Unipetrol, a.s. and Dwory S.A. have executed a share purchase agreement for the sale of 100 % of shares of Kaucuk a.s.

Polski Koncern Naftowy ORLEN S.A. ("PKN ORLEN"), Central Europe’s largest downstream oil company, announces that on 30 January 2007 UNIPETROL, a.s., headquartered in Prague, Czech Republic (“Unipetrol”), as the seller, and Firma Chemiczna Dwory S.A., headquartered in Oswiecim, Poland (“Dwory”), as the purchaser, have executed a Share Purchase Agreement (the “Share Purchase Agreement”) regarding the sale of 6 236 000 ordinary shares in Kaucuk a.s. (“Purchase Shares”), headquartered in Kralupy nad Vltavou, Czech Republic (“Kaucuk”).

The Purchase Shares represent 100% of the initial capital of Kaucuk with a par value CZK 1 000 for each share (i.e. approximately PLN 139.2, based on average CZK/PLN exchange rates as of 29 January 2007, as stated by the National Bank of Poland), and represents 100% of the votes at the General Meeting of shareholders of Kaucuk.

The Purchase Shares will be paid for by Dwory S.A. in the form of EUR 195 000 000 (i.e. approximately PLN 765 180 000, based on average EUR/PLN exchange rates as of 29 January 2007, as stated by the National Bank of Poland) in cash (“Purchase Price”). The book value of the Purchase Shares in the Unipetrol books amounted to CZK 5 460 000 000 as of 31 December 2006 (i.e. approximately PLN 760 032 000, based on average CZK/PLN exchange rates as of 29 January 2007, as stated by the National Bank of Poland).

Kaucuk is a chemical company, and a producer of styrene-butadiene and polybutadiene rubbers, polystyrene plastics and synthetic rubber.
The main business activities of Unipetrol include crude oil refining, petrochemical and chemical production, and the sale of fuels.
Dwory is a chemical company and its activities are concentrated on the production of synthetic rubbers, styrene plastics, and vinyl and copolymer dispersions.

PKN ORLEN owns 63% of votes at the General Meeting of Unipetrol.

The Supervisory Board of Kaucuk consists of 3 members, 1 of which is a Unipetrol employee, while 2 are Kaučuk employees. The Unipetrol Supervisory Board consists of 10 members, 7 of which are PKN ORLEN employees. The Kaucuk Management Board/Board of Directors consists of 3 members, of which 2 are Unipetrol employees and 1 is a Kaucuk employee.

The Share Purchase Agreement was signed today, but the closing of the transaction will occur only after the satisfaction of several conditions agreed by both Unipetrol and Dwory, which may take as long as two to three quarters. These conditions include, among others, the obtaining of all necessary consents from the relevant anti-monopoly authorities to the sale of the Shares to Dwory and the transactions contemplated within the Share Purchase Agreement (including the formation of a joint-venture between the Unipetrol Group and Kaucuk for the purpose of the construction and operation of a new butadiene unit), the performance of an environmental audit concerning the land owned by Unipetrol and used by Kaucuk, in order to identify any existing environmental problems, and the execution of commercial contracts between the Unipetrol Group and Kaucuk, on the basis of the already-agreed principles which will assure the further smooth operation of the Unipetrol Group.

Concurrently with the Share Purchase Agreement, Unipetrol, Dwory, Chemopetrol and Kaucuk on 30 January 2007 entered into Agreement on Cooperation in Connection with the Construction and Operation of a New Butadiene Unit (the “Cooperation Agreement”), pursuant to which a selected entity of the Unipetrol Group and Kaucuk will create a Czech joint stock company for the purposes of the construction and operation of the new butadiene unit. The shareholding of the newly created company and the participation in the establishment and future operating costs of the company will be split between the Unipetrol Group, with a share of 51%, and Kaucuk, with a share of 49%.

The execution of the Share Purchase Agreement and the Cooperation Agreement implies several liabilities on the part of both Unipetrol and Dwory in respect of the past and future operations of Kaucuk. There are three major areas where financial exposure of the parties may occur – a misrepresentation or a breach of the representations and warranties provided by either Unipetrol or Dwory, liabilities arising from the environmental conditions of Kaucuk originating prior to or after the closing of the transaction, and certain changes relating to the anti-monopoly fine recently imposed on Kaucuk and Unipetrol by the Commission of the European Communities.

As the Purchase Shares represent more that 20% of the Kaucuk initial capital, they are significant assets in accordance with the Polish Regulation of the Minister of Finance dated 19 October 2005, on current and periodic information to be published by issuers of securities (Journal of Laws as of 26 October 2005).

See also: regulatory announcement no 10/2007 dated 29 January 2007.