The Court of Appeal in Warsaw dismissed the appeal of the ERO President regarding the settlement of value of annual adjustment of the stranded costs (so-called LTC compensations) for 2008 for Turow PP

The Management Board of PGE Polska Grupa Energetyczna S.A. discloses that on April 24, 2012 the Court of Appeal in Warsaw dismissed the appeal of the President of the Energy Regulatory Office (the “ERO President”) against a judgement of the Regional Court in Warsaw – the Court of Competition and Consumer Protection (the “CCCP”) regarding the settlement of value of annual adjustment of the stranded costs for 2008 for Turów Power Plant due as a result of the termination of long-term contracts of sale of capacity and electricity (so-called “LTC compensations”). The judgement is final and binding. However the ERO President is entitled to file a cassation appeal with the Supreme Court.

The total claim value of disputes concerning LTC compensations for 2008 due to generators from the PGE Capital Group, calculated as a difference between the amount of annual adjustment calculated by the companies and the amount settled by the ERO President in decisions, amounts to PLN 434.7 million. The claim value in the Turów Power Plant case was PLN 164.5 million.

Description of the case:

On July 31, 2009, the ERO President issued six decisions in relation to some generators from the PGE Capital Group, i.e. PGE Elektrownia Opole S.A., PGE Elektrownia Turów S.A., PGE Zespół Elektrowni Dolna Odra S.A., PGE Elektrociepłownia Rzeszów S.A., PGE Elektrociepłownia Lublin – Wrotków Sp. z o.o., PGE Elektrociepłownia Gorzów S.A., concerning the annual adjustment of stranded costs due under the Act of June 29, 2007 on the principles of compensating for generators’ costs arising in connection with the early termination of long-term contracts for the sale of capacity and electricity (Dz. U. of 2007 No. 130, Item 905, as amended). Pursuant to the decisions mentioned, the above companies were obliged to return amounts indicated in the decisions to Zarządca Rozliczeń S.A. or were given lower adjustments than expected. The companies from the PGE Capital Group appealed against the decisions of the ERO President to the CCCP. On May 26, 2010 the CCCP changed decisions of the ERO President in accordance with the appeals filed by the generators from the PGE Capital Group. The ERO President appealed against those judgements.

Until the date of this report, the Court of Appeal issued following verdicts in cases regarding the settlement of value of annual adjustment of the stranded costs for 2008:

- dismissal of the appeal by the ERO President in case of Elektrociepłownia Rzeszów on February 2, 2012 (current report no 3/2012 dated February 2, 2012);
- allowance of the appeal by the ERO President in case of Elektrociepłownia Lublin-Wrotków on March 7, 2012 (current report no 9/2012 dated March 8, 2012);
- repealing of the verdict of the Court of Competition and Consumer Protection in case of ZEDO and remittance of the case for re-examination by the Court of Competition and Consumer Protection on March 12, 2012 (current report no 10/2012 dated March 12, 2012);
- dismissal of the appeal by the ERO President in case of Elektrociepłownia Gorzów on March 27, 2012 (current report no 13/2012 dated March 27, 2012).

Generators from the PGE Capital Group are in similar disputes with the ERO President regarding stranded cost compensations for 2009 and 2010. These cases have not been settled yet.

Legal ground: Art. 56 section 1 point 1 of the Act on public offering, conditions governing the introduction of financial instruments to organised trading, and public companies (Dziennik Ustaw 2009 no 185, item 1439, as amended).