Adoption and approval of PGE Group's strategy

The Management Board of PGE Polska Grupa Energetyczna S.A. ("PGE", the"Company") informs that on September 6, 2016 the Supervisory Boardapproved PGE Group's (the "Group") strategy update presented by theManagement Board of PGE. The below report presents the key elements ofthe updated strategy. At the same time the Company's Management Boardinforms that the strategy presentation will be posted on PGE's website.

As part of its strategy PGE will be seeking to maximize ROIC, i.e.Return on Invested Capital, which is to be achieved by launching anumber of initiatives aimed at increasing the Group's efficiency andflexibility. This will enable implementation of the program to developmodern conventional electricity as well as new technologies and businessmodels.

Mission and vision

PGE's mission is to ensure security and growth based on reliability ofsupply, technical excellence, modern services and partnershiprelationships. The overall objective of PGE Group's operations is toincrease its shareholder value and the key role in ensuring Poland'senergy security. In accordance with its long term growth vision PGE isto become:

- Leader in electricity generation, actively taking advantage of growthopportunities

- Reliable and active media and service supplier

- Poland's most efficient and flexible energy group

- Leader in developing new business models and business lines

Maintaining the leading position in generation is to involve achievingan at least 40% share in Poland's electricity generation market beyond2020.

Operational efficiency

In order to improve its cost efficiency the company is planning toachieve a PLN 500m reduction of controllable costs by 2020 versus 2016.This will allow for the total cost reduction of approximately PLN 3.5bnin 2016-2020 versus the current forecasts. Furthermore, PGE is intendingto reduce planned expenditures on modernization and replacements byapproximately PLN 500m in 2016-2020, among others as a result ofintroducing an integrated production assets management system. As partof organizational changes, the heat production operations will be placedin a separate Cogeneration business line with the goal to improveoperational efficiency and develop this business based on numerousoperational and cost synergies and the strong position on the regionalheat markets.

Investments

In the course of the investment program that envisages realizing thefull potential of the company's core operations and developing modernconventional electricity the Group allows for an option where thirdparty partners could participate in its flagship investment projects atOpole and Turów. At the same time PGE is reviewing further investmentsin conventional power generation, e.g. at Dolna Odra, based on the newmarket model.

The Company will carry out the modernization of its power plants andcombined heat and power plants to the optimal degree in order to complywith the new BAT industrial emissions standards, and it also takes intoaccount the potential growth of the biomass co-firing technology's sharein PGE's generation portfolio based on the new RES support system.

The investment projects in the distribution segment are to result inreducing the performance indicators by 2020 versus 2015: SAIDI and SAIFIby 56%, and the average new customer connection time by 40%.

The Group assumes capital expenditures of approximately PLN 34bn in2016-2020, not including capitalized costs related to removal ofoverburden. Beyond 2020 PGE will be implementing a new investmentprogram, dependent on selected strategic options (developing moderncoal-fired power generation, off-shore wind farms or a nuclear powerplant). The choice will be determined by the external factors: amongothers, European Union's climate and energy policy, the power system'sneeds or market model.

New technologies and business models

PGE is planning to implement innovations in all links of the valuechain, increasing the efficiency of utilizing combustion by-products andflexibility of the generation units as well as automating processes andoptimizing replacement activities in lignite mining.

The Group is intending to participate in the growth of renewable energysources so as to generate approximately 25 percent of Poland's RESelectricity production in 2030. PGE's strategic options also includeconstructing an approximately 1000 MW off-shore wind farm, implementingthe most advanced on-shore wind farm projects, expanding biomassco-firing at dedicated installations and increasing its involvement inthe microgeneration segment.

The Group is also planning to expand activities in the energy efficiencyarea, building PGE's brand as the market leader. At the same time theGroup is increasing its involvement in developing and commercializingnew energy technologies, creating a modern, comprehensive offering forthe customer, in accordance with the requirements of the changingenvironment.

Social responsibility

PGE is of the opinion that a responsible approach towards the naturalenvironment, customers, shareholders and public interest will allow fora safe implementation of the Group's mission and vision.

PGE is to be a responsible organization, aware of its environmentalimpact, building shareholder value and ensuring sustainable growth ofthe business. In its activities in this area the Group is focusing,among others, on:

- Reducing environmental impact

- Education with respect to efficient use of electricity andenvironmental impact

- Utilizing diverse energy sources

- Ensuring security of electricity supply

- Operating based on ethical principles

- Taking actions for the benefit of local communities

Strategy implementation preconditions

The Group assesses that the implementation of the strategy will bedependent on several external conditions materializing, among which theregulatory ones are of the highest importance:

- Poland's energy policy supporting the implementation of PGE Group'smission and vision

- Available capacity remuneration mechanism (capacity market)

- System-wide new investment project support mechanisms

- Implementing agreed solutions with respect to free CO2 emissionallowances

Ultimately PGE assumes increasing the Group's investment potential thatwould allow for implementing the long term growth vision, as well asperiodically updating the strategy in response to new marketopportunities and changing external conditions.

The Company's Management Board informs that the above constitutesconfidential information the publication of which was delayed inaccordance with art. 17 section 4 of the Regulation (EU) No 596/2014 ofthe European Parliament and of the Council of 16 April 2014 on marketabuse (market abuse regulation) and repealing Directive 2003/6/EC of theEuropean Parliament and of the Council and Commission Directives2003/124/EC, 2003/125/EC and 2004/72/EC.