22. Discontinued activity

The Group presents as discontinued operations the results and cash flows of a disposal group classified as held for sale or which has been disposed of if the group meets the following conditions:

• represents either a separate major line of business or a geographical area of operations,
• is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or
• is a subsidiary acquired exclusively with a view to resale.

The Group recognizes the impairment loss upon initial or subsequent revaluation of an assets (or a disposable group) to the fair value less disposal costs. The Group has estimated the fair value of the disposable group, as discussed in more detail below.

The Group estimates that transactions entered into by the Group with a subsidiary whose operations are classified as discontinued operations, made as part of its core operations will continue after the disposal of the subsidiary. Accordingly, revenues and expenses of Group companies arising from transactions with the disposable group are presented under the result from continuing operations, with a corresponding consolidation adjustment recognized under discontinued operations. In the Group’s opinion, other revenues and expenses, including financial expenses arising from the Group’s transactions with discontinued operations will not continue.

Discontinued operations represent the activities of the company previously classified within the Mining segment, which is related to the disposal by the Company of 100% of its shares in TAURON Wydobycie S.A. and consequently the loss of control by the TAURON Group over TAURON Wydobycie S.A., as described in more detail in Note 3 of consolidated financial statements.

Following the fulfilment on 4 November 2022 of the condition precedent contained in the contingent agreement on the sale of shares in TAURON Wydobycie S.A. concerning the execution of an increase in the share capital of TAURON Wydobycie S.A, in order to repay the indebtedness of TAURON Wydobycie S.A. to the Company, the Company assessed that the conditions under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations have been fulfilled in the scope of the classification of its activity as discontinued and the assets and liabilities of TAURON Wydobycie S.A. as a disposal group classified as held for sale.

Moreover, as at the date of recognition of the net assets of TAURON Wydobycie S.A. to the disposable group classified as held for sale, the Group measured it at fair value. The fair value was estimated at PLN 0. The transaction price of PLN 1 was determined following a valuation of TAURON Wydobycie S.A. shares carried out using the discounted cash flow method based on long-term financial projections covering the years 2022-2049 by an external, independent advisor. Due to the fact that the fair value of the disposable group was lower than its existing carrying amount, the Group recognized the impairment loss due to revaluation of the group classified as held for sale to the fair value. The total cost of writing down the net assets of the disposable group classified as held for sale to fair value amounted to PLN 460 million and reduced the value of non-financial fixed assets within the disposable group classified as held for sale.

The result on the loss of control of TAURON Wydobycie S.A. amounted to PLN 1 and was equal to the selling price. The net assets of the divested company, including the recognition of a write-down of non-financial fixed assets in the amount of PLN 460 million, as at the date of loss of control, i.e. 31 December 2022, amounted to PLN 0 are presented in the table below.