Initiation of the procedure aimed at the issuance of bearer bonds carrying the preemptive right to acquire shares in the Company

The Management Board of PKN ORLEN S.A. (hereinafter the „Company”) hereby gives notice of initiation of the procedure aimed at the issuance of bearer bonds carrying the preemptive right to acquire shares in the Company.

The Management Board of the Company has taken steps to convene an Ordinary General Shareholders Meeting of the Company, including on its agenda issues relating to the implementation of a new incentive programme for the members of the Management Board and executive staff of the Company and key subsidiaries of the Company, to be based upon the issuance of bonds carrying the preemptive right (hereinafter the "Option Programme”). The intended implementation of the Option Programme within the Company is related to the completion in 2003 of the incentive programme based upon the issuance of Series A bonds convertible into Series D shares. As proposed by the Management Board the resolution on the issue of Bonds carrying the preemptive right to acquire shares in the Company, on the conditional increase in the share capital, excluding the preemptive right, and on amendment to the Charter of the Company shall be adopted by the Ordinary General Shareholders Meeting of the Company, provided that the Ordinary General Shareholders Meeting has adopted the resolution on the implementation of the Option Programme. It is anticipated that the bonds carrying the preemptive right, with a nominal value and issue price of 1 grosz (PLN 0.01), issued under the Option Programme (the „Bonds”), will be originally acquired by a trustee who will subsequently offer them to the persons eligible for participation in the Option Programme. The Management Board proposes that, for the purposes of the Option Programme, the Company issue:
(i) 3,866,667 Series B Bonds,
(ii) 3,866,667 Series C Bonds; and
(iii) 3,866,666 Series D Bonds.

As proposed by the Management Board, one Bond of Series B, C or D, respectively, is to give the right to acquire one Share of Series E, F or G, respectively. 31 December 2008, shall be the date of final redemption of the Bonds and expiration of the preemptive rights. It is anticipated that Bonds will not bear interest. The Management Board proposes that, in order to grant holders of the Bonds the right to acquire shares in the Company, the General Shareholders Meeting adopt a resolution on the conditional increase in the share capital of the Company by the amount of PLN 14,500,000 to be effected by way of issuance of no more than (i) 3,866,667 ordinary bearer Series E shares, (ii) 3,866,667 ordinary bearer Series F Shares; and (iii) 3,866,666 ordinary bearer Series G Shares.

The value of the Company's equity as of 31 March 2004 amounted to PLN 9,525,405 thousand (consolidated financial statement for Q1 2004). Hence, the aggregate nominal value of the Bonds, amounting to PLN 116,000, represents 0.001218% of the Company's equity and the aggregate nominal value of the Company's shares to be acquired on the basis of Bonds, amounting to PLN 14,500,000, represents 0.1522% of the Company's equity. On the other hand, the sum of the aggregate nominal value of Bonds and the aggregate nominal value of all issued and unredeemed bonds of the Company (i.e. the sum of the nominal value of Bonds amounting to PLN 116,000 and the aggregate nominal value of all issued and unredeemed bonds of the Company amounting to PLN 100,000,000) represents 1.05% of the Company's equity, as of 31 March 2004.

The Management Board recommends that the General Shareholders Meeting authorize the Supervisory Board to adopt, upon the motion of the Management Board, a decision about a possible introduction of the Bonds to public trading in securities, provided that the Supervisory Board would have the right to make such decision if it considers introduction of the Bonds to public trading as appropriate, no later than by the time the Bonds are offered to the trustee.

About PKN ORLEN S.A. PKN ORLEN S.A. is one of the largest companies in Central & Eastern Europe, with listings on the Warsaw and London Stock Exchanges, and trading on the OTC market in the U.S.A. It is Poland’s largest refiner of crude oil and marketer of world-class petroleum and related products. It has a substantial wholesale and retail distribution system that includes the largest network of service stations in Poland. It also has significant financial investments in the telecommunications sector in Poland.