Current Report No.: 35/2015

Current Report No.: 35/2015

Date of preparation: 14.09.2015

Short name of issuer: Enea S.A.

Subject: Update of the corporate strategy of Enea Capital Group for 2014-2020 - disclosure of delayed information

Legal basis: Article 56 item 1(1) of the Act on Offerings - confidential information

Content of report:

The Management Board of Enea S.A. ("Issuer", "Company"), hereby publishes the content of the confidential information whose disclosure was delayed pursuant to Article 57 item 1 of the Act of 29 July 2005 on public offering and conditions of introducing financial instruments to an organised trading system and on public companies (J.L. of 2013 item 1382) in conjunction with § 2 item 1(1) of the Regulation of the Minister of Finance of 13 April 2006 regarding the type of information which may infringe upon the legitimate interest of an issuer, and a method of the issuer's conduct in relation to the delay in the publication of confidential information (J.L. No. 67 item 476).

Confidential information, whose disclosure was delayed, was adoption on 27 August 2015 by the Issuer's Supervisory Board of a resolution approving the document titled "Corporate Strategy of Enea Capital Group for 2014-2020. Update 2015" (Strategy Update). The Issuer adopted, on the same day, the updated Corporate Strategy of Enea Capital Group for implementation.

During the recent several years the market and regulatory conditions shaping the power sector in Poland were and still are subject to dynamic changes. These changes include e.g. lower than anticipated pace of growth in the demand for electricity and lower level of energy prices, significant decrease in investment plans in the area of generation and change in their fuel structure, the issue of regulation within RES, potential of gas extractions from non conventional sources in Poland and challenges faced by the segment of distribution and energy sales. An active monitoring of the market environment, in which Enea Capital Group operates, development of innovation, resources, potential, the Group's position and implementation of a considerable part of the strategy approved in 2013, gave grounds for updating the document setting the Group's development directions.

The final scenario of Enea Capital Group's development in the Strategy Update foresees that the superior idea of Enea CG's operations shall be: building value for shareholders and guaranteeing reliability of energy supplies to customers. The idea will be supported through: the concentration of operations on the power market, development in all energy links of the value chain in order to build a strong position of Enea CG on the market in the long run, development of the Group supported with acquisitions within occurring market opportunities and a new pillar - implementation of innovative solutions in particular links of the value chain as a collateral for the Group's further development.

Enea CG's mission and vision remained unchanged. The mission is still "Enhancing the Group's value through building customer confidence", and the vision: "Fully integrated energy group building its competitive advantage through flexible responding to market needs and efficient resources management".

The Company did not also change the map of strategic goals. Pursuant to the approved Strategy Update, the strategic goals of Enea Capital Group's operations in the next years, reflecting the formulated final development scenario will be: higher value for shareholders, building long-term relations with customers, growth in profitable areas, better efficiency and optimum use of the organisation's potential.

In the Strategy Update the Group particularly addressed three new elements: (i) safeguarding fuel supplies for own generating assets, (ii) innovations and (iii) wider HR policy of Enea Capital Group.

Enea CG holds mainly the generating assets based on bituminous coal. The profitability of energy generation from bituminous coal is currently under a great pressure and it is anticipated that the pressure will increase (RES development, costs of CO2 emissions, development of transborder connections). Thus, energy companies must adjust the purchase of coal from extraction assets so that to reduce the cost and improve the competitiveness of the generation based on coal.

The implementation of innovations and new technologies is one of the key factors affecting the enterprise competitiveness on the market. In the conditions of a durable global low level of economic growth the innovativeness and innovations become the key factors enabling generation of a growth in revenue and margins on products. Enea CG's innovation operations will be strongly focused on customer needs and raising the internal efficiency of the organisation. The Group, as a beneficiary of implemented innovations, will build the competitiveness and enhance the efficiency of operations.

Conclusions from the analysis of Enea CG's needs within human resources management and the current situation within this area indicate that it is necessary to formulate and implement a comprehensive HR policy for Enea CG. It will guarantee the realisation of goals and tasks faced by Enea CG and at the same time will satisfy the ambitions and professional aspirations of employees.

Within human resources management, the policy will be based on significant, as regards the strategic point of view, instruments of long-term impacting on the internal and external labour market and principles of their use. It will also describe the preferred method of realising the tasks of superiors towards employees and the method of performing work by the employees themselves. In this sense, the HR policy will shape the company's organisational culture.

Within the superior goal, i.e. higher value for shareholders, the Group will pursue the improvement of the key financial ratios, including the growth in the return on equity and return on assets, with the concurrent building of customer confidence through an effective offering of products/services and servicing adjusted to customer expectations.

The growth path in profitable areas will be realised through building a competitive generating portfolio. The Group will pursue the development of the generating capacity to the level of the additional 1,075 MWe in the segment of system power plants in 2017 and finally (in 2020) additional ca. 500 MWe in RES and ca. 200 MWe and 1,000 MWt in cogeneration sources and heating networks, however the selection of the fuel for cogeneration units, including the possibility of using biomass or RDF/pre-RDF, will be a derivative of the analysis of economic attractiveness of particular undertakings. In relation to the 2013 perspective Enea Capital Group verified in particular its investment plans within cogeneration sources and heating networks reducing in the Strategy Update the final (2020) volumes of capacity installed in this type of installations by ca. 100 MWe and ca. 500 MWt.

A growth in profitable areas will be also performed through the allocation of funds in the distribution supporting the optimum use of resources. The realisation of the above goal will occur through the implementation of the programme of enhancing the reliability and reducing the failure rates of the grid, programme of developing smart grid solutions in order to obtain advantage for the grid operation and enhancing the quality of customer service, and also via undertaking activities directed at the reduction in the volumes of electricity necessary to cover losses in the energy balance.

The last element of the development in profitable areas is realisation of the goal within a growth of the margin mass on product sales. The goal will be realised by initiatives undertaken both by the sales area and wholesale area.

Higher efficiency of the Group will be obtained through the concentration on the core operations, improvement of the customer service processes of internal and external customers, which will lead to an annual reduction in customer service costs. Additionally, the Group will try to optimise fixed costs.

The realisation of the indicated paths will be possible due to an optimum use of the organisation's potential. The improvement of the management model will take place through a further integration of the Group.

The target capital structure of Enea CG reflects the adopted direction of concentration on the core operations. The Group will continue to perform restructuring operations within the functioning of entities whose scope of operations is not related to the operations of a power company, in order to maintain only those companies in the structure which come from the basic value chain and companies supporting them.

The realisation of the investments planned by Enea Capital Group during 2015-2020 requires incurring total capital expenditures in the amount of ca. PLN 17 billion.

The planned capital expenditures will be covered from own sources and obtained debt financing.

The implementation of the activities foreseen in the Strategy's horizon will allow for a dynamic development of Enea Capital Group, considerable strengthening of the market position and guaranteeing higher value for the Group's shareholders.