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16. Equity-accounted joint ventures
The Group holds interests in equity-accounted joint ventures, which include:
- Joint venture agreement between Grupa LOTOS S.A. and BP Europe SE on joint operations related to supply of aviation fuel through LOTOS - Air BP Polska Sp. z o.o.
- Agreement on cooperation between LOTOS Petrobaltic S.A. and CalEnergy Resources Poland Sp. z o.o. with respect to development and production of gas and condensate reserves from the B-4 and B-6 fields in the Baltic Sea, performed through special purpose vehicles Baltic Gas spółka z ograniczoną odpowiedzialnością i wspólnicy sp.k. and Baltic Gas Sp. z o.o. (general partner).
- Joint venture set up for the purpose of oil exploration and production operations in Lithuania, operated in the form of UAB Minijos Nafta.
For key information on equity-accounted joint ventures, see Note 2.
| The Group's ownership interest ownership interest | Carrying amount of (PLN '000) |
|||
|---|---|---|---|---|
| Dec 31 2015 | Dec 31 2014 | Dec 31 2015 | Dec 31 2014 | |
| Downstream segment | ||||
| LOTOS-Air BP Polska Sp. z o.o. | 50.00% | 50.00% | 16,274 | 14,551 |
| Upstream segment (LOTOS Petrobaltic Group) |
||||
| Baltic Gas Sp. z o.o. | 49.99% | 49.99% | 11 | 12 |
| Baltic Gas spółka z ograniczoną odpowiedzialnością i wspólnicy sp.k. (1) | 43.96% | 62.40% | 54,46 | 51,433 |
| UAB Minijos Nafta | 49.99% | 49.99% | - | 33,603 |
| Total | 70,745 | 99,599 | ||
(1) The ownership interests as at December 31st 2015 were determined based on the value of contributions made by individual partners relative to the sum of all contributions:
- Baltic Gas Sp. z o.o. (general partner) 0.001%, (December 31st 2014: 0.001%),
- LOTOS Petrobaltic S.A. (limited partner) 43.968% (December 31st 2014: 62.403%),
- CalEnergy Resources Poland Sp. z o.o. (“CalEnergy”) (limited partner) 56.031% (December 31st 2014: 37.596%).
The Group’s indirect ownership interest in Baltic Gas spółka z ograniczoną odpowiedzialnością i wspólnicy sp. k. (jointly-controlled entity) is 43.96% (December 31st 2014: 62.40%).
| PLN '000 | The Group’s share in the companies’ net profit or loss | |
|---|---|---|
| Year ended Dec 31 2015 |
Year ended Dec 31 2014 |
|
| Downstream segment | ||
| LOTOS-Air BP Polska Sp. z o.o. | 1,755 | 185 |
| Upstream segment (LOTOS Petrobaltic Group) |
||
| Baltic Gas Sp. z o.o. | (21) | (25) |
| Baltic Gas spółka z ograniczoną odpowiedzialnością i wspólnicy sp.k. (1) | (644) | (711) |
| UAB Minijos Nafta | (32,156) (2) | (23,914) (2) |
| Total | (31,066) | (24,465) |
(1) In the partnership agreement, the shares of each of the partners in the profit or loss of Baltic Gas Sp. z o.o. i wspólnicy sp.k. were defined as follows:
- Baltic Gas Sp. z o.o. holds a 0.001% share in profit and a 100% share in loss,
- LOTOS Petrobaltic S.A. holds a 50.9995% share in profit and
- CalEnergy holds a 48.9995% share in profit.
Accordingly, for IFRS purposes, Baltic Gas Sp. z o.o. i wspólnicy sp.k is an entity jointly controlled by the Group (equity-accounted joint arrangement under IFRS 11).
(2) Including an impairment loss on the interest in UAB Minijos Nafta of PLN 28,457 thousand (2014: PLN 21,983 thousand), see Note 16.1.
16.1 Change in shareholdings in equity-accounted joint ventures
Downstream segment
LOTOS – Air BP Polska Sp. z o.o.
| PLN '000 | Year ended Dec 31 2015 |
Year ended Dec 31 2014 |
|---|---|---|
| At beginning of period | 14,551 | 14,419 |
| Share in net profit/(loss) | 1,755 | 185 |
| Share in other comprehensive income/(losses), net (actuarial losses on post-employment benefits) | 16 | (30) |
| Share in losses on intra-Group transactions | (48) | (23) |
| At end of period | 16,274 | 14,551 |
Upstream segment (LOTOS Petrobaltic Group)
Baltic Gas Sp. z o.o.
| PLN '000 | Year ended Dec 31 2015 |
Year ended Dec 31 2014 |
|---|---|---|
| At beginning of period | 12 | 7 |
| Share capital increase | 20 | 30 |
| Share in net loss | (21) | (25) |
| At end of period | 11 | 12 |
Baltic Gas Sp. z o.o. i wspólnicy sp.k.
| PLN '000 | Year ended Dec 31 2015 |
Year ended Dec 31 2014 |
|---|---|---|
| At beginning of period | 51,433 | 51,796 |
| Increase in contributions | 3,671 | 348 |
| Share in net loss | (644) | (711) |
| At end of period | 54,46 | 51,433 |
In 2015, the expenditure on cash contributions made to Baltic Gas Spółka z ograniczoną odpowiedzialnością i wspólnicy sp.k. totalled PLN 3,878 thousand, of which PLN 207 thousand was attributable to contributions made in 2014 (2014: PLN 309 thousand). The expenditure on these cash contributions was presented in the statement of cash flows from investing activities under Cash contributions − equity-accounted joint ventures.
UAB Minijos Nafta
| PLN '000 | Year ended Dec 31 2015 |
Year ended Dec 31 2014 |
|---|---|---|
| At beginning of period | 33,603 | 63,576 |
| Dividends paid | (837) | (7,280) |
| Share in net loss: | (32,156) | (23,914) |
| - share in net loss of joint venture | (3,699) | (1,931) |
| - impairment loss on interests held in joint venture | (28,457) | (21,983) |
| Exchange differences on translating foreign operations | (610) | 1,221 |
| At end of period | - | 33,603 |
The interest held in UAB Minijos Nafta (the AB LOTOS Geonafta Group) were tested for impairment as at December 31st 2015 and as at December 31st 2014. The Group determined the recoverable amount of the tested assets as their value in use measured using the discounted future cash flows method.
The key assumptions underlying computation of the recoverable amount of the tested assets are consistent with the assumptions used to compute the recoverable amount of the Lithuanian production licences held by companies of the AB LOTOS Geonafta Group tested for impairment as at December 31st 2015 and as at December 31st 2014, see Note 15.1.2.
Following the impairment tests, in 2015 and 2014 the Group recognised an impairment loss on the interest held in UAB Minijos Nafta. In 2015, the impairment loss amounted to PLN 28,457 thousand (2014: PLN 21,983 thousand) and brought the cost of the project to zero. The impairment losses on the interest held in UAB Minijos Nafta are disclosed in the consolidated statement of comprehensive income under Share in net profit/loss of equity-accounted joint ventures.
16.2 Condensed financial information on equity-accounted joint ventures
Statement of comprehensive income
| PLN '000 | LOTOS-Air BP Polska Sp. z o.o. |
Baltic Gas Sp. z o.o. |
Baltic Gas Sp. z o.o. i wspólnicy sp.k. |
UAB Minijos Nafta |
|---|---|---|---|---|
| year ended Dec 31 2015 | ||||
| Revenue | 221,388 | - | - | 31,658 |
| Cost of sales | (197,125) | - | (626) | (33,124) |
| Gross profit/(loss) | 24,263 | - | (626) | (1,466) |
| Distribution costs | (15,175) | - | - | (824) |
| Administrative expenses | (4,476) | (42) | (730) | (5,144) |
| Net other income/(expenses) | (159) | - | - | 45 |
| Operating profit/(loss) | 4,453 | (42) | (1356) | (7,389) |
| Net finance income/(costs) | (101) | - | 68 | (164) |
| Pre-tax profit/(loss) | 4,352 | (42) | (1,288) | (7,553) |
| Income tax expense | (842) | - | - | 2 |
| Net profit/(loss) | 3,510 | (42) | (1,288) | (7,551) |
| Other comprehensive income/(loss), net | 32 | - | - | - |
| Total comprehensive income/(loss) | 3,542 | (42) | (1,288) | (7,551) |
| Depreciation/amortisation | (820) | - | (626) | (9,882) |
Statement of comprehensive income
| PLN '000 | LOTOS-Air BP Polska Sp. z o.o. |
Baltic Gas Sp. z o.o. |
Baltic Gas Sp. z o.o. i wspólnicy sp.k. |
UAB Minijos Nafta |
|---|---|---|---|---|
| Year ended Dec 31 2014 | ||||
| Revenue | 478,279 | - | - | 57,212 |
| Cost of sales | (457,504) | - | (626) | (47,228) |
| Gross profit/(loss) | 20,775 | - | (626) | 9,984 |
| Distribution costs | (15,849) | - | - | (1,088) |
| Administrative expenses | (4,347) | (50) | (615) | (14,488) |
| Net other income/(expenses) | 56 | - | (123) | (148) |
| Operating loss | 635 | (50) | (1,364) | (5,740) |
| Net finance income/(costs) | (137) | - | (58) | 289 |
| Pre-tax profit/(loss) | 498 | (50) | (1,422) | (5,451) |
| Income tax expense | (129) | - | - | 1,076 |
| Net loss | 369 | (50) | (1,422) | (4,375) |
| Other comprehensive income/(loss), net | (60) | - | - | - |
| Total comprehensive income/(loss) | 309 | (50) | (1,422) | (14,995) |
| Depreciation/amortisation | (779) | - | (626) | (10,900) |
Statement of financial position
| PLN '000 | Note | LOTOS-Air BP Polska Sp. z o.o. |
Baltic Gas Sp. z o.o. |
Baltic Gas Sp. z o.o. i wspólnicy sp.k. |
UAB Minijos Nafta |
|---|---|---|---|---|---|
| Dec 31 2015 | |||||
| Non-current assets | 10,698 | 1 | 125,589 | 66,077 | |
| Current assets, including: | 29,232 | 31 | 8,700 | 15,025 | |
| Cash and cash equivalents | 12,790 | 5 | 6,359 | 6,946 | |
| Total assets | 39,930 | 32 | 134,289 | 81,102 | |
| Non-current liabilities | 4,228 | - | - | 18,274 | |
| Current liabilities | 16,487 | 11 | 9,918 | 4,860 | |
| Total liabilities | 20,715 | 11 | 9,918 | 23,134 | |
| Net assets | 19,215 | 21 | 124,371 | 57,968 | |
| 50% | 49.99% | * | 49.99% | ||
| Share of net assets | 9,608 | 11 | 54,460 | 28,978 | |
| Impairment loss on shares | - | - | - | 28,978 | |
| Fair value measurement | 6,736 (1) | - | - | - | |
| Elimination of intra-Group transactions | (70) | - | - | - | |
| Interest in joint ventures | 16 | 16,274 | 11 | 54,460 | - |
Statement of financial position
| PLN '000 | Note | LOTOS-Air BP Polska Sp. z o.o. |
Baltic Gas Sp. z o.o. |
Baltic Gas Sp. z o.o. i wspólnicy sp.k. |
UAB Minijos Nafta |
|---|---|---|---|---|---|
| Dec 31 2015 | |||||
| Non-current assets | 11,598 | 1 | 97,869 | 122,455 | |
| Current assets, including: | 37,046 | 25 | 7,596 | 13,401 | |
| Cash and cash equivalents | 6,220 | 9 | 3,375 | 2,791 | |
| Total assets | 48,644 | 26 | 105,465 | 135,856 | |
| Non-current liabilities | 5,081 | - | - | 18,031 | |
| Current liabilities | 27,888 | 2 | 23,859 | 5,889 | |
| Total liabilities | 32,969 | 2 | 23,859 | 23,920 | |
| Net assets | 15,675 | 24 | 81,606 | 111,936 | |
| 50% | 49.99% | * | 49.99% | ||
| Share of net assets | 7,838 | 12 | 51,433 | 55,968 | |
| Impairment loss on shares | - | - | - | (22,365) | |
| Fair value measurement | 6,736 (1) | - | - | - | |
| Elimination of intra-Group transactions | (23) | - | - | - | |
| Interest in joint ventures | 16 | 14,551 | 12 | 51,433 | 33,603 |
* For IFRS purposes, Baltic Gas Sp. z o.o. i wspólnicy sp.k is an entity jointly controlled by the Group (equity-accounted joint arrangement under IFRS 11); see Note 16 above.
(1) PLN 6,736 thousand gain on fair value measurement of a retained interest in a previously controlled entity as at the date of loss of control.
For information on transactions with joint ventures in which the Group holds interests, see Note 36.1.
The Notes to the consolidated financial statements are an integral part of the statements.
(This is a translation of a document originally issued in Polish)
