PGE ELECTRICITY DISTRIBUTION

An investment programme for PGE Dystrybucja's electricity distribution network in Poland over the period 2022-2025. The programme includes investments in network rehabilitation and expansion, and metering.

The programme is expected to improve the planning, operation, monitoring, control, billing and maintenance functions of the distribution network, increase its capacity, improve its flexibility, reliability, safety and security, and accommodate the integration of increasing amounts of renewable energy sources (RES).

The programme comprises the expansion and modernisation of the electricity distribution network of PGE Dystrybucja in Eastern Poland. Some of the programme schemes are located in Cohesion Priority Regions. The programme is expected to deliver economic benefits over the financial return, in particular by addressing market failures linked to negative environmental externalities (reducing GHG emissions from power generation by connecting renewables and, indirectly, from mobility), increased energy efficiency from installing smart meters, and the supply of public goods (security of power supply). The operation is expected to yield good quality and results, thanks to avoided GHG emissions, good employment creation and governance arrangements.

The Promoter appreciates the financial value added provided by the EIB. The long tenor of the EIB loan (18) is well in line with the economic life of the underlying electricity distribution assets and it is perfectly suited to finance investments with long payback period such as the Project implemented by PGE Dystrybucja. The funding of similar maturities is not available on the Polish bond and loan market. Customised terms such as flexible drawdown over the long availability period and the availability of local currency (PLN) funding are of value to the Promoter because of the multiannual Project's implementation period and PLN cash-flows. The EIB involvement will send a strong signalling effect to the commercial banks operating in Poland and other stakeholders that EIB is standing by to support the decarbonisation of the Polish energy sector.

The investment programme comprises several electricity distribution schemes with voltages ranging from 400 V up to 110 kV. Some of these schemes may fall under Annex II of Directive 2014/52/EU, amending the EIA Directive 2011/92/EU, which requires the competent national authority to determine the need for an EIA. The environmental and social due diligence will focus on the Promoter's capacity to implement the programme in line with the EIB environmental and social standards and requirements.

The Bank will require the Promoter to ensure that contracts for implementation of the project have been and shall be tendered in accordance with the applicable EU procurement legislation, Directive 2014/25/EU as well as Directive 92/13/EEC as interpreted by the Court of Justice of the EU, with publication of tender notices in the Official Journal of the EU, as and where required.