Receipt of the proposal of the terms and conditions for the acquisition of 100% of shares in PGE GiEK by the State Treasury

With reference to the current report no. 24/2021 of July 23, 2021 on Agreement regarding co-operation in spin-off of coal assets to National Energy Security Agency (“NABE”), PGE Polska Grupa Energetyczna S.A. (“PGE”, the “Issuer”) discloses that on July 14, 2023 PGE received from the State Treasury, represented by the Minister of State Assets, proposal of a non-binding document summarising terms and conditions for acquisition by the State Treasury of all shares held by the Issuer in PGE Górnictwo i Energetyka Konwencjonalna S.A. (Issuer’s subsidiary, “PGE GiEK”) constituting 100% of the share capital of PGE GiEK in order to set up NABE (the “Transaction”) (the “Document”).

The Document particularly includes proposed price for the acquisition of shares of PGE GiEK, key economical and legal terms for the realization of the Transaction, including key provisions of the preliminary sale agreement and the promised sale agreement as well as proposed mechanism of settling the intragroup debt of PGE GiEK towards the Issuer.

In accordance with the Document the sale price of shares of PGE GiEK (Equity Value) amounts to PLN 849 million (the “Sale Price”) on the basis of the Enterprise Value settled as at September 30, 2022 (settlement according to locked-box mechanism) and adjusted for the net debt.

The Document assumes that the debt of PGE GiEK towards the Issuer in amount of PLN 5.4 billion will be subject to repayment throughout 8-year period from the conclusion of the Transaction and the repayment of 70% of the debt will be secured by the guarantee of the State Treasury. The eventual debt existing at the date of the acquisition of shares of PGE GiEK by the State Treasury (if it occurs) will be repaid by NABE using the funds from the loan granted to NABE by banks within the Transaction.

Other intragroup settlements, particularly settlements regarding CO2 emission rights, are being pursued on ongoing basis and will not have impact on the Sale Price.

The Document does not constitute an offer or obligation to conclude any agreement.

The Document will be subject to further negotiations of PGE with the State Treasury, which aim will be final reconciliation and signing the Document summarising terms and conditions of the Transaction of acquisition of shares of PGE GiEK by the State Treasury. The Document will be signed only in case of completion of the negotiations by the State Treasury with all the companies, i.e.: PGE Polska Grupa Energetyczna S.A., Enea S.A., Energa S.A., TAURON Polska Energia S.A.

The Document is non-binding. PGE will analyse it in details. Potential acceptance of the proposal will depend on obtaining by the Issuer of necessary corporate approvals.

The Document agreed and signed by the parties will be a basis for submitting a request by the Minister of the State Asset to the Prime Minister for acquisition of the shares held by the Issuer in PGE GiEK and for obtaining other necessary approvals for realisation of the Transaction.

The core business of PGE GiEK is lignite mining and generation of electricity in conventional power plants. PGE GiEK consists of 5 conventional power plants with total installed capacity of approx. 12.85 GW and 2 lignite mines. Moreover, PGE GiEK is a holding company for other entities constituting the Conventional Generation segment of PGE Group that provide activities supporting the core business of PGE GiEK.