On April 26th 2016, an agreement to launch operations of Polska Grupa Górnicza (PGG) was signed. The investors will engage with PGG on market terms and will closely monitor the implementation of the company's business plan. Analyses have been carried out that indicate that the investment will yield positive returns.

The agreement was signed by the Energa Group, PGE Group, PGNiG Group, Węglokoks, Towarzystwo Finansowe Silesia (TFS), Fundusz Inwestycji Polskich Przedsiębiorstw (FIPP) FIZAN, as well as banks - Kompania Węglowa's bondholders - Alior Bank, BGK, BGŻ BNP Paribas, PKO BP, Bank Zachodni WBK, and 13 trade unions active at Kompania Węglowa.

Set to become Poland's and Europe's largest producer of hard coal, PGG will comprise 11 mines, 4 mining facilities, and head office units separated from Kompania Węglowa.

By investing in PGG, energy sector companies gain access to extensive stocks of thermal coal with parameters meeting the needs of both existing and planned generation units, which is in line with the strategic objectives of power groups. In addition, given the collaboration between the generation and production sectors, customers can gain stable partners guaranteeing an uninterrupted supply of electricity and heat at predictable prices.

The investors have undertaken to purchase PGG shares for a total of PLN 2,417m, of which PLN 1,800m is to be contributed in cash and the balance in the form of conversion of TFS's and Węglokoks' claims.

Energa Kogeneracja, an Energa Group company, will invest PLN 500m in PGG, PGE Górnictwo i Energetyka Konwencjonalna of the PGE Group - PLN 500m, PGNiG TERMIKA of the PGNiG Group - PLN 500m, FIPP FIZAN - PLN 300m, TFS - PLN 400m, and Węglokoks - PLN 217m (with PLN 500m invested earlier, Węglokoks' investment in PGG will total PLN 717m).
The investors do not plan for PGG to be fully consolidated.

As part of refinancing of Kompania Węglowa's current bond issue programme, the banks and Węglokoks have undertaken to acquire new bonds issued by PGG for PLN 1,037m, in three tranches to be redeemed in 2019−2026. Węglokoks' and the banks' investment in the bonds is going to reach PLN 421.5m and PLN 615.5m, respectively.

Financial creditors participated in negotiating the agreement, demonstrating their readiness to play a long-term role in the transformation of Poland's key economic sectors, which has resulted in the bondholders' approval of the agreement designed to secure the company's more profitable and efficient operation.

PGG will operate based on a business plan created to maintain strict control of coal production cost, improve the company's operating efficiency, and achieve the assumed profitability ratios. The details of the business plan will be stipulated in the investment agreement whose execution has been scheduled for Friday, April 29th 2016.

Based in the energy sector, the investors are aware of the changes taking place on the energy market and are making active efforts to diversify their energy mix. However, domestic coal is still the main source of Poland's energy security, remaining the key feedstock in both electricity and heat generation, which is not likely to change for decades to come.


An important condition to PGG's establishment and the investors' commitment was the agreement with trade unions of April 19th 2016 on the rights of social partners. It provides for the implementation of PGG's business plan, which should make the mining facilities operate more efficiently by creating mine complexes and temporarily suspending certain employee benefits.

PGNiG - Polish Oil & Gas Company issued this content on 27 April 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 27 April 2016 09:34:50 UTC

Original Document: http://en.pgnig.pl/news/-/news-list/changeYear/2016?_newslistportlet_WAR_newslistportlet_urlTitle=polska-grupa-gornicza-investors-and-banks-reach-an-agreement&_newslistportlet_WAR_newslistportlet_newsGroupId=18252&_newslistportlet_WAR_newslistportlet_action=newsDetails&_newslistportlet_WAR_newslistportlet_currentPage=1