Signing of documents regarding the settlement of the Coal Project as part of the Ostrołęka C Project and the implementation of the Gas Project in Ostrołęka

Current Report No. 25/2021

Date: 25 June 2021

Subject: Signing of documents regarding the settlement of the Coal Project as part of the Ostrołęka C Project and the implementation of the Gas Project in Ostrołęka

Legal basis: Article 17(1) MAR - inside information.

The Management Board of Energa SA ("Issuer") hereby announces that it has become aware of the signing on 25 June 2021 between Elektrownia Ostrołęka Sp. z o.o. (an entity related to the Issuer, hereinafter referred to as "EO" or "Contracting Party of the Coal Project") and CCGT Ostrołęka Sp. z o.o. (a 100% subsidiary of the Issuer, hereinafter referred to as "CCGT Ostrołęka" or "Contracting Party of the Gas Project"), on the one side, and GE Power sp. z o.o. with its registered office in Warsaw, GE Steam Power Systems S.A.S. (former business name: ALSTOM Power Systems S.A.S.) with its registered office in Boulogne-Billancourt, France (collectively referred to as the "Coal Project Contractor") and General Electric Global Services, GmbH with its registered office in Baden, Switzerland (together with GE Power sp. z o.o. collectively referred to as the "Gas Project Contractor") on the other side of the "Contract Amendment Document of the contract dated 12 July 2018 for the construction of the Ostrołęka "C" Power Plant with a capacity of 1,000 MW" ("Contract Amendment Document"), together with the Gas Annex together with the Service Agreement and the Agreement concerning the settlement of the implementation of the Coal Project, concurrently concluded by the parties duly identified, the essential characteristics of which are set out below by the Issuer.

I. In accordance with the Contract Amendment Document:

1) terms and conditions of execution of the investment project covered by the contract dated 12 July 2018 for the construction of the Ostrołęka "C" Power Plant with a capacity of 1,000 MW concluded between the Contracting Party of the Coal Project and the Contractor of the Coal Project ("Contract") after a change of technology and agreement on the subject matter of the investment as construction of a gas-steam power plant (in place of a coal-fired power plant), i.e. the Gas Project, is specified in the annex to the Contract entitled "Contract for construction of a gas-steam power plant" ("Gas Annex"), which replaces the existing provisions of the Contract in their entirety;

2) the parties to the Gas Annex who are responsible for the execution of the Gas Project will be the Gas Project Contractor as the contractor and the Contracting Party of the Gas Project as the investor (contracting party);

consequently: General Electric Global Services, GmbH with its registered office in Baden (Switzerland) entered in place of the previous participant on the side of the Contractor, CCGT Ostrołęka Sp. z o.o. entered in place of the contracting party EO, and EO is not a participant in the Gas Project and consequently will not have any rights or obligations arising from the Gas Annex;

3) terms and conditions of settlement of works performed under the Contract before its suspension (vide Issuer's current report No. 9/2020 dated 14 February 2020), and after the suspension until the implementation of the decision on changing the technology and determining the subject of the investment as the construction of a gas-steam power plant (instead of a coal-fired power plant - vide Issuer's current report No. 51/2020 dated 2 June 2020) is regulated by the agreement between EO and the Contractor of the Coal Project concerning the settlement of the Coal Project within the Contract concerning the construction of the Ostrołęka "C" Power Plant ("Agreement regarding Settlement").

II. The subject matter of the Gas Annex is the construction of a 745 MWe net gas-fired combined cycle gas turbine (CCGT) power plant for the estimated amount of approx. PLN 2.5 billion to be located in Ostrołęka on a site originally used for the coal-fired unit project. The unit will be powered by high-methane natural gas. It will be designed and constructed as a single-shaft unit: with one gas turbine, a recovery boiler, a condensing steam turbine unit and a wet fan cooler. The project will be implemented as a "brown field" project - making maximum use of the construction infrastructure completed for the Coal Project. The Contract will be performed on a "turnkey" basis, covering the performance of all works including, but not limited to, design, obtaining replacement administrative decisions on behalf of the Gas Project Contracting Party, deliveries, civil works, assembly, trial run, obtaining the final occupancy permit decision, commissioning, staff training. The building permit design will be developed by the Gas Project Contracting Party and the Gas Project Contractor will incorporate it into the design, update or supplement it and update the decisions and construction permit held. The schedule for the implementation of the Gas Project provides for the commencement of construction works by the end of 2021, and the commissioning of the power plant in 2025. The signing of the above Gas Annex is part of the introduction of the procedure for amending the Contract, pursuant to the provisions governing its amendments. The amendment was initiated by EO on the basis of the decision of the shareholders of 2 June 2020 (vide the aforementioned current report of the Issuer No. 51/2020 dated 2 June 2020).

III. The Agreement regarding Settlement regulates the rights and obligations of EO and the Coal Project Contractor mainly with respect to the settlement of the works performed by the Coal Project Contractor in the implementation of the Coal Project, with respect to the construction works until they are suspended as a result of the suspension of the Contract, the preservation and security activities performed during the suspension of the Contract and the works related to the completion of the works dedicated to the implementation of the Coal Project. Pursuant to this agreement, settlement of the Coal Project will take place by the end of 2021 and the total amount that EO will be required to pay to the Coal Project Contractor will not exceed PLN 1.35 billion (net).

The Issuer explains that this particular construction of the Contract Amendment Document is aimed at enabling the execution of the Gas Project by CCGT Ostrołęka Sp. z o.o, as the company that will replace EO in the implementation of the investment located in Ostrołęka, because the Issuer and ENEA S.A. (as the shareholders of EO) concluded on 22 December 2020 agreements (which was reported by the Issuer in current report No. 84/2020 of 22 December 2020), where ENEA S.A. confirmed its statement on withdrawal from the participation in the Gas Project, and at the same time determined that the Gas Project should be implemented by the company to which the assets serving the implementation of the Gas Project are transferred. CCGT Ostrołęka Sp. z o.o. was established as a special purpose vehicle dedicated to the performance of one of the above-mentioned agreements (Division Agreement); therefore, on 25 June 2021 entered into a sales agreement with EO in order to acquire the EO enterprise allowing the implementation of the Gas Project, which is reported in the Issuer's current report No. 24/2021 of 25 June 2021.

Construction of the Contract Amendment Document, together with the associated Agreement regarding Settlement fulfils the need to implement the second agreement from among those entered into on 22 December 2020, of which the Issuer reported in current report No. 84/2020 of 22 December 2020. The signing of the above agreement is tantamount to the performance of the agreement entered into on 22 December 2020 between the Issuer and ENEA S.A. to cooperate in the settlement of the Coal Project, that is, the Settlement Agreement providing that the costs related to the Coal Project will be settled proportionally by the parties to this agreement (ENEA S.A. and the Issuer) according to the existing rules and within the limits adopted in the agreement concluded between the Issuer and ENEA S.A. on 30 April 2019, which was reported by the Issuer in current report No. 7/2019 of 30 April 2019. The Issuer will announce the final settlement of all costs associated with the Coal Project in a separate current report.