Tauron Polska Energia S.A.

Capital/Financing Update • Mar 15, 2019

Current report No. 7/2019

Net debt/EBITDA ratio calculated in accordance with the terms ofTPEA1119 bonds issue

TAURON Polska Energia S.A. ("Issuer") announces that due to set up ofPLN 214 million provision, as disclosed by the Issuer in current reportno. 6/2019 of March 15, 2019, the net debt/EBITDA ratio as defined inthe terms of the issue of TPEA1119 series bearer bonds issued onNovember 4, 2014 for the total amount of PLN 1,750,000,000 ("Ratio","Bonds"), based on the preliminary financial results, may, as ofDecember 31, 2018 reach 3.04x (the final value of the Ratio will becalculated based on the Issuer's approved consolidated financialstatements).

This means that the Ratio may top the maximum allowed level of 3.0x thatwas indicated in the terms of the Bonds issue.

The Issuer informs that, in contrast to the definitions included inother financing agreements, the Ratio's definition takes into accountthe PLN 1.54 billion worth liabilities stemming from the subordinatedbonds issued, in the Issuer's debt.

At the same time, the Issuer indicates that in March 2016 they signedagreements with some holders of the Bonds ("Agreements") who, as ofMarch 15, 2019, are entitled to exercise in total, 41.93 percent of thevotes at the bondholders' meeting. Under the Agreements the bondholdersthat are a party thereto are obligated to take part in everybondholders' meeting related to the Bonds and to vote for all the bondsheld against passing of a resolution allowing to demand that the Issuerredeem the Bonds early (put option) due to the Ratio topping 3.0x. TheIssuer disclosed the details of the Agreements in current report no.16/2016 of March 22, 2016. The Agreements protect the Issuer against therisk of a demand to redeem the Bonds early , as passing of theresolution on early redemption demand at the bondholders' meetingrequires a 66 and 2/3 percent majority of the votes of the bondholderspresent at the meeting.

The obligations under the Agreements shall remain in force, as long asthe net debt/EBITDA ratio does not top 3.5x (the definition of thisratio provided in the Agreements does not take into account theliabilities stemming from the subordinated bonds, i.e. it is in linewith the definitions included in the Issuer's other financingagreements).

At the same time, the Issuer informs that any potential case of theRatio topping the 3.0x level will not cause a breach of other financingagreements concluded by the Issuer and will not lead to negativeconsequences related to such agreements, in particular, in line with theprovisions of the agreements it may not constitute grounds to demandearly repayment of debt.

The Bonds' redemption date falls on November 4, 2019, and the Issuer hasfunds for this purpose.

The Issuer represents that its financial and liquidity position isstable. Also, the Issuer has guaranteed funds to carry out the capexprojects underway, in particular to complete the construction of the 910MW generating unit at Jaworzno.

The Issuer informs that in the case of other financing agreements thatinclude a financial covenant in the form of the net/EBITDA ratio, themaximum value allowed was set at 3.5x or higher. The net/EBITDA ratiocalculation does not take into account the debt stemming from thesubordinated bonds issued. As of December 31, 2018 the value of theratio calculated this way, based on the preliminary financial results,reached 2.54x (taking into account the provision disclosed by the Issuerin current report no. 6/2019 of March 15, 2019).

Legal basis:

Art. 17 sec. 1 of MAR - inside information