29. Future capital expenditure commitments

As at December 31, 2020, the PGE Capital Group had committed themselves to incurring expenditures for property, plant and equipment in the amount of approximately PLN 7,689 million. These amounts will be allocated mainly for the construction of new units, modernisation of assets of the Group’s entities and purchase of machinery and equipment.

The most important future capital expenditures concern the following projects:

• Conventional Power Generation:
  • Bełchatów Power Plant Branch – modernisation of the flue gas desulphurisation plant – approximately PLN 172 million,
  • Turów Power Plant Branch – construction of new unit no. 7 – approximately PLN 510 million,
  • Dolna Odra Power Plant Complex Branch – construction of two CCGT units (nos. 9 and 10) and a maintenance services contract for two gas turbines – approximately PLN 4,249 million,
• Distribution – investment commitments related mainly to network distribution assets in the total amount of approximately PLN 1,346 million,
• Other Activities, PGE EJ1 sp. z o.o. – agreement for technical consultancy services in the investment process related to the construction of Poland’s first nuclear power plant, a basic scope of PLN 115 million. The optional scope of the agreement includes the amount of approximately PLN 1,097 million.

Established in 2010, PGE EJ 1 sp. z o.o. is a company belonging to the PGE Capital Group. The current scope of the Programme conducted by PGE EJ 1 Sp. z o.o. provides for the performance of environmental and site surveys at two potential locations (Lubiatowo-Kopalino and Żarnowiec) and the preparation of an environmental impact assessment report and a site report.

On 24 September 2020, the Standing Committee of the Council of Ministers adopted a draft resolution of the Council of Ministers on updating the Nuclear Energy Programme (a long term project referred to as “Poland’s Nuclear Power Programme”) submitted by the Climate Minister and recommended it for approval by the Council of Ministers.

On October 1, 2020 PGE S.A. and the other shareholders of PGE EJ 1 sp. z o.o. (Enea S.A., KGHM Polska Miedź S.A. and TAURON Polska Energia S.A.) signed a Letter of Intent with the State Treasury on the State Treasury’s purchase of 100% shares in the company PGE EJ 1 sp. z o.o. The parties to the Letter of Intent committed themselves to performing, in good faith, all actions necessary to prepare and carry out a transaction consisting in the acquisition of shares in PGE EJ 1 sp. z o.o. by the State Treasury. The objective set out in the Letter of Intent was for the State Treasury to acquire shares in PGE EJ 1 sp. z o.o. by December 31, 2020, whereas the parties did not specify the validity term of the Letter of Intent.

On 2 October 2020, the Council of Ministers adopted a resolution (no. 141) on updating the Nuclear Energy Programme.

The business model for Polish nuclear power plants presented in the updated Nuclear Power Programme provides for the State Treasury’s acquisition of 100% of shares in the special purpose company responsible for investments in nuclear power in Poland (PGE EJ1 Sp. z o.o.).

Before December 31, 2020 and until the date of preparation of these financial statements, the acquisition of shares in PGE EJ 1 sp. z o.o. by the State Treasury had not taken place. The negotiation process is underway.

The decision to proceed with the transaction will depend on the outcome of negotiations in this regard and the fulfilment of other conditions stipulated by law or corporate documents.