Delivering high-quality energy
Already the largest coal producer in Russia and one of the key heat and electricity suppliers, our aim is to be one of the world’s leading energy companies. We will achieve this by expanding our existing mining, processing and power generating assets, investing in new technologies and continuing to develop our logistics and distribution systems. We also aim to reduce our environmental impact and enhance our positive contribution to the social and economic development of the regions where we operate.
Strengthening our presence in resilient, high-margin international coal markets will help ensure the long-term sustainability of our business. In Russia, we are focused on unlocking synergies between our coal and energy businesses and the co-generation of heat and electricity in order to remain a cost-efficient and responsible energy producer.
Increasing output of high-CV products at Tugnuisky
At the Tugnuisky and Nikolsky open-pit mines, we mine coal with a low nitrogen and sulphur content, which makes it especially attractive for Japanese buyers, given the growing demand for high-CV coal in this premium market.
In 2019 we started the trial operation of a second Tugnuisky WP. New wastewater treatment plans are being built for the mine and the washing plant.
- Increase the total capacity of Tugnuisky and Nikolsky to 15.5 Mt by 2023
- Double the supply of coal from Buryatia to Japan by 2021
Increasing production of high-quality and high-demand coal products
Expanding mines in Buryatia, Khakassia and the Khabarovsk region.
Building a new washing plant at Tugnuisky, increasing the throughput of the Chegdomyn WP.
We continued to develop our assets in Khakassia (Chernogorsky), Buryatia (Tugnuisky and Nikolsky), Khabarovsk region (Pravoberezhny), which led to a 5% year-on-year increase in production at these open-pit mines. Meanwhile, we used the market downturn to upgrade underground mining equipment, which led to a decrease in underground production, leading to a total 7% hard coal production decrease year-on-year.
SUEK launched a second washing plant at Tugnuisky, bringing the share of washed hard coal to 62%.
Strengthening our presence in premium coal markets
Strengthening our market presence in Japan, South Korea and Southeast Asia’s premium markets.
Growth in the share of direct sales by developing distribution networks in key sales countries.
Sales Southeast Asia increased by 4%, driven mainly by growing exports to Vietnam and Hong Kong.
SUEK stepped up sales to other premium markets, including 1.2 Mt supplied to Mexico.
In the Atlantic, despite a general market decline, shipments to the countries of the Mediterranean basin increased by 1% to 6.5 Mt, mainly due to an increase in shipments to Morocco.
Supplying more coal to Japan and South Korea through the promotion of products with a low ash content and higher calorific value.
Increasing deliveries to core markets (Taiwan, Malaysia, Hong Kong, Mexico).
Consolidating our position in the Russian thermal coal market
Increasing coal production at Borodinsky in the Krasnoyarsk region to meet growing demand from our power plants.
Domestic coal sales grew by 3% thanks to growth in supplies to SGC’s plants.
To meet this rising demand from our CHPPs, we increased production at Borodinsky by 4% to 22.3 Mt.
Maximising the share of SUEK’s coal supply to our plants
Consolidating our position in the Russian heat and electricity markets
Consolidating our share in the Siberian heat and electricity market through capacity upgrade and potential M&AsM&A — mergers and acquisitions.
SUEK acquired Reftinskaya GRES and agreed on the purchase of the Krasnoyarskaya GRES-2. This will boost SUEK’s total power generating capacity by 46% to 16 GW, which makes us No. 5 electricity producer in Russia.
The transition of Barnaul to the ‘alternative boiler’ tariff was implemented.
Consolidating Reftinskaya GRES and Krasnoyarskaya GRES-2.
Switching to the ‘alternative boiler’ tariff in and other cities.
Improving the operational efficiency of our coal assets
Continuing to introduce advanced underground mine layouts, increasing the length of longwalls to 350-400 metres.
Optimising the combined operation of excavators and dump trucks to ensure growth in production volumes and investment cost savings.
Productivity of mining personnel decreased in line with lower production. But we upgraded equipment to improve efficiency in future. At the Kirov mine, we commissioned a 350 m longwall, while another one will be launched in 2020. At the Yalevsky mine, we launched a second longwall 400 m long.
After optimising loads for our excavator and truck units, we reduced the per 1 m3m3 — cubic metre energy consumption by 4%.
SUEK was recertified its compliance with the ISO 50001 Energy Management Systems standards.
Improving labour productivity by refining our incentivisation and training systems, introducing more productive equipment and digital technologies.
Improving the operational efficiency of our energy assets
Optimising the operation of power plants to achieve growth in output and save on investment costs.
Increasing the share of co-generation of heat and electricity to optimise the use of production capacities and fuel consumption.
We continued the replacement of inefficient old boiler houses and simultaneous reconstruction of 114 kmkm — kilometre of heat networks in Krasnoyarsk, Kemerovo, Barnaul and Novosibirsk.
Projects to upgrade the Tom-Usinskaya GRES, Biyskaya CHPP and Krasnoyarskaya CHPPs 1, 2 and 3 were included in the state DPM-2 programme. This will enable us to replace inefficient boiler houses, increase the share of heat generated in co-generation mode and reduce fuel consumption per unit of energy, as well as supply new customers.
Improving the efficiency of thermal power plants through capacity upgrades.
Developing our railcar fleet
Developing SUEK’s railcar fleetIn April 2019, SUEK acquired
- 5 years old or younger
- 32-year service life and a capacity of up to 77 t
- Lower environmental impact per tonne compared to conventional railcars
This increased SUEK’s fleet under management to 53,350 units. Higher-capacity railcars make up 65% of our managed railcar fleet.
As a result, SUEK has ensured that more than 80% of its railcar needs are covered by its own fleet. The company can minimise its use of third-party railcars and improve the reliability of on-time deliveries to key Asian markets, as well as optimising transportation costs.
Maintaining the share of railcars under management to cover our needs by 80% or more.
Cooperating with Russian Railways to accelerate the turnover of cars on SUEK routes and increase investment in priority coal transportation areas.
SUEK purchased more than 16,000 high-capacity railcars bringing the fleet under management to 53,350 units and covering over 80% of the company’s transportation needs.
Expanding our transhipment capacities
Further developing Vanino Terminal.
Developing Murmansk Commercial Seaport to meet our coal transhipment target of 15.5 Mt and attract third-party cargo, including for the development of the Arctic.
Completing the upgrade of Maly Port to boost its capacity to 4 Mt a year.
SUEK increased coal transhipment through its own ports to 82%, thereby minimising the use of third-party ports.
Coal shipment through the Vanino Bulk Terminal reached a record 20.5 Mt, benefiting from the completed upgrade of the port.
Murmansk Commercial Seaport transshipped 16.3 Mt of coal and 1.3 Mt of non-coal products.
In Maly Port to increase transhipment capacity up to 4 Mt of coal a year, we completed dredging of the operational waters and approach canal and restored railways.
Project financing development
In June 2019, SUEK signed an agreement with the Japan Bank for International Cooperation (JBIC) to open an export credit line for the purchase of Japanese mining equipment. A loan of up to $50m has been financed by JBIC and commercial banks. The Japanese state export credit agency, NEXI, provides credit insurance to the extent financed by commercial banks. Project financing enables SUEK to diversify borrowed capital sources and cut rates across the Group’s loan portfolio.
Reftinskaya GRES consolidation
In October 2019, SUEK acquired from ENEL one of the largest power plans in Russia, Reftinskaya GRES, located in the Sverdlovsk Region (Urals).
- Installed capacityInstalled capacity — the amount of energy that a power station is able to produce of 3.8 GW
- 40% of the total electricity supply to the Sverdlovsk region
- Equipped with modern filters that capture 99.9% of ash emissions and an online emissions monitoring system
- 330-metre chimney No. 4 is one of the tallest stacks in the world
- Audited compliance with ISO 14001:2015 Environmental Management Systems
- ISO 9001:2015 Quality Management Systems
- OHSASOHSAS — Occupational Health & Safety Assessment Series 18001:2007 Health and Safety Management Systems.
Sustaining profits despite the cyclical nature of the business
Maintaining profitability through cost control and a focus on premium markets.
Thanks to the contribution from the energy business, SUEK was able to partially offset the impact of a significant decrease in global coal prices on the Group’s revenue.
Cost control and the synergistic effect following the consolidation of the coal and energy businesses helped the company maintain EBITDA at over $2 billion and EBITDA margin at 28%.
Ensuring a stable positive cash flow.
Maintaining a conservative financial policy
Keeping an optimal Net debt / bank EBITDA ratio within the approved KPIKPI — Key performance indicator.
A year-on-year decrease in EBITDA and a temporary increase in debt as a result of major strategic acquisitions in the non-coal mining sectors (rail cars, power stations) pushed the Net debt / EBITDA ratio up to 3.1x.
The investments planned for 2019 were limited to key projects and the maintenance of our capacities. SUEK’s operating cash flow grew by 7% thanks to our focus on working capital management, which enabled us to maintain our operating cash flow to CAPEX ratio at 2.1x.
2023 plansMaintaining Net debt / EBITDA ratio at an average of
Optimising borrowing costs
Developing a portfolio of financial instruments.
We continued to diversify our loan portfolio, in particular involving a large number of international banks in our syndicated loan, enabling us to optimise the rate on this instrument.
In light of the favourable domestic market environment, SUEK placed rouble-denominated bonds and reduced the average funding rate of our overall portfolio.
We also expanded our project financing, and in particular entered into transactions with Japanese state export agencies to finance the acquisition of Japanese mining equipment.
Our credit ratings were confirmed with a stable outlook.
Optimal finance costs
Digital technology enhances industrial safety
In the reporting year, SUEK carried out pilot tests of a number of digital safety control solutions at its mining, energy and logistics facilities facilities.
Equipping a worker’s helmet with digital tools to analyse the location of equipment and people relative to each other, prevent collisions through warning signals, and to urgently call the dispatcher.
With similar functions also monitors human health status and vital signs.
At our power plans we have launched video control systems for employees working with high voltage, which allow both remote monitoring of employees’ actions and advice from a supervisor. This allows to reduces the possibility of emergency situations.
Helps determine the location and control of employees in mines. In 2019, this system was introduced in the logistics segment, which helps determine the location of trackwalkers in remote areas, control their route, call the dispatcher in case of emergency.
Preventing accidents and fatalities
Promoting a culture of health and safety, including zero tolerance for accidents at all of SUEK’s assets.
Investing in the development of monitoring and warning systems.
There were no collective fatalities in 2019. However, despite our efforts, eight individual fatalities occurred in the company.
Based on a detailed analysis of each case, we identified the root causes of these accidents related to the organisation of work processes, the adequacy of the protective equipment and locks.
The company developed comprehensive measures aimed at preventing similar cases in the future.
A complex of operational remote monitoring and control of the safety of production processes was launched, in which information from all subsystems is consolidated and analyzed using special mathematical algorithms in real time.
Reducing occupational injuries
Progressive development of monitoring and safety systems at particularly hazardous facilities.
Implementing training programmes for personnel to reduce occupational injuries.
We continued the development of monitoring and warning systems at our facilities, in particular, designed a remote control system for ensuring industrial safety at open-pit mines and washing plans for subsequent integration with systems in use at our underground mines.
We began the transition of our coal, logistics and energy assets to the new international ISO 45000 Occupational Health and Safety standard.
The Industrial Safety Committee under SUEK’s Management Board, as part of the upgrade of the company’s training base, approved:
- The upgrade of our training centre at Urgal
- Further development of the Virtual Mine, with computer simulation of the mining process and equipment
2023 plansProgressive decline in LTIFR aiming for
Transformation of Rubtsovsk heating systemFollowing the transition of the town of Rubtsovsk to the ‘alternative boiler’ method, SUEK invested about
- Secure heat supply to >140,000 people
- 32% fewer breakdowns of heating systems
- Over 9 km of pipelines upgraded
Better supplies of heat to the regions where we operate
Reducing accidents and minimising interruptions in case of emergencies on heat networks, connecting new facilities to the company’s heat supply system.
were especially outdated, our investment in the
upgrade of heat networks rose by
were connected to our heat networks,
increasing our heat coverage by
The progressive replacement and upgrade of heat networks and ensuring their trouble-free operation.
Reducing adverse environmental impacts
Implementing environmental programmes, including projects to reduce air and water pollution and enhance waste recycling.
Constructing taller stacks and installing filters to reduce emissions at power plants.
Replacing inefficient boiler facilities with CHPPs.
Dust reduction in ports.
Increasing the share of washed coal to minimise emissions during transportation, transhipment and use of coal.
A new 275-metre-tall stack construction was completed at Krasnoyarskaya CHPP-
Our CHPPs replaced 3 inefficient old boiler houses.
In the Coal Segment we used less overburden for backfilling in 2019 due to smaller worked out areas for reclamation. Our Novosibirskaya
We continue to process organic waste, rubber products, polymers, rubbers, oil sludge, bitumen, roofing materials, electronic equipment, used oils, medical, wood and other carbon-containing waste.
At the Murmansk Commercial Seaport, SUEK completed the introduction of a state-of-the art stationary spraying system and installed Phase 2 dust shields. Besides, the port launched an environmental dispatcher’s office.
Ensuring the sustainability of communities in the regions where we operate
Guaranteeing the development and well-being of our employees.
Delivering a long-term programme for social infrastructure development and support for local communities.
Cooperating with regional and municipal authorities on projects to develop social infrastructure and support educational institutions.
The company implemented over 250 social and charitable programmes, with investment amounting to $26m.
They resulted in 84 growth points in regions where SUEK operates.
We were able to keep staff turnover at 14% in the Coal Segment and decrease it by 6 p.p. in the Energy Segment, due to the implementation of an effective personnel strategy.
50 employees in the Kuzbass region improved their housing thanks to SUEK’s housing assistance programme.
As part of the company’s staff development, 34% employees received training / retraining / professional development.
Qualitative growth of the social component, taking into account the created growth points in regions where we operate.
Providing sufficient qualified personnel to implement strategic goals.
Improving corporate procedures
Introducing best practices in the corporate culture.
The compliance of our corporate practices with international standards was confirmed by the following certificates received:
- ISO 19600:2014 Compliance Management
- ISO 37001:2016 Anti-Corruption Management
Vladimir Hlavinka and Michael Baumgärtner joined the Board of Directors, after which the share of independent directors reached 50%
Further introduction of best practices to SUEK’s corporate system