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12/8/2019 8:57:45 AM
 
 
 

Current Report No. 11/2018

28.03.2018 08:50

Signing of the transaction documentation related to the investment of the Closed-end Investment Funds managed by Polski Fundusz Rozwoju S.A. (Polish Development Fund) in the company carrying out the 910 MW power generating unit construction project in Jaworzno.

In reference to the current report no. 25/2017 of June 1, 2017, current report no. 43/2017 of December 29, 2017 and current report no. 4/2018 of February 28, 2018, related to the continuation of activities aimed at cooperation in the implementation of the 910 MW power generation unit construction project in Jaworzno (”Unit”), the Management Board of TAURON Polska Energia S.A. (”Issuer”) informs that on March 28, 2018 the Issuer, Nowe Jaworzno Grupa Tauron sp. z o.o. (”Special Purpose Vehicle”) and Fundusz Inwestycji Infrastrukturalnych – Kapitałowy Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych (Infrastructure Investments Fund – Non-public Assets Closed-end Equity Investment Fund) and Fundusz Inwestycji Infrastrukturalnych – Dłużny Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych (Infrastructure Investments Fund - Non-public Assets Closed-end Debt (Fixed Income) Investment Fund) (collectively the ”Funds”), a part of whose investment portfolio is managed by Polski Fundusz Rozwoju S.A. (Polish Development Fund), signed the transaction documentation defining the terms of the Funds’ equity investment in the Special Purpose Vehicle.

The transaction documentation includes the Investment Agreement and the Shareholders Agreement, along with appendices thereto, including the drafts of a multi-year Electricity Sale Agreement and a multi-year Coal Sale Agreement that are to be concluded by the Issuer and the Special Purpose Vehicle.

Investment Agreement defines the terms and conditions of the Funds’ equity investment in the Special Purpose Vehicle. This investment assumes the Funds joining the Special Purpose Vehicle and their participation in the subsequent recapitalizations of the Special Purpose Vehicle, by taking up the newly created shares in exchange for financial contributions up to the total maximum amount of PLN 880 mln, i.e. PLN 440 mln by each of the Funds. The Funds’ stake in the Special Purpose Vehicle’s share capital, as of the day the Unit is commissioned, should reach approx. 14%, while the Issuer’s stake shall in no case drop below 50% + 1 share. The Issuer will be obligated to ensure the Special Purpose Vehicle’s recapitalization to the extent required to complete the Unit’s construction project after the Funds have achieved the equity exposure in the amount equal to the above mentioned maximum level.

Investment Agreement makes joining the Special Purpose Vehicle by the Funds contingent on the fulfillment of specific suspending conditions. The suspending conditions include obtaining a consent of the President of the Office of Competition and Consumer Protection for the concentration, issuing by the Head of the National Revenue Administration (NRA) of the decision on approving the terms of the Electricity Sale Agreement as an advance pricing agreement (”APA Decision”), concluding by the Issuer and the Special Purpose Vehicle of the specified agreements, including the Electricity Sale Agreement and the Coal Sale Agreement, as well as completing (or ensuring completing) by the Issuer of the specified activities by the Special Purpose Vehicle’s corporate bodies (authorities). The suspending
conditions are to be fulfilled within 4 months from the day of concluding the Investment Agreement, excluding the condition related to obtaining the APA Decision which is to be fulfilled within 7 months.

Investment Agreement defines situations that represent a material breach of the Investment Agreement by the Issuer or by the Funds. An occurrence of a material breach of the Investment Agreement prior to the Funds joining the Special Purpose Vehicle may lead to the need to pay liquidated damages in the amount corresponding to the value of the Funds’ investments, and, after the Funds have joined the Special Purpose Vehicle, it may lead to the conclusion of an agreement on the sale of the stake in the Special Purpose Vehicle by the Funds in favor of the Issuer on the terms defined in the Investment Agreement.

Shareholders Agreement defines the principles of corporate governance in the Special Purpose Vehicle. This agreement grants the Funds, among others, a personal entitlement to appoint, suspend in their duties and dismiss one member of the Management Board and one member of the Supervisory Board of the Special Purpose Vehicle. It also defines a catalogue of matters for the completion of which by the Special Purpose Vehicle a unanimous resolution of the Management Board, the Supervisory Board or the General Meeting of Shareholders of the Special Purpose Vehicle will be required. Shareholders Agreement will come into force on the day the Funds join the Special Purpose Vehicle.

Joining the Special Purpose Vehicle by the Funds will trigger the so-called Lock-up Period (lasting, as a principle, 7 years from that date), during which the Shareholders of the Special Purpose Vehicle will not be allowed to sell shares in the Special Purpose Vehicle without a consent of the other Shareholders (except for cases explicitly indicated in the Shareholders Agreement). After the Lock-up Period has elapsed the Issuer will have the right to buy all the shares in the Special Purpose Vehicle held by the Funds for a price determined in accordance with the provisions of the Shareholders Agreement.

The drafts of the Electricity Sale Agreement and the Coal Sale Agreement assume implementing the business model of the Special Purpose Vehicle’s functioning agreed upon in the Investment Agreement, assuming that:

- Special Purpose Vehicle will, as a principle, be selling its entire volume of electricity generated by the Unit to the Issuer, excluding the volume of electricity covered by the so-called power exchange obligation and the volume covered by the liabilities of the Special Purpose Vehicle towards Polskie Sieci Elektroenergetyczne S.A. (power transmission system operator),

- Issuer will have the ability to operationally control and deploy the Unit’s net generation capacity, including the ability to influence (control) the volume of electricity generated in the long and short term,
- electricity price will be set at a level that will enable the Special Purpose Vehicle to reach the assumed return on assets, taking into account the tax regulations related to transfer pricing,

- under the Coal Sale Agreement the Issuer will provide long term supplies of hard coal, as the Unit’s primary fuel, for the Special Purpose Vehicle, including for the needs of generating electricity covered by the power exchange obligation and maintaining mandatory fuel inventory levels.

The above agreements constitute long term sale agreements and they will be in force from the day they are concluded until the end of the year in which the 30-year period running from the beginning
of the normal commercial operation of the Unit ends, and their early termination may take place on the conditions specified therein.

Legal basis: Art. 17 clause 1 MAR – confidential information
 

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