Joint financing agreement signed between LOTOS Petrobaltic S.A. and Polskie Inwestycje Rozwojowe S.A.
Report no. 212013-10-07

On October 7th 2013, LOTOS Petrobaltic S.A. (LPB), a 99.99% subsidiary of Grupa LOTOS S.A., and Polskie Inwestycje Rozwojowe S.A. (PIR) signed an agreement to jointly finance the development of the B8 oil field in the Baltic Sea.
The purpose of the agreement is to work out the terms and structure of financing for the project, in connection with which a special purpose vehicle (SPV) will be formed, to which LPB will transfer the B8 field licence and assets.
The tasks to be carried out by the SPV include the completion of drilling work within the field, installation of subsea production facilities, and conversion of the Petrobaltic drilling platform to a production platform. Subsequently, the SPV will produce and sell oil and gas extracted from the B8 field.
As a mezzanine lender, PIR will have its claims subordinated to those of banks as senior lenders, or it will be a minority holder of the SPV's equity if it elects to exercise the equity participation option. The financing can take the form of a private placement of corporate bonds with restricted transferability, and the financing period should not exceed 10 years. PIR has expressed its willingness to participate in the project financing on market terms.
The total cost of the B8 project, including the value of assets contributed by LPB to the SPV, stands at approximately PLN 1,600m, of which the market value of the assets contributed by LPB is approximately PLN 700m, and the total external financing sourced from banks and PIR amounts to approximately PLN 900m.
The agreement provides that PIR's share in the project financing will not exceed PLN 563m. The parties want the first tranche of the PIR financing to be advanced in the first half of 2014.
The final project financing structure will be arrived at through further analyses and negotiations, and in consultation with banks interested in providing funds for the project. The details of the final financing structure will be published in a report.
The legal basis for the publication of this Current Report is Art. 56.1.1 of the Public Offering Act – inside information.