PGE REPOWEREU FRAMEWORK LOAN

The framework loan will finance the construction and operation of solar photovoltaic (PV) power plants across Poland and modernisation of one pumped storage hydropower plant.

The aim is to finance part of the promoter's solar PV project pipeline as well as the modernisation of one of its existing pumped storage hydropower plants in Poland. The operation will contribute the achievement of the 2030 decarbonisation targets set out in the National Energy and Climate Plan (NECP) of Poland; it is therefore eligible under Article 309 point (c) common interest. A high proportion of the underlying projects are expected to be located in Less Developed Regions, thus are eligible under Article 309 point (a). The underlying projects are expected to be economically justified by generating clean and renewable electricity at a cost (on a levelised cost of energy basis) below the cost of fossil-fuel based alternatives in Poland.

The project increases renewable energy generation capacity in Poland and contributes to national and EU 2030 climate objectives. This Framework Loan contributes to the Bank's lending priority objectives of Renewable Energy, on Climate Action, Environmental Sustainability and partially to Economic and Social Cohesion. The project produces electricity from low carbon sources (solar PV), addressing the market failure of negative climate and environmental externalities, through the reduction of carbon emissions and air pollution compared to fossil-fuel generation. In addition, the Pumped Storage Hydro plant, improves flexibility of the market and increase the share of intermittent renewable energy generation that can be injected into the grid.

As the schemes are expected to rely, at least partially, on revenues from the market (the wholesale market and/or unsubsidized commercial Power Purchase Agreements), in a sector characterised by incomplete markets (limited forward/hedging, lack of scarcity and locational pricing), the operation improves market efficiency and competition.

The schemes are expected to be located mostly in EIB Cohesion Priority regions. At least 54% as per initial CAPEX estimate presented by the promoter for the Pumped Storage Hydro and for the PV pipeline is located in Less Developed Regions.

The Promoter appreciates the terms provided by the EIB. The long tenor of the EIB loan (18) is well in line with the economic life of the underlying electricity distribution assets and it is perfectly suited to finance investments with long payback period such as the Project implemented by PGE. The funding of similar maturities is not available on the Polish bond and loan market. Customised terms such as flexible drawdown over the long availability period are of value to the Promoter because of the multiannual Project's implementation period and PLN cash-flows. The EIB involvement will send a strong signalling effect to the commercial banks operating in Poland and other stakeholders that EIB is standing by to support the decarbonisation of the Polish energy sector.

The solar PV schemes as well as rehabilitation works at the pumped storage hydro plant are expected to fall under Annex II of the environmental impact assessment (EIA) Directive 2011/92/EU as amended by Directive 2014/52/EU, requiring the competent authorities to determine whether an EIA is required. The EIB will assess the capacity and procedures of the promoter to ensure the schemes' compliance with the sector-relevant national and European environmental and biodiversity regulations. For large allocations, the authorization procedure and compliance with the relevant EU directives, specifically Habitats and Birds Directives (92/43/EEC and 2009/147/EC respectively), will be further assessed during the appraisal of the individual scheme, in particular the potential cumulative impacts assessment and the impacts on protected flora and fauna, including Natura 2000 sites. Given that China largely dominates the market of photovoltaic solar panels, and media reports about the risk of forced labour, the Bank will apply an enhanced due diligence on the topic, in line with the EIB's Environmental & Social Standards. The project is expected to contribute to Climate Action and Environmental Sustainability (CA&ES) objectives, in particular to climate change mitigation and pollution prevention and control.

The promoter has to ensure that contracts for implementation of the project have been and will be tendered in accordance with the applicable EU procurement legislation, 2014/25/EU as well as Directive 92/13/EEC as interpreted by the Court of Justice of the EU, with publication of tender notices in the EU Official Journal, as and where required.