Change in a significant contract with Polskie Górnictwo Naftowe i Gazownictwo SA

Thursday, 30 January, 2014
Current report no. 6/2014

The Management Board of KGHM Polska Miedź S.A. announces that on 30 January 2014 an annex was signed to the comprehensive contract for the purchase of fuel gas („the Contract”), entered into on 30 July 2010 with Polskie Górnictwo Naftowe i Gazownictwo SA (PGNiG), as announced by the Company in current report no. 26/2010.
The contract from 2010 involves the purchase of natural gas for power generation purposes – to supply two Gas-Steam Blocks, each of approx. 45 MWe, and is valid to 30 June 2033. Based on the annex, the annual volume to be supplied was reduced from 266 million m3 to 41.5 million m3. This change is due to the limitation by KGHM Polska Miedź S.A. in the generation of electricity in association with heat production due to changes in the system of support for cogeneration in 2013 as well as to low electricity prices. The estimated value of this Contract after signing the annex is approx. PLN 830 million. The parties do not preclude a return to the initial volume of supply following improvements in the regulatory environment and in macroeconomic conditions.

Also, annexes were signed for three other contracts for the purchase of fuel gas from PGNiG: i) a contract dated 25 September 2001, ii) a contract dated 4 January 1999, and iii) a contract dated 1 October 1998. The only change in these contracts involved their period of validity, which was changed from being undefined to 30 June 2033. The estimated value of the three contracts during their period of validity is approx. PLN 2.8 billion and exceeds 10 % of the Company's equity value. The highest-value contract is the contract entered into on 4 January 1999. The estimated value of this contract is approx. PLN 1.8 billion.
This change secures long term cooperation with the main supplier of fuel gas, i.e. PGNiG with respect to the purchase of nitrogen-rich natural gas.

Legal basis: § 5 sec. 1 point 3 of the Decree of the Minister of Finance dated 19 February 2009 regarding current and periodic information published by issuers of securities and conditions for recognising as equivalent information required by the laws of a non-member state (Journal of Laws No. 33, item 259).