Grupa LOTOS S.A. (the “Company”, “Grupa LOTOS”) has published today, the prospectus prepared in connection with a rights issue by way of a public offering. Proceeds from the issue will be used to finance the project EFRA i.e. the construction of delayed coking unit with accompanying infrastructure and development of gas fields B4 / B6 on the Baltic Sea. The issue price was set at PLN 18.10 for a gross amount of approximately PLN 995.5 million. The November 14, 2014 is the last day of listing on which the acquisition of the existing shares in a WSE trading session would allow for the acquisition of the Pre-emptive Rights[1].

Acquisition of the new shares in the exercise of pre-emptive rights was declared by the Polish State Treasury.

According to the prospectus of the Company approved by the Polish Financial Supervision Authority on November 7, 2014, proceeds from the issue will be used to finance the project EFRA i.e. the construction of delayed coking unit with accompanying infrastructure and development of gas fields B4 / B6 on the Baltic Sea.

- The rights issue will give Grupa LOTOS flexibility in financing of its investment projects. The investments will strengthen the company’s competitive position in the downstream segment, simultaneously supporting further growth in the upstream segment - Paweł Olechnowicz, Grupa LOTOS Chief Executive Officer said. - The aim of the EFRA project is to increase our refining margin by extending the technological process via enhanced processing of heavy petroleum fractions. The projects in the Baltic Sea support our expansion in upstream.

The EFRA Project

Implementation of EFRA Project – construction of delayed coking unit with accompanying infrastructure will allow for significant improvement in the depth of oil processing. The result will be a decrease in the share of heavy petroleum products in the Group’s total production, greater focus on the production of middle distillates and production of coke as the last fraction, which as the Company estimates, is likely to add approximately USD 2 per barrel to the Group’s refining margin. The Company estimates that the total value of the EFRA Project, including expenditures related to the financing of the EFRA Project during its construction and the security deposits required by banks, will be approximately PLN 2.34 billion. According to the Company’s plans, this amount will include approximately PLN 530-650 million of proceeds from the issue.

The EFRA Project is planned to be completed in the first quarter of 2018. 

Development of gas fields B4 / B6 on the Baltic Sea

Deposits B4 / B6 have gas resources of around 4.3 billion cubic meters (classified as Best Estimate). The project aims at development of these deposits. The results of its implementation will be the diversification of the Company’s revenue stream and the increase of the mining margin on the gas projects. Furthermore, the project will result in the improvement of Poland’s energy security.

The estimated total value of capital expenditures to be incurred by Grupa LOTOS for the development of B4 and B6 gas fields will amount to approximately PLN 800 million as Grupa LOTOS owns 51 percent of the project. According to the Company’s plans, this amount will include approximately PLN 350-470 million of proceeds from the issue. The launch of industrial production of natural gas on these fields is planned at the turn of 2017 and 2018.

- Already today Grupa LOTOS has one of the most modern and effective refineries in Europe and the well-developed retail network. The investment, which we plan to carry out, may increase the potential of our capital group and generate additional cash flow. It translates into benefits to local communities in the region of Pomerania and the entire Poland. Improving the position of Grupa LOTOS will enhance energy security of Poland – said Paweł Olechnowicz.

On the prospectus

The Company has published today the prospectus, which was prepared in connection with a rights issue by way of a public offering of 55,000,000 ordinary series D shares (the “Prospectus”). The Prospectus was approved by the Polish Financial Supervision Authority on November 7, 2014. The Prospectus was made available in an electronic format on the website of the Company (www.lotos.pl) and, additionally, for information purposes, on the website of the Joint Offering Agent – Dom Maklerski PKO Banku Polskiego (www.dm.pkobp.pl).

Key Terms and Conditions of Grupa LOTOS rights issue offering

Within the Offering, the Company offers 55,000,000 ordinary series D bearer shares. The Offering is being carried out as a rights issue with the existing shareholders of the Company being entitled to subscribe for the Offer Shares in the exercise of the Pre-emptive Rights to subscribe for the Offer Shares pro rata to their current holdings. The Record Date is November 18, 2014. The existing shareholders of the Company as at November 18, 2014 will receive one Individual Pre-emptive Rights for each Existing Share. 1 (one) Individual Pre-Emptive Right authorises the holder to take up 0.42348946045 of an Offer Share.

The listing of 129,873,362 Individual Pre-emptive Rights on the WSE will be subject to the registration of the Individual Pre-emptive Rights with the NDS and compliance with the terms and conditions for the listing of the Individual Pre-emptive Rights on the WSE, in line with applicable regulations.

The issue price was set at PLN 18.10 for a gross amount of approximately PLN 995.5 million.

In accordance with the offering schedule, listing and trading of the Individual Pre-emptive Rights on the WSE will take place from November 20, 2014 until November 25, 2014. For persons entitled to subscribe for the Offer Shares in the exercise of the Pre-emptive Rights and under the Additional Subscription, the subscription period is scheduled from November 20, 2014 until November 28, 2014. 

Persons entitled to subscribe for the Offer Shares in the exercise of the Pre-emptive Rights and under the Additional Subscriptions

The persons entitled to subscribe for the Offer Shares in the exercise of the Pre-emptive Rights shall be:

• persons who held the Existing Shares as at the end of day on the Record Date and who have not disposed of the received Individual Pre-emptive Rights at the time of placing a subscription order for the Offer Shares; and,

• persons who have acquired the Individual Pre-emptive Rights and have not disposed of them at the time of placing a subscription order for the Offer Shares.

The persons entitled to place the Additional Subscription by the Pre-emptive Right exercise date shall be persons who were shareholders at the end of the Record Date. No Additional Subscription may be made by persons who were not shareholders of the Company at the end of the Record Date and who acquired the Individual Pre-emptive Rights. Those persons may only place subscriptions as a result of the exercise of the Pre-emptive Rights.

Société Générale Corporate & Investment Banking is acting as Sole Global Coordinator, Joint Bookrunner and Joint Offering Agent, Powszechna Kasa Oszczędności Bank Polski S.A. Oddział – Dom Maklerski PKO Banku Polskiego w Warszawie as Joint Bookrunner and Joint Offering Agent, and Bank Zachodni WBK S.A., ING Securities S.A., ING Bank N.V. and UniCredit CAIB Poland S.A. as Co-Lead Managers.

Offering Schedule

The Management Board may decide to change the opening and closing dates of the acceptance period for orders in agreement with the Joint Offering Agents. This shall take place no later than on the opening date or closing date of the acceptance period for orders, respectively. Other dates may also be changed. New dates will be announced to the public no later than on the opening and closing date of each period. Information on any such change will be made available to the public in a current report published under Article 56.1 of the Offering Act, and also by way of an update report made available to the public in the same manner as the Prospectus under Article 52.2 of the Offering Act.

The Capitalised terms, not defined herein shall have the meanings assigned to them in the Prospectus.

Disclaimer:

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

This material is for promotional purpose 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”). The prospectus prepared in connection with the offering of the Company’s shares (the “Shares”) subject to pre-emptive rights (the “Prospectus”) was approved by the Polish Financial Supervision Authority on 7 November 2014 and is the sole legally binding document containing information about the Company and the offering of its Shares in Poland. The Prospectus was made available in an electronic format on the website of the Company (www.lotos.pl) and, additionally, for information purposes, on the website of Powszechna Kasa Oszczędności Bank Polski S.A. Oddział – Dom Maklerski PKO Banku Polskiego w Warszawie (www.dm.pkobp.pl).

This material 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 material (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 material or a part thereof, or its contents or in any other manner in connection with this material.

Société Générale, Powszechna Kasa Oszczędności Bank Polski S.A. Oddział – Dom Maklerski PKO Banku Polskiego w Warszawie, BZ WBK, ING Securities and Unicredit are acting exclusively for the Company and no one else in relation to the Offering and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Offering and will not be responsible to any other person for providing the protection afforded to their respective clients or for providing advice in connection with the Offering.

Grupa LOTOS S.A. Communications Office, ul. Elbląska 135, 80-718 Gdańsk, tel.58 308 87 31, 58 308 83 88, e-mail: media@grupalotos.pl