Signing of a contract for the supply of fuel gas with Polskie Górnictwo Naftowe i Gazownictwo S.A.

Report number

The Management Board of KGHM Polska Miedź S.A. (“Company”, “KGHM”) announces that on 27 July 2017 a Framework Agreement for the comprehensive sale of fuel gas as well as bilateral Individual Contracts were concluded with the company Polskie Górnictwo Naftowe i Gazownictwo S.A. (“PGNiG”, “Seller”). The agreement in question along with the contracts replace the existing five individual long-term contracts between the parties, which in accordance with the stipulations of the Framework Agreement are terminated – including the contracts which were announced by the Company in the following regulatory filings: no. 26/2010 dated 30 July 2010 and no. 6/2014 dated 30 January 2014.

The Framework Agreement and Individual Contracts standardise the conditions for the purchase of fuel gas for all reception points, which until now had differed from one other.    

The Framework Agreement was entered into for the period from 1 July 2017 to 1 October 2033. It regulates the manner in which Individual Contracts are entered into and terminated, as well as common terms and conditions for all of the contracts, such as the rules for placing orders for fuel gas supply, settling deliveries and renegotiating gas prices. Moreover, under certain conditions, the agreement provides for the possibility to change the type of fuel gas from nitrogen-rich gas to high-methane gas, and provides a mechanism enhancing the energy security of the Company, in which the Seller guarantees the fuel gas supplies, in the quantities required by KGHM.

These Individual Contracts represent implementing agreements to the Framework Agreement. They specify the amounts of fuel gas and the price formula shared by all of the contracts – based on market indices of gas prices, and other significant technical and trade parameters of the supply of gas to the Company. All of the Individual Contracts were signed for the period ending 1 October 2033, while for some of the contracts the date on which deliveries are to start was determined to be 1 July 2017, and for others to be 1 October 2017.

The estimated total value of the Framework Agreement together with Individual Contracts during the entire period they will be in force is approx. PLN 4.8 billion.

Legal basis: Art. 17 (1) of MAR (Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) 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 (Official Journal of the European Union dated 12 June 2014, no. L 173/1)