Tauron Polska Energia S.A.

Capital/Financing Update • Dec 11, 2018

Current report no. 36/2018

Signing of the hybrid financing agreements with the European InvestmentBank

TAURON Polska Energia S.A. ("Company") informs that the Company and theEuropean Investment Bank ("EIB") signed the following agreements onDecember 11, 2018:

a) subscription agreement ("Subscription Agreement") constituting thebasis for issuing hybrid bonds ("Bonds") with the total nominal value ofPLN 400 000 000,

b) project related agreement ("Project Agreement") defining detailedrequirements related to the financing of an investment project.

The proceeds from the Bond issue will be used to cover the expendituresof TAURON Dystrybucja S.A. related to the expansion and upgrading of thepower grid infrastructure in 2018-2022.

The bonds to be issued will be subordinated, unsecured, coupon bearersecurities to be subscribed by the EIB as part of the European Fund forStrategic Investments launched by the EIB jointly with the EuropeanCommission in order to implement the so-called Juncker Plan.

In accordance with the Subscription Agreement the Bonds will be issuedin a single series. The Bond issue date has been set as December 17,2018. The maturity date has been set as 12 years from the issue date,however in accordance with the nature of hybrid financing the firstfinancing period has been defined as 7 years ("1st Financing Period")during which the Company shall not be able to redeem the Bonds early andthe EIB shall not be able to sell the Bonds to third parties early (inboth cases subject to the exceptions defined in the SubscriptionAgreement).

The Bonds will bear a fixed interest rate in the 1st Financing Period,while in the subsequent 5-year financing period ("2nd Financing Period")the Bonds will bear a floating interest rate (WIBOR 6M), increased by aset margin. The Agreement provides for an option to defer the Bondsinterest payment dates until, at the latest, the Bonds maturity date oruntil the fifth day from the day of taking the decision to pay out thedividend.

The subordinated nature of the Bonds means that in case of a bankruptcyor winding up of the issuer the obligations related to the Bonds shallbe repaid only ahead of the liabilities of the Company's shareholders.

The planned Bond issue will have a positive impact on the Company'sfinancial stability as the Bonds are excluded from the calculation ofthe net debt / EBITDA ratio which is a covenant in the Company'sdomestic bond issue programs (excluding the TPEA1119 series bonds listedin the Alternative Trading System on the Catalyst market with thematurity date falling on November 4, 2019). Furthermore, the Bonds willbe classified by a rating agency as equity in the amount of 50 percentof this financing.

The issue will be carried out after the standard suspending conditionsin case of this type of financing have been met.

Legal basis: Art. 17, clause 1 of MAR - inside information