Integrated report 2021

33.3 Investment agreement with Ørsted for offshore wind farm projects

On February 10, 2021 PGE Group entities and Ørsted signed an agreement to form a 50%/50% joint venture to develop two offshore wind farm projects. These are PGE’s on-going projects Baltica 2 through SPV EWB2 (with a planned capacity of approx. 1,5 GW) and Baltica 3 through SPV EWB3 (with a planned capacity of approx. 1 GW).

PGE Baltica 6 sp. z o.o., PGE Baltica 5 sp. z o.o. (PGE’s subsidiaries) („Existing Shareholders”), Orsted Baltica 2 Holding sp. z o.o., Orsted Baltica 3 Holding sp. z o.o., (subsidiaries of Ørsted Wind Power A/S („OWPAS”), hereinafter jointly referred to as „Investors”), Elektrownia Wiatrowa Baltica – 2 sp. z o.o. and Elektrownia Wiatrowa Baltica – 3 sp. z o.o. signed an investment agreement concerning the development by the Investors of projects Baltica 2 and Baltica 3.

The investment agreement establishes the legal framework for the formation of a joint venture between PGE and OWPAS for the development, construction and operation of offshore wind projects Baltica 2 and Baltica 3.

Under the investment agreement, the Investors undertake to acquire newly-issued shares in EWB2 and EWB3 constituting 50% of share capital and granting the Investors 50% of votes at each of the companies.

On March 10, 2021 the President of the Polish Office of Competition and Consumer Protection approved the concentration.

On May 6, 2021, after the fulfilment of the conditions precedent, relevant PGE Group entities and Ørsted completed the transaction in which Ørsted entities acquired shares representing a 50% stake in EWB2 and EWB3. Once the share capital increase was registered, Ørsted and PGE (acting through subsidiaries) became 50/50 partners in this joint operation.

The total price for the 50% stake in EWB2 and EWB3 constitutes the equivalent of approx. PLN 686 million. The increased price includes in particular contributions made by PGE to the companies after the investment agreement was signed.

Once the relevant assumptions are met, Ørsted entities will be required to make additional contributions to EWB2 and EWB3, which can amount to a total of PLN 1,024 million.

In closing the transactions, Ørsted and PGE entities signed a number of documents, separately for Baltica 2 and Baltica 3, including in particular:

  • shareholder agreements, regulating the companies’ corporate governance, operational rules for integrated project teams, commitments by the parties regarding financing and the provision of other services to the companies, restrictions on the disposal of shares in the companies constituting the joint operation as well as the consequences of contractual breaches and change of control;
  • agreements concerning the provision of development services for the companies constituting the joint operation by relevant subsidiaries from both sides;
  • agreements regarding access to resources, based on which both of the parties will delegate personnel to the companies;
  • shareholder loan agreements, pursuant to which the shareholders will provide debt financing (aside from equity financing) to the companies,
  • corporate guarantees issued by PGE and Ørsted Wind Power A/S, pursuant to which both of the parties guarantee due performance of liabilities at the development stage of the projects by their respective subsidiaries.
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