Polish NPP new build project Project Overview PGE and PGE EJ 1 February 2016

Polish NPP new build project Project Overview – February 2016

Disclaimer

 This Presentation has been prepared by PGE S.A. (“ PGE”) and PGE EJ 1 Sp. z o.o. (“ PGE EJ 1”) (the “Company”) on the basis of information received from different sources, including not independently audited and publicly available information. The Company is not responsible for the accuracy, reliability and consistency of information contained in this Presentation (“ Presentation”).  This Presentation includes results of preliminary analyses considered by PGE and PGE EJ 1. PGE and PGE EJ 1 reserve the right to introduce changes and modifications as well as to complement this information at any given stage and are not under obligation to explain reasons for these changes, modifications and complementation.  The information included in this Presentation cannot form the basis for any claims or civil law suits against PGE, PGE EJ 1 or any other entity from within PGE Capital Group, in particular with regards to damages or indemnities to be paid in case of negligence in contracting.  PGE and PGE EJ 1 wish to inform that all responsibilities and risks pertaining to and resulting from any decisions taken on the basis of or in relation to the information provided in the Presentation shall be borne by makers of these decisions. As a result, PGE and PGE EJ 1 on their own behalf and on behalf of all their directors, partners, employees and agents, declare that none of the entities listed herein will incur any liability towards any person in connection with any consequences of the decisions and/or actions taken in reliance on this Presentation and information provided.  This Presentation reflects prevailing conditions, and PGE and PGE EJ 1’s understanding of the current situation, all of which are accordingly subject to change after this date upon obtaining new information or occurrence of new events.

 For internal distribution only.

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Polish NPP new build project Project Overview – February 2016

Agenda

Purpose of NPP new build project Main Investor NPP Project stages Site selection Integrated Proceedings Site infrastructure Business and financing models Stakeholder Management

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Polish NPP new build project Project Overview – February 2016

Agenda

Purpose of NPP new build project Main Investor NPP Project stages Site selection Integrated Proceedings Site infrastructure Business and financing models Stakeholder Management

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Polish NPP new build project Project Overview – February 2016

Business purpose of NPP new build project

NPP Project 

Unchanged country imperatives driving nuclear power introduction to Poland – security of supply (aging generation fleet, EU climate change policies) – Electricity supply shortage (near blackout) in August 2015, State Grid Operator forced strong electricity supply reductions on large and industrial customers for the first time since 1989

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Continued Polish government commitment to the implementation of the Polish Nuclear Power Programme

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Nuclear power in future fuel mix according to the Polish Energy Policy until 2050 (each of three reference scenarios defined includes nuclear in the national energy fuel mix)

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Increase of Poland’s industrial capabilities with a number of Polish companies having potential to join the nuclear supply chain

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Diversification of Poland’s generation portfolio in order to lower CO2 emission (currently approx. 90% based on coal and lignite)

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PGE as the leader continues NPP build project development activities with important milestones achieved

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Polish NPP new build project Project Overview – February 2016

Agenda

Purpose of NPP new build project Main Investor NPP Project stages Site selection Integrated Proceedings Site infrastructure Business and financing Stakeholder Management

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Polish NPP new build project Project Overview – February 2016

PGE Polish Energy Group – Main Investor

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2 open pit lignite mines (Bełchatów and Turów) Lignite output 50 million tons p.a.

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Production net ca. 55 TWh

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Installed capacity ca. 12.6 GW

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Sales of heat ca. 18 million GJ

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2 Lignite-fired power plants (Bełchatów and Turów)

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2 Hard coal-fired power plants (Opole and Dolna Odra)

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Combined heat and power plants – 8 sites (Szczecin, Pomorzany, Gorzów, Bydgoszcz, Zgierz, Kielce, Rzeszów and Lublin-Wrotków)

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Hydroelectric power plants (Hydro ca. 97 MW, Pumped-storage ca. 1.5 GW), Wind farms 311 MW

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Activity of PSE S.A.

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Distribution of energy 32.54 TWh

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Distribution grid: 281,290 km

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Number of substations: 91,374

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Final consumers 39.60 TWh

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Wholesale market 62.44 TWh

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Balancing market 1.10 TWh

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Mining

Power generation

Transmission

Distribution

Nuclear potential locations

Wholesale & Supply

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Polish NPP new build project Project Overview – February 2016

Agenda

Purpose of NPP new build project Main Investor NPP Project stages Site selection Integrated Proceedings Site infrastructure Business and financing models Stakeholder Management

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Preparation of the investment process and construction of Poland’s first nuclear power plant is divided into four key stages (in line with MAEA recommended approach)

MAEA (Phase 2)

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MAEA (Phase 3)

Stage I

Stage II

Stage III

Pre-development

Development

Construction

Site selection – site investigation and environmental surveys – obtaining the decision on environmental conditions and site permit Development and execution of Integrated Proceedings (amongst others selection of technology) Business and financing model development (incl. support mechanisms) National and site infrastructure planning (incl. transmission system) Communication and Education (public support) Preparation and implementation of Integrated Management Systems Building nuclear and other specific competences (Capacity Building) Obtaining the Decision in Principle

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Preparation of a detailed technical plan of a nuclear power plant (FEED) Prep. of a preliminary safety report Obtaining key decisions, permits and licences: – Licence issued by the PAA (Polish National Atomic Energy Agency) – Construction permit for NPP and environmental permit Signing a contract regarding the connection to the transmission grid Development of associated infrastructure for the NPP construction Communication (public support) Building of key competences and human resources development Financial close and Final Investment Decision

Decision in Principle Source: own materials

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Stage IV Start-up and commissioning

Site preparation and initiation of the final stage of the process First concrete NPP construction process Delivery of long lead equipment System tests Development of national and site infrastructure for the NPP operations Connection to the transmission grid Simulator installation Further expertise development and building site operator structure Fuel Loading Permit

Final Investment Decision

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Power tests Start-up Licence Integration of the NPP with the National Grid Operating licence Concession for power production Commercial operation (COD) Daily operations of the NPP Maintenance of the NPP Fuel management Waste management

Fuel Loading 9

Polish NPP new build project Project Overview – February 2016

National and site infrastructure planning and preparation

Stakeholder Management and Communication (local communities focus)

Integrated Proceedings

Feasibility Study

Support mechanisms and business model

Legislation and relations with European Commission

Decision in Principle

Implementation of Integrated Management Decision Systemin

Capacity Building

Site selection (EIA, Site Permit) based on site characterization

Organization of Polish Nuclear Program – 10 main projects

Principle

Source: own materials

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Polish NPP new build project Project Overview – February 2016

Agenda

Purpose of NPP new build project Main Investor NPP Project stages Site selection

Integrated Proceedings Site infrastructure Business and financing models Stakeholder Management

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Polish NPP new build project Project Overview – February 2016

Site selection

So far studies and analyses were conducted in three considered sites of a nuclear power plant: "Choczewo ", "Lubiatowo-Kopalino" (Choczewo) and "Żarnowiec" (Gniewino and Krokowa). Based on their results, in January 2016, two sites were selected for the full program of site characterization and the environmental impact assessment - "Lubiatowo-Kopalino" and "Żarnowiec".

 Full environmental studies and site characterization works to be started in 2016 (seismic already ongoing, meteo equipment under installation)  Preliminary national and site infrastructure plan developed in cooperation with local communities and Pomerania voivodeship  First stage of transmission grid and transmission infrastructure analyses completed for candidate sites in cooperation with PSE – Polish National Grid 12

Polish NPP new build project Project Overview – February 2016

Site characterization and environmental assessment

Preparations are underway to launch full environmental assessment and site investigation by PGE EJ 1

The purpose of environmental assessment is to provide data necessary for a decision whether a given site is suitable for the construction of a nuclear power plant in terms of environmental protection.

Environmental assessment

Start – 2016 Duration – 12 months

The objective of site investigation is to confirm that a given site is suitable for a nuclear power plant in terms of nuclear safety.

Site investigation

Start –2016 Duration – 24 months

The Environmental Scoping Report (ESR) has been prepared and, on the 5th of August 2015, the first stage of the environmental impact assessment (EIA) procedure was launched. 13

Polish NPP new build project Project Overview – February 2016

Agenda

Purpose of NPP new build project Main Investor NPP Project stages Site selection Integrated Proceedings Site infrastructure Business and financing models Stakeholder Management

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Polish NPP new build project Project Overview – February 2016

Integrated Proceedings (IP) framework Under the Integrated Proceedings, potential bidders will be requested to include in their offers all of the following elements:

Plant Vendor

 Provision of technologies for the NPP as well as the general implementation of the investment (EPC)

 Proposed rules and conditions for the capital engagement by strategic investor/business partner  Concept of how to finance the Investment, together with written confirmation of interest in supporting the project from relevant ECAs, financing institutions or commercial banks (at best offer(s) selection stage; these are construed as Letters of Intent and potentially also the preliminary proposed financing conditions)

Fuel supplier

O&M support provider

Equity investor / Strategic Partner

Integrated Proceedings Export Credit Agencies Commercial financing

 Nuclear fuel supply and related services  Provision of O&M support services for the NPP together with capacity building program for PGE EJ1

EPC Contractor

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All elements of the IP scope are obtained in one procedure

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The financing closure takes place after the above mentioned elements are obtained, but its initial terms and conditions are the subject of the IP scope

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Integrated Proceedings are to be conducted as a competitive procedure based on the Contracting Authority’s Regulations, outside of the regime of the PPL

IP Participants Companies which have submitted declarations of participation and took part in preliminary dialogue between 2012 - 2015 15

Polish NPP new build project Project Overview – February 2016

Reactor Technology

Received declarations determine the potential reactor technologies for the first Polish NPP

EPR

ABWR

AREVA NP PWR 1650 MWe

GE-Hitachi BWR 1350 MWe

AP1000 Westinghouse / Toshiba PWR 1100 MWe

GE-Hitachi BWR 1535 MWe

APR1400

EC6

KEPCO PWR 1400 MWe

Candu Energy PHWR 700 MWe

ESBWR

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Polish NPP new build project Project Overview – February 2016

Agenda

Purpose of NPP new build project Main Investor NPP Project stages Site selection Integrated Proceedings Site infrastructure Business and financing models Stakeholder Management

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Polish NPP new build project Project Overview – February 2016

Planning and development of site infrastructure

Define the scope of investments and the preliminary schedule for their preparation and implementation

Consultation and agreement with the municipalities and the Marshal Office of the Pomeranian Voivodeship

Finalization of the first stage of network analyses for specific sites and considered NPP reactor technologies in cooperation with PSE SA (Polish National Grid)

Development of the site development study, transport study, and permit plan

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Polish NPP new build project Project Overview – February 2016

Agenda

Purpose of NPP new build project Main Investor NPP Project stages Site selection Integrated Proceedings Site infrastructure Business and financing models Stakeholder Management

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Polish NPP new build project Project Overview – February 2016

Business and Financing model development (incl. support mechanisms)

Business model, investment, support mechanisms, electricity market  In April 2015, PGE and National Business Partners (KGHM Polska Miedź SA, Tauron Polska Energia SA and Enea SA ) signed a shareholding agreement giving each of the partners 10% share in PGE EJ 1

PGE EJ 1 shareholding structure (since April 2015)

 Ongoing work on financing model for the investment. Involvement of Export Credit Agency considered. Need of support scheme to be established  Necessary support system for the Project including Contract for Difference (CfD) and National Treasury guarantees 20

Polish NPP new build project Project Overview – February 2016

Agenda

Purpose of NPP new build project Main Investor NPP Project stages Site selection Integrated Proceedings Site infrastructure Business and financing models Stakeholder Management

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Polish NPP new build project Project Overview – February 2016

Polish NPP new build project

STAKEHOLDER MANAGEMENT AND COMMUNICATION Activities on local level

 Development of long-term cooperation program with the local communities  3 Local Information Centers – 1 in each of the 3 adjacent communities hosting 3 candidate sites  Dedicated communication regarding site characterization activities – workshops, printed publications, public exhibitions  Ongoing education for local schools – dedicated classes, trips to science centers  Seasonal educational events on nuclear power during major local events  Focused projects – study tours to European NPPs, conferences, seminars

Activities on national level  Świadomieoatomie.pl – website presenting various information on nuclear power as well as news on the NPP project in Poland  Atom dla Nauki (Atom for Science) – promoting nuclear-related knowledge among students and cooperation with universities (3rd edition)  Pandora’s Promise – organization of the official premiere and several special screenings of the documentary by Robert Stone 22

Polish NPP new build project Project Overview – February 2016

Polish NPP new build project

HIGH LOCAL SUPPORT FOR NPP CONSTRUCTION IN THE NEIGHBORHOOD

KROKOWA

GNIEWINO

CHOCZEWO

% of supporters

Recent opinion polls (Autumn 2015) show strong support for the NPP in all three communities, with support levels ranging from 66% (Krokowa) up to 71-72% (Gniewino and Choczewo) Regular public opinion polls (every 6 months since 2011) to monitor local and national levels of support for the NPP. 23

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