Enea S.A. — Management Reports 2021

Dec 16, 2021

Current Report No.: 39/2021

Date of Preparation: 15 December 2021

Issuer's Abbreviated Name: ENEA S.A.

Subject: Updated ENEA Group Development Strategy until 2030 with anoutlook to 2040

Legal Basis: Article 17(1) of the Market Abuse Regulation - confidentialinformation

Body of the report:

The Management Board of ENEA S.A. ("Company", "Issuer", "ENEA") herebyreports that, pursuant to the resolution of the ENEA S.A. SupervisoryBoard of 15 December 2021 approving the document entitled "ENEA GroupDevelopment Strategy until 2030 with an outlook to 2040" ("Strategy"),on the same day, the Company adopted the updated Strategy forimplementation.

The ENEA Group ("ENEA Group", "Group") as a responsible entity operatingin the power sector striving to meet other global challenges, intends toconduct its business in a manner that minimizing its impact on thenatural environment. Acting in accordance with the assumptions adoptedfor the transformation of the power sector in Poland, the Group takessteps to spin off from its structures any assets related to thegeneration of electricity in conventional coal-fired units.

According to our updated mission: "ENEA, while carrying out thetransformation of the Polish energy sector in a reasonable and efficientmanner, provides reliable products and services to its customers bybuilding lasting relationships based on respect for the environment andshared values."

Our key development directions form the foundation for defining theGroup's strategic goals until 2030 with an outlook to 2040.Specifically, we have defined the following key development directions:

1) Development of energy storage projects and provision of services tothird parties;

2) Involvement in offshore wind energy generation;

3) Intensification of activities aimed at gaining access to green energythrough the execution of projects included in the ENEA Group's RESportfolio;

4) Development of hybrid installations;

5) Conventional energy generation based on low-emission sources (gas -as a transition fuel; biomass; RDF);

6) Development of a smart power grid;

7) Changed operation of the DSO in the new power market model;

8) Development of the ENEA Group's wholesale trade area (prop-trading,origination);

9) Construction of multi-energy products, including supply chainmanagement;

10) Expansion of sales and enhancing customer loyalty;

11) Development of New Lines of Business;

12) Development of a modern offering for prosumers, includingcooperation with local governments and urban development NGOs, andparticipation in the creation and management of energy islands (energyclusters);

13) Increasing the efficiency of customer service across the ENEA Group.

These development directions form a foundation, which is used to definestrategic goals for the Group. In connection with the foregoing, theENEA Group's overriding objective is a sustainable transformationincreasing the value of the ENEA Group. The map of objectives includes,apart from the overriding objective, the following partial ones:

From the Owner's Perspective:

- Development of Renewable Energy Sources based on state-of-the-arttechnologies;

- Lasting relationships with Customers, systematically decreasing costsof reaching and retaining Customers;

- Ensuring financial security of the ENEA Group;

- Reliability and continuity of electricity supply;

- Implementation of innovative solutions and new technologies in allareas of the ENEA Group's business.

From the Customer's Perspective:

- Responsible partner in sustainable management of relations with localcommunities, the environment and Customers;

- Ability to satisfy the Customer's comprehensive needs;

- Attractive price to quality ratio of the offered product and servicebundles;

- Development of new lines of business to be able to offer Customers newproducts, not only power-related ones.

From the Process Perspective:

- Producing an optimum and sustainable mix of products and services forwell-identified Customers in cooperation with business and socialpartners;

- Reaching Customers efficiently and delivering the promised value, ontime, at the right price and quality point, while ensuring responsibleand ethical marketing and reliable information;

- Consistent, integrated and sustainable management of flexible, opencompetence groups in clearly defined lines of business, in the preferredrole of business operators on entrusted assets.

From the Development Perspective:

- Modern, transparent and ethical Organizational Governance system atall levels across the entire ENEA Group;

- Efficient operating model of the ENEA Group aligned with the Group'sevolution;

- Progressive education taking into account the challenges oftransformation.

ENEA assumes that it will achieve the following by implementing theStrategy:

1. increase in (gross) installed capacity from renewable energy sourcesby 1,510 MW in 2030 and by 3,580 MW in 2040, calculated in relation to2020 (without taking into account the capacity of the already existing"Green Unit" owned by ENEA Elektrownia Połaniec);

2. decrease in the value of the CO2 emission unit factor to 254 kg CO2per MWh in 2030, with the aim of achieving a value of 201 kg CO2 per MWhby 2040 and achieving climate neutrality by 2050;

3. share in the sales of electricity to ENEA Group Customers in Poland'stotal electricity sales market of 16% by 2030 and at least 17% by 2040;

4. SAIDI at 74.59 minutes in 2030 and 70 minutes in 2040;

5. SAIFI at 2.02 in 2030 and 1.93 in 2040;

6. network losses in distribution at 5.14% in 2030 and 5.0% in 2040;

7. ROE of the ENEA Group at 6.4% in 2030 and 7.1% in 2040;

8. ROA of the ENEA Group at 2.9% in 2030 and 4.6% in 2040;

9. share of the New Lines of Business in the ENEA Group's EBITDA at7-12% by 2030 and 10-15% by 2040, in relation to the total EBITDA of theENEA Group.

The estimated measures of strategic objectives to be achieved by 2040mentioned in items 1-2 and 7-9 have been calculated based on theassumption of the spin-off of coal-fired assets outside the ENEA Group.

The Group's estimated value of capital expenditures in 2023-2042 is PLN68 billion, including:

1. Distribution area - PLN 42.5 billion;

2. Construction and further modernization of integrated gasificationcombined cycle units - PLN 5.8 billion;

3. Investments in renewable energy sources and energy storage - PLN 13.8billion;

4. Other activities of the ENEA Group (including, without limitation, inthe heat segment) - PLN 6.2 billion.

Please note that the term EBITDA is defined as the value of operatingprofit (loss) + depreciation and amortization + impairment losses onnon-financial non-current assets (values for the reporting period). Theterm ROE means the Return on Equity, which is a measure of the value ofprofit generated from equity [net profit (loss) generated in thereporting period divided by equity at the end of the reporting period].In turn, ROA means the Return on Assets, which describes the value ofprofit generated based on the assets held [net profit (loss) generatedin the reporting period divided by the value of total assets at the endof the reporting period]. The measures specified above refer to the ENEAGroup's consolidated figures and are standard measures of efficiency ofany business activity, applicable in particular to the sector in whichthe Issuer's Group operates. The foregoing definitions and methodologiesfor their calculation are the same as the definitions and methodologiesfor the calculation of these indicators applied in the Issuer's periodicreports. The definitions of these terms are also included in theglossary of terms and abbreviations available on the Company's website(https://ir.enea.pl/slownik).

The Issuer also points out that, irrespective of exercising duediligence, having regard to the duration of the Strategy and thepossible occurrence of factors of an external nature as well as theresulting unpredictability of factors that may affect the indicators andtheir values presented in the Strategy, they must not be treated asoperational or financial forecasts, but only as benchmarks by which tomeasure the achievement of the Strategy's objective which the Companywill strive to attain during its term.

Moreover, below is an explanation of the technical and industry conceptsincluded in the Strategy.

The term DSO means the distribution system operator, which is a utilitycompany that distributes electricity. The term RDF means _#8216;refuse-derivedfuel' in the form of a selected fraction of municipal waste that may beused as a fuel other than conventional fuels. The term _#8216;prop-trading' isthe activity of a trading company consisting of generating a profitbased on trading on the company's own account in contracts listed oncommodity exchange markets, while the term _#8216;origination' refers to thedevelopment of a trading company's wholesale trading activity based onnon-standard products. SAIDI (System Average Interruption Duration Index- index of the system average duration of a long and very longinterruptions (expressed in minutes per Customer), SAIFI (System AverageInterruption Frequency Index - indicator of the system average frequencyof long interruptions in energy supply (expressed in the number ofinterruptions per Customer). A New Line of Business is construed as eachnew activity/product/service performed or provided outside the ENEAGroup's core business, from which the ENEA Group will generate incomefollowing the marketing thereof by the Group.