The ORLEN Group determines individual discount rates for each defined cash-generating unit (CGU) using the Capital Asset Pricing Model (CAPM). As of the date of impairment tests, i.e., 31 December 2022, market risks specific to the country and business segment were considered for each Cash Generating Unit (CGU) to reflect the ongoing market assessment of the time value of money and the risk associated with a particular group of assets. This consideration corresponds to the return that investors would require when deciding on an investment that would generate cash flows in the amount, timing and type of risk corresponding to the cash flows that the Group expects to obtain from a given CGU.

As at 31 December 2022, the ORLEN Group applied variable discount rates, which took into account the anticipated changes in interest rates on 10-year government bonds for the countries that were analysed.

This approach is intended to reflect the expected decrease in the risk-free rate in the coming years, resulting, among other things, from forecasts of a decline in the inflation rate.

As at 31 December 2022, the ORLEN Group estimated the following main after-tax discount rates for the years 2023-2028 (the fixed discount rates calculated for 2028 was used for subsequent years):

To determine the value in use, the ORLEN Group used the comparable companies method to calculate the discount rates as at 31 December 2022, which were based on the weighted average cost of equity and debt. To estimate the cost of capital and cost of debt, the ORLEN Group obtained macroeconomic indicators, such as beta and D/E, from sources including the Bloomberg website and publications by Prof. Aswath Damodaran (source: http://pages.stern.nyu.edu), and used publications by the Energy Regulatory Authority and quotations of 10-year government bonds available as at 31 December 2022 as sources for the ENERGA Group's business.

For the initial five years, the ORLEN Group applied a discount rate that takes into account the estimated variable risk-free rate, which was based on the yield curve of 10-year bonds.

Starting from 2028, the ORLEN Group estimated the risk-free rate as the sum of the inflation target for a specific country and the average spread for the period of 2007-2020 between the historical yield of 10-year bonds and historical inflation for that country.

As a result, the applied discount rates take into consideration the anticipated impact of projected interest rates on impairment tests.

The market risk premium was estimated based on Prof. Aswath Damodaran's publications (source: http://pages.stern.nyu.edu) and available publications of financial institutions.

As at 31 December 2022, the discount rates for determining the fair value less costs to sell of production assets in Canada were determined for each production area, within a range of 13% to 17.6%.

As at 31 December 2021, the ORLEN Group estimated the following main after-tax discount rates:

To determine the value in use, the ORLEN Group used the comparable companies method to calculate the discount rates as at 31 December 2021, which were based on the weighted average cost of equity and debt. To estimate the cost of capital and cost of debt, the ORLEN Group obtained macroeconomic indicators, such as beta and D/E, from sources including the Bloomberg website and publications by Prof. Aswath Damodaran (source: http://pages.stern.nyu.edu), and used publications by the Energy Regulatory Authority and quotations of 10-year government bonds available as at 31 December 2021 as sources for the ENERGA Group's business. The market risk premium was estimated based on Prof. Aswath Damodaran's publications (source: http://pages.stern.nyu.edu) and available publications of financial institutions.

As at 31 December 2021, the discount rates for determining the fair value less costs to sell of production assets in Canada were determined for each production area, within a range of 11% to 16.4%.