6.1. Group's structure

SELECTED ACCOUNTING PRINCIPLES

 Principles of consolidation

The consolidated financial statements of the Group include assets, liabilities, equity, income, expenses and cash flows of the Parent Company and its subsidiaries that are presented as those of a single economic entity and are prepared as at the same reporting period as separate financial statements of the Parent Company and using uniform accounting principles in relation to similar transactions and other events in similar circumstances.

The subsidiaries are consolidated using full consolidation method, non-controlling interests shall be presented in the consolidated statement of financial position as noncontrolling interest, separately from the equity of the owners of the Parent Company. Joint operations by recognition of respective share in assets, liabilities, revenues and cost.

The joint ventures as well as investments in associates are accounted for under equity method. The Group's share in profit or loss of the investee is recognized in the Group's profit or loss as other operating activity. For investments in associates - the Group has a significant influence if it holds, directly or indirectly (i.e. through subsidiaries), from 20% to 49% of the voting rights of an entity, unless it can be clearly stated otherwise.

PROFESSIONAL JUDGEMENTS

Investments in subsidiaries and jointly controlled entities

The Group, regardless of the nature of its involvement in the entity (the entity in which it invested) defines its status by assessment, whether it controls the entity in which the investment was made, and whether it has a joint control in a joint venture, after consideration of all the facts and circumstances.

PKN ORLEN as the Parent Company is a multi-segment entity, appropriately allocated to all operating segments and corporate functions.

¹From 01.01.2017 UNIPETROL RPA, s.r.o.
²In 2016, the Company accounted for under equity method, in 2017 consolidated using the full consolidation method, detailed information in note 6.2.

Activity of core companies belonging to ORLEN Group

6.2. Changes in shareholder structure of the ORLEN Group

^*Date of transaction means the date of entry to the court register.

Changes in the Group structure are an element of the strategy, assuming a focus on core activities and allocating the resulting available capital for development of the Group in the most prospective areas.

STRUCTURED ENTITIES

ORLEN Capital AB

The company’s business is raising funds through the issuance of bonds and other financial instruments for institutional and private investors. ORLEN Capital AB specializes in granting borrowings or loans to Group companies and conduct any other activities related to the financial instruments. On 30 June 2014 and on 7 June 2016 ORLEN Capital AB issued Eurobonds with 7-year redemption of approximately of PLN 5,214 million translated using exchange rate as at 31 December 2017 (representing EUR 1,250 million).The funds obtained by ORLEN Capital through the issue were transferred to PKN ORLEN under the borrowing agreement. PKN ORLEN is the guarantor of the both issued bonds by an irrevocable and unconditional guarantees issued to the bondholders of PLN 8,759 million  translated using exchange rate as at 31 December 2017 (representing of EUR 2.1 billion). The guarantees were granted for the time of the Eurobonds issues, until 30 June 2021 and 7 June 2023, respectively.

ORLEN Finance AB

The company’s business is to conduct financial services within the ORLEN Group, including intercompany borrowings, as well as any other financial instruments. In the 2nd half of 2017, were commenced operations leading to the liquidation of the company.

ORLEN Insurance Ltd.

ORLEN Insurance is an internal insurance company (i.e. captive), which main purpose is insurance and reinsurance the Group's business, matching insurance to the individual needs of its property and the potential loss of margin.