CONCLUSION BY PROJECT COMPANIES IMPLEMENTING OFFSHORE WIND FARM PROJECTS OF AGREEMENTS FOR THE SUPPLY OF WIND TURBINES AND AGREEMENTS FOR PERFORMING WARRANTY SERVICE

The Management Board of the company under the name Polenergia S.A. (the “Issuer”), with reference to report No. 6/2022 of February 22, 2022, informs that on February 15, 2024, the project companies MFW Bałtyk II sp. z o.o. and MFW Bałtyk III sp. z o.o. (“Project Companies”), in which the Issuer holds 50% of shares, developing offshore wind farm construction projects as part of a joint venture of the Issuer and Equinor Wind Power AS, i.e. MFW Bałtyk II and MFW Bałtyk III, respectively (collectively “Projects”), have concluded the following agreements (each of the Project Companies separately) with Siemens Gamesa Renewable Energy Sp. z o. o. with its registered office in Warsaw, a company from the Siemens Energy AG group (“Contractor”):

1. agreements for the supply of wind turbines for the implementation of the MFW Bałtyk II and MFW Bałtyk III offshore wind farm projects, respectively (“Turbine Supply Agreements”);
2. agreements for warranty service of wind turbines included in the offshore wind farms of MFW Bałtyk II and MFW Bałtyk III (“Service Agreements”);

Turbine Supply Agreements and Service Agreements, collectively referred to as the “Agreements”.

The agreements are concluded under English law.

Turbine Supply Agreements:

The Turbine Supply Agreements cover the design, engineering, delivery, installation supervision and commissioning of a complete set of 100 offshore wind turbines (50 for each Project) with a maximum capacity of 14.4 MW each along with the WTG SCADA (Supervisory Control and Data Acquisition) system.

Turbine Supply Agreements are conditional. Their entry into force depends on the Contractor providing security and the advance payment by the Project Companies.

The Contractor’s total remuneration under both Turbine Supply Agreements (i.e. for both Projects) is estimated at the date of conclusion of these agreements at approximately EUR 1.66 billion. This amount is not final and will be updated during the term of the Turbine Supply Agreements, because part of the Contractor’s remuneration is based on rates subject to indexation in terms of prices of specific materials and services, inflation, currency hedging or labor costs. The Contractor’s final remuneration will be determined in accordance with the provisions of the Turbine Supply Agreements, based on the ultimately completed scope of work and considering factors depending on the market situation. The Project Companies estimate the total amount of investment expenditure to be incurred under the Turbine Supply Agreements, including in connection with the exercise of options, at approximately EUR 1.8 billion.

The conclusion of Turbine Supply Agreements requires the Project Companies to incur significant capital expenditure (“CAPEX”) before making the final investment decision (“FID”) for the Projects. The estimated value of CAPEX to be incurred before FID, considering indexation, is approximately PLN 88 million and approximately EUR 88 million.

Both Turbine Supply Agreements contain identical substantive provisions, standard for this type of contracts, including detailed definition of the scope and schedule of work, rules for terminating contracts, liability rules, including contractual penalties and guarantees of proper performance of Turbine Supply Agreements. The differences between the Turbine Supply Agreements reflect the design differences of each Project.

Turbine Supply Agreements guarantee the Project Companies the right to terminate them also without specifying the reason, however, termination of Turbine Supply Agreements in this manner will involve the obligation to pay termination fees to the Contractor, the value of which increases over time, depending on the moment of termination of the Turbine Supply Agreements.

The agreed remuneration of the Contractor was calculated assuming the so-called back-to-back installation, i.e. implementation of both agreements on a continuous basis. If this assumption does not come true due to the failure of a given Project Company to commence work on one of the Projects or the termination of one of the Turbine Supply Agreements, an amount of approximately EUR 30 mln will be added to the contract price.

The conclusion of Turbine Supply Agreements allows for the implementation of Projects in accordance with the current schedule.

​Service Agreements

Service Agreements cover maintenance and warranty service of wind turbines included in the MFW Bałtyk II and MFW Bałtyk III offshore wind farms for a period of 5 years.

The Contractor’s total remuneration under both Service Agreements (i.e. for both Projects) is estimated at the date of conclusion of these agreements at approximately EUR 384 mln, which includes the initial fee and annual fees due to the Contractor during the 5-year period indicated above. Fees for services specified in the Service Agreements will be subject to indexation, the level of which will depend on the industry producer price index and quarterly data published by Eurostat.

Project Companies may extend the validity period of Service Agreements for another 5 years, which, however, will involve paying a higher annual remuneration to the Contractor.

Both Service Agreements contain the same substantive provisions, standard for this type of agreements, including the detailed definition of the scope and schedule of work, the rules for terminating the Agreements and the rules of liability. The differences between the Agreements reflect the project differences of each Project.

Pursuant to the Service Agreements, the Contractor provided a performance guarantee to the Project Companies.

Securing payments to the Contractor

Pursuant to the Turbine Supply Agreements, the Issuer will be obliged to provide payment security in the form of a corporate guarantee (“PCG”). PCG issued by the Issuer will concern 50% of the value of the existing liabilities of the Project Companies towards the Contractor. The maximum amount of the Issuer’s liabilities under PCG is in total, rounded: (i) up to EUR 27 mln and up to PLN 29.6 mln for liabilities arising in the period from September 30, 2024 to April 30, 2025, and (ii) up to 47, EUR 2 mln and up to PLN 52 mln for liabilities arising in the period from May 1, 2025 to July 31, 2025, and in each case the PCGs will expire upon reaching financial closure confirmed by the financing institution (loan agent). PCG will also secure the payment of fees by the Project Companies for the termination of the Turbine Supply Agreements.

legal basis: art. 17 section 1 Regulation (EU) No 596/2014 of the European Parliament and of the Council on market abuse and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC, and 2004/72/EC (Journal of Laws EU L. of 2014, No. 173, page 1, as amended).