Reserve capital results from statutory allocation of profits generated in previous reporting periods, from surplus of profit distribution in excess of the value of statutory allocations, as well as from merger of PGE S.A. with its subsidiaries.

According to regulations of the Commercial Code, joint stock companies are obliged to create reserve capital to cover potential losses. At least 8% of the profit for the reporting year recognized in the parent company’s separate financial statements is transferred to reserve capital, until this capital amounts to at least one third of the share capital. The part of reserve capital which amounts to one third of share capital can only be used to cover losses recognized in the separate financial statements and cannot be distributed for other purposes. The General Shareholders’ Meeting decides on the use of the reserve capital.

Reserve capital subject to distribution to shareholders amounted to PLN 7,342 million as at December 31, 2016 and to PLN 6,776 million as at December 31, 2015.