PGE and EDF have signed the Conditional Share Sale Agreement regardingsale of EDF assets in Poland

With reference to current report no. 26/2017 dated May 11, 2017, theManagement Board of PGE Polska Grupa Energetyczna S.A. ("PGE", the"Company") discloses that on May 19, 2017 PGE has signed the ConditionalShare Sale Agreement (the "CSSA") regarding sale of EDF assets in Polandwith EDF International SAS and EDF Investment II B.V. (jointly "EDF").

The CSSA includes in particular (the "Transaction"):

- acquisition of 99.51% of shares of EDF Polska S.A.,

- acquisition of 100% of shares of EDF Investment III B.V.,

- indirect acquisition of 50% of shares + 1 share of ZEW KogeneracjaS.A. (shares held by EDF Polska S.A. and EDF Investment III B.V.), and

- acquisition of shares in supporting subsidiaries of EDF Polska S.A.

By execution of the CSSA, PGE will acquire number of conventionalgenerating assets, including:

- 4 CHPs i.e. Kraków, Gdańsk, Gdynia and Toruń, district heating networkin Toruń and Rybnik power plant (currently controlled by EDF PolskaS.A.),

- 4 CHPs i.e. Wrocław, Zielona Góra, Czechnica and Zawidawie anddistrict heating network in Zielona Góra, Siechnica and Zawidawie(currently controlled by EDF Polska S.A. and EDF Investment III B.V.).

The Transaction value (Enterprise Value) for all assets acquired fromEDF, has been established in the Locked Box formula as of December 31,2016 ("Locked Box Date") and amounts to approximately PLN 4.51 billion,of which approximately 2.45 billion PLN accounts for equity value andapproximately PLN 2.06 billion accounts for net debt.

Total cash considerations to be paid by PGE with respect to theTransaction will consist of:

- equity value of approximately 2.45 billion PLN ("Equity Value"),

- interest on the Equity Value settled pro rata from January 1, 2017until the closing of the Transaction amounting to no more thanapproximately PLN 107 million as a result of economic benefits fromoperations of acquired assets vesting with the Company following theLocked Box Date,

- intra-company debt balance as of the closing of the Transaction in themaximum amount of approximately PLN 1.68 billion and USD 40 million("Intra-company Debt"),

- outstanding interest as of the closing of the Transaction related tothe Intra-company Debt.

After the closing of the Transaction, pursuant to the Polish regulationsregarding capital market, as a consequence of acquisition of shares ofZEW Kogeneracja S.A. PGE Group will be obliged to announce asubscription tender for shares of ZEW Kogeneracja S.A. in numbersufficient to reach 66% threshold of voting rights in ZEW KogeneracjaS.A. Cost of the tender is not included in the Transaction value.

The closing of the Transaction is planned no later than January 2, 2018.The payment for the assets shall take place at the closing of theTransaction.

The closing of the Transaction is conditional upon satisfaction of allof the following conditions:

- obtaining by PGE the antitrust authority clearance (UOKiK),

- obtaining by PGE the Minister of Energy clearance pursuant to the Actof July 24, 2015 on the Control of Certain Investments,

- obtaining by PGE a waiver from the President of the AgriculturalProperties Agency (ANR) on pre-emption right,

- obtaining by EDF a clearance on the transaction from the relevantgovernmental authorities in France regarding the governance of andtransactions on the capital of state owned companies (the FrenchRegulatory Condition).

The EDF assets acquired by PGE have installed capacity of 3.3 GWe and4.4 GWt (including Toruń gas-fired CHP commissioned in 2017) andproduced 12.4 TWh of electricity (net) and 32.8 PJ of heat in 2016.

According to the best knowledge of the Company, the consolidated EBITDAgenerated by those assets amounted to approximately PLN 1.1 billion in2016.

For comparison, PGE generating assets had installed capacity of 12.75GWe (including 10.61 GWe in Conventional Generation segment) and 3.55GWt as at December 31, 2016 and produced 53.67 TWh of electricity(including 51.70 TWh in Conventional Generation segment) and 18.57 PJ ofheat in 2016. PGE's consolidated EBITDA amounted to approximately PLN7.38 billion in 2016.

In the opinion of the Management Board of PGE, the Transaction fits inupdated PGE Group Strategy and drives PGE to become the leader in heatgeneration in Poland. Acquired district heating assets perfectly matchPGE's business profile increasing the share of stable regulated revenuesand - through multilateral diversification - limiting the overall riskof the Company. Moreover, the heating assets possessed and taken overare the sound foundation for further expansion of the activity, withfocus on cogeneration units, underdeveloped and undercapitalised heatinginstallations as well as district heating networks.

The Company will inform in a separate current report about further stepsin the Transaction.