Strategy in action

Construction of new units at Elektrownia Opole

● Project objective: construction of two power blocks with 900 MW each
● Budget: approx. PLN 11 billion (net, without financing costs)
● Expenditures until the end of 2017: approx. PLN 8.3 billion
● Net efficiency: 45.5%
● Contractor: consortium: Rafako, Polimex-Mostostal and Mostostal Warszawa in cooperation with GE as project manager on behalf of consortium
● Commissioning of finished units in accordance with agreement with General Contractor: unit 5 - July 31, 2018, unit 6 - March 31, 2019
● January 31, 2014 - order to proceed
● Status: as regards unit 5 and ancillary infrastructure, work began on a cold start-up; as regards the key equipment at unit 6, installation work is on-going with regard to the boiler and assembly of low- and medium-pressure pipelines at the machine facility; work is also under way on the assembly of flue gas desulphurisation systems and a slag removal system; work progress at the end of December 2017 was approx. 89%

Construction of new unit at Elektrownia Turów

● Project objective: construction of 490 MW lignite-fired unit
● Budget: approx. PLN 4 billion (net, without financing costs)
● Expenditures until the end of 2017: approx. PLN 1.6 billion
● Net efficiency: 43.1%
● Contractor: consortium: MHPSE, Budimex and Tecnicas Reunidas
● Commissioning of finished unit: first half of 2020
● December 1, 2014 - order to proceed
● Status: as regards the unit's main equipment, assembly of the boiler's pressure part and elements of a turboset is on-going, as is assembly of auxiliary systems, including a flue gas desulphurisation system and carburisation system and work on the unit's main electricity building

Construction of Thermal Processing Installation with Energy Recovery at CHP plant Rzeszów

● Project objective: construction of Thermal Processing Installation with Energy Recovery at CHP plant Rzeszów with approx. 8 MWe in condensation (4.6 MWe + 16.5 MWt in cogeneration)
● Budget: approx. PLN 293 million (net, without financing costs)
● Expenditures until the end of 2017: approx. PLN 118 million
● Fuel: municipal waste
● Boiler efficiency: 86%
● Contractor: consortium: TM.E. S.p.A. Termomeccanica Ecologia and Astaldi S.p.A.
● Commissioning: June 2018
● December 22, 2015 - contract with contractor, April 8, 2016 - order to proceed
● Status: a leak test was conducted on the boiler's pressure elements, which turned out successful; work at the construction site is under-way on the assembly of a flue gas desulphurisation system and a system for slag revalorisation; assembly of equipment and installations in the electricity area is also on-going

Adaptation of generation assets to BAT conclusions

• Project objective: Maintain production capacities of existing assets, including provision of district heating to local communities
• Planned investment expenditures: PLN ~ 1.2 billion (conventional plants), PLN ~ 0.7 billion (CHP plants)
• Deadline: H2 2021, in the event of derogation from IED directive for CHPs - until their deadline lapses
• Status: investments in progress at Elektrownia Turów on units 1-3 and at EC Pomorzany and ZEC Bydgoszcz

Comprehensive reconstruction and modernisation of units 1-3 at Elektrownia Turów

● Project objective: adaptation to future BAT conclusions regarding permissible SO2, NOx and particulate matter emission levels and increase in availability, efficiency and nominal power output of each turboset by approx. 15 MWe
● Status: water tests for the combustion chamber and steam reheater were successfully conducted; work on foundations for a funnel at the combustion chamber and in the cyclones is on-going. Modernisation of turboset and condenser and modernisation of generation with stator replacement, modernisation of electrostatic precipitator and modernisation of cooling tower have been completed. Work on the launch of the control and measurement apparatus system and automatics is under-way.
● Budget: PLN 0.8 billion (net, without financing costs)
● Fuel: lignite
● Deadline: 2020

Electromobility

● Project objective: promote and develop electric transport in Poland and gain experience and competence necessary to serve as operator for electric car charging infrastructure and provide electric car charging services
● Main activities:

• concern individual transport – cars used for private and business purposes
• PGE has been continuing a project launched in December 2016 in which a pilot run is being implemented that consists of the construction of infrastructure for an electromobility system in Łódź. In the fourth quarter of 2017, the first rapid charging station in Łódź was launched, with the next stations expected to follow in the coming months. Talks regarding cooperation in locations are on-going (Rzeszów and Kraków)

Recycling

• Project objective: PGE Group is preparing to execute a project allowing to develop and implement a new technology for the recycling of lithium batteries, particularly those used in energy warehouse systems and to charge electric cars. This technology is intended to obtain strategic materials from used lithium batteries – cobalt, nickel and copper. The project directly supports the assumptions of the Ministry of Development concerning transformation of the economy in the direction of circular economy, as well as the requirements of the Polish legislation specifying the needs of collection and utilisation of used batteries. The project has business potential due to the anticipated growth in the world’s market of lithium batteries and the increase in the quantity of battery wastes connected with that, as well as increased demand of markets for products recycled from used batteries
● Main activities: PGE S.A. has set up a consortium with RDLS sp. z o.o., a spin-off of the Warsaw University operating in the area of environmental research and biotechnology. The goal of the consortium is to produce a pilot recycling installation for lithium batteries and implement this technology in Poland. The project was recommended by NCBiR for co-financing from public funds of the Research Programme of the Power Sector. The consortium led by RDLS received consent for financing of the project from NCBiR funds. In December 2017 the Management Board of PGE S.A. issued approval for commencement of the project implementation phase and signing of an agreement on project funding between NCBiR and RDLS. Project implementation has commenced on December 29, 2017. On that day the consortium leader signed a project financing agreement

Human Capital Management Strategy

● Project objective: to support business strategy goals through securing strategic and effective human resources management and optimisation and standardisation of HR processes
● Activities undertaken in 2017: works were under way to clarify the definitions of specialisations in Workplace Architecture and, during meetings with PGE Group management, specialist competences were selected to be included in the Competence Model next to firm-wide and management competences. The Competence Model will eventually be used in the process of evaluating skills of PGE Group’s employees. In the fourth quarter of 2017, work continued on implementing the competence assessment, including training for PGE Group internal trainers

Acquisition of EDF's assets

The purchase of EDF Polska's assets was finalised on November 13, 2017. With this agreement, PGE Group's installed electricity capacities increased by 25% to 16.27 GWe. PGE Group strengthened its top position in the power segment and became the largest supplier of eco-friendly district heating in the country, with a 15% share of the Polish district heating market.

Strategic options - construction of Poland’s first nuclear power plant

The project to build Poland's first nuclear power plant is run by PGE EJ sp. z o.o., where PGE S.A. has a 70% stake (with 10% stakes held by TAURON Polska Energia S.A., ENEA S.A. and KGHM Polska Miedź S.A.). Currently the project is at its growth stage (preliminary phase). Site characterisation work and environmental studies are currently being conducted in preparations to build Poland's first nuclear power plant. These works are on-going at two locations: Lubiatowo-Kopalino and Żarnowiec within the Choczewo, Krokowa and Gniewino municipalities in the Pomorskie voivodship. These studies are focusing on activities that are necessary to prepare an environmental impact assessment and a site characterisation report. The purpose of the environmental studies is to specify the undertaking's impact on the environmental at the preparatory stage, construction stage, exploitation stage and plant liquidation stage. The purpose of the site characterisation research is to obtain data to evaluated terrain in terms of usefulness for the power plant, including the verification of factors making it impossible to consider that terrain meets nuclear safety requirements (major fault). Work results will be necessary to develop solutions that ensure the safe operations of the plant and reduce to a minimum its impact on the lives of local residents and the natural environment.

Strategic options - construction of offshore wind farms

As for the offshore wind farm project, preparatory works are currently being conducted. The following companies are participating in this project: Elektrownia Wiatrowa Baltica 2 and Elektrownia Wiatrowa Baltica 3. These are subsidiaries of PGE Energia Odnawialna S.A. In previous years, we obtained permits to create artificial islands, which are necessary to set up wind farms, and signed contracts for connections to the power network with Polskie Sieci Elektroenergetyczne S.A. (national transmission system operator). In 2016, we started sea bed research in potential offshore wind farm locations and in 2017 we held meetings with fishing communities - a group of stakeholders whose opinion we are taking very seriously in this project. This year, we plan to submit an application for a decision on the investment's environmental conditions.

Strategic options - development of modern coal-based energy generation

The lignite deposits currently mined by PGE in Bełchatów and Turów will be depleted by 2040-2045 therefore we are undertaking research in order to identify domestic deposits that could be used in the future. Work is under-way to obtain a concession for lignite mining at the Złoczew and Gubin 2 deposits. Total industrial resources at both of these deposits are estimated at 1.4 billion tonnes, which would secure fuel for 30-45 years of power plant operations.

Involvement in equity structures that support the development of new technologies and solutions as well as small businesses

● Project objective: introduction of a new model for developing and implementing new solutions, allowing to manage higher-risk undertakings whilst reducing time-to-market for new solutions (for own purposes or to sell to other entities)
● Main activities:

• PGE Ventures was established to conduct an investment activity on the basis of its own funds and funds obtained from the public budget (PFR Ventures, NCBiR). The process of recruitment was completed. Preparation to conclude the first investment agreements is ongoing
• A scouting programme was launched in order to select equity investments. The first two were conducted in January 2018
• Acceleration activities conducted by PGE Nowa Energia have been commenced and rules of co-operation between the companies (PGE Nowa Energia and PGE Ventures) have been determined, providing for optimisation and maintenance of continuity at the next stages of development of small. Project acceleration applications are being accepted