Change of PGE’s rating by Fitch Ratings

The Management Board of PGE Polska Grupa Energetyczna S.A. (“PGE”, the “Company”), discloses that on January 13, 2025 Fitch rating agency (“Fitch”, the “Agency”) has downgraded long-term Issuer Default Rating (IDR) of PGE from BBB+ with stable outlook to BBB with stable outlook, PGE’s senior unsecured rating and senior unsecured rating of subsidiary PGE Sweden AB (publ) from BBB+ to BBB and national ratings: PGE from AA(pol) with stable outlook to A+(pol) with stable outlook and senior unsecured rating from AA(pol) to A+(pol).

Within the rating assessment Fitch agency did not assume a spin-off from PGE Group’s structure of conventional assets associated with mining and electricity generation from lignite and hard coal.

Fitch justifies the rating downgrade by projected increase of Company’s net leverage due to a high capex, allocated largely to energy transition. Additionally, in its report the Agency points out a weakening PGE's competitive position due to structural market changes, including the growth of renewables in electricity generation. As a consequence, Fitch expects decrease in volumes of PGE's lignite- and coal-fired power generation and reduced profitability of the Company, which is significantly affected by the fixed cost base of its lignite mines, given the lack of domestic regulatory mechanisms to cover these losses.

According to the Agency’s report, stable outlook reflects PGE's adequate projected net leverage and the solid share of regulated distribution and a gradually improving electricity generation mix, including investments in new CCGT units, onshore renewable energy sources and first offshore wind project.

The Management Board of PGE emphasises that the ratings downgrade, within the investment grade rating level, does not impact the current Company’s financing agreements and costs of debt servicing.

The full announcement of the Agency is available on the Fitch Ratings website.