Current Report No.: 10/2020

Execution of a term sheet and agreement with Operator Gazociągów Przesyłowych GAZ-SYSTEM S.A.

Current Report No.: 10/2020

Date of preparation:

Abbreviated name of the Issuer: CIECH S.A.

Subject: Execution of a term sheet and agreement with Operator Gazociągów Przesyłowych GAZ-SYSTEM S.A.

Legal basis: Art. 17.1 of the MAR – inside information


In reference to Current Report No. 48/2019 of 5 December 2019, the Management Board of CIECH S.A. (hereinafter referred to as the “Issuer” or “CIECH”), herewith informs that on 7 February 2020, a term sheet was signed (hereinafter referred to as the “Term Sheet”) and an agreement with regard to cooperation in the development of design documentation for the water and brine pipelines (hereinafter referred to as the “Agreement” and “Linear Infrastructure” respectively) between CIECH and Operator Gazociągów Przesyłowych GAZ-SYSTEM S.A. (hereinafter referred to as “GAZ-SYSTEM”). The Term Sheet and the Agreement are related to the letter of intent signed on 5 December 2019 by CIECH and GAZ-SYSTEM (hereinafter jointly referred to as the “Parties”) with regard to their cooperation in the implementation of an investment (hereinafter referred to as the “Investment”) involving construction by GAZ-SYSTEM of a salt mine (hereinafter referred to as the “Salt Mine”), with an underground gas storage facility (hereinafter referred to as the “Gas Storage”) at the Damasławek salt dump, along with the Linear Infrastructure, and cooperation in the supply of brine to the CIECH Soda Polska S.A. production facilities (hereinafter referred to as “CIECH Soda Polska”). The execution of the Term Sheet and the Agreement is yet another step towards ensuring diversified sources of brine supply to the CIECH Soda Polska production facilities in the long term.

The agreement defines terms and conditions of cooperation between the Parties in the preparation and conducting of a tender procedure for the preparation of the Linear Infrastructure design documentation (hereinafter referred to as the “Design Documentation”), principles of co-financing the contract for the preparation of the Design Documentation and supervision over the implementation of the Design Documentation contract.

The assumptions of the Terms Sheet include, among others, the following: 

  1. conclusion of an investment agreement by the Parties (hereinafter referred to as the “Investment Agreement”), according to which GAZ-SYSTEM will implement the Investment together with the Linear Infrastructure for the transport of brine to CIECH Soda Polska, while CIECH will co-finance the construction of the Linear Infrastructure. The Investment Agreement should be concluded after the following conditions have been jointly met:

    1. the location decision with regard to the Linear Infrastructure has become final and effective,
    2. the Parties have obtained the last of the required corporate approvals;

  2. ensuring CIECH priority over any other entities in terms of time and quantity of brine supplies, and thus enabling the achievement of the goal consisting in the diversification of brine supply sources;
  3. conclusion of a contract by the Parties (hereinafter referred to as the “Contract”), in which the Parties will define, among others, terms and parameters of brine supply to CIECH Soda Polska, which may also be defined separately in the Investment Agreement, as well as the brine price. Pursuant to the assumption of the Term Sheet, the Contract will be concluded for a minimum period of 20 years, with the option provided to CIECH to extend it for another 15 years. The Contract should be concluded after the Parties have entered into the Investment Agreement.

The amount of expenditure on the Linear Infrastructure will be defined in the Investment Agreement, among others, on the basis of the Design Documentation (hereinafter referred to as the “Expenditure”). The Investment Agreement will specify the CIECH’s financial share in the Expenditure (hereinafter referred to as the “CIECH Contribution”) and the form of the CIECH Contribution (equity and/or debt). On the Part of CIECH, the conclusion of the Investment Agreement will depend on, among others, obtaining corporate approvals required by the Articles of Association of CIECH. The CIECH Contribution will be taken into account in the brine price defined in the Contract. The estimated expenditure on the Linear Infrastructure, determined according to the current stage of negotiations, to be incurred by both Parties in the proportion set out in the Investment Agreement, may amount to approximately PLN 450 million, with initial assumptions specified in the Term Sheet.


CIECH will make its contribution after certain conditions have been met, such as:

  1. conclusion of the Contract,
  2. securing the CIECH Contribution, adequate to the construction schedule of the Linear Infrastructure,
  3. obtaining final and effective approvals/permits required by law to implement the Investment or its relevant part,
  4. securing the right of the Parties to reimbursement of expenses incurred by them,

- to be specified in the Investment Agreement.

The Term Sheet defines the initial and estimated Investment implementation schedule. The Investment implementation schedule will be specified in the Investment Agreement on the basis of, among others, the Design Documentation and any documentation developed at the request of GAZ-SYSTEM with regard to the design of the construction of the Salt Mine and the Gas Storage. 

The signing of the Term Sheet and the Agreement does not affect relationships with the existing business partners.

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).

Signatures of the Company’s representatives:

Dawid Jakubowicz – President of the Management Board 

Mirosław Skowron - Member of the Management Board

Do góry