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Submission of the Conditional Investment Offer in Polska Grupa Górnicza sp. z.o.o.

  • No. of the report: 16/2016
  • Report date: 15.03.2016
  • Report legal ground: Art. 56 section 1 p. 1 of Act on Public Offering – confidential information

Contents of the report

The Management Board of PGE Polska Grupa Energetyczna S.A. (hereinafter “PGE”, “Issuer”) discloses that on March 15, 2016 has submitted the Conditional Investment Offer in Polska Grupa Górnicza (hereinafter “Conditional Offer”). As part of the Conditional Offer the Issuer has expressed interest in acquisition through the take up of stake in increased share capital of Polska Grupa Górnicza sp. z o.o. (hereinafter “PGG”) for a total amount up to PLN 500,000,000 (hereinafter “Investment”), on condition that a number of the below mentioned conditions set and conditions suspending the Investment are met, which is described below.
PGG is currently a subsidiary of Węglokoks S.A., that is to operate basing on selected mining assets to be acquired from Kompania Węglowa S.A. (hereinafter “KW”).

It is planned that PGG would acquire following organizational units of KW: KWK (hard coal mine) Chwałowice Division in Rybnik, KWK Jankowice Division in Rybnik, KWK Marcel Division in Radlin, KWK Rydułtowy-Anna Division in Rydułtowy, KWK Bielszowice Division in Ruda Śląska, KWK Bolesław Śmiały Division in Łaziska Górne, KWK Halemba-Wirek Division in Ruda Śląska, KWK Piast Division in Bieruń, KWK Pokój Division in Ruda Śląska, KWK Sośnica Division in Gliwice, KWK Ziemowit Division in Lędziny, Zakład Elektrociepłownie (CHPs Division), Zakład Górniczych Robót Inwestycyjnych (Mining Investments Works Division), Zakład Informatyki i Telekomunikacji (IT Division), Zakład Remontowo-Produkcyjny (Overhaul and Manufacturing Division) and “Corporate Center”.

The Conditional Offer has been prepared based on preliminary information regarding the activity of KW and PGG operations contained in documentation provided to the Issuer and includes conditions set and conditions suspending the participation of PGE in the Investment, which include i.a.:

1) Implementation of restructuring activities guarantying profitability of PGG business and generation of positive cash flow to equity, across all units of PGG, including reaching agreements with the social side, that will assure realization of restructuring assumptions,

2) Obtaining by PGG new external investors allowing for recapitalization amounting to at least PLN 1,500,000,000 (this amount includes PGE conditional involvement) and concluding investment agreements with other investors being involved in the Investment,

3) Business Plan of PGG will be prepared based on achievable assumptions which do not assume the need of further recapitalization of the company by PGE, in the horizon of at least year 2026,

4) Reaching the satisfactory structure of PGG financing – for both shareholders and bondholders, including PGE, that will – among others – exclude or minimize the risk, that the Investment is considered unlawful State aid,

5) Restructuring of KW debt, taken over by PGG, including negotiations of KW debt restructuring, that will be satisfactory for PGE and signing agreements that will provide stable long-term functioning of PGG,

6) Obtaining of required internal corporate acceptance,

7) Obtaining permissions of respective anti-trust authorities and permissions of other administrative bodies which are required by law.

The final decision of Issuer regarding the involvement in the Investment will take place following analysis of the due diligence results and after determining the final shape of the other arrangements. If approved, PGE will clarify the quota of involvement in the Investment and the final conditions for participation. PGE has reserved the right to indicate its subsidiary, which will finally acquire shares in the increased capital of PGG.

Conditional Offer does not constitute an offer within the meaning of art. 66 of the Civil Code and is only an expression of the will of accession to negotiations in good faith.

PGE in a current report will inform about the possible submission of a binding offer and its conditions, as well as about the decision on the acquisition of shares in PGG.
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