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Financing agreements to develop the B8 field
Report no. 17/20142014-08-25

On August 25th 2014, B8 Spółka z ograniczoną odpowiedzialnością Baltic Spółka komandytowo-akcyjna ("B8 SPV"), an indirect subsidiary of Grupa LOTOS S.A. through LOTOS Petrobaltic S.A. ("LOTOS Petrobaltic"), executed the following agreements with Polskie Inwestycje Rozwojowe S.A. ("PIR"), Bank Gospodarstwa Krajowego ("BGK") and Bank Pekao S.A. ("Bank Pekao") to finance the development of the B8 oil field in the Baltic Sea: the Senior Note Programme Agreement and the Subordinated Note Programme Agreement.

Under the Senior Note Programme Agreement, the B8 SPV will issue notes to finance the development of the B8 field, its VAT liabilities and day-to-day operations. BGK and Bank Pekao will subscribe for the notes issued by the B8 SPV on the terms specified in the agreement.

Under the Subordinate Note Programme Agreement, the B8 SPV will issue notes to finance the development of the B8 field. Additionally, pursuant to the agreement, the B8 SPV will be able to issue notes to redeem previously issued notes and cover its interest payments on these notes. PIR will subscribe for the notes issued by the B8 SPV on the terms specified in the agreement.

The relations between senior and subordinate creditors and the seniority of claims against the B8 SPV are regulated by the Intercreditor Agreement.

Pursuant to the agreements, the investment project will be carried out on a project finance basis by the B8 SPV, a special purpose vehicle. LOTOS Petrobaltic will transfer to the B8 SPV the B8 field's licence and contribute a drilling platform. The B8 SPV will carry out the remaining development work on the B8 field, including conversion of the drilling platform into a production centre, preparation of subsea infrastructure, and drilling of two last injection wells before the start of production.

The total cost of the B8 field development project is estimated at approximately PLN 1.8bn, including LOTOS Petrobaltic's contribution with a market value of approximately PLN 800m. To partly finance the project, the B8 SPV will obtain USD 210m under the Senior Note Programme Agreement with BGK and Bank Pekao, and PLN 333m under the Subordinated Note Programme Agreement with PIR.

Furthermore, pursuant to the Senior Note Programme Agreement, the B8 SPV will be able to issue notes to cover its VAT liabilities up to the amount of PLN 50m and finance its day-to-day operations, up to the amount of PLN 30m, after production from the field has been launched, while under the Subordinated Note Programme Agreement, the B8 SPV will be able to issue notes to cover its interest payments on the notes subscribed for by PIR up to the amount of PLN 50m and redeem the notes subscribed for by PIR up to the amount of PLN 50m.

The notes subscribed for by the banks are to be redeemed by December 31st 2021, while those subscribed for by PIR – by December 31st 2022.

The legal basis for the publication of this Current Report is Art. 56.1.1 (inside information) of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies.

Not for release, publication or distribution, directly or indirectly, in or into the United States of America, Australia, Canada or Japan.

This communication is for informational purposes only and under no circumstances shall constitute an offer or invitation to make an offer, or form the basis for a decision, to invest in the securities of Grupa LOTOS S.A. (the “Company”). This communication does not constitute marketing or advertising material within the meaning of Art. 53 of the Act on Public Offerings, the Conditions for Introducing Financial Instruments to an Organized Trading System, and Public Companies. A decision as to whether to increase the share capital of the Company has not been made yet. The extraordinary general meeting of the shareholders of the Company the agenda of which includes a resolution on the share capital increase has been convened to be held on 8 September 2014 (the “EGM”). The announcement regarding the convocation of the EGM was published in on 12 August 2014. On the same date, the draft resolution of the EGM regarding the share capital increase was published on the Company’s website (www.lotos.pl). In case of the adoption by the EGM of the resolution on the share capital increase by way of the issuance of new shares (the “Shares”) in the Company subject to pre-emptive rights, the Company intends to file with the Polish Financial Supervision Authority (the “PFSA”) a motion for the approval of a prospectus (the “Prospectus”) which will be the sole legally binding document containing information about the Company and the offering of its Shares in Poland (the “Offering”). The Company will be authorized to carry out the Offering only after the EGM has adopted the above-mentioned resolution and the Prospectus has been approved by the PFSA. The Company will make the Prospectus available pursuant to applicable law.

This communication does not constitute a recommendation within the meaning of the Regulation of the Polish Minister of Finance Regarding Information Constituting Recommendations Concerning Financial Instruments or Issuers Thereof dated 19 October 2005.

This communication (and the information contained herein) does not contain or constitute an offer of securities for sale, or solicitation of an offer to purchase securities, in the United States, Australia, Canada or Japan, or any other jurisdiction. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States of America, unless registered under the Securities Act or unless an exemption from the registration requirements set forth in the Securities Act applies to them. No public offering of the securities will be made in the United States of America.

Neither the Company nor any of its subsidiaries or any other related entities shall be held accountable for any damage resulting from the use of this communication or a part thereof, or its contents or in any other manner in connection with this communication.