Vast economic potential of LNG Terminal

| Prospects & Investment |

The first test tanker with liquified natural gas entered the terminal in Świnoujście in December 2015. This breakthrough event opens up a new era in Polish energy supply policy. Apart from becoming independent of particular gas suppliers, we have gained a series of important opportunities which can boost Poland’s position in Europe.

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Another natural gas supply contract

| About Us |

Our Works have made another step towards the diversification of natural gas sourcing thanks to a new agreement with Vattenfall Energy Trading. The contract is worth nearly 90 million PLN.

Supply diversification and cost optimization

– We are eager to make use of each market opportunity to optimize the supply of natural gas to our company, and to reduce the purchase price of this fuel – explained Wojciech Kozak, the Vice Chairman of Grupa Azoty “PUŁAWY”. In his opinion, deals signed by “PUŁAWY” provide the company with numerous benefits, including a variation of natural gas input points into the distribution system. “PUŁAWY” Vice Chairman also said that gas coming from the West now constitutes 20% of the general consumption of the resource in Our Works, but we must not forget that PGNiG is and is going to remain the key partner of Grupa Azoty “PUŁAWY”, providing the majority of the natural gas required by our installations.

Four natural gas suppliers

In December 2013, Grupa Azoty Zakłady Azotowe “PUŁAWY” contracted natural gas supply for 2014 with the following providers: RWE Polska (a contract worth 69 million PLN) and Statoil (97 million PLN). Our Company has also signed an annex to the long-term agreement with PGNiG concerning natural gas, which is indispensable in ammonia manufacturing installations. The value of this contact is estimated to reach as much as 1,09 billion PLN in 2014 alone!

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Grupa Azoty diversifies natural gas supply sources

| Polish Market |

The beginning of 2014 has brought some highly optimistic news about the plans to tighten the cooperation between chemical and energy companies in Poland. Grupa Azoty “PUŁAWY”, the largest consumer of natural gas in Poland, has secured agreements for the supply of this resource in 2014 with three business partners. The move confirms the strategy of “PUŁAWY” to diversify the sources of this fuel.

PGNiG is still the chief supplier

The 1.09-billion PLN contract means that Polskie Górnictwo Naftowe i Gazownictwo will remain the main supplier of natural gas for Grupa Azoty “PUŁAWY”. The other two deals were signed with Statoil and RWE Polska, which will provide fuel worth 97 million and 69 million zloty respectively.

Consistent strategy of “PUŁAWY”

Natural gas is one of the key resources used in our Works. At the same time, the move “PUŁAWY” has made is directly connected with the advancing freeing up of the natural gas market, and further dynamic development of gas trade in Poland.

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Grupa Azoty. The priority for 2014 is investment

| Prospects & Investment |

Grupa Azoty is intending to tighten the cooperation with KGHM Polska Miedź, the same company which has just signed a deal with “PUŁAWY”. The agreement concerns seeking and excavation of resources used in chemical manufacturing.

Another level of cooperation

The implementation of joint energy projects constitutes the next step in the process, following the previous deal. Namely, Grupa Azoty “PUŁAWY”, Gdańskie Zakłady Nawozów Fosforowych “Fosfory” and KGHM Polska Miedź had signed an agreement regarding the search for and mining of phosphorites. The cooperation of the companies is also to expand to such areas as the processing of phosphogypsum and searching for potassium salt deposits abroad.

Sustainable development

Additionally, Grupa Azoty is intending to continue the investment projects which have been initiated already and to launch new such initiatives, estimated to be worth over 800 million PLN! New investments concern modernizing installations for ammonia manufacturing and processing, for the production of liquid and granulated fertilizers, as well as the energy sector. The overriding objective of these projects is improving the efficiency and operational excellence of installations in all works forming Grupa Azoty.

Further investment in natural gas

Grupa Azoty is not planning to become involved in the search for natural gas, but it is interested in participating in projects which have already reached the excavation stage. The opening of LNG (liquefied natural gas) Terminal in Świnoujście will certainly have a major influence on the activity of Grupa Azoty in this respect, seeing that it will lead to te diversification of natural gas supply sources.

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Visegrád Group betting on biofuel

| Foreign Markets |

At the latest meeting held in Szekszárd, the representatives of Polish, Czech, Slovakian and Hungarian Chambers of Agriculture signed a joint document concerning biofuel.

The chief element of the agreement is an appeal to EU decision makers to support the production of plant-based biofuel. The explanation of the appeal is straightforward – taken together, Visegrad Group countries are estimated to be able to manufacture 8 billion liters of biofuel per year. This quantity would cover 1% of the EU demand for such fuel.

Using biofuel involves diversification of the sources of supply, which boosts energy supply safety. The second argument is protecting the natural environment. Another benefit of support for biofuel is decreasing the volume of imports of soy-based fodder to the EU, even by one fifth. The quantity of GMO-free and antibiotics-free feeding stuff which is the by-product of biofuel manufacturing is estimated at 5 million tonnes annually.

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KGHM and Fosfory on a joint project to seek natural resources

| Production & Resources |

On Friday 30th, 2013 KGHM Polska Miedź S.A. and Gdańskie Zakłady Nawozów Fosforowych “Fosfory” signed a letter of intent confirming willingness to cooperate. Basing on this document, both Parties are to engage in talks about the rules of cooperation during the implementation of projects concerning the search of and research into deposits of chemical resources in Poland and abroad, as well as recycling.

For Fosfory, a company located in Gdańsk and belonging to Grupa Azoty Puławy, the main objective is to obtain a source of polihalite, the sulfate of potassium, calcium and magnesium. The mineral is an excellent source of potassium for the manufacturing of complex fertilizers.

Seeking deposits and ensuring a safe supply of resources is of particular, strategic interest for all companies in Grupa Azoty – said Grupa Azoty CEO Paweł Jarczewski upon the signing of the agreement. He mentioned other possible use of the resource – polihalite might bring a change of complex fertilizers manufacturing technology used by Fosfory in Gdańsk and Police. Potassium in this form, as an ingredient of complex fertilizers, is absorbed by plants in a better way, makes fertilizing more effective and is more environmentally-friendly than that in the chlorine form – Mr Jarczewski added.

The above activities confirm the strategy of Grupa Azoty, a strategy which focuses on diversification of resources and gaining access to own resource deposits. The Parties are to initiate talks shortly and define the manner and rules of cooperation during this enterprise.

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Perspectives for PUŁAWY Group

| Prospects & Investment |

Due to specificity of the business in which we are active, general macroeconomic factors have a considerable influence on the functioning of “PUŁAWY” Copmany. Looking from this perspective, let us take a moment to discuss the perspectives that our company faces in the approaching months of 2013.

What 2012 brought

The chief challenges for “PUŁAWY” are: general economic slowdown in 2012, resulting in lower demand home and abroad, lower GDP growth than expected and the forecast of further GDP growth stagnation. However, analysts suggest that slow GDP growth will lead to lower inflation rate, which will bring lower interest rates, and might stimulate demand in the long term. Growth of demand is also likely seeing that is will be necessary to replenish stock used up in 2012. Another factor is the forecast fall of value of the Polish Zloty against EUR (by c. 4%) and USD (by c. 8%). And yet, this trend might be reversed in the second half of the year.

PUŁAWY’s answer

Responding to such factors, “PUŁAWY” Company has decided to react in such a way as to conteract the impact of poor market conditions. In 2013 we are planning to:

• diversify the trade offer,

• introduce new product portfolio,

• compete in the area of pricing, but first and foremost by offering unrivaled quality.

Undoubtedly an important factor, which makes the plans more likely to be a success, is the decrease of the price of natural gas, which is one of the key resources in the Great Chemical Synthesis sector manufacturing.

Stronger in a group

The excellent financial result of “PUŁAWY” Company in the first half of 2012/13 financial year resulted from modernization of the installation (cheaper production, better quality) and constant improvements of customer service through needs analysis as well as diversification of suppliers. This confirms the fact that the Group is bound to reach its target for this year. A major step is also the merger of “PUŁAWY” and Azoty Tarnów CG into “Azoty” CG. Common strategy, joining the potentials and experience bring effects of scale and synergistic effects. Thanks to common work to modernize production and increase the portfolio, the consolidation will help retain the Group’s advantage over competition home and abroad.

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