Acquisition of shares in ENGIE Energia Polska S.A. (presently: Enea Elektrownia Połaniec S.A.)
On 30 September 2016, Enea S.A. made an offer to purchase 100% of shares in ENGIE Energia Polska SA (EEP, presently: Enea Elektrownia Połaniec S.A.). The offer was made in the manner set out in the process initiated by ENGIE, the holder of 100% of shares in EEP. On 2 December 2016, the Company acquired the exclusive right to conduct further negotiations regarding the purchase of 100% of shares in EEP. On 23 December 2016, the Company and ENGIE International Holdings B.V. signed the conditional agreement of sale of 100% of shares in EEP and of indirect sale of 100% of shares in ENGIE Bioenergia Sp. z o.o. The transaction closing was dependent on the fulfilment of the following essential conditions precedent:
- obtaining the consent from the Minister of Energy pursuant to the Act on control of certain investment projects
- obtaining the consent from the Office of Competition and Consumer Protection (OCCP) President for the concentration
- waiver of the priority right of purchase by the President of the Agricultural Real Property Agency
- conversion of EEP’s debt owed to member companies of ENGIE group into equity in EEP
On 28 February 2017, the Company was notified that the last of the abovementioned conditions was fulfilled, which meant that all the abovementioned conditions precedent were fulfilled. On 2 March 2017, the Company received from ENGIE International Holdings B.V. the calculation of the initial selling price of 100% of shares in EEP at the level of PLN 1 264 159 355.
On 14 March 2017, the Issuer acquired 100% of shares in EEP, i.e., 7 135 000 of shares carrying the right to the same number of votes, at the initial price of PLN 1 264 159 355. The estimated expenses related to the acquisition of shares amounted to PLN 3.9m The transaction fits into Enea Group Development Strategy for the period until 2030 approved in September 2016. With this transaction, the Group will increase its share in the national electricity production and become the second largest player on the electricity production market. The consolidated financial statements disclose the acquisition price allocation to identifiable acquired net assets.
In the period from 14 March to 31 December 2017, EEP Group earned net revenue on sales in the amount of PLN 1 643 962k and net profit in the amount of PLN 190 727k. According to the estimates made by the Management Board, if the merger took place on 1 January 2017, the consolidated net revenue on sales for 2017 would reach PLN 11 732 854k, whereas the consolidated net profit would amount to PLN 1 176 582k.
EEP Group did not have any contingent liabilities which would have to be examined in the context of the merger settlement.
Implementation of the Investment Agreement with Energa S.A. and Elektrownia Ostrołęka S.A. on the construction and operation of the power unit at Elektrownia Ostrołęka S.A.
On 19 September 2016, Enea SA and Energa S.A. signed the Letter of Intent on commencing cooperation in the field of preparing, implementing, and operating a high-end coal fired 1 000 MW power unit at Elektrownia Ostrołęka (the Investment Project, Ostrołęka C).
The Parties’ intention is to jointly develop an effective business model for Ostrołęka C, verify its design documentation, and optimise the technical and economic parameters of the new power unit. The cooperation will also involve conducting the tender procedure to choose the general contractor of the Investment Project.
In the unanimous opinion of the Parties, the Investment Project implementation will have a positive effect on the power safety of Poland, meet the highest environmental standards, and ensure another stable high-efficiency and low-emission source of energy in the National Power System.
On 8 December 2016, the Company signed the Investment Agreement on implementation of Ostrołęka C project. The subject matter of the Agreement is the preparation, construction, and operation of the abovementioned power unit. Pursuant to the Agreement, the cooperation will be generally organised in three stages: the Development Stage – until the issue of the notice to proceed for the general contractor, the Construction Stage – until the commissioning of Ostrołęka C for commercial operation, and the Operation Stage – the commercial operation of Ostrołęka C. Following the Development Stage completion, Enea SA is obliged to participate in the Construction Stage, on the assumption that the Project profitability condition is met and that the Project financing does not violate the Company’s bank covenants.
It is estimated that the total investment outlays of Enea SA until the Development Stage completion will amount to approx. PLN 128m. Until the Investment Project implementation, Energa SA will transfer to Enea SA its shares in Elektrownia Ostrołęka SA accounting for 50% of the share capital of the value of approx. PLN 101m. The condition precedent for the coming into effect of the Investment Agreement was the obtainment of the consent from the OCCP President for the concentration through the acquisition of shares in SPV for the Project implementation. The conditions was met on 11 January 2017.
On 19 December 2016, SPV announced the tender procedure to choose the general contractor for the construction of Ostrołęka C supercritical power plant of the power capacity of approx. 1 000 MW and net efficiency of at least 45%. If relevant assumptions (including, without limitation, those related to the required participation of Enea SA, Energa SA and Financial Investors, if any) are met and if the power market or other support mechanism is introduced, Elektrownia Ostrołęka SA will be able to accept the order for the comprehensive implementation of this project.
On 1 February 2017, Enea SA and Energa SA signed the Agreement of acquisition of 24 980 926 shares in Elektrownia Ostrołęka SA of the total value of PLN 24m, thus taking up 11.89% of shares in the Company’s share capital.
Under the abovementioned agreements, Energa S.A. and Enea S.A. took joint control over Elektrownia Ostrołęka SA with its registered office in Ostrołęka whose purpose of activity is the construction and operation of a new coal fired power unit. Each of the parties will hold 50% of shares in Elektrownia Ostrołęka SA and the same number of votes at the General Meeting.Each of the investors will have the same number of representatives in the Management Board and the Supervisory Board. Decisions on key operations will require a unanimous consent of both shareholders holding the rights to net assets of Elektrownia Ostrołęka SA. In the light of the above, the investment was classified as a joint venture accounted for by equity method.
Elektrownia Ostrołęka SA is a non-public company, which is why there are no market price quotations for its shares. On 13 April 2017, the Extraordinary General Meeting of Shareholders of Elektrownia Ostrołęka S.A. passed a resolution on the company’s share capital increase from PLN 210 100k to PLN 229 100k through new share issue. In the private subscription, Enea S.A. took up 9 500 000 shares in exchange for a cash contribution which was made on 28 April 2017. After taking up the new issue shares, Enea increased its share in the share capital of Elektrownia Ostrołęka S.A. to 15.1%. On 27 June 2017, Enea SA and Energa SA signed the Agreement of Acquisition of 20 017 269 shares in Elektrownia Ostrołęka SA of the total value of approx. PLN 19.2m, increasing their share in the share capital of Elektrownia Ostrołęka SA to 23.79%. In order to ensure sufficient funds for the company, ENERGA S.A. and Enea S.A., under the agreement of 23 November 2017, granted the company a loan in the amount of PLN 10m from each of the Shareholders. On 23 November 2017, the Extraordinary General Meeting of Shareholders of Elektrownia Ostrołęka S.A. passed a resolution on transformation of the company into a limited liability company. The transformation is in the process of registration with the National Court Register.
Acquisition of shares in Polimex-Mostostal S.A.
On 18 January 2017, Enea S.A. concluded an investment agreement with Energa SA, PGE Polska Grupa Energetyczna SA, PGNiG Technologie SA (the Investors) and Polimex, whereby the Investors agreed to make investment in Polimex. The investment was to take the form of taking up by Investors of the total number of 150 million of shares issued by Polimex. The Company agreed to take up 37.5 million of new issue shares for the total issue price of PLN 75m. The agreement was concluded on the conditions precedent described in detailed in the current report 2/2017. Together with the abovementioned agreement, other agreements were signed, setting out detailed cooperation rules and the Investors’ mutual rights and duties connected with the implementation of the abovementioned investment, as well as additional agreements on the investment implementation which were signed with the creditors and current shareholders of Polimex.
On 20 January 2017, in connection with the fulfilment of the conditions precedent stipulated in the abovementioned Investment Agreement, the Company accepted the offer from Polimex management board to take up in private subscription 37.5 million of shares for the issue price of PLN 2 per share, i.e., for the total issue price of PLN 75m. Moreover, as a result of performance of one of the abovementioned additional agreements, on 20 January 2017, the Company acquired 1.5 million of shares in Polimex from its current shareholder. The acquisition price for all shares was PLN 80.6m. Enea S.A. took a 16.48% share.
An investment agreement enables the Investors to have an influence on the financial and operating policy of Polimex. Such powers are exercised by the Supervisory Board. Also, the Investors signed the agreement on investments in Polimex (“Agreement”). The purpose of signing the Agreement was to ensure increased control over Polimex for the Investors holding in aggregate the majority share in votes at the General Meeting of Shareholders of Polimex. The Agreement stipulates, among other issues, that the parties will agree upon by voting their common position when making key decisions falling within the scope of powers of the General Meeting of Shareholders and the Supervisory Board of Polimex, including decision on the personal composition of Polimex Management Board. Due to the Investors’ abovementioned powers which result in their significant impact, the participation in Polimex was classified as an associated entity accounted for by the equity method. Polimex is an engineering and construction company distinguished by a wide range of services provided on the general contractor basis. The company is quoted at the Warsaw Stock Exchange (WSE).
On 21 March 2017, the Investors published a call to subscribe for Polimex shares in connection with the fact that they exceeded (as the parties to the agreement) the 33% threshold of the total number of votes at the general meeting of Polimex. The call was a subsequent one, i.e., the Investors intended to acquire under the call the number of shares being the surplus over the number of shares held by them at that time (i.e., in aggregate, 65.93% of the total number of votes Polimex) and ensuring the achievement of no more than 66% of the total number of votes at the general meeting of Polimex.
In connection with the call, each of the Investors (including Enea) intended to obtain no more than approx. 0.018% of the total number of votes at the general meeting of Polimex. The call was settled on 28 April 2017; as a result, each of the Investors acquired 24 shares in Polimex. Presently, the Company holds 39 000 024 shares in Polimex representing a 16.48% share in the share capital of Polimex. In aggregate, the Investors hold 156 000 097 of shares representing a 65.9% share in the share capital of Polimex. In line with the Investment Agreement, Polimex took measures in 2017 aimed to obtain admission to trading at WSE for T-series shares acquired by Investors. On 20 October 2017, the Polish Financial Supervision Authority approved Polimex issue prospectus prepared in connection with the issue of 150 000 000 ordinary bearer T-series shares.
On 31 October, the Management Board of GPW decided to admit T-series shares to exchange trading on the GPW basic market with effect from 3 November 2017 on condition that Krajowy Depozyt Papierów Wartościowych S.A. (KDPW, Central Securities Depository of Poland) registers theses shares by 3 November 2017. On 2 November 2017, KDPW Operating Department made an announcement about the registration of 150 000 000 of T-series shares in the Company on 3 November 2017 under the code PLMSTSD00019.
Recapitalisation of Polska Grupa Górnicza sp. z o.o.
In the context of the process of finding capital investors by Katowicki Holding Węglowy S.A., in July 2016, Enea S.A. commenced discussions with potential investors about the possibility of making the investment and its potential parameters. On 28 October 2016, Enea S.A. signed a letter of intent with Węglokoks S.A. and Towarzystwo Finansowe Silesia sp. z o.o. expressing the parties’ initial interest in the financial commitment in Katowicki Holding Węglowy S.A. or its selected assets.
In connection with the interest of Polska Grupa Górnicza S.A. (PGG) in acquiring selected assets from Katowicki Holding Węglowy S.A. and beginning the process of PGG recapitalisation, Enea S.A. and the current PGG Shareholders conducted the necessary analyses of the Business Plan presented by PGG and expressed their interest in capital commitment in Polska Grupa Górnicza S.A.
On 30 March 2017, the Supervisory Board of Enea S.A. agreed for the Company to join Polska Grupa Górnicza S.A. and take up new shares in PGG capital of the nominal value of PLN 300m in exchange for a cash contribution in the amount of PLN 300m.
On 31 March 2017, the Company signed:
- the investment agreement setting out the terms and conditions of financial investment in PGG (Investment Agreement)
- the agreement on exercising joint control over PGG (Investor Agreement)
Investment Agreement
The Parties to the Investment Agreement are: Enea S.A., ENERGA Kogeneracja sp. z o.o., PGE Górnictwo and Energetyka Konwencjonalna S.A., PGNiG TERMIKA S.A., Węglokoks S.A., Towarzystwo Finansowe Silesia sp. z o.o., Fundusz Inwestycji Polskich Przedsiębiorstw Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych (the Investors) and PGG. Under the Investment Agreement, PGG was to acquire selected mining assets from Katowicki Holding Węglowy S.A. under the promised agreement which was concluded on 1 April 2017.
The Investment Agreement governs the procedure for conducting the investments and for the Company’s joining PGG, the rules for operation of PGG and its bodies as well as the rules for the parties’ exit from investments in PGG.
Under PGG recapitalisation, Enea S.A. agreed to take up new shares in PGG of the total nominal value of PLN 300m in exchange for a cash contribution in the amount of PLN 300m in the following three stages:
- in the first stage, the Company took up new shares in PGG of the nominal value of PLN 150m in exchange for a cash contribution in the amount of PLN 150m. After taking up these shares, the Company held a 4.39% share in the share capital of PGG. The first recapitalisation took place in April 2017;
- in the second stage, the Company took up new shares in PGG of the nominal value of PLN 60m in exchange for a cash contribution in the amount of PLN 60m. After taking up these shares, the Company holds a 5.81% share in the share capital of PGG. The second recapitalisation took place in June 2017;
- in the third stage, the Company will take up new shares in PGG of the nominal value of PLN 90m in exchange for a cash contribution in the amount of PLN 90m. After registration in the National Court Register, the Company will hold a 7.66% share in the share capital of PGG. The third recapitalisation took place in Q1 2018.
The Agreement sets out the rules for appointing the Supervisory Board members: each of the Investors and the State Treasury shall have the right to appoint one member of the Supervisory Board to be composed of no more than 8 members.
The investment fits into Enea Group Development Strategy whose components include securing the resource base for conventional power industry.
Investor Agreement
On 31 March 2017, the Investors: ENERGA Kogeneracja sp. z o.o., PGE Górnictwo, Energetyka Konwencjonalna S.A., PGNiG TERMIKA S.A., Fundusz Inwestycji Polskich Przedsiębiorstw Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych, and Enea S.A., made the Agreement governing the procedure for the parties to agree upon their common positions on decisions related to the Company and for exercising joint control over the Company. The Agreement for Enea S.A. was concluded upon the condition of obtaining a consent of the OCCP President for taking over joint control over the Company. The OCCP consent referred to in the preceding sentence was issued on 22 December 2017.
In addition, the letter of intent signed on 16 October 2016 between Enea S.A., Węglokoks S.A. and Towarzystwo Finansowe Silesia sp. z o.o. on the previously analysed capital investment in Katowicki Holding Węglowy S.A. was terminated on 31 March 2017.
On 31 January 2018, by virtue of the resolution of the Extraordinary General Meeting of Shareholders of Polska Grupa Górnicza S.A., the share capital of Polska Grupa Górnicza S.A. (PGG) was increased in line with the provisions of the Investment Agreement of 31 March 2017 made between Węglokoks S.A., Fundusz Inwestycji Polskich Przedsiębiorstw Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych, Towarzystwo Finansowe Silesia sp. z o.o., PGE Górnictwo Energetyka Konwencjonalna S.A., Energa Kogeneracja sp. z o.o., PGNIG Termika S.A., Enea S.A. and PGG, whereby the Investors agreed to pay additional capital to PGG together with the remaining Investors in the total amount of PLN 1 000 000 000 (one billion Polish Zloty), with the participation of Enea S.A. in the amount of PLN 300 000 000 (three hundred million Polish Zloty), by a cash contribution, in three tranches. The first recapitalisation (1st tranche) took place on 3 April 2017 and the second one on 14 June 2017.
As a result of passing the abovementioned resolution, Enea S.A. signed an agreement on 31 January 2018 on the taking up of shares between ENEA and PGG, accepting the offer to take up in private subscription 900 000 (nine hundred thousand) new shares of the nominal value of PLN 100 each and of the total nominal value of PLN 90 000 000 (ninety million Polish Zloty) in exchange for a cash contribution in the amount of PLN 90 000 000 (ninety million Polish Zloty). B-series shares are ordinary registered shares and should be fully paid up in the form of a cash contribution before the share capital increase registration.
