PROJECT CANCELLATION AND WRITE-DOWN

Polenergia S.A. (‘Company’) hereby announces that on 10th October 2016 it was decided that the Company’s subsidiary – PPG Pipeline Projektgesellschaft mbH (‘PPG’) – would not exercise the option to purchase 100% shares in Inwestycyjna Spółka Energetyczna – IRB Sp. z o.o. (‘IRB’). IRB through its subsidiaries (‘Project Companies’) has the right to build a gas pipeline with a total length of about 150 km (including 118 km in Germany) and capacity of 5 billion m3/year that would combine the Polish and German gas systems (‘Project’).

The above-mentioned decision resulted from the inability to agree on terms and conditions of the Project implementation in Poland, which was a prerequisite for the purchase of IRB.

For the above reasons, on 10th October 2016 the Management Board of the Company decided to make a write-down of assets related to the Project. It was a non-cash write-down. The influence on the net result will be approx. PLN 43 million and will be included in the consolidated financial statements of the Company. This write-down, in accordance with the accepted definition, will have no impact on EBITDA.