Ciech S.A.

Environmental & Social Information • Feb 7, 2020

Text of the report:

In reference to Current Report No. 48/2019 of 5December 2019, the Management Board of CIECH S.A. (hereinafter referredto as the"Issuer"or"CIECH"),herewith informs that on 7 February 2020, a term sheet was signed(hereinafter referred to as the"Term Sheet") and anagreement with regard to cooperation in the development of designdocumentation for the water and brine pipelines (hereinafter referred toas the"Agreement"and"Linear Infrastructure"respectively)between CIECH and Operator Gazociągów Przesyłowych GAZ-SYSTEM S.A.(hereinafter referred to as"GAZ-SYSTEM"). The TermSheet and the Agreement are related to the letter of intent signed on 5December 2019 by CIECH and GAZ-SYSTEM (hereinafter jointly referred toas the"Parties") with regard to their cooperation inthe implementation of an investment (hereinafter referred to as the"Investment")involving construction by GAZ-SYSTEM of a salt mine (hereinafterreferred to as the"Salt Mine"), with an undergroundgas storage facility (hereinafter referred to as the"Gas Storage")at the Damasławek salt dump, along with the Linear Infrastructure, andcooperation in the supply of brine to the CIECH Soda Polska S.A.production facilities (hereinafter referred to as"CIECH Soda Polska").The execution of the Term Sheet and the Agreement is yet another steptowards ensuring diversified sources of brine supply to the CIECH SodaPolska production facilities in the long term.

The agreement defines terms and conditions ofcooperation between the Parties in the preparation and conducting of atender procedure for the preparation of the Linear Infrastructure designdocumentation (hereinafter referred to as the"Design Documentation"),principles of co-financing the contract for the preparation of theDesign Documentation and supervision over the implementation of theDesign Documentation contract.

The assumptions of the Terms Sheet include, amongothers, the following:

1.1.conclusion of an investment agreementby the Parties (hereinafter referred to as the"Investment Agreement"),according to which GAZ-SYSTEM will implement the Investment togetherwith the Linear Infrastructure for the transport of brine to CIECH SodaPolska, while CIECH will co-finance the construction of the LinearInfrastructure. The Investment Agreement should be concluded after thefollowing conditions have been jointly met:

a.the location decision with regard tothe Linear Infrastructure has become final and effective,

b.the Parties have obtained the last ofthe required corporate approvals;

2.2.ensuring CIECH priority over any otherentities in terms of time and quantity of brine supplies, and thusenabling the achievement of the goal consisting in the diversificationof brine supply sources;3.conclusionof a contract by the Parties (hereinafter referred to as the"Contract"),in which the Parties will define, among others, terms and parameters ofbrine supply to CIECH Soda Polska, which may also be defined separatelyin the Investment Agreement, as well as the brine price. Pursuant to theassumption of the Term Sheet, the Contract will be concluded for aminimum period of 20 years, with the option provided to CIECH to extendit for another 15 years. The Contract should be concluded after theParties have entered into the Investment Agreement.

The amount of expenditure on the LinearInfrastructure will be defined in the Investment Agreement, amongothers, on the basis of the Design Documentation (hereinafter referredto as the"Expenditure"). The Investment Agreementwill specify the CIECH's financial share in the Expenditure (hereinafterreferred to as the"CIECH Contribution") and the formof the CIECH Contribution (equity and/or debt). On the Part of CIECH,the conclusion of the Investment Agreement will depend on, among others,obtaining corporate approvals required by the Articles of Association ofCIECH. The CIECH Contribution will be taken into account in the brineprice defined in the Contract. The estimated expenditure on the LinearInfrastructure, determined according to the current stage ofnegotiations, to be incurred by both Parties in the proportion set outin the Investment Agreement, may amount to approximately PLN 450million, with initial assumptions specified in the Term Sheet.

CIECH will make its contribution after certainconditions have been met, such as:1.conclusionof the Contract,2.securingthe CIECH Contribution, adequate to the construction schedule of theLinear Infrastructure,3.obtainingfinal and effective approvals/permits required by law to implement theInvestment or its relevant part,4.securingthe right of the Parties to reimbursement of expenses incurred by them,-to be specified in the Investment Agreement.

The Term Sheet defines the initial and estimatedInvestment implementation schedule. The Investment implementationschedule will be specified in the Investment Agreement on the basis of,among others, the Design Documentation and any documentation developedat the request of GAZ-SYSTEM with regard to the design of theconstruction of the Salt Mine and the Gas Storage.

The signing of the Term Sheet and the Agreement doesnot affect relationships with the existing business partners.