English Russian SUEK Annual Report 2014
Chairman’s Statement
Mission, Vision, Values
Our Strengths
  • Strengthening our
    position as a leader

    chairmans statement
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    In 2014, we continued to demonstrate marked progress in the implementation of our strategic objectives, despite the difficult economic and market environment. We are consistently strengthening our position as a leader of the Russian coal mining industry and one of the leading players in international coal markets.

    Andrey Melnichenko
    Chairman of the Board of Directors, JSC SUEK

    Leader of the coal industry
    The coal mining industry experienced a difficult year in 2014. The sharp drop in global coal prices due to excessive supply in several key markets was exacerbated by deterioration in the Russian economic climate and increased geopolitical tension. Nonetheless, our position as the largest coal producer in Russia and supplier in both Russian and international markets remains strong. As a result of recent investment in the modernisation of our production assets and logistics chain and an extensive programme to improve operational efficiency, we continue to show sustainable growth in key operational indicators and to follow the same growth strategy.

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  • Mission, Vision, Values



    Our mission is to help fuel the world by producing coal safely and sustainably whilst delivering value to all our stakeholders.
    We accomplish this by:

    • Reliably supplying high‐quality coal products to our customers in Russian and international markets
    • Building long‐term relationships with suppliers and partners
    • Developing the skills and competence of all our human resources
    • Contributing to the socio‐economic development of the country and of the communities in the regions where we operate
    • Protecting the environment and leading the way in environmental standards
    • Creating long‐term value for our stakeholders


    Our vision is to be one of the world’s leading coal companies and to remain the largest coal producer in Russia. We will achieve this through:

    • Expanding our existing mining and processing assets
    • Investing in further development of transportation and logistics and increasing output from deposits located closest to the target markets
    • Innovating across our business


    The core values of our business are:

    • Safety in all our operations
    • Social and environmental responsibility
    • Leadership in all areas
    • Continuous development and improvement
    • Financial and operational growth and stability
    • Openness with customers and partners
    • Professionalism and integrity in everything we do

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  • Our Strengths

    Our Strengths

    Many factors contribute to our ability to maintain a leading position in coal mining and supply, both in Russia and internationally. Our business model and strategy have proven their stability over the years and our continued investments in efficiency ensure we remain well positioned for the future. We are aware of our strengths but also acknowledge that we must continually look to improve how we operate – both as a business and as an employer.

    Reputation We are a coal company with
    a track record as a reliable
    supplier with a robust
    presence in the Russian
    market, as well as in the main
    international markets.

    Vast mineral reserves Our extensive reserve base
    ensures sustainable supply of
    consistently high-quality coal
    for our customers.

    Favourable geographic position The advantageous location
    of our assets in Russia and
    their easy access to
    developed transport
    infrastructure simplifies sales
    to Europe and Asia.

    Integrated business model Our vertically integrated
    business model enables us to
    control the production,
    logistics and sales network,
    from mining through to
    end users.

    Prudent corporate governance We are committed to high
    standards of corporate
    governance, adopting
    governance principles in line
    with international good

    Operating efficiency Investment in modern,
    efficient mining systems has
    delivered improved
    productivity and is
    underpinned by a disciplined
    approach to cost control.

    Investing in people We pride ourselves in being
    the employer of choice in the
    coal mining industry in Russia
    and strive to develop the
    expertise of our employees.

    Health and safety We strive to achieve the
    highest standards of health and
    safety, placing special
    emphasis on safety technology
    and operational safety in our
    production units.

    Environmental commitment We have introduced and
    achieved high environmental
    standards including the
    sustainable use of natural
    resources. We continually
    look to minimise the adverse
    impact of our operations.

    Download ‘Our Strengths’

Who We Are
Where We Operate
Map of Supplies
  • Leaders in fueling the world

    SUEK Group is the number one coal producer in Russia – twice the size of our largest Russian competitor. We are also the sixth largest coal exporter in the world and one of the ten largest coal groups by reserves, with an estimated 5.5 billion tonnes under the JORC Code. We have large‐scale open‐pit and underground mines in Siberia and far eastern Russia.

    No 1

    Coal producer in Russia
    Coal exporter from Russia
    Coal supplier to Russian power
    generation market


    Customers in 36 countries


    Employees, 23,200 of whom
    are production staff

    5.5 Bt

    JORC Reserves. According to
    our estimate, the Group is the
    top ten largest coal company in
    the world by reserves


    The Group’s capital expenditure
    in 2014. Our investment
    programme is one of the largest
    among coal companies in Russia


    Spent on social and community
    projects during 2014

    Coal international sales by the world’s leading producers in 2014
    (million tonnes)

    Coal Export Diagram

    Coal production in Russia

    Coal production Pie Chart

    Thermal coal supplies in Russia

    Thermal Coal Supplies Pie Chart

    Download ‘SUEK at a Glance’

  • Well positioned to service
    global market

    Murmansk Commercial Seaport Ust-Luga Port Moscow Azov Port Buryatia Details Buryatia Khabarovsk Details Khabarovsk Khabarovsk Kemerovo Details Kemerovo Kemerovo Khakasia Details Khakasia Krasnoyarsk Details Krasnoyarsk Krasnoyarsk Krasnoyarsk Primorye Details Primorye Primorye Primorye Zabaykalie Details Zabaykalie Zabaykalie
  • Global reach to key markets

    Map of Production Supplies
Financial Highlights
Non‐financial Highlights
  • Financial Highlights

    We measure both financial and non‐financial performance in order to determine whether we are on track to achieve our long‐term goals.

    In 2014, SUEK Group delivered solid results despite a very challenging market environment, our production increased and sales volumes rose. We also saw EBITDA rise and EBITDA margins grow even though revenue was down mainly due to a fall in the global coal price.

    EBITDA margin
    Net debt/EBITDA
    Lost time injustry frequency rate (LTIFR) Sales to Russian market (million tonnes) Share of supplies to Russian market (%)



    EBITDA margin
    Measurement: EBITDA is an indicator of the company’s financial performance and is calculated as earnings before interest, taxes, depreciation and amortisation within the calendar year. EBITDA margin is a measurement of the Group’s earnings before interest, taxes, depreciation, and amortisation as a percentage of its total revenue.

    Relevance to the business: EBITDA is an important indicator of our financial health and measures our operating profitability. As EBITDA excludes depreciation and amortisation, the EBITDA margin can provide a more accurate view of our profitability.

    EBITDA margin is the key financial indicator that demonstrates the Group’s operating profitability and measures success of implementation of its strategy.

    Performance: In 2014, increased international coal sales and a decrease in cost of sales in US Dollar terms as a result of Russian Rouble devaluation compensated for the negative effect of the decline in the global coal price on our financial performance. Consequently, in 2014 the company’s EBITDA remained similar to 2013, amounting to $1,044m.

    EBITDA margin increased from 19% for 2013 to 21% for 2014, indicating a better performance by the Group despite lower coal prices.

    Net debt/EBITDA Measurement: Net debt to EBITDA calculated as the Group’s financial borrowings minus cash and cash equivalents divided by EBITDA.

    Relevance to the business: Net debt to EBITDA is a measure of the ability of a company to pay off its debts and demonstrates the financial health and liquidity position of the Group.

    Performance: The key financial ratio net debt to adjusted EBITDA as at 31 December 2014 equalled 2.99x, which was still well below the maximum value of 4.0x provisioned by the current loan agreements. These figures demonstrate that the Group had sufficient funds to meet its financial obligations.

    Download ‘Financial Highlights’

  • Non‐financial Highlights

    Lost time injury
    frequency rate

    (million tonnes)
    Coal washed
    (million tonnes)
    Lost time injustry frequency rate (LTIFR) Production (million tonnes) Coal washed (million tonnes)




    Sales to Russian market
    (million tonnes)
    Share of supplies
    to Russian market

    sales volumes

    (million tonnes)
    Sales to Russian market (million tonnes) Share of supplies to Russian market (%) International sales volumes s(million tonnes)



    Workforce productivity
    (tonnes per man-month)
    Workforce productivity (tonnes per man-month)


    Download ‘Non‐financial Highlights’

  • Achievements

    2014 has been another eventful year for SUEK Group. We demonstrated several records across our operations and expanded our geographic reach with the opening of a new Chinese office, incorporating a subsidiary company in Indonesia and opening a new distribution company in Russia. We were also recognised for our achievements and received several prestigious business awards across various sectors.


    Raising a consortium loan

    Subsidiary in Indonesia

    New distribution operation
    in the Altay region

    February World record in underground drilling

    World record in
    underground drilling

    Winning Russian Business
    Leaders Competition


    New monitoring and tracking
    systems in Kuzbass

    New monitoring and tracking systems in Kuzbass

    World record in
    overburden removal


    Award for social entrepreneurship


    ‘Mining Olympics 2014’


    SUEK PLC’s credit rating


    SUEK Group is praised for reporting quality

    JSC SUEK is recognised as a leader in corporate

    World record in underground drilling

    Vanino Bulk Terminal sets a new record


    New production facility commissioned in Khakasia

    World record in underground drilling

    New Russian coal production record in Kuzbass

    Office opening in China

    Download ‘Achievements’

Business Model
Strategic Priorities
  • Leadership through
    vertical integration

    SUEK Group is a leading, vertically integrated producer of coal, one of the most important energy sources in the world. We create and deliver long‐term value to our shareholders at every stage of our value chain – mining production, processing, transportation, shipment through port facilities, sales and distribution. Our integrated business model enables us to benefit from economies of scale and helps us maintain our status as the leading coal exporter from Russia.

    Business model workflow integration

    Download ‘Business Model’

  • Strategy for growth

    Securing our leading position in the industry is an important goal for SUEK Group. We continue to look for opportunities to reinforce our competitive advantage, expand our market share and develop a socially responsible business. To meet these objectives, we have identified five strategy pillars to focus on.


    Download ‘Strategy’

  • Strategic Priorities

    1 Emphasising growth

    We want to enhance our position as
    the leading producer of thermal coal in
    Russia and to strengthen our presence
    in international markets, particularly in
    the Asia‐Pacific region. Increasing the
    share of washed coal in SUEK’s product
    portfolio is a major contributor to this
    growth. We also plan to develop sales
    of premium sized coal and to increase
    trading of semi‐soft and hard coking
    coal with international and Russian
    metallurgical customers. All current and
    planned projects for developing new coal
    deposits indicate our growth potential.
    We expect to maintain the synergies from
    association with the Russian electric
    power industry by signing long‐term
    contracts with energy producers.

    2 Improving operational efficiency and productivity

    Our goal is to maintain low‐cost coal
    production, re‐equip our production units
    and further expand our mining assets.
    By modernising mining equipment and
    refining operational processes, we can
    improve the efficiency of our business.

    We will continue to improve internal
    management processes and will benefit
    by maximising the value of the business.

    3 Developing coal supply logistics

    Through focused investment, we
    plan to maximise the efficiency of coal
    transportation, including upgrades of
    stations that connect main rail lines to
    ports and end users and to increase the
    loading capacity of our port facilities.

    4 Achieving high safety standards

    We will ensure compliance with the best
    international standards in occupational
    and industrial safety in all areas where
    we operate and we will seek to reduce
    injury rates and to prevent fatal accidents.

    5 Following the best corporate governance, social and environmental practices

    Our current programme of employee
    training and development will strengthe
    n our reputation as one of the most
    attractive employers in the coal mining
    industry in Russia.

    We plan to continue our investment
    in a number of public, educational and
    social projects to improve the welfare
    of people in the regions where we
    operate. In all aspects of our business,
    we aim to minimise any adverse impact
    on the environment.

    Download ‘Strategic Priorities’


Health & Safety

Our People Icon
  • Attaining the maximum level of industrial safety, occupational safety and health protection of our staff.

Our People

Health and Safety Icon
  • Developing our employees and upgrading their professional skills;
  • Improving programmes which motivate staff to improve operational efficiency and to ensure safe operations.

Environmental Protection

Environmental Protection Icon
  • Employing technologies to reduce the adverse industrial impact on the environment by introducing innovations in coal mining and coal processing.


Communities Icon
  • Improving the quality of life of those living in the regions where we operate;
  • Encouraging sustainable
    socio-economic development in these areas by participating in social projects;
  • Developing open communication with stakeholders while meeting the
    challenges of sustainable development.

Download ‘Sustainability’