Ciech S.A.

Legal Proceedings Report • Sep 18, 2019

Text of the report:

With reference to Current Report No. 32/2019 of09.08.2019, the Management Board of CIECH S.A. with its registeredoffice in Warsaw (the "Issuer" or "Company")herewith informs that today the Board of Directors of CIECH Soda RomaniaS.A. based in Romania ("CSR"), due to:

1.-termination of the contract for thesupply of process steam (the "Contract") by CET Govora S.A. based inRomania in composition bankruptcy ("CET"), as a result of the expiry ofthe contract termination period, as informed by the Issuer in itsCurrent Report No. 23/2019 of 18.06.2019;

2.-failure to reach agreement between CSRand CET, as part of their Steam price negotiations, resulting in theabsence of a new Steam supply contract

3.-suspension of the supply of processsteam (the "Steam") to the CSR plant by CET;

4.-CSR's inability to conduct economicallyprofitable operations based on the Steam price offered by CET, due tothe negative impact of the proposed Steam price on CSR financial results,

adopted a resolution on the temporary suspension ofits soda ash production (the "Resolution") leading to thereduction of CSR production operations. The adoption of the Resolutionhas its rationale in the business, legal and factual conditions existingat the time of its adoption.

In connection with the temporary suspension of thesoda ash production at CSR, the Issuer and CSR will take measuresconcerning the ability to continue operations in Romania, including inparticular:

1.-conducting talks with CET on theresumption of Steam supplies;

2.-conducting an analysis of thepossibility of obtaining a new source of Steam at a reasonable cost andlong-term cooperation in the supply of other raw materials necessary forproduction (guaranteeing cost predictability in subsequent years);

3.-reviewing strategic options related toCSR.

In collaboration with the Issuer, CSR will continuework on preparing the concept of optimising the organisational and HRstructure of CSR and the Romanian Branch of the Issuer, adapting it tothe changed economic situation through, among others, a voluntaryredundancy programme, outplacement activities and an offer to relocatesome of the employees to other factories of the CIECH Group. In addition:

1.-a maintenance procedure will be carriedout and action plans and procedures related to the security of thetechnological process, production apparatus and equipment and other CSRassets will be implemented in order to make such resumption ofproduction the simplest in technical terms;

2.-a specialised technical analysis willbe prepared concerning conditions for launching production in the eventof prolonged outage;

3.-necessary notifications and changeswill be made, and necessary reports will be submitted, ensuing from thedecision, redundancies and concessions.

In the opinion of the Issuer, the temporarysuspension of soda ash production at the plant should not jeopardise theability to achieve the (Adj.) EBITDA result of more than PLN 900 millionin 2021, in accordance with the Strategy of the Group for 2019-2021, asannounced by the Issuer on 5 December 2018 in its Current Report No.34/2018. In the analyses, when developing the CIECH Group Strategy for2019-2021, the share of (Adj.) EBITDA of the Romanian business wasassumed to be less than 1% in the 2021 result of the CIECH Group. TheIssuer assumed that the Romanian business would be able to generate(Adj.) EBITDA of approx. PLN 25 million in 2019, with negative cashflows. The temporary suspension of production at CSR will not result inthe infringement of any obligations under the syndicated loansagreement, as announced by the Company, among others, in its CurrentReports Nos. 38/2015 of 30.10.2015 and 1/2018 of 9.01.2018, and therevolving credit facilities agreements, as communicated by the Companyin its Current Report No. 13/2019 of 18.04.2019.