Contents of the report
With reference to current report no 25/2016 dated April 26, 2016, the Management Board of PGE Polska Grupa Energetyczna S.A. („PGE”) discloses that on April 28, 2016, PGE Górnictwo i Energetyka Konwencjonalna S.A. („PGE GiEK”) – the subsidiary of PGE, signed the Investment Agreement determining the conditions of the financial investment (the “Investment”) in Polska Grupa Górnicza Sp. z o.o. (the „Agreement”)
The parties of the Agreement are: PGE GiEK, ENERGA Kogeneracja, PGNiG TERMIKA S.A., Węglokoks S.A. („Węglokoks”), Towarzystwo Finansowe „Silesia” Sp. z o.o. („TFS”), Fundusz Inwestycji Polskich Przedsiębiorstw FIZAN (jointly referred later to as the „Investors”) and Polska Grupa Górnicza Sp. z o.o. („PGG”). PGG will operate on the basis of selected mining assets, to be acquired from Kompania Węglowa S.A. (“KW”) (including 11 hard coal mines, 4 operational units and support, managing and supervisory functions of KW headquarters that will be transferred therewith).
The Agreement specifies the Investment conditions, including inter alia, conditions of PGG recapitalisation by the Investors, operating rules of PGG and corporate governance rules, including method of Investors’ supervision over PGG.
Recapitalisation of PGG in total amount of PLN 2,417 million, will take place in 3 tranches, within which PGE GiEK will pay a total of PLN 500 million, including:
- PLN 361.1 million within the first tranche (payable within 4 business days after signing of the Bond Issue Agreement by PGG). As a result of the first payment, PGE GiEK will have 15.7% in the share capital of PGG;
- PLN 83.3 million within the second tranche (up to November 3, 2016). As a result of the second payment, PGE GiEK’s share in the share capital of PGG will increase to 16.6%;
- PLN 55.6 million within the third tranche (up to February 1, 2017). As a result of the third payment, PGE GiEK’s share in the share capital of PGG will increase to 17.1%.
The particular tranches will be released, on the condition, inter alia, that terms of PGG bonds issue are not breached.
PGG shall function on the basis of the business plan, which aims at optimisation of coal production costs and achieving defined profitability levels. Business Plan assumes that in 2017 PGG will generate positive cash flows for the Investors.
The Agreement foresees several mechanisms allowing for on-going monitoring of the financial standing of PGG, including execution of Business Plan and taking further optimization measures, among others, in case of adverse changes in market conditions.
The Agreement assumes that each shareholder of PGG is entitled to appoint, recall and suspend one member of the Supervisory Board (individual rights).
Due to lack of control over the company, PGE does not plan to consolidate PGG under full consolidation method.
Legal ground: Art. 56 section 5 of the Act on public offering, conditions governing the introduction of financial instruments to organised trading, and public companies (Dziennik Ustaw 2013, item 1382, as amended).