LOTOS: Commencement of preparations for reorganisation of Grupa LOTOS S.A.

Grupa LOTOS S.A. (“Grupa LOTOS” or the “Company”) announces that on March 12 2021 the Company’s Management Board issued a general acceptance of intra-organisational measures aimed at optimising the Group structure and preparing to give effect the model for the implementation of the remedies (see Current Report No. 21/2020) which are required for Polski Koncern Naftowy Orlen S.A. (“PKN Orlen”) to acquire the Company.

To prevent adverse effects of the proposed concentration on competition in the relevant markets, the European Commission conditionally cleared the concentration, i.e. its approval is subject to the implementation of remedies (“Remedies”), including structural and behavioural commitments relating to the structure and policies of the undertakings involved in the concentration. In order to implement the Remedies referred to in Current Report No. 21/2020, conditional agreements should be executed to dispose of certain assets and companies of the LOTOS Group.

The sale of those assets and companies will be subject to acceptance of the agreements and the buyers by the European Commission and acquisition by PKN ORLEN, directly or indirectly, of equity control over Grupa LOTOS.

The Remedies apply to the following areas:

• production and wholesale of fuels;
• retail sale of fuels;
• logistics;
• bitumens and aviation fuel.

Implementation of the Remedies in the area of production and wholesale of fuels requires, among other things:

• separating the refining assets from the structure of Grupa LOTOS and contributing them to a Special Purpose Vehicle, i.e. a legal entity for the refining assets, wholly-owned by the Company;
• executing an agreement to sell 30% of shares in the Special Purpose Vehicle, together with the joint venture agreement and key auxiliary agreements.

Completion of these two steps is subject to a number of corporate approvals, including approval by the Company's General Meeting.

To give effect to the agreed model for the implementation of the Remedies the Company will need to undertake a number of reorganisation measures prior to the final decision on taking control over the Company by PKN Orlen, including:

• separation of an organised part of Grupa LOTOS’ business comprising the refining assets
  and its contribution to LOTOS Asfalt Sp. z.o.o. (which is wholly-owned by the Company); LOTOS Asfalt Sp. z o.o. will thus become the Special Purpose Vehicle referred to above;
• transfer of shares in LOTOS Biopaliwa from LOTOS Terminale to the Company;
• transfer of shares in LOTOS Infrastruktura to LOTOS Terminale;
• transfer of logistic assets of LOTOS Infrastruktura to LOTOS Terminale.

At the same time, the Company emphasises that irrespective of the execution of the Company acquisition by PKN Orlen, the reorganisation measures may bring a number of benefits to the Company. Integration of the refining business, which is now carried out separately by two entities – Grupa LOTOS and Lotos Asfalt, for historical reasons:

• will streamline the organisational structure and operational model and will standardise human resources management in the production area;
• will streamline the model of settlements for intermediate products and utilities between the companies;
• will increase the potential for margin optimisation;
• will potentially reduce the cost of the external financing obtained for the EFRA project.

The reorganisation of the logistics companies (LOTOS Infrastruktura and LOTOS Terminale) and the biofuels company (LOTOS Biopaliwa) within the Group will improve its efficiency through, inter alia:

• consolidation of logistics assets in a single entity;
• streamlining of the ownership structure in the Group and elimination of cross-equity links between companies, which will simplify, among other things, corporate supervision procedures.

Legal basis: Article 17(1) of MAR – Inside information.