The Management Board of Grupa LOTOS S.A. hereby reports that on April 11th 2006, Lotos Ekoenergia SA and Shell International Trading and Shipping Company Limited (Shell Trading) entered into an agreement on feedstock supply for the installations which are to be constructed under the Comprehensive Technical Upgrade Programme of Grupa LOTOS S.A. (PKRT). The agreement, whose term is 12 years from the commencement of commercial operation of PKRT, secures the supply of feedstock by Shell Trading to Lotos Ekoenergia SA. The commencement of performance of the obligations related to the supply and offtake of feedstock is subject to prior execution of PKRT. The value of the agreement to Lotos Ekoenergia SA over the agreement term is estimated at PLN 11 bln, counting from the anticipated date of commencement of supplies, based on the forecast oil market prices. The agreement stipulates contractual penalties for failure to perform both parties obligations of supply/offtake of agreed volumes of product meeting relevant specifications. The value of the penalties may exceed the PLN equivalent of EUR 200,000. The abovementioned agreement, in addition to the earlier concluded offtake agreement securing the collection from Lotos Ekoenergia SA by Shell Trading of the product surplus generated after the implementation of the PKRT Programme, is another essential step in the process of execution of the Programme, which was specified as one of the main issue objectives in the Issue Prospectus of Grupa LOTOS S.A. The Comprehensive Technical Upgrade Programme, in which Grupa LOTOS S.A. intends to invest over PLN 3.2bn in 2005-2009, provides for the construction of an IGCC unit, an SDA unit, and a MHC unit at the Gdańsk Refinery. The agreement is deemed significant because its estimated value exceeds 10% of Grupa LOTOS S.A.’s equity. Concurrently, an annex was executed to the agreement of March 31st 2005 between LOTOS Ekoenergia S.A. and Shell International Trading and Shipping Company Limited (Shell Trading), securing the offtake of the product surplus generated after the implementation of the PKRT Programme (offtake agreement). Under the annex, the offtake agreement will be terminated if the financial closing of the project is not completed by June 30th 2007 and the project’s operations are not launched within 42 months from that date. Furthermore, Lotos Ekoenergia has the right to extend the above deadlines by 12 and 6 months, respectively. Legal basis for the publication of this report: Par. 5.1.3 of the Minister of Finance’s Regulation on current and periodic information to be published by issuers of securities, dated October 19th 2005.
Execution of a Feedstock Supply Agreement between LOTOS Ekoenergia S.A. and Shell Trading.
Report no. 96/20052006-04-11