Signing of the Merger Plan with PGE Górnictwo i Energetyka S.A. and PGE Energia S.A.

The Management Board of PGE Polska Grupa Energetyczna S.A. (the “Company”, “PGE”) hereby informs about approval and signing on January 26, 2010 of the Merger Plan of PGE (the “Acquiring company”) with its subsidiaries PGE Górnictwo i Energetyka S.A. with its registered office in Łódź and PGE Energia S.A. with its registered office in Lublin (“Acquired Companies”). The Merger Plan is attached to this current report. In relation to the Merger, the share capital of the Acquiring Company shall be increased by the maximum amount of up to PLN 1,396,981,460 and it shall take place by way of issue of up to 139,698,146 shares with the nominal value of PLN 10 each, which shall be issued to the shareholders of the Acquired Companies, subject to regulations of art. 514 of the Commercial Companies Code, i.e. excluding the Acquiring Company as a shareholder of the Acquired Companies, that will not acquire its treasury stock in exchange for the shares of the Acquired Companies.At the same time the Management Board informs that on January 25-27, 2010 merger plans of PGE’s subsidiaries were signed in following business areas:- conventional energy (acquiring company is PGE Elektrownia Bełchatów S.A. witch its registered office in Rogowiec),- renewable energy (acquiring company is PGE Energia Odnawialna S.A. with its registered office in Warsaw),- energy retail sales (acquiring company is PGE Obrót S.A. with its registered office in Rzeszów),- energy distribution (acquiring company is PGE Dystrybucja S.A. with its registered office in Lublin.Signing of abovementioned merger plans is an element of realization of Consolidation Program in PGE Capital Group (the “Consolidation”), which aim is to streamline and simplify current organizational structure of PGE Capital Group to free the reserves and improve management model.As a result of merger of companies cost of licenses and costs of functioning of subsidiaries’ Management Boards and Supervisory Boards will be reduced. The Management Board of PGE estimates that immediate savings connected with mergers will amount to app. PLN 15m already in the first year, what fully covers all costs of this operation. It means that discounted direct savings from mergers of the companies exceed the connected costs by app. PLN 130m. Currently the intensive analytical works are being carried in order to estimate the savings resulting from further stages of Consolidation. The Management Board of PGE estimates that the potential savings can reach PLN 1bn within the 3 years following the completion of the Consolidation program.Merger of Acquiring Company and Acquired Companies will take place according to the procedure specified in art. 492 § 1 section 1 of the Code of Commercial Companies (Dziennik Ustaw 2000, No 94, pos. 1037 as amended) (the “CCC”) by way of a transfer of the whole property of Company’s being acquired to Acquiring company (merger via acquisition) in exchange for Acquiring Company’s shares which will be received by shareholders of Acquired Companies with taking into consideration regulation of art. 514 CCC i.e. excluding the Acquiring Company as a shareholder of the Acquired Companies, that will not acquire its treasury stock in exchange for the shares of the Acquired Companies (the “Merger”).The Acquired Companies are direct subsidiaries of PGE. The Company has 85% share in share capital of each of the abovementioned Acquired Companies.PGE Górnictwo i Energetyka S.A. is holding company managing capital group which includes main generation assets of PGE Capital Group (PGE Elektrownia Bełchatów S.A., PGE Elektrownia Turów S.A., PGE Elektrownia Opole S.A.) and two lignite mines (PGE Kopalnia Węgla Brunatnego Bełchatów S.A. and PGE Kopalnia Węgla Brunatnego Turów S.A.).PGE Energia S.A. is holding company managing capital group which includes among others PGE Zespół Elektrowni Dolna Odra S.A. and distribution companies and retail sale companies belong to PGE Capital Group.The Merger will take place in accordance with art. 11 of the Act dated 7 September 2007 on principles of acquisition of shares from the State Treasury in the process of consolidation of companies from the electric power sector (Dziennik Ustaw 2007 No. 191, item 1367, as subsequently amended).Legal ground: § 5 sec. 1 point 13 and §19 section 1 and 2 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).