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Current Report No.: 4/2020

Title: Conclusion of a memorandum of understanding on the suspension of financing of the Ostrołęka C project
Date: 2020.13.02
Report no.:  Current Report No.: 4/2020

Current Report No.: 4/2020

Date of preparation: 13 February 2020

Short name of Issuer: ENEA S.A.

Legal basis: Article 17(1) MAR - confidential information

Subject: Conclusion of a memorandum of understanding on the suspension of financing of the Ostrołęka C project

Content of report:

The Management Board of ENEA S.A. ("Issuer") hereby informs that on 13 February 2020 the Issuer concluded a memorandum of understanding ("Memorandum") with Energa S.A. ("Energa") (hereinafter jointly: "Sponsors") on the suspension by Energa and the Issuer of financing of the construction project of the new coal-fired unit - the planned Ostrołęka C power plant in Ostrołęka with a capacity of approx. 1,000 MW ("Project").

Moreover, a number of circumstances have recently arisen which, in the opinion of the Sponsors, may have an impact on the Project, resulting in the need for a comprehensive analysis of further activities under the Project, including its further financing. In particular, the Sponsors identified here the following ones:

(i) the planned changes in the European Union's policy with respect to the energy sector and the new Energy Lending Policy of the European Investment Bank together with the initiative of the European Commission related thereto on the so-called Green Deal, i.e. a roadmap to ensure the European Union's climate neutrality by 2050;

(ii) announcement by Polski Koncern Naftowy Orlen S.A. on 5 December 2019 of a public tender offer to purchase 100% of Energa shares.

These factors, constituting an extraordinary change in circumstances, combined with difficulties with obtaining external financing for the Project justify the suspension of the Project's financing by Energa and the Issuer and, in consequence, may trigger the exercise by the Elektrownia Ostrołęka sp. z o.o. ("Company") of its right to suspend the construction of the Project. In the Memorandum, the Issuer and Energa undertook to conduct analyses of, in particular, technical, technological, economic and organisational parameters as well as of further financing of the Project, while the detailed subject, schedule and method of performing these analyses will be agreed by the parties to the Memorandum within 10 days of the conclusion thereof.

The Sponsors accepted that the suspension of the Project's financing will result in the need for Company to suspend the performance of the Contract for the Construction of Ostrołęka "C" Power Plant with a capacity of approx. 1,000 MW concluded on 12 July 2018, as well as of the Contract for redevelopment of railway infrastructure for operational purposes of Ostrołęka C Power Plant of 4 October 2019. The Memorandum does not affect the validity of any existing memoranda of understanding, in particular it does not affect any existing arrangements regarding the financing terms of the Project and the formula of settlements between the Sponsors adopted on the basis of the existing memoranda, of which the Issuer informed in Current Report No. 12/2019 of 30 April 2019 and in Current Report No. 68/2018 of 29 December 2018, while the memorandum of understanding the Issuer informed about in Current Report No. 12/2019 of 30 April 2019 will be applied to settle any possible additional costs which may arise out of suspension of the construction of the Project by the Company.

Having in mind the diverse and international nature of Enea SA's shareholding, and also the provisions of the Best Practices of WSE Listed Companies, Enea SA guarantees the availability of its website also in English. In case of any interpretation doubts and discrepancies between the Polish and English versions, the Polish version shall prevail.