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12/15/2019 5:50:33 AM
 
 
 

Current Report No. 6/2017

28.02.2017 16:00

Termination of long-term contracts for the purchase of property rights by a subsidiary

The Management Board of TAURON Polska Energia S.A. (the “Issuer”) informs that on 28 February 2017 TAURON Sprzedaż sp. z o.o. (a subsidiary of the Issuer, hereinafter referred to as the “Subsidiary”) submitted declarations on the termination of long-term contracts (”Contracts”) for the purchase of property rights arising from certificates of origin of energy from renewable sources (so-called green certificates, hereinafter referred to as “PM OZE”) by the Subsidiary

The following customers - owners of installations generating electricity from renewable sources (”Customers”) are parties to the contracts concluded in 2008:
- in.ventus spółka z ograniczoną odpowiedzialnością EW Dobrzyń spółka komandytowa,
- in.ventus spółka z ograniczoną odpowiedzialnością Ino 1 spółka komandytowa,
- in.ventus spółka z ograniczoną odpowiedzialnością EW Gołdap spółka komandytowa.

The Contracts shall be terminated with immediate effect due to the failure of the parties to reach an agreement under contractual negotiations in accordance with the procedure envisaged under the Contracts.

As a result of termination of the Contracts the Subsidiary will avoid a loss constituting a difference between contractual prices and the market price of green certificates. The estimated value of the aforementioned loss due to continued execution of the Contracts until the end of their originally assumed term (i.e. by 2023) - considering the current market prices of green certificates - shall amount to approximately PLN 343 million net.

The total value of contractual liabilities of the Subsidiary estimated for the period 2017-2023 shall amount to approximately PLN 417 million net. The above value was calculated according to the price formulas adopted in the Contracts for the period from the day of drawing up this report until the end of their originally assumed effective term (i.e. by 2023).

The amendments to legal regulations which entered into force after the day of concluding the aforementioned Contracts, providing basis for the notice of renegotiation:
1) repealing of the Act of 8 January 2010 on the amendment to the Act on Energy Law and on the amendment to certain other acts of law, effective as of 31 December 2012 (Journal of Laws of 2010, no. 21 item 104), regulation of the Minister of Economy of 14 August 2008 concerning the detailed scope of obligations to acquire certificates of origin and present them for redemption, to pay the substitution fee, to purchase electricity and heat generated in renewable energy sources and the obligation to confirm data related to quantities of electricity generated in a renewable energy source (Journal of Laws of 2008, no. 156 item 969) (the “MG Regulation of 2008”), as a result of entry into force of the regulation of the Minister of Economy of 18 October 2012 concerning the detailed scope of the obligations to acquire certificates of origin and present them for redemption, to pay the substitution fee, to purchase electricity and heat generated in renewable energy sources and the obligation to confirm data related to quantities of electricity generated in a renewable energy source (Journal of Laws of 2012 item 1229) (the “MG Regulation of 2012”),
2) entry into force of the Act of 20 February 2015 on renewable energy sources (”RES Act”) and the subsequent amendments to the provisions of the RES Act , including in particular, the Act of 22 June 2016 on the amendment to the Act on renewable energy sources and certain other acts of law (Journal of Laws of 2016, item 925),
3) entry into force of the Regulation of the Minister of Energy of 17 October 2016 concerning the change of the qualitative share of the total electricity arising from redeemed certificates of origin confirming generation of electricity from renewable sources in 2017 (Journal of Laws of 2016, item 1753).

The Issuer indicates that the Subsidiary had no possibility to envisage, despite applying due diligence and care, that the amendments to the legal regulations described above would take place.

The MG Regulation of 2012 significantly affected the increase in the supply of property rights arising from certificates of origin referred to in Article 9e(1) of the Act of 10 April 1997 on Energy Law (Journal of Laws of 2012, item 1059, as amended) - currently Article 44(1) of the RES Act, resulting in permanent and significant decline in PM OZE prices. A significant increase in the PM OZE supply as of 2012 results from the reduction of minimum shares of non-forest biomass in the total quantity of biomass supplied to the combustion process in relation to the requirements of the MG Regulation of 2008.

The RES Act passed in 2015 has totally changed the system of support to electricity production in renewable energy sources which provided principal grounds for concluding the Contract and constitutes a significant change in the legal framework, posing direct and critical impact on profitability of the Contracts.

The RES Act stipulates gradual abandoning of the support to electricity production in renewable energy sources through the system of certificates of origin in favour of the auction system.

 

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