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Current Report No. 53/2020

14.11.2020 08:50

Update of the information on the construction of the power generating unit in Jaworzno – commissioning of the unit and conclusion of a settlement and an annex to the agreement

In reference to the current report no. 19/2014 of April 17, 2014, on the conclusion of the agreement with the RAFAKO S.A. - MOSTOSTAL WARSZAWA S.A. consortium (”Consortium”, “Agreement”) on the construction of the 910 MW power generating unit at the Jaworzno III Power Plant (”Unit”) and the current report no. 19/2020 of May 4, 2020, on the date of the commissioning of the Unit, TAURON Polska Energia S. A. (”Issuer”) informs that on November 13, 2020:

1. The Unit was commissioned. The Unit began to operate in the Polish power system after the trial run had been completed, during which the Unit had reached the nominal (rated) capacity of 910 MW.

2. Nowe Jaworzno Grupa TAURON sp. z o.o. ("NJGT", a subsidiary of the Issuer), E003B7 sp. z o.o. (a company that is wholly owned by RAFAKO S.A. under restructuring) and the Consortium, including RAFAKO S.A. under restructuring acting with the agreement of the supervisor (administrator) of the arrangement under the simplified restructuring proceedings, signed a settlement ("Settlement") which is the result of the mediation conducted before the Arbitration Court at the General Counsel to the Republic of Poland (Prokuratoria Generalna Rzeczypospolitej Polskiej) and which regulates, in particular, the following issues:

a) the Parties, i.e. NJGT and the Consortium, waived their mutual and equivalent claims that had arisen by the date of signing the Settlement, with the exception of, inter alia, NJGT’s claims under the statutory warranty or the warranty, as well as the recourse claims against the Consortium for the payment of the claims of further subcontractors and the claims of the Consortium related to the works carried out in accordance with the contract,

b) the Consortium will provide additional services for NJGT, including the works aimed at optimizing the Unit's operation (performance), the results of which will include, inter alia, the reduction of the Unit’s technical minimum power generation output from 40 percent to 37 percent In addition, the technical warranty for the boiler’s high-pressure part will be extended by six months (to 36 months), with respect to which NJGT will receive an additional security (bond) issued by the warranty providers.

The Settlement will enter into force after the suspending conditions have been met, the key ones among which include the Unit's commissioning by November 15, 2020 (the condition has been met) and the submission by the Consortium of an agreement, in the form of a promissory agreement (pre-approved commitment), with the financial institutions with respect to the method of obtaining the funds required to complete the project.
NJGT and the Consortium also agreed that the Settlement concluded before the mediator would be referred to the competent common court along with a petition for the approval thereof by the court. After the Settlement concluded before the mediator has been approved by the court by way of a legally binding decision, the Settlement shall become a legally binding court approved settlement agreement.

In connection with the conclusion of the Settlement, on November 13, 2020, NJGT and the Consortium concluded an annex to the Agreement ("Annex"), that regulates in detail the agreements reached by the Parties specified in the Settlement with respect to the additional services to be provided by the Consortium including, among others, the deadlines for their completion and the payment terms related thereto.

At the same time, the Issuer informs that the conclusion of the Settlement and the Annex will not lead to the exceeding of the assumed total amount of expenditures that is foreseen for the implementation of this investment project, i.e. PLN 6.2 billion, where the remuneration for the Consortium under the Agreement signed and the annexes thereto concluded will, in total, amount to PLN 4.6 billion.

The Issuer holds 84.76 percent of the votes and shares in NJGT.

Art. 17, clause 1 of MAR – inside information.

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