The contract signed on 11 January 2012 completes the process of acquisition by a special purpose vehicle, PGNiG SPV 1 Sp. z o.o., of 24,591,544 shares corresponding to 99,8% of all Vattenfall Heat Poland SA (VHP) shares. PGNiG will pay to Vattenfall the price of PLN 3,016.7 mio. The capital expenditure was financed by PGNiG from its bond issue programme.

Owing to the VHP acquisition, PGNiG is becoming an energy conglomerate providing the customers with multiple energy carriers, including heat, electricity and gas. The production capacities of the CHPPs and power plants owned by VHP are responsible for over 23% of the total installed heat capacities in Poland. The two biggest assets are: Siekierki and Żerań CHPPs. The company also owns the heating plant in Kawęczyn and in Wola, as well as the CHPP and heating system in Pruszków. The total installed electricity capacity of the sources amounts to approx. 1 GWe and the heating capacity amounts to approx. 4.8 GWt. VHP covers approx. 75% of the demand for heat in Warsaw and supplies 98% of the heat to SPEC grid; it also has approx. 3% share in the electricity generation market in Poland.

In terms of effectiveness, VHP is one of the best managed and most profitable companies of the Polish electric power engineering sector. In the forthcoming years the new regulations in the heating market (the tariff benchmarking system) are going to create a significant potential for Company value growth. Maintenance of support for high efficiency energy cogeneration systems will also contribute positively to VHP results.

The company implements an ambitious plan of pro-environmental investments in Siekierki CHPP. The works connected with exhaust gas desulfurisation and denitration installation are scheduled to be completed in 2012. In the first six months the General Contractor is going to be selected for the investment consisting in the conversion of the coal-fired K1 boiler into an installation dedicated to firing of biomass. This task is to be completed by late 2014. Owing to the aforementioned investments the Company will meet the stringent environmental standards of IED Directive, which is to enter into force in 2016. The major VHP task in medium term  perspective is the investment in a new combined cycle gas and steam unit in Żerań CHPP, which is to replace the presently operating and well-worn header system in 2017. The company is also currently analysing the possibility to construct successive gas units in other Warsaw locations. The new installations and state-of-the-art production units will help reduce emissions and improve the air quality for Warsaw residents.

VHP is going to become the competence centre of PGNiG Capital Group in the electricity generation area. The experienced staff will constitute the basis for further PGNiG expansion in the electric power engineering market, and the Company responsibilities will go beyond the operations in Warsaw heat market and will be related also to development of new business projects concerning electricity and heat generation deployed by PGNiG Capital Group in various places across Poland.

In the forthcoming days the company will change its name and continue its operations under the name of PGNiG Termika.

The acquisition of Warsaw CHPPs, which are considered the leaders of the Polish power sector, is the next milestone in the deployment by PGNiG Capital Group of its updated strategy, whereby power generation is one of the three core areas of the Company's development. The takeover of the VHP heating and power generation assets has been well received by the market. This transaction was one of the factors prompting Standard & Poor's Financial Services, a rating agency, to raise its outlook for PGNiG. The agency stressed the benefits from enhanced diversification and improved risk profile of PGNiG operations.

The preliminary contract for the sale of VHP shares was concluded on 23 August 2011, and on 29 November 2011 the President of the Polish Office of Competition and Consumer Protection unconditionally approved the acquisition of VHP assets by PGNiG Capital Group.

Joanna Zakrzewska

The Press Officer, PGNiG SA