PGE Polska Grupa Energetyczna S.A.

M&A Activity • Jul 17, 2023

Receipt of the proposal of the terms and conditions for the acquisitionof 100% of shares in PGE GiEK by the State Treasury

With reference to the current report no. 24/2021 of July 23, 2021 onAgreement regarding co-operation in spin-off of coal assets to NationalEnergy Security Agency ("NABE"), PGE Polska Grupa Energetyczna S.A.("PGE", the "Issuer") discloses that on July 14, 2023 PGE received fromthe State Treasury, represented by the Minister of State Assets,proposal of a non-binding document summarising terms and conditions foracquisition by the State Treasury of all shares held by the Issuer inPGE Górnictwo i Energetyka Konwencjonalna S.A. (Issuer's subsidiary,"PGE GiEK") constituting 100% of the share capital of PGE GiEK in orderto set up NABE (the "Transaction") (the "Document").

The Document particularly includes proposed price for the acquisition ofshares of PGE GiEK, key economical and legal terms for the realizationof the Transaction, including key provisions of the preliminary saleagreement and the promised sale agreement as well as proposed mechanismof settling the intragroup debt of PGE GiEK towards the Issuer.

In accordance with the Document the sale price of shares of PGE GiEK(Equity Value) amounts to PLN 849 million (the "Sale Price") on thebasis of the Enterprise Value settled as at September 30, 2022(settlement according to locked-box mechanism) and adjusted for the netdebt.

The Document assumes that the debt of PGE GiEK towards the Issuer inamount of PLN 5.4 billion will be subject to repayment throughout 8-yearperiod from the conclusion of the Transaction and the repayment of 70%of the debt will be secured by the guarantee of the State Treasury. Theeventual debt existing at the date of the acquisition of shares of PGEGiEK by the State Treasury (if it occurs) will be repaid by NABE usingthe funds from the loan granted to NABE by banks within the Transaction.

Other intragroup settlements, particularly settlements regarding CO2emission rights, are being pursued on ongoing basis and will not haveimpact on the Sale Price.

The Document does not constitute an offer or obligation to conclude anyagreement.

The Document will be subject to further negotiations of PGE with theState Treasury, which aim will be final reconciliation and signing theDocument summarising terms and conditions of the Transaction ofacquisition of shares of PGE GiEK by the State Treasury. The Documentwill be signed only in case of completion of the negotiations by theState Treasury with all the companies, i.e.: PGE Polska GrupaEnergetyczna S.A., Enea S.A., Energa S.A., TAURON Polska Energia S.A.

The Document is non-binding. PGE will analyse it in details. Potentialacceptance of the proposal will depend on obtaining by the Issuer ofnecessary corporate approvals.

The Document agreed and signed by the parties will be a basis forsubmitting a request by the Minister of the State Asset to the PrimeMinister for acquisition of the shares held by the Issuer in PGE GiEKand for obtaining other necessary approvals for realisation of theTransaction.

The core business of PGE GiEK is lignite mining and generation ofelectricity in conventional power plants. PGE GiEK consists of 5conventional power plants with total installed capacity of approx. 12.85GW and 2 lignite mines. Moreover, PGE GiEK is a holding company forother entities constituting the Conventional Generation segment of PGEGroup that provide activities supporting the core business of PGE GiEK.