TAURON Polska Energia : Current Report No. 12/2017

20.04.2017 13:00

​The Management Board of TAURON Polska Energia S.A. ('Company') announces that on April 20th 2017 the Company and Grupa Azoty S.A ('Grupa Azoty'), jointly referred to as the 'Parties', signed a letter of intent ('Letter of Intent') in which the Parties outlined general terms and conditions of their cooperation aimed to execute a coal gasification project ('Project').

The Letter of Intent was signed taking into consideration that among various coal conversion methods, of primary mid- and long-term importance will be those that support efficient utilisation of coal resources, in line with the directions of the European Union's policy. This stems, in particular, from the need to reduce the environmental nuisance of power generation and chemical processes, including the need for significant reduction of CO2 emissions.

The product of the technological system referred to in the Letter of Intent is primarily synthesis gas, with a composition enabling its direct use as feedstock for the production of hydrogen, ammonia, methanol or other chemicals. The Parties determined that natural gas currently used to produce nitrogen-based fertilizers can be partly replaced with syngas obtained through coal gasification. This creates new prospects for the mining industry, increasing the country's energy security through the development of low-carbon technology.

The Project is currently at the stage of Pre-FEED (Preliminary Front End Engineering Design) and accompanying analyses, including market analyses. Grupa Azoty has commissioned work connected with the Project documentation, including preliminary selection of licensors and analysis update. Estimates are putting the Project's cost at between EUR 400m and EUR 600m, depending on the technology chosen.

Company has declared its participation in the implementation of the Project on terms to be defined by the Parties in separate agreements, including the assumption of selecting and construction of a unit guaranteeing maximised utilisation of coal from coal mines owned by the Company's capital group. If the Company is unable to provide the required quantity or parameters of coal required by the installation, additional coal may be supplied by third parties.

The Letter of Intent outlines the framework terms of cooperation and, at the present stage, does not give rise to any financial obligations nor require the Parties to make any management decisions. The Parties have declared their intention to cooperate and sign further agreements, including an agreement establishing a joint SPV for the Project.

The Letter of Intent will remain in force until December 31st 2017, but each Party has the right to terminate it on a month's notice.

Article 17 paragraph 1 MAR - inside information