Memorandum of Understanding

to conduct feasibility study

for petrochemical complex

Grupa AZOTY S.A.

Grupa LOTOS S.A.

Warsaw

December 3rd 2013

Paweł Olechnowicz

CEO & President of Grupa LOTOS S.A.

Exploration for and production of

hydrocarbons:

10,400 boe/d

Operations in Poland, Norway and Lithuania

LOTOS in Poland and abroad

Refining:

10.5m t/a – crude oil processing capacities

Most advanced refinery in the EU

Sales:

419 LOTOS and LOTOS Optima service stations

33% share of the Polish fuel market

Products marketed in 78 countries

Second largest company in Poland

Sixth largest company in CEE

The project creates a link between Poland's refining and chemical industries

Petrochemical complex

Current:

Oversupply of naphtha

High-margin chemical products must be imported

Insufficient resource base for the chemical industry

Negative trade balance at PLN -16.7bn*

Post-project:

The naphtha oversupply will be utilised

Needs of the Polish chemical industry will be addressed and

its further growth secured

Excess chemicals output will be exported

New technologies and know-how will be brought in

* 2012 data for “Organic chemicals and plastics in primary forms”

Construction of the complex will yield economic, social and technological benefits

Increases the stability of supplies to domestic manufacturers

Improves Poland's export capacity

Synergises the potential of both companies

Use of advanced, world-class technologies will stimulate further

R&D work

Development of Poland’s research capabilities

Creates new jobs (direct and indirect employment of ca. 2,000 and

3,000–5,000 respectively)

Polish construction companies engaged as contractors

(5,000–7,000 workers in the construction stage)

Integration of Grupa LOTOS' and Grupa Azoty's resource bases

Diversification of product mixes and revenue streams

Secure foothold in high-margin chemical products market

Memorandum of Understanding and formation of SPV

Nov 23

2012

MoU to conduct preliminary feasibility

study

Technical analysis (including

preliminary environmental impact

assessment and facility siting analysis)

Market analysis

Economic analysis

Dec 3

2013

MoU to conduct full

feasibility study,

formation of SPV

Promising results of analyses

for future steam cracker unit

Paweł Jarczewski

CEO & President of Grupa Azoty S.A.

Overview of Grupa Azoty

Manufacturing and sale of fertilizers and chemicals

- Poland’s No.1 and EU’s No.2 manufacturer of nitrogen and

compound fertilizers

- Other products, used in various industries, include melamine

(world’s No. 3 manufacturer), caprolactam, polyamide, OXO

alcohols, and titanium white

• The Group formed through successive acquisitions of Polish

chemical companies

- Grupa Azoty S.A. (Parent)

- Grupa Azoty Zakłady Azotowe "Puławy" S.A.

- Grupa Azoty Zakłady Chemiczne "Police" S.A.

- Grupa Azoty Zakłady Azotowe "Kędzierzyn" S.A.

- Other entities

• Listed on the WSE (WIG30, WIG, WIG-CHEMIA, WIG-PL, Respect

Index) and included in the MSCI index

• Major shareholder – the Polish State Treasury (33%)

• Q1-Q3 2013 revenue of PLN 7.5bn, with net profit of PLN 771m

• Total headcount of approximately 13,500

Group’s total exports amounted to approximately PLN 4.5bn

Key export markets

• Belgium

• Brazil

• China

• Czech Republic

• France

• Germany

• Slovakia

• Switzerland

• Taiwan

• US

• UK

• Italy

ca. 85% of total

exports

- exports

>PLN 10m

- exports

<PLN 10m

Grupa Azoty – strong global presence

Products

(depending on configuration)

Polyethylene (LLDPE) imports >800,000 t/a

Propylene imports >400,000 t/a

Butadien imports >35,000 t/a

Benzene imports >26,000 t/a

Acrylic acid

derivatives imports >250,000 t/a*

Xylene balance

Demand from Polish chemicals manufacturers

* imported in products

Naphtha

LPG

Petrochemical

complex

Used in production of construction materials,

tyres, paints, varnishes, textiles and detergents, etc.

Grupa LOTOS and Grupa Azoty are natural partners for the project

LOTOS currently has

excess naphtha output

Supply of feedstock

Offshore and onshore logistics

Investment land

The new complex's output will be sold to Grupa

Azoty and other Polish chemical companies

Excess volumes will be exported

Processing of chemicals

Manufacturing of high-margin

products

Investment land

The project is in perfect tune with the strategies of both

Grupa LOTOS and Grupa Azoty

Extension of the

product chain

Optimisation of

business economics by

leveraging resources

and market conditions

Margin maximisation

Utilisation of excess

naphtha output

Further diversification of

product mix

Extension of the value

chain

Research in the area of

high value-added

speciality chemicals

Development of

intellectual capital

Further steps involve full feasibility study for steam cracker unit and establishment of SPV

• Execution of Memorandum

of Understanding on the

project

Prompt preparation

for feasibility study

Steps taken to establish

the SPV (shareholders'

agreement, antitrust

clearance)

- 2013 - - 2014 -

January 2014: Start of work on the full feasibility study for the project,

particularly including:

Analysis of possible financing structures

Formation of the SPV

Preliminary agreements with financing and industry partners

Investment decision

+ Polskie Inwestycje Rozwojowe will participate in the process as a potential investor, and

will ensure completeness of the analyses and proper financial structuring of the project

If the project is confirmed to be commercially viable, the investment stage will span 2015–2018, with the complex brought on-line in 2019

Organisation of the funding

and financial structuring

Start of design

and preparatory

work, mid-2015

Project completed

and brought on-line

- 2015 - - 2016–2018 -

Construction stage

- 2019 -

Mariusz Grendowicz

President of

Polskie Inwestycje Rozwojowe S.A.

Criterion Comments

Geographical coverage PIR invests in selected sectors in Poland and the Polish Exclusive Economic Zone (power,

hydrocarbons, transport, local government-owned infrastructure, industrial and

telecommunications infrastructure).

Project types Greenfield and brownfield projects. PIR does not acquire interests in existing

infrastructure.

Transaction structure Transactions involving special purpose vehicles, i.e. project finance and Public-Private

Partnerships (PPP).

Interest

Significant minority interest (with the possible exception of PPP projects) in the form of

equity or mezzanine financing.

Value

Minimum/maximum investment threshold of PLN 50m/PLN 750m.

Duration

PIR accepts long-term capital commitments, but prefers quick exits (within five to seven

years) to release funds for other projects.

Rate of return PIR invests only in profitable, low- to moderate-risk projects. These are largely financed

with debt capital sourced from banks or financial markets.

Instruments Equity, mezzanine, Fund of Funds

Partners

Private entities (including foreign-owned) and entities partly owned by the state, public

institutions or local governments (e.g. as Public-Private Partnerships).

PIR's role in Grupa LOTOS—Grupa Azoty joint project

The groups' joint project falls within PIR's area of interest.

Due to the project's scale, unprecedented in Central Europe, its financing will require the

involvement of major international banks.

PIR serves as a competence centre in determining the contractual arrangements and financing

structure for infrastructural projects run by SPVs co-financed by banks and financial investors.

PIR has a team of financial professionals with extensive international experience in financing

complex infrastructural projects.

PIR will review the groups' joint project from the perspective of a financial investor.

It will also provide assistance in determining the contractual arrangements and financing

structure for the project.

If the analyses yield favourable results on the rate of return, risk and financing terms, it will

then consider committing up to PLN 750m to the project.

Thank you for

your

attention

Key advisors

on the preliminary feasibility study:

Leader of the advisory consortium –

Economic advisor

Technical advisor Market advisor