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Conclusion of an agreement for the construction of CCGT unit in Gorzów CHP and of gas supply contract

  • No. of the report: 94/2013
  • Report date: 03.10.2013
  • Report legal ground: Art. 56 section 1 p. 2 of Act on Public Offering – current and periodic information

Contents of the report

The Management Board of PGE Polska Grupa Energetyczna S.A. („PGE”) informs that on October 3, 2013 PGE Górnictwo i Energetyka Konwencjonalna S.A. („PGE GiEK”), a subsidiary of PGE, concluded an agreement for the construction of a combined cycle gas turbine unit (“CCGT unit”) in Branch Elektrociepłownia Gorzów (“Gorzów CHP”) and for the provision of maintenance services with the consortium of Siemens Sp. z o.o. and Siemens Industrial Turbomachinery AB ("Siemens Consortium").

According to the provisions of the agreement, CCGT unit with a capacity of 138 MWe and 90 MWt and 83.93% operating efficiency in co-generation will be commissioned within 28 months from the award of the contract. The net value of the contract for unit construction amounts to PLN 562 million. This will be a base unit for electricity and heat generation for needs of Gorzów Wielkopolski municipality and will replace currently used hard coal-fired installations.

The profitability of the investment project has been provided mainly through access to local sources of natural gas, what enables local synergies and much lower gas prices as compared to tariffs.

Therefore, on October 3, 2013 PGE GiEK also concluded the agreement for the supply of natural gas ("Agreement") with Polskie Górnictwo Naftowe i Gazownictwo S.A. ("PGNiG"). Its subject matter is sale of nitrogen-rich gas extracted from PGNiG deposits to the new CCGT unit in Gorzów CHP. The agreement is concluded for a period of 20 years from the date of commencement of gas supply, which is dependent on the commissioning date of the new unit. The annual volume of supply will amount to 281 million m3 per year.

The estimated net value of the Agreement as at the signing date amounts to approximately PLN 3 billion. The Agreement meets the criteria of the material agreement since its value exceeds value of 10% of the PGE’s equity.

The agreement provides for contractual penalties, which maximum amount may exceed the

PLN equivalent of EUR 200,000, including penalties for failure to collect the minimum annual amount of gas and for the necessity to terminate the Agreement due to non-performance or improper performance of the significant obligations by the buyer. If the contractual penalties provided for in the Agreement do not cover any damage suffered, either party may claim additional compensation in excess of these penalties, but only within the limits of the actual loss, except for loss of profit.

Legal ground: § 9 in connection with § 5 section 1 point 3 of the Regulation of the Minister of Finance dated February 19, 2009 on current and periodic information published by issuers of securities and on conditions under which such information may be recognized as being equivalent to information required by the regulations of law of a state which is not a member state. (Dziennik Ustaw of 2009, No. 33, item 259, as amended).