Current report no: 4/2018

Conclusion of a significant contract by a subsidiary of CIECH S.A.

Current report no: 4/2018

Date of preparation: 30.03.2018 

Abbreviated name of the Issuer: CIECH S.A.

Subject: Conclusion of a significant contract by a subsidiary of CIECH S.A.

Legal basis: Art. 17. 1 of the MAR – inside information

Contents of the report: 

With reference to current report no. 20/2017 of 30 November 2017 (the "Current Report"), concerning, among others, confirmation of acceptance by CIECH Soda Polska Spółka Akcyjna with its registered office in Inowrocław (the "Subsidiary"), of an offer by Polska Grupa Górnicza S.A. with its registered office in Katowice ("PGG") for the supply of power coal (the “Product”), containing significant terms and conditions of a new contract for 2018 and the following years, the Management Board of CIECH S.A. (the “Issuer") herewith informs that on 30 March 2018, as a result of further negotiations, the Subsidiary signed a contract for the sale of the Product (the “Agreement") with PGG.

The subject matter of the Contract is the sale of the Product to the Subsidiary by PGG as per FCA PGG’s mine stations, according to Incoterms 2010. 

The contract was concluded for an indefinite period. The contract will terminate if the fixed quality parameters of the Product change and if the Parties fail to agree on the new quality parameters of the Product on or before 30 September of the year preceding the next annual delivery period.

The agreement provides for the determination of the price of the Product for 2018, while in subsequent years, the price will be determined according to a price formula. The price of the Product depends on its calorific value.

The Parties provided for the possibility to reduce the volume of the Product supplies in the annual delivery period if a relevant request is submitted by either Party, and the possibility to increase the volume of supplies in the annual delivery period if a relevant request is submitted by the Subsidiary and if PGG confirms its ability to increase supplies.

The estimated value of the Contract in the period of 5 years may amount to approximately PLN 340,000,000. 

The contract provides for contractual penalties reserved for the Subsidiary and PGG in the event of failure to collect or failure to deliver, respectively, of the minimum quantity of the Product fixed in the Contract less production allowance. The amount of contractual penalties was fixed at 10% of the value of uncollected or undelivered Product to the minimum amount of Product determined for the relevant year of Contract duration. 

Either Party may claim compensation, on general terms, in excess of the contractual penalties specified in the Contract if the contractual penalties do not cover the damage incurred.

Either Party has the right to terminate the Contract without a cause by giving notice to the other Party with a two-year notice period, effective as of the end of the calendar year in which the notice period expires.

The remaining terms and conditions of the Contract do not differ from the terms commonly applied in business to this type of contracts. 

Legal basis: Article 17.1 of the Regulation of the European Parliament and of the Council (EU) No. 596/2014 of 16 April 2014 on Market Abuse (the Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (Official Journal of the European Union L No. 173, p. 1) (the “MAR”).

Signatures of individuals representing the Issuer:

Maciej Tybura – President of the Management Board

Artur Osuchowski – Member of the Management Board

Do góry