Enea S.A. — Environmental & Social Information 2019

Dec 13, 2019

Current Report No.: 36/2019

Date of preparation: 12 December 2019

Short name of issuer: ENEA S.A.

Subject: Approval of ENEA Capital Group's Development Strategy until2030 with the perspective towards 2035

Legal basis: Article 17 item 1 of MAR - confidential information

Content of report:

The Management Board of ENEA S.A. ("Company", "ENEA") hereby informsthat pursuant to the resolution of ENEA S.A. Supervisory Board of 12December 2019 regarding the approval of the document "ENEA CapitalGroup's Development Strategy until 2030 with the perspective towards2035" ("Strategy"), the Company adopted the Strategy for implementationon the same day.

As a responsible resources and energy conglomerate, ENEA Capital Group,in order to meet global challenges, assumes to conduct its operations ina sustainable manner while at the same time minimising its environmentalimpact.

Pursuant to the new mission: "ENEA provides reliable products andservices to its Customers by building lasting relationships based onrespect for the environment and shared values"

Given: (i) significant changes in the environment closer to and furtheraway from the company and the fuel and energy sector, both in terms ofregulation and the market; (ii) swift technological progress in allareas of the value chain, mainly solutions for renewable and dispersedenergy sources; (iii) respect for the natural environment and supportfor the climate objectives of the European Union, ENEA Capital Group hasupdated its development directions. The key development directions are:

1) Transformation of generation assets towards zero- and low-carbonsources;2) Innovative services for ENEA Customers;3) Moderncommunication and models of cooperation with the Customer;4)Electromobility, hydrogen technologies;5) Smart Grid - smartsolutions for Customers;6) Automation, robotization and digitisationof processes;7) Internet of Things, Artificial Intelligence,Blockchain;8) Energy storage;9) Fuel sourced in accordance withbest practice and with respect for the environment.

ENEA assumes its transformation towards an innovative low-emissionconglomerate, offering not only electricity but also comprehensivepackages of products and services required by Customers.

Development directions are the foundation for defining strategicobjectives for the Group. ENEA identifies five key strategic objectivessupporting the transformation of ENEA Capital Group into a low-emissionconglomerate:

1) Diversification of ENEA Capital Group's generation portfolio;2)Reliability and continuity of electricity supply;3) Responsiblepartner in sustainable management of relations with local communities,the environment and Customers;4) Maintaining the financial securityof ENEA Capital Group;5) Innovation in all aspects of ENEA CapitalGroup's activities.

At the same time, the Company has decided that, within the overarchingobjective of the Group, the Group's sustainable development will also beessential. Therefore, the overarching objective of ENEA Capital Group is"Steady and continuous growth of ENEA Capital Group's value whileensuring the Group's sustainable development".

In addition to the aforementioned overarching objective, the map ofobjectives also includes the following objectives:

From the Owner's Perspective:

- Lasting relations with Customers, steadily decreasing costs ofobtaining and retaining Customers;- Maintaining the financialsecurity of ENEA Capital Group;- High, controlled share in selectedmarket segments;- Reliability and continuity of electricity supply;-High margin of packaged services and products;- Innovation in allaspects of ENEA Capital Group's activities;- Diversificationof ENEA Capital Group's generation portfolio.

From the Customer's Perspective:

- Ability to meet complex needs;- Timely delivery of whatever isneeded;- Favourable price-to-quality ratio (value for money) ofproduct and service packages;- Low overall cost of purchase, supportin financing purchases from ENEA Capital Group's offer;-Ethical, reliable and innovative supplier;- Responsible partner insustainable management of relations with local communities, theenvironment and Customers.

From the Processes' Perspective:

- Generation of an optimal and balanced mix of products and services forwell-identified Customers in cooperation with business and socialPartners;- Efficient outreach to Customers and delivering promisedvalues on time, at the right price and quality, including responsibleand ethical marketing and reliable information;- Efficient,integrated and balanced management of flexible, open competence groupsin clearly defined business lines, in the preferred role of BusinessOperators on the entrusted assets.

From Development's Perspective:

- Modern, transparent and ethical Corporate Governance at all levelsthroughout ENEA Capital Group;- Sustainable investments inintangible and tangible assets.

ENEA assumes that, as a result of the implementation of the Strategy, itwill achieve:

1. reduction of the unit CO2 emission ratio value to 550 kg CO2/MWh in2030, with the aim to achieve the ratio value of 434 kg CO2/MWh by 2035;2.RES share in electricity generation at the level of 22% by 2025 and 33%in 2030;3. the share of zero- and low-emission generation sources atthe level of 22% in 2025 and 41% in 2030 in ENEA Capital Group's totalelectricity generation, with the aim of achieving the value of 60% by2035;4. the volume of electricity sales at the level of 24.8 TWh in2030;5. ENEA's share in the electricity sales market at the level of14% in 2025 and 15% in 2030;6. the installed capacity of 7,447 MW in2025 and 8,287 MW in 2030, with the aim to achieve the value of 9,672 MWby 2035;7. the value of SAIDI at the level of 105 minutes in 2025and 100 minutes in 2030;8. the value of SAIFI at the level of 2.14in 2025 and 2.03 in 2030;9. the value of the distribution gridlosses index at the level of 5.4% in 2025 and 5.3% in 2030;10.increased market share in coal sales to the commercial power industry to25% in 2025 and to 30% in 2030;11. ROE at the level of 10% in 2025and 2030;12. ROA at the level of 5% in 2025 and 2030;13. EBITDAgrowth on 2018 by 35% in 2025 and 39% in 2030;14. share of EBITDAfrom New Business Lines at the level of 7-12% in 2030;15. the valueof EBITDA from New Business Lines in the amount of PLN 360 million in2030;16. share of R&D&I expenditures in ENEA Capital Group's totalcapital expenditures at the level of 2% in 2030.

The strategic objectives to be achieved in the perspective of 2035,referred to in points 3 to 6 above, have been estimated assuming thereplacement of 200 MW units 1-8 in Kozienice Power Plant withlow-emission power units and upgrade of 200 MW units 2-7 in PołaniecPower Plant.

The Group estimates its capital expenditures on maintaining businesscontinuity and on new generation capacities at over PLN 64 billion inthe perspective of 2035, including:

1. Distribution Area - PLN 26.9 billion;2. Mining Area - PLN9.2 billion;3. Generation Area - PLN 12.5 billion;4.Renewable Energy Sources - PLN 14.7 billion;5. Otheractivities - PLN 1.2 billion.

Capital expenditures for the implementation of investments in newgeneration capacities, supporting ENEA's transformation towards alow-emission conglomerate, have been estimated at approximately PLN 22billion.