Current Report No. 41/2014

Date of preparation: 6 November 2014

Topic: ENERGA Group 2014-2022 Investment Program Update

Legal grounds: Article 56 section 1 point 1 of the Act on Offerings – confidential information

The Management Board of ENERGA SA (‘Company’) announces that on 6 November 2014, the Supervisory Board approved the Multiyear Strategic Investments Program for the ENERGA Group for years 2014-2022 (‘Investment Program’). The document is an update of the Investment Program for years 2013-2021 announced publicly in the current report of 13 September 2013. The assumptions and priorities of the ENERGA Group's Strategy set forth in that report remain in effect.

Annual updates of the Investment Program are a consistent practice in the Company, communicated in the past by the Company’s Management Board. This year's changes introduced to the Program are driven by the development plan submitted by ENERGA-OPERATOR SA to the Energy Regulatory Office in consideration of the European and national regulations governing the operation of the energy sector in Poland.

The current Investment Program envisages for the years 2014-2022 the aggregated capital expenditures of PLN 18.2 billion for ENERGA Group's basic and additional growth investment projects. The previous Program for 2013-2021 was approx. PLN 1.5 billion lower and included expenditures of PLN 1.1 billion for the acquisition of wind assets from Dong and Iberdrola and the acquisition of Ciepło Kaliskie.

Following the update of the Program, the total value of basic investments will be about PLN 11.8 billion [1], with the Distribution Segment accounting for the largest part (PLN 9.8 billion). This is due to the need to: connect new customers (PLN 4.4 billion), modernize the distribution network (PLN 2.3 billion) and in relation to the connection of RES (PLN 1.2 billion) and incur expenditures for smart grid (PLN 1.1 billion) and other investment projects, which are not aimed directly at increasing the grid's distribution capacity (PLN 0.9 billion). Compared to the previous Program, expenditures envisaged for the years 2014-2022 were reduced by about 20%. This is mainly an effect of more efficient execution of investment projects, due to which, fulfillment of the assumed objectives will require lower expenditures.

Over 10% of the basic capital expenditures, or approx. PLN 1.3 billion, were allocated to the Generation Segment, including approx. PLN 0.4 billion for CHP, PLN 0.5 billion for the system power plant and about PLN 0.4 billion for RES. In the Investment Program for the Generation Segment, the ENERGA Group has ‘investment option’ projects (about PLN 0.2 billion), which include expenditures for achieving the FID-ready status with projects. These are projects in which the building phase will depend on the support system; they include: preparation of the Wisła hydro power plant, co-generation units, CCGT plants and wind farms.

Approximately PLN 0.4 billion of expenditures was allocated to the Sales Segment to be used mainly for development of IT tools and investments in lighting. The last group of basic expenditures is other expenditures of approx. PLN 0.2 billion, mainly IT projects.

A new item that was added to the Investment Program is additional development projects, which build the value of the ENERGA Group in the total amount of PLN 6.4 billion in the years 2015-2022 and which may be expended, among others, on RES generation units, acquisitions, research and development projects (currently, the Group conducts a number of research and development projects, in segments and in ENERGA SA). Execution of additional investment projects will depend on regulatory and market conditions.

The overriding goal of the Company is to create sustainable value for stakeholders, including shareholders, by developing the Group as an efficient and innovative organization, which can flexibly adapt to external conditions, maintains a business profile with predictable risk levels and efficient capital structure.

[1] Values of individual investment components have been rounded and they do not necessarily add up to their total figures.

Legal grounds:

Article 56 section 5 of the Act on offerings – updating of confidential information