In the previous reporting periods, the PGE Group recognized substantial impairment allowances of property, plant and equipment of Conventional Generation segment. In the current reporting period, the Group analysed impairment indications in order to verify whether there is a need to recognize further impairment of these assets or to reverse previously recognized impairment allowances.

The most important factors analysed, included:

• analysis of the execution of the financial plan in 2016,
• confirmation of validity of the investment plan,
• analysis of electricity prices included in the contracts concluded for the following years,
• analysis of accuracy of assumptions about the so-called capacity market, cogeneration support after 2018 and allocation of free of charge CO₂ emission rights,
• review of estimated margins on production and sale of electricity in the future periods, in the light of the most recent forecasts of electricity, coal and CO₂ emission rights prices.

The analysis shows that conventional power generating units execute the financial plan as intended. New forecasts of electricity, coal and CO₂ emissions rights prices that are available to the PGE Group do not cause a significant change in the forecasted margins. At the same time, according to the PGE Group the assumptions about the capacity market, cogeneration support and the volume of free of charge CO₂ emissions rights that were adopted in 2015 are also valid on December 31, 2016. In case of heat and power plant Szczecin, the Group is of the opinion that Enea’s termination of the contract for the supply of energy origin rights to this entity, as described in note 28.4, is ineffective and therefore the Group will assert in court to resume the contract or to obtain compensation. As a consequence, according to the PGE Group there are no indicators for further impairment of property, plant and equipment of Conventional Generation segment nor for reversal of previously recognized impairment allowances as at the reporting date.

Some of the significant regulatory assumptions adopted in the analysis mentioned above are beyond the control of the PGE Group and their realization in the future is uncertain. This concerns in particular issues related to the final shape of the Polish power market and its notification by the European Commission, cogeneration support after 2018 and allocation of free of charge CO₂ emission rights after 2020. In these areas, the PGE Group relies on its current assumptions as to further changes in regulations which are subject to risk. The change of these regulations in the future, in relation to the current expectations, may affect the valuation of the recoverable amount of power generating assets of Conventional Generation segment.