Signing of an investment agreement with Ørsted regarding offshore wind projects

With regard to the current report no. 27/2019 dated October 22, 2019, the Management Board of PGE Polska Grupa Energetyczna S.A. (PGE) discloses that on February 10, 2021, relevant entities from PGE and Orsted group concluded an agreement, according to which the parties determined their share at 50% in two offshore projects developed until now by PGE: Baltica 2 (with potential capacity of approximately 1.5 GW) and Baltica 3 (with potential capacity of approximately 1 GW). The details of the agreement are provided below.

PGE Baltica 6 sp. z o.o., PGE Baltica 5 sp. z o.o. (subsidiaries of PGE) (the “Current Shareholders”), Orsted Baltica 2 Holding sp. z o.o. (“Orsted B2”), Orsted Baltica 3 Holding sp. z o.o. (“Orsted B3”), (subsidiaries of Ørsted Wind Power A/S (“OWPAS”), later jointly referred to as the “Investors”), Elektrownia Wiatrowa Baltica – 2 sp. z o.o. (“EWB2”) and Elektrownia Wiatrowa Baltica – 3 sp. z o.o. (“EWB3”) signed an investment agreement related to the Investors’ investment in the Baltica 2 and Baltica 3 projects (the “Investment Agreement”).

The Investment Agreement constitutes a legal framework for the establishment of a joint venture between PGE and OWPAS dedicated to the development, construction and operation of the Baltica 2 and Baltica 3 offshore wind power farms.

Under the Investment Agreement, the Investors agree to subscribe for newly issued shares in EWB2 and EWB3, representing 50% of the entire share capital and entitling the Investors to 50% of votes in the governance bodies of each company. Upon completion of the transaction (“Closing”), EWB2 and EWB3 will be joint ventures in which 50% of shares will be held by the relevant Current Shareholder and the remaining 50% of shares will be held by the respective Investor.

The total subscription price for the newly issued shares in EWB2 and in EWB3 will amount to the equivalent of PLN 657 million. In addition, the Investors may be required to make additional conditional contributions to each of EWB2 and EWB3, respectively, following execution of final investment decision and fulfilment of certain conditions.

Closing is conditional upon fulfilment of certain conditions precedent, including the consent by the President of the Office for Competition and Consumer Protection in Poland (Prezes Urzędu Ochrony Konkurencji i Konsumentów).

The Investment Agreement provides that the relevant parties will enter into a number of ancillary transaction documents at Closing. These documents include a shareholders’ agreement in respect of each of EWB2 and EWB3, respectively, as well as documents establishing rules with regard to joint management of the project which will regulate among others such matters as corporate governance of the joint ventures, obligations of the parties related to funding and providing provision of other support, restrictions regarding the transfer of ownership interests, and consequences of events of default and changes of control, provision of development services to the joint ventures and provision of shareholder loans.