PGE Polska Grupa Energetyczna S.A.

Management Reports • Jun 12, 2025

Report Content Adoption of the new PGE Group's Strategy for 2035

The Management Board of PGE Polska Grupa Energetyczna S.A. (the"Company", "PGE") informs that on June 12, 2025 a PGE Group's Strategyuntil 2035 (the "Strategy") was adopted and its motto is "Energy for asafe future".

The Strategy was developed in response to the increasing marketvolatility, unpredictability of the environment, the need forresponsible transition of the sector and challenges related torealisation of energy megaprojects and is based on three main pillars:

1. energy security understood as system's stability and uninterruptedenergy supplies thanks to smart grid infrastructure, modern generationsources and energy storage facilities;

2. increasing competitiveness of the Polish economy and lower costs ofelectricity thanks to due to investments in renewable energy sources,modern models of co-operation with Customers and increasing share oflocal content,

3. shareholders value creation with fair relations with employees, localcommunities and in line with the ESG rules.

Within the Strategy which determines flexibility as the main growthdriver, the PGE Group assumes change of operating profit structure insuch way that - beside regulated segments and energy from RES - newsegments of flexible gas capacities and energy storage facilities willhave a larger contribution what will translate into EBITDA growth fromPLN 11 bn in 2024 to PLN 17 bn in 2030 and PLN 30 bn in 2035.

The Strategy assumes total capital expenditures of PLN 235 bn, includingPLN 175 bn for development and maintenance, PLN 39 bn for acquisitionsand PLN 21 bn for additional investment options. Within the above amount39% of expenditures will be allocated for tariff-based investments, 22%for offshore wind farms with Contracts for Difference and 39% forinvestments justified by other support schemes with possibility toachieve additional profitability from energy and balancing capacitiesmarkets. As part of the investment program PLN 75 bn of expenditureswill be dedicated to the distribution development, PLN 85 bn foroffshore and onshore renewable energy, PLN 37 bn for new segment offlexible gas generation, PLN 14 bn for energy storage and PLN 18 bn fordistrict heating segment.

As a result of implementation of the Strategy the risk profile ofoperations will improve and PGE Group assumes efficient use of externalfinancing while improving the investment grade rating. Projected ratioof net financial debt to EBITDA will allow for meeting the covenants incurrent financing agreements.

The Strategy assumes return to regular dividend payments is foreseenafter reaching recurring net profit, perspective of positive free cashflows for a minimum of 2 years, maintaining investment grade rating andlack of one-offs with significant impact on cash flow.

Key assumption of the Strategy is maintaining the role of the leader inmodern energy through implementation of strategic ambition to achieve aleading position in 8 strategic leadership areas presented below:

1. Reliable distribution

Realisation of the investment outlays at the level of PLN 75 bn allowingthe growth in connection capacities for new RES by 11 GW (+125%) and by12 GW (+14%) for new off-takers with the simultaneous decline in SAIDIby 30% in relation to the average from years 2019-2024. The financialresult will be more than two-time increase in Regulatory Assets Base toPLN 57 bn and increase of EBITDA to PLN 10 bn.

2. Energy from RES

Implementation of investment program valued at PLN 85 bn translatinginto growth of installed capacity in onshore and offshore wind energy,photovoltaics and hydro power plants to more than 9 GW (taking intoaccount projects in joint venture model with partners) that will allowfor growth in annual electricity sales volume from renewable energysources to 28 TWh and EBITDA of more than PLN 10 bn.

3. Flexible gas capacities

Program of construction of up to 10 GW in flexible, low-emissiongas-fired power plants (ready to conversion to zero-emission fuels),including 4 GW in CCGT technology and 6 GW in OCGT technology willrequire capital expenditures in amount of PLN 37 bn. Investment programis divided in two stages: a) realisation of projects amounting to 5.1 GWin capacity planned for commissioning by 2030 based on current capacitymarket mechanisms, b) further 4.9 GW realised in years 2020-2035dependant on evolution of support schemes in Poland. Targeted EBITDA ofthe segment is at the level of PLN 7 bn.

4. Energy storage

Strategic objective is achieving 18 GWh of energy storage capacity, whatwill translate into approx. 60% market share. Investment expendituresassumed at the level of PLN 14 bn (including 50% of Młoty pumped storageplant project financing) are aimed at reaching targeted capacity of 10GWh in pumped storage power plants and 8 GWh in chemical energy storagefacilities what should translate into EBITDA growth to PLN 2.1 bn.

5. Clean district heat

Planned investment expenditures at the level of PLN 18 bn (including PLN3 bn for grid acquisitions and further modernisation thereof) are toresult in lowering of CO2 emissions by 60% vs 2021 and development ofenergy-efficient heating systems (also in co-operation withmunicipalities) and integration of district heating with electric powersector for greater system flexibility what will allow for achievingannual EBITDA of PLN 2.8 bn.

6. Responsible transition

Realisation of responsible transition through respecting the employees'and local communities dialogue rules, efficient assets management whilekeeping the country's energy security. As part of coal assetstransition, for which expenditures of PLN 5.0 bn are expected, a fullco-operation with the transmission grid operator is declared, as well asuse of certain locations to pursue development projects and involvementof experienced staff in other business segments and revitalisation ofpost-plants areas. In nuclear energy area expenditures of approx. fewhundred millions PLN solely for conducting necessary research andanalyses in 3 potential locations - Bełchatów, Turów and possibly Konin.

7. Offer for business Partners

PGE Group's offer is a response to expectations of business Customers bycomplex meeting their needs related to efficient management ofelectricity and heat consumption profile what will allow for loweringthe exposure for prices volatility and ultimately will make it possibleto decrease the costs. Co-operation shall consist of enabling activeparticipation of Partners in the energy market and balancing capacitiesmarket and its scope also covers prosumer solutions (generation sources,energy storage facilities, DSR - Demand Side Response), energy servicesand advisory support.

8. Quality of Customer service

The highest standard of PGE customer services provides for security ofenergy supplies, enabling participation in energy transition,accessibility of user-friendly contact channels and possibility to buyadditional services. The objective is maintaining Customer SatisfactionIndex at the level of 85 points and integration and accessibility ofremote channels and stationary Customer service points and effectiveintegration of communication channels thanks to the advanced digitalsolutions.

The Management Board of PGE assumes that in the new Strategy horizonstable financial situation of the Group will support the country'senergy security and partner co-operation with Polish and internationalfinancial institutions will enable significant increase of projectfinance in investments realisation. Additionally, PGE intends toeffectively use the opportunities for obtaining preferential financing,including National Recovery and Resilience Plan and aid funds.

In the Management Board's opinion the realisation of the Strategy andconsistent appliance of disciplined investment policy assuming minimalreturn on investments at the level of 7.5% (apart from projects withsecured revenue side in form of Contracts for Difference or PowerPurchase Agreements for which this requirement may be lowered) willtranslate into significant Group's value growth.

The Management Board of the Company informs that the presentation on theStrategy will be published on the PGE website.

Alternative Performance Measures used in the Strategy:

EBITDA - Earnings before interest, taxes, depreciation and amortisation

NetDebt / EBITDA - Financial net debt ratio - Consolidated short-termand long-term financial debt (adjusted for financial debt from ProjectFinance transactions) reduced by cash and cash equivalents, short-termdeposits and restricted cash (excluding cash and cash equivalentspossessed by companies pursuing Project Finance transactions) inrelation to the consolidated 12M EBITDA.

IRR (Internal Rate of Return) - the interest rate at which the presentvalue of the cash inflows from the investment equals the present valueof the outflows

RecEx net - Ratio of net reclamation expenses - difference betweenreclamation costs of generation assets and revenues from sale ofliquidated assets.