.
2
Appointed to the Supervisory Board on 26 October 2021.
3
On 16 March 2021, Mr Piotr Augustyniak resigned as Member of the Supervisory Board of CIECH S.A.
Members of the Supervisory Board are entitled to the gross monthly remuneration specified in the Resolution of the Annual General Meeting
of CIECH S.A. of 28 April 2022.
The Chairman of the Supervisory Board Committee is entitled to an additional gross monthly remuneration of 10% of the amount set out in
the aforementioned Resolution. Members of the Supervisory Board committee are entitled to an additional gross monthly remuneration of
5% of the amount set out in the aforementioned Resolution.
In 2022, the Supervisory Board Members additionally received individual awards based on the Resolution of the Annual General Meeting of
CIECH S.A. of 28 April 2022.
9.4 INFORMATION ABOUT AGREEMENTS CONCLUDED WITH THE ENTITY AUTHORISED TO
AUDIT THE CIECH GROUP’S CONSOLIDATED FINANCIAL STATEMENTS
The entity authorised to audit financial statements for the period from 1 January 2022 to 31 December 2022 was BDO Spółka z ograniczoną
odpowiedzialnością Sp. k. with its registered office in Warsaw. On 8 June 2022, CIECH S.A. signed an agreement with BDO Spółk a
z ograniczoną odpowiedzialnością sp. k. on the review of semi-annual and audit of annual financial statements for the years 2022 and 2023.
In 2022, BDO z ograniczoną odpowiedzialnością Sp. k. with its registered office in Warsaw and foreign members of the BDO netw ork were
also the auditors of the largest consolidated companies/subsidiaries of CIECH S.A., including CIECH Soda Polska S.A., SDC Group, Ciech Salz
Deutschland GmbH, CIECH Soda Romania S.A., CIECH Sarzyna S.A., CIECH Vitrosilicon S.A., CIECH Pianki Sp. z o.o.
The entity authorised to audit financial statements for the period from 1 January 2021 to 31 December 2021 was Deloitte Audyt Spółka z
ograniczoną odpowiedzialnością Sp. k. with its registered office in Warsaw. On 14 May 2020, CIECH S.A. signed an agreement wi th Deloitte
Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. on the review of semi-annual and audit of annual financial statements for the years
2020 and 2021.
Value of agreements concluded with BDO Spółka z ograniczoną odpowiedzialnością Sp. k (2022) and Deloitte Audyt Spółka z ograniczoną
odpowiedzialnością Sp. k. (corresponding period) is presented below:
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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| 31.12.2022 1 | 31.12.2021 1/2
CIECH S.A. |  |
Audit of the annual financial statements and review of the semi-annual financial statements | 682 | 623
Audit of the financial statements as at 30 September 2022 | 185 | -
Other attestation services | 20 | 45
TOTAL | 887 | 668
Consolidated subsidiaries of the CIECH Group |  |
Audit of the annual financial statements and review of the semi-annual financial statements | 1,848 | 2,347
Audit of the annual financial statements for 2021 | 281 | -
Other attestation services | 6 | 158
TOTAL | 2,167 | 2,505

1
The above amounts do not include additional costs, such as travel, accommodation and nourishment costs – additional costs may amount to a maximum of
approx. 10% of the agreement value.
2
The figures for the comparable period refer to agreements with Deloitte Audyt Sp. z o.o. Sp. k. who provided audit services in 2020-2021.
9.5 COMPOSITION OF THE GROUP
Accounting policy – Basis of consolidation
Subsidiaries are entities controlled by the Parent Company.
An investor, regardless of the nature of its involvement with an entity (the investee), determines whether it is a parent by assessing
whether it controls the investee.
An investor controls an investee if and only if the investor has all the following:
a) power over the investee;
b) exposure, or rights, to variable returns from its involvement with the investee, and
c) the ability to use its power over the investee to affect the amount of the investor’s returns.
An investor considers all facts and circumstances when assessing whether it controls an investee. The investor reassesses whether it
controls an investee if facts and circumstances indicate that there are changes to one or more of the aforesaid elements.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until
the date that control ceases.
When selecting entities for consolidation, the Management Board was guided by the criteria of significance of their financial data (according
to the concept assumptions of IFRS), for executing the obligation of an actual and reliable image of the material and financial situation, and
the financial result of the Group.
The total share of data of subsidiaries not covered by consolidation under the full method, due to their irrelevance, in relation to the total
values of the CIECH Group for the period from 1 January 2022 to 31 December 2022 does not exceed 1% of total consolidated assets of the
Group and 0.5% of consolidated net revenues from sales of goods and products and financial operations. The non-consolidated subsidiary is
Nordiska Unipol AB.
Aggregated data of associates and jointly-controlled companies which were not measured under the equity method for the period from 1
January 2022 to 31 December 2022 did not exceed 1% of the total consolidated equity of the CIECH Group.
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A list of fully consolidated companies and companies accounted for under the equity method is provided below:
Company name
Registered
office
Segment
Business
Share in
equity as at
31.12.2022 /
% of votes at
the GMS
Share in
equity as at
31.12.2021 /
% of votes at
the GMS
Parent company
CIECH S.A.
Warsaw
Soda, Agro,
Foams,
Silicates,
Packaging,
Other,
(Resins –
discontinued
operations)
Sales of chemical products manufactured by the CIECH Group
companies, sales of chemical products and semi-finished
products purchased from third-party producers, holding
activities, managing a portfolio of the Group's subsidiaries,
provision of support services (including in the area of sales,
purchases, finance, HR and the legal area) for the Group's
companies, financial service activities not elsewhere classified
(so-called intercompany loans) for the benefit of the Group's
companies.
-
-
Fully consolidated direct and indirect subsidiaries
CIECH Trading
Sp. z o.o.
Warsaw
Other
The company is preparing for the liquidation process,
operations are being phased out.
100%
100%
CIECH Soda
Romania S.A.
Ramnicu
Valcea,
Romania
Soda,
Silicates
Manufacture of other basic inorganic chemicals, wholesale of
chemical products. Production suspended in the Soda
Segment.
98.74%
98.74%
CIECH Vitrosilicon
S.A.
Iłowa
Silicates
Manufacture of other basic inorganic chemicals, manufacture
of other chemical products.
100%
100%
CIECH Vitro
Sp. z o.o.
1
Iłowa
Packaging
Manufacture of hollow glass, manufacture and processing of
other glass.
100%
100%
CIECH
Transclean Sp. z o.o.
Bydgoszcz
Other
Since 2017, the Company has not carried out any operating
activities.
100%
100%
CIECH Pianki
Sp. z o.o.
Bydgoszcz
Foams
Manufacture of plastics in primary forms and other plastic
products.
100%
100%
Ciech Group
Financing AB
Stockholm,
Sweden
Other
Financing activities.
100%
100%
Verbis ETA Sp. z o.o.
Warsaw
Other
General partner of Verbis ETA Sp. z o.o. SKA.
100%
100%
Verbis ETA
Sp. z o.o. SKA
Warsaw
Other
Financing activities, direct lending to the CIECH Group
companies.
100%
100%
CIECH Serwis i
Remonty Sp. z o.o.
Warsaw
Other
Provision of repair and maintenance services, repair and
maintenance of machinery.
100%
100%
CIECH
Nieruchomości
Sp. z o.o.
2
Warsaw
Other
Buying and selling of own real estate, estate agency, real
estate management.
100%
100%
Proplan Plant
Protection Company
S.L.
Madrid,
Spain
Agro
Production of crop protection chemicals.
100%
100%
CIECH Salz
Deutschland GmbH
Stassfurt,
Germany
Soda
Production and sales of salt products.
100%
100%
CIECH SERVICES
Sp. z o.o.
Bydgoszcz
Soda, Agro,
Foams,
Silicates,
Packaging,
Other
Provision of support services for companies of the CIECH
Group.
100%
100%
CIECH Ventures
Sp. z o.o.
Warsaw
Other
Holding activities, other financial activities.
100%
-
CIECH Sól Sp. z o.o.
Warsaw
Soda
Production and sales of salt products.
100%
-
CIECH
Nieruchomości
Rolne Sp. z o.o.
Warsaw
Other
Support activities for crop production, property management.
100%
-
CIECH Finance
Sp. z o.o.
Warsaw
Other
Implementing divestment projects concerning obsolete fixed
assets (property) and financial assets (shares in companies).
100%
100%
CIECH R&D Group
CIECH R&D Sp. z o.o.
Warsaw
Soda, Agro,
Foams,
Silicates,
Packaging,
Other
Research and developments activities, granting licenses to
the CIECH Group companies to use the trademarks: “Ciech”,
“Ciech Trading” and “Sól Kujawska naturalna czysta”.
100%
100%
Smart Fluid S.A.
Warsaw
Other
Research & Development.
52.83%
52.83%
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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Company name
Registered
office
Segment
Business
Share in
equity as at
31.12.2022 /
% of votes at
the GMS
Share in
equity as at
31.12.2021 /
% of votes at
the GMS
CIECH Soda Polska Group
CIECH Soda Polska
S.A.
Inowrocław
Soda
Manufacture of other basic inorganic chemicals, wholesale of
chemical products, power generation and distribution.
100%
100%
CIECH Cargo
Sp. z o.o.
Inowrocław
Soda
Freight transport services.
100%
100%
Cerium Sp. z o.o. w
likwidacji (in
liquidation)
Warsaw
Other
The company was liquidated on 31 August 2021.
-
100%
Gamma Finanse
Sp. z o.o.
3
Warsaw
Other
Financing activities.
100%
100%
El-Pomiar Sp. z o.o.
Inowrocław
Other
Repair and maintenance of electrical equipment.
94.23%
92.31%
CIECH Sarzyna Group
CIECH Sarzyna S.A.
Nowa
Sarzyna
Agro
Manufacture of resins, manufacture of pesticides and other
chemical products.
100%
100%
Verbis KAPPA
Sp. z o.o.
Nowa
Sarzyna
Agro
General partner of Verbis KAPPA Sp. z o.o. SKA, other financial
intermediation.
100%
100%
Verbis KAPPA
Sp. z o.o. SKA
Nowa
Sarzyna
Agro
Other financial intermediation.
100%
100%
Algete Sp. z o.o.
Nowa
Sarzyna
Agro
Granting CIECH Sarzyna Group companies the license for
using the trademark of “Chwastox” for the purpose of
business.
100%
100%
CIECH Agro Romania
S.R.L.
Ramnicu
Valcea,
Romania
Agro
Wholesale of chemical products.
100%
100%
SDC Group
SDC GmbH
Stassfurt,
Germany
Soda
Holding company for all SDC Group entities.
100%
100%
CIECH Soda
Deutschland
GmbH&Co. KG
Stassfurt,
Germany
Soda
Manufacture of other basic inorganic chemicals, wholesale of
chemical products.
100%
100%
Sodawerk Holding
Stassfurt GmbH
Stassfurt,
Germany
Soda
Holding activities.
100%
100%
Sodawerk Stassfurt
Verwaltungs GmbH
Stassfurt,
Germany
Soda
Management and financial activities.
100%
100%
CIECH Energy
Deutschland GmbH
Stassfurt,
Germany
Soda
Power generation and distribution.
100%
100%
Kaverngesellschaft
Stassfurt GbmH
4
Stassfurt,
Germany
Soda
Management and maintenance of gas caverns.
50%
50%
1
Number of shares / votes at the GMS attributable directly to CIECH S.A. — 39.41%, indirect share through CIECH Soda Polska S.A. — the remaining 60.59%.
2
Shares in the share capital acquired by CIECH S.A. – 99.18% and CIECH Soda Polska S.A. – 0.82%.
3
Shares in the share capital acquired by CIECH S.A. – 1.4% and CIECH Soda Polska S.A. – 98.6%.
4
Jointly-controlled company accounted for under the equity method.
As at 31 December 2022, shares in CIECH Soda Polska S.A., CIECH Sarzyna S.A., CIECH Pianki Sp. z o.o., CIECH Cargo Sp. z o.o., CIECH Vitrosilicon
S.A., CIECH Vitro Sp. z o.o., CIECH Soda Deutschland GmbH & Co. KG, CIECH Energy Deutschland GmbH and CIECH Salz Deutschland Gmbh,
who are guarantors of the term loan, revolving credit facilities and overdraft facilities, were pledged as collateral for financial liabilities on
account of the term loan, revolving facility and overdraft facilities.
9.6 INFORMATION ON THE IMPACT OF CLIMATE ISSUES ON THE OPERATIONS OF THE CIECH
GROUP
The impact of climate issues has been determined in accordance with management's current, obtainable and best estimates of the economic
conditions likely to occur in the foreseeable future. These estimates take into account the current knowledge of the potential wide-ranging
impacts of climate change (risks described in, amongst others, the Directors’ Report for the CIECH Group and CIECH S.A. for 2022, in Section
3.4). Operational plans and impairment tests take into account mitigating measures. Mitigating the threats associated with the effects of
climate change includes, among others Initiatives aimed at geographical and product diversification in the Agro segment, especially exposed
to the effects of drought. In addition, the Ciech Group invests in energy transformation, both in terms of improving the effectiveness of
currently used technologies and diversification of sources of energy acquisition in low and zero-emission solutions. These expenditures fall
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)
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within the Group's and the Company's long-term strategy of, among other things, achieving climate neutrality by 2040. The first stage
assumes a 33% reduction in CO
2
emissions from Scopes 1 and 2 by the end of 2026 compared to the baseline year of 2019
(https://ciechgroup.com/relacje-inwestorskie/o-ciech/strategia-grupy/). There were no significant impairment losses on non-
current/operating assets during 2022 (see Section 5 of these financial statements for details). There was also no need to recognise additional
provisions other than allowances and provisions which are recognised in the course of the Company's ordinary activities.
9.7 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE
RUSSIAN INVASION OF UKRAINE ON THE CIECH GROUP'S ACTIVITIES
The Russian invasion of Ukraine in February 2022 was an event that shattered the existing order of life in Europe known up to the outbreak
of the conflict. Russia's aggression against Ukraine has led to a collapse in Europe's energy order and stability and to previously unplanned
measures aimed at making European Union countries independent of the monopoly of Russian energy supplies. The conflict in Ukraine
resulted in a worsening of the adverse phenomena related to fluctuations and availability of raw materials.
In the first weeks after the outbreak of the conflict, the CIECH Group was confronted with unprecedented and unpredictable risks that had
a high impact on ensuring the operational continuity of individual production plants due to supply chain disruptions and the availability of
energy raw materials. In particular, this risk affected the Soda segment. Over time, the Group, through the crisis measures taken, has
contained the risk of shock and uncertainty due to the deterioration of availability and the increase in raw material prices. Looking ahead to
the past 2022, it became apparent that the armed conflict in Ukraine had an impact on all business segments of the Group, but that the
effects of the conflict on each segment varied.
Before a detailed analysis of the impact of the conflict in Ukraine on the individual segments is presented, it should be noted that, from the
very beginning of the conflict, the Management Board of CIECH S.A. has been monitoring the situation in detail and on an ongoing basis and
analysing various scenarios for the markets' reactions and administrative decisions and their impact on the Group. The Group seeks to
respond to developments on an ongoing basis.
The impact of Russia's invasion of Ukraine from the perspective of the operations of individual business segments of the CIECH Group is
presented below:
Soda Segment
Soda segment suffered the greatest impact of the conflict in the Group, through an increase in the price of energy inputs and a
deterioration in their availability. The inability to import anthracite from Russia, as a result of the economic sanctions in place since April
2022, resulted in the soda plants switching to the use of more expensive coke from Polish manufacturers. Coal deliveries continue and
are sourced from the existing suppliers, PGG and Węglokoks, however the terms of cooperation and deliveries have been renegotiated
due to the unprecedented increase in global market prices. The price of coal purchased has increased, but in view of the need to secure
the continuity of production of soda plants and ensure the availability of soda products to customers, the aspect of increased coal costs
has faded into the background. For gas, the level of risk increased to high for the Stassfurt plant. It was assumed that there would be
limitations in gas supply or even a stoppage of supply, which could have resulted in the soda plant and salt brewing plants in Stassfurt
halting production. However, by the end of 2022, the situation with raw materials had stabilised slightly and the risk of reduced gas
supplies and thus the need for the Stassfurt plant to reduce or suspend production had not materialised. Following significant increases
in the prices of energy inputs, resulting in an increase in production costs, the Group decided to react proactively to the fluctuating prices
of raw materials and renegotiated the prices of soda products with its customers along with the increase in the prices of these raw
materials (despite the fact that contracts were binding for the whole of 2022 and the commercial terms were set). Owing to the favourable
situation in demand, the Group was able to pass on to its customers the rising costs of soda products. As a result, the Soda Segment
delivered the highest revenues in the Group's history.
Agro Segment
For the Agro Segment, the impact of the Russian invasion of Ukraine was significantly lower than for the soda segment. The countries
involved in the ongoing conflict, i.e. Russia, Belarus and Ukraine, did not represent large markets for the products of the Nowa Sarzyna
plant. Also, raw materials (mainly active substances) and inputs necessary for the production of CIECH Sarzyna's crop protection products
were not sourced from these countries (the main purchase market for raw materials is Asia and manufacturers from India and China). The
unfavourable impact of the conflict in Ukraine for the company materialised due to the occurrence of an oversupply of cereals on the
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Agro Segment
Polish market in 2022. Large quantities of cereals from Ukraine entered the market, resulting in Polish farmers reducing the acreage of
their own crops and thus decreasing the demand for crop protection products from Nowa Sarzyna. An additional risk factor that weakened
the demand for crop protection products in the Agro Segment was unfavourable weather conditions (prolonged drought in the spring in
Poland and drought in Spain at the turn of spring and summer). However, the segment met its targets, owing to high demand at the
beginning of the year, even before the onset of Russia's invasion of Ukraine, and later at the end of the year when weather conditions
improved.
Foams Segment
The impact of the armed conflict in Ukraine on the Foams segment materialised in the form of uncertainty and fear of economic recession
for individual upholstered furniture manufacturers' customers. The segment experienced a decline in demand for upholstered furniture
and lower than expected demand for foams during 2022. The challenging demand situation was further exacerbated by high price pressure
from other foam manufacturers and price reductions. The Bydgoszcz plant took measures to maintain the level of margins earned and
meet the financial targets set for the segment.
Silicates Segment and Packaging Segment
For both of these segments, the detrimental phenomenon caused by Russia's invasion of Ukraine was a significant and unpredictable
increase in gas prices. In addition, both segments also saw increases in soda prices. As a result of increased prices for two key raw
materials, both segments experienced significant increases in production costs. The Silicates Segment was in a better position than the
Packaging Segment in the realities that occurred, as it was possible to raise prices for silicate customers in response to rising production
costs. Owing to such measures, CIECH Vitrosilicon has minimised the effects of rising production costs and passed them on to its
customers. Such measures were also supported by the level of demand in the silicate market. For th e Packaging Segment, the ability to
pass the effects of rising raw material prices on to customers was very limited. The purchasing capacity of individual customers has also
been further reduced by the high level of inflation in 2022 - a decline in purchases of headstone lamps and lanterns by end customers,
which had already been ongoing in previous years, was observed. Given the situation, the Packaging Segment focused its efforts on the
most efficient use of raw materials and sought to optimise their use at every stage of the production process. The segment was unable to
avoid, like other segments, price increases for its products, which offset, to a limited extent, the effects of rising raw material prices.
Strengthening IT infrastructure
Another threat that has emerged following the outbreak of conflict in Ukraine has been the increase in the risk of cyber-attacks. In this area,
the Group has, since the beginning of the conflict, when increased activity of hacker groups and attacks on information syste ms and resources
was observed, strengthened the security measures in place and performs continuous monitoring of unusual events, logs and operations.
These measures have been implemented as part of the IT security policy and information security policy.
Addressing financial risks
Another significant issue that affected the Group in connection with Russia's invasion of Ukraine is that prices in the financial markets,
including commodity prices, exchange rates and interest rates, become highly volatile.
In the wake of the ongoing conflict, prices of assets perceived as more risky also weakened, which translated into the depreciation of PLN
against, among others, EUR and USD. The Group has a significant exposure to the EUR/PLN exchange rate (total position of EUR -290.3
million) and a relatively low exposure to USD/PLN (total position of USD -7.6 million). In the short term, the weakening of the PLN against
the EUR led to an increase in negative valuations of derivatives contracted that are sensitive to the EUR/PLN exchange rate (forward and
CCIRS transactions), foreign currency credit facilities in EUR and trade payables in EUR, which was offset by an increase in the valuation of
loans granted in foreign currency, receivables and cash held in foreign currency and an increase in the expected value of future revenues in
foreign currency. Taking into account the hedging relationships regarding future revenues in foreign currencies, the impact of changes in the
EUR/PLN rate on the Group’s profit/loss is limited (the position affecting the current profit/loss is EUR 52.0 million). The valuation of
derivatives contracted did not involve any cash margin and an increase in the negative valuation of transactions did not have a negative
impact on the Group's current liquidity.
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Market interest rate risk in respect of the Group's term loans has been fully hedged with PLN IRS and CCIRS transactions entered into in May
2021 following the refinancing of the loan, therefore an increase in market interest rates would had a limited impact on the Group's cash
flows. The increase in interest rates drove up the cost of servicing short-term working capital funding (factoring and credit facilities) and lease
funding.
In addition, the CIECH Group enters into derivative transactions to hedge commodity risks, including regarding the sale of electricity, the
purchase of natural gas and CO
2
emission allowance units (EUAs). Due to significant changes in the prices of these raw materials, there were
significant changes in valuations of hedging transactions concluded. Due to the very high volatility in the pricing of commodity contracts for
gas and electricity and CO
2
, resulting in exceeding transaction limits, it was necessary to use cash collateral for some of the transactions,
which had a negative impact on the Group's current liquidity in the short term – at the end of December 2022, the amount of margin provided
in connection with open derivatives amounted to PLN 104.1 million.
Maintaining a secure financial position
The CIECH Group's liquidity situation was and continues to be stable, and the CIECH Group companies have sufficient cash and available
sources of financing to be able to meet their obligations on time, even if current cash flows deteriorate and access to new sources of financing
becomes limited. As at 31 December 2022, the Group held cash of PLN 685 million and limits available under committed credit facilities of
PLN 402 million. The Group had access to funds made available under committed facility agreements (syndicated facility agreement with a
total value of PLN 2,115 million) and additional sources of financing in the form of receivables factoring agreements, reverse factoring
agreements and overdraft facilities. The risk of default on repayment liabilities under the loan agreements or risk of loans being called in due
to failure to meet the level of ratios tested under the loan agreements has not materialised.
In the case of the syndicated facility agreement, the majority of the debt is of a long-term nature, with the short-term portion representing
principal repayment due on the end of June and December 2023 in the amount of PLN 187 million.
No indication of impairment
As at the date of these statements, the Group's analyses did not reveal any indications of a materially higher risk of impairment of property,
plant and equipment and intangible assets in use or investments in progress was found. However, due to the uncertainty associated with the
conflict and its further development and subsequent impact on the global economy, the measurement of individual balance sheet items,
including: fixed assets and intangible assets, inventories, receivables, measurement of financial instruments, provisions and liabilities, will be
closely monitored and it is not excluded that they may change in subsequent reporting periods.
It should be reiterated that the Management Board of CIECH S.A. monitors the situation related to the conflict on an ongoing basis and takes
measures to ensure the continuity of the Group's and its individual companies' operations and to maintain the assumed margin levels.
9.8 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE
COVID-19 CORONAVIRUS PANDEMIC ON THE CIECH GROUP'S ACTIVITIES
Throughout 2022, the CIECH Group did not experience any negative impact of the COVID-19 coronavirus on its ongoing operating activity.
The CIECH Group, individual Group companies and production plants operated smoothly.
None of the CIECH Group's business segments recorded negative events or incidents caused by the ongoing pandemic.
There were no instances of reduced or lost business continuity due to infections or employee absence at any of the CIECH Grou p’s production
plants.
As far as other areas of the CIECH Group's operations are concerned, also no adverse effects of the ongoing COVID-19 pandemic were
recorded during 2022.
9.9 EVENTS AFTER THE REPORTING DATE
• On 19 January 2023, the Extraordinary Shareholders’ Meeting of CIECH Nieruchomości Rolne Sp. z o.o. increased the Company's share
capital by PLN 200 thousand, i.e. from PLN 5 thousand to PLN 205 thousand through creation of 40,000 new, equal and indivisible shares
with a nominal value of PLN 50 per share. The right to subscribe for all 40,000 shares was granted to CIECH S.A., the sole shareholder of
the Company. Registration of the increase of the share capital by the court is pending.
• On 31 January 2023, Mr Mirosław Skowron tendered his resignation as Member of the Management Board of CIECH S.A.
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• On 31 January 2023, CIECH Salz Deutschland GmbH filed a lawsuit against EVATHERM AG at the Magdeburg District Court for the
payment of approximately EUR 20 million (including interest and legal costs). The lawsuit was filed due to improper performance of the
contract, delayed commissioning of the installation and problems with the operation of the installation and the production process at
the CSD evaporated salt plant located in Staßfurt, launched in 2021. For details, see current report No 4/2023.
• On 13 February 2023, a notice of intention to announce a tender offer to subscribe for the shares in CIECH S.A. issued by Santander
Bank Polska S.A. – Santander Brokerage Office on behalf of KI Chemistry SARL, the main shareholder of CIECH S.A., was published.
• On 9 March 2023, a notice was published on the announcement of a tender offer for the sale of shares in CIECH S.A. The acceptance of
subscriptions for shares under the Tender Offer will start on 10 March 2023 and will last until 12 April 2023. The expected date of
settlement of the share purchase transaction in the Tender Offer is 19 April 2023.
• On 10 March 2023 public aid in the amount of PLN 18,734.4 thousand PLN was granted to CIECH Soda Polska S.A. under the program
"Aid for energy-intensive sectors related to sudden increases in natural gas and electricity prices in 2022".
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REPRESENTATION BY THE MANAGEMENT BOARD
These consolidated financial statements of the CIECH Group for the financial year ended 31 December 2022 were approved by the Company’s
Management Board on 23 March 2023.
Warsaw, 23 March 2023
(signed on the polish original) (signed on the polish original)
Dawid Jakubowicz
President of the Management Board of CIECH Spółka
Akcyjna
Kamil Majczak
Member of the Management Board of CIECH Spółka
Akcyjna
(signed on the polish original)
Jarosław Romanowski
Member of the Management Board of CIECH Spółka
Akcyjna
Signature of person responsible for the preparation
of the financial statements
(signed on the polish original)
Katarzyna Rybacka
Chief Accountant of CIECH Spółka Akcyjna