Current Report No. 8/2020
Date: 13 February 2020
Subject: Conclusion of the Memorandum of Understanding on Further Actions within the Ostrołęka C Project between Energa SA and Enea S.A.
Legal basis: Article 17 (1) of MAR - inside information
The Management Board of Energa SA informs that on 13 February 2020 a Memorandum of Understanding on Further Actions within the Ostrołęka C Project was concluded between Energa SA (Energa) and Enea S.A. (Enea) (Memorandum of Understanding). Under the Memorandum of Understanding, Energa and Enea (hereinafter jointly: Sponsors) decided to suspend financing of the Project involving construction of a new coal-fired unit, i.e. the planned Ostrołęka C power plant in Ostrołęka with the capacity of approx. 1,000 MW (Project). The financing is suspended in particular in connection with the need to and for the duration of analyses to be carried out by the Sponsors regarding further actions in the Project, and its further financing. The detailed scope, schedule and method of conducting the analyses will be agreed on by the Sponsors within 10 days of the conclusion date of the Memorandum of Understanding. In particular, technical, process, economic and organisational parameters of the Project will be analysed.
The Sponsors are parties to the Memorandum of Understanding of 28 December 2018 concluded with Elektrownia Ostrołęka Sp. z o.o., a company which carries out the Project (Company), which defines, among others, limits of financial involvement of the Sponsors (Energa and Enea) in the Project (December Memorandum of Understanding). Additional Project financing issues were agreed in the Memorandum of Understanding on financing the construction of the Ostrołęka C Power Plant, concluded on 30 April 2019 between the Sponsors (April Memorandum of Understanding). Energa announced both of these Memoranda of Understanding in its current report No. 55/2018 of 28 December 2018 and 7/2019 of 30 April 2019.
Regardless of the declarations on Project financial involvement as expressed in the said Memoranda of Understanding, the Sponsors are also involved in seeking external financing, however the existing efforts to acquire an investor for the Project have not brought the expected results.
Recently, a number of circumstances have occurred which, in the Sponsors’ opinion, may impact the Project. As a result, further actions related to the Project and its further financing need to be analysed comprehensively. The Sponsors mentioned in particular (i) planned changes of the European Union’s policy on the electricity sector and (ii) the new Energy Lending Policy of the European Investment Bank along with the related initiative of the European Commission of 11 December 2019 on the Green Deal, aiming to reach a climate-neutral Europe by 2050, and ultimately (iii) the Call by Polski Koncern Naftowy Orlen S.A. of 5 December 2019 to sell 100% of Energa shares, the progress and result of which may considerably affect the aspects of the Project financing model.
In the Sponsors’ opinion, these circumstances are an extraordinary change of conditions not expected by the Sponsors when making the decision on the subject and method of Project financing. These circumstances justify suspension of Project financing for the duration of analyses planned in accordance with the Memorandum of Understanding.
The Sponsors assumed that suspension of project financing will require the Company to suspend the Contract for the Construction of Ostrołęka C Power Plant of 12 July 2018 and the Agreement on reconstruction of the railway infrastructure for Ostrołęka C Power Plant of 4 October 2019. The Memorandum of Understanding does not affect the validity of the existing memoranda of understanding between the Sponsors as well as between the Sponsors and the Company, in particular it does not affect the existing arrangements made with regard to Project financing and the formula of settlements between the Sponsors, adopted on the basis of the December Memorandum of Understanding and April Memorandum of Understanding.
Energa treats the Memorandum of Understanding and circumstances referred to therein, as well as the actions listed therein, as information relevant for the market, given the strategic nature of the Project as one of the most key investment projects of Energa. Energa will inform the market of the schedule adopted with Enea and of the subject of analyses.