On February 24th 2022, Russia attacked Ukraine, thereby initiating large-scale hostilities in Ukraine. The international community responded by introducing sanctions against Russia. As at the date of authorisation of these consolidated financial statements, it is not possible to predict how the armed conflict and the international response to the conflict will develop further.

The Group does not conduct any direct operations in Ukraine, Belarus or Russia.

The Group is closely monitoring developments on the ground and analysing its potential negative consequences. At present. it is not yet possible to reliably assess their impact on the Group’s business in the future or to estimate the impact on the future financial statements of the Group, as this is highly dependent on further development of the war in Ukraine, the reaction of the international community and their effect on the Polish economy and macroeconomic environment.

As at the date of authorisation of these financial statements, the Group did not observe any risk of interruption of the supply chain. The flow of the feedstock remains uninterrupted. The Group prepares for various scenarios, mainly through diversification of supplies from various directions, and the Group’s diversification efforts are an ongoing process. Operationally, the Group is ready to pursue various alternative operating schemes and the refinery, being one of the most modern refineries in Europe, is technologically capable of processing different types of crude.

In the past, the Group experienced a disruption of pipeline deliveries of crude oil from the Russian direction during the so-called „chloride crisis”, when deliveries were made by sea. The incident did not affect the continuity of production and the execution of sales contracts. The location of the Groups’ refinery significantly improves its flexibility in diversifying supply and distribution channels.

In addition, for March and April 2022, the Group planned lower demand for the feedstock due to the scheduled maintenance shutdown of the refinery. Supplies contracted for this purpose are secured and are being delivered.

The Group also holds mandatory reserves of its own and at the State Reserves Agency, which may be released when necessary, subject to approval by the state authorities, in order to secure supplies and thus ensure the country’s energy security.

As at the date of authorisation of these financial statements, the Group performs all its commercial contracts in a timely and uninterrupted manner.

The Group’s credit exposure to Ukrainian, Belarusian and Russian institutions and entities is immaterial. Large-scale operational disruptions that could potentially entail liquidity constraints for certain entities may also have an adverse impact on the credit quality of various actors along the supply chain. As part of the credit risk management process, the Group monitors on an ongoing basis market developments and information on its customers that could suggest a deterioration of their financial standing and adjusts the structure of credit limits when and as needed. Based on its analyses, the Group has not identified any need to update the assumptions used to assess the expected credit losses after the end of the reporting period and until the date of authorisation of these financial statements.

The events described above do not necessitate an adjustments in these consolidated financial statements of Grupa LOTOS S.A. for 2021. At present, the Group does not identify any indication that it may not be able to continue as a going concern as a result of this situation. At the same time, the Group is not able to reliably estimate its possible effects on future financial statements.

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