Conclusion of the Loan Agreement among Energa S.A., Enea S.A. and Elektrownia Ostrołęka spółka z o.o. and planned conversion of receivables of Energa S.A. and Enea S.A. under an earlier loan to Elektrownia Ostrołęka into the shares of the latter company

Current Report No. 38/2019

Date: 23 December 2019

Subject: Conclusion of the Loan Agreement among Energa S.A., Enea S.A. and Elektrownia Ostrołęka spółka z o.o. and planned conversion of receivables of Energa S.A. and Enea S.A. under an earlier loan to Elektrownia Ostrołęka into the shares of the latter company

Legal basis: Article 17(1) of the Market Abuse Regulation - confidential information

The Management Board of Energa S.A. ("Lender") hereby informs that on 23 December 2019 a Loan Agreement among Energa S.A. ("Lender", "Energa"), Elektrownia Ostrołęka spółka z o.o ("Borrower") and Enea S.A. ("Enea") was concluded ("Loan Agreement").

Granting of the loan under the Loan Agreement constitutes partial performance of Energa's obligations under the Memorandum of Understanding of 30 April 2019 between Energa and Enea on the financing of the construction of the Ostrołęka C Power Plant ("Project") ("Memorandum of Understanding of 30 April 2019"), further detailing the declarations of financial commitment made by Energa and Enea in the Memorandum of Understanding of 28 December 2018. Energa announced both of these Memoranda of Understanding in its current report No 55/2018 of 28 December 2018 and No 7/2019 of 30 April 2019.

The amount of the loan incurred by the Borrower is up to PLN 340 million and will be paid out in tranches upon reasonable request of the Borrower in relation to the Project implementation. The first tranche of PLN 160 million is to be paid out on the date of this report, that is on 23 December 2019.

Interest on the loan will be calculated based on the interest rate that reflects the cost of capital in the power generation sector and that will be updated as at the end of the 1st, 2nd and 3rd quarters 2020.

The loan repayment is secured with an unprotested blank promissory note and the Borrower's statement on submission to enforcement proceedings pursuant to Article 777 of the Civil Procedure Code. Bullet repayment of the loan with interest is set to take place by 26 February 2021.

Under the Loan Agreement, Energa has performed a conditional sale of half of its receivable under the Loan Agreement from the Borrower to Enea. The receivables sold will be transferred to Enea upon the fulfilment of conditions precedent set out in the Memorandum of Understanding on 30 April 2019 on (i) 31 January 2021 or (ii) on the date the entire price is paid by Enea to Energa, whichever is the later.

After 31 January 2021, receivables under the Loan Agreement may be converted by Energa and Enea to the Borrower's capital.

Furthermore, the Management Board of Energa S.A. hereby informs that an annex was made on 23 December 2019 among Energa, the Borrower and Enea (the "Annex") to the loan agreement of 17 July 2019 (the "Loan Agreement 1").

The Loan Agreement 1 was made by and between Energa and the Borrower up to the amount of PLN 76 million as part of performance of the Memorandum of Understanding of 30 April 2019 for a period ending on 31 December 2019.

Up to the Annex date, Energa has disbursed two loan tranches totalling PLN 58 million.

To perform the obligation under the Memorandum of Understanding of 30 April 2019, Energa and Enea made a dispositive assignment agreement on 30 September 2019, whereby Energa transferred half of its receivables under Loan Agreement 1 onto Enea, i.e., the rights under a part of the loan granted to the Borrower in the amount of PLN 29 million with all the rights related thereto, particularly interest fixed as at 30 September 2019.

Energa and Enea intend to convert the receivables under Loan Agreement 1 to shares in the Borrower's share capital. The Annex was made to extend the loan repayment term until 31 January 2020 in order to enable the interested parties to fulfil corporate requirements as necessary for the completion of the conversion before the maturity of the receivables under Loan Agreement 1, particularly in order for Energa and Enea to obtain permission of their respective Supervisory Boards to convert their respective receivables under Loan Agreement 1 into the Borrower's shares.

Energa has not previously informed the market of the conclusion of the Loan Agreement 1 and of the transfer of a part of receivables under Loan Agreement 1 onto Enea due to the amounts of those transactions which were below the materiality threshold in terms of Energa's business operations, and also in view of Energa's existing disclosure practice as it considered those agreements not to fulfil the criterion of significant agreements. Energa also bore in mind that the transactions were implemented as part of performing the Memorandum of Understanding of 30 April 2019 of which the market had been advised.

Given the Loan Agreement and the material amount of Energa's exposure on that account, Energa decided that the Loan Agreement 1 and the Annex became significant agreements and that the information of their conclusion became of importance for the market in order to present a full picture of Energa's current financial commitment to the Project and of the further investment plans related thereto.