• Strengthening our
  position as a leader

  
  

  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.

  Download ‘Chairman’s Statement’

• Mission, Vision, Values

  

  

  

  Mission

  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

  Vision

  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

  Values

  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

  Download ‘Mission, Vision, Values’

• 

  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
  practice.

  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’

• 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

  1,500

  Customers in 36 countries

  31,400

  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

  $496m

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

  $16m

  Spent on social and community
  projects during 2014

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

  

  Coal production in Russia

   
  

  Thermal coal supplies in Russia

   
  

  Download ‘SUEK at a Glance’

• Well positioned to service
  global market

  

  Download ‘Where we Operate’

• Global reach to key markets

  

  Download ‘Map of Supplies’

• 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 ($m)	EBITDA margin (%)	Net debt/EBITDA
  +1%		-2%
  EBITDA 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 (LTIFR)	Production (million tonnes)	Coal washed (million tonnes)
  +5%	+2%	+14%

  Sales to Russian market (million tonnes)	Share of supplies to Russian market (%)	International sales volumes (million tonnes)
  -1%		+8%

  Workforce productivity (tonnes per man-month)
  +8%

  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.

  January

  Raising a consortium loan

  Subsidiary in Indonesia

  New distribution operation
  in the Altay region

  February

  World record in
  underground drilling

  Winning Russian Business
  Leaders Competition

  April

  New monitoring and tracking
  systems in Kuzbass

  

  World record in
  overburden removal

  May

  Award for social entrepreneurship

  August

  ‘Mining Olympics 2014’

  October

  SUEK PLC’s credit rating

  November

  SUEK Group is praised for reporting quality

  JSC SUEK is recognised as a leader in corporate
  charity

  

  Vanino Bulk Terminal sets a new record

  December

  New production facility commissioned in Khakasia

  

  New Russian coal production record in Kuzbass

  Office opening in China

  Download ‘Achievements’

• 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.

  

  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

  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.

  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.

  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.

  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.

  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’

Sustainability

Health & Safety

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

Our People

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

Environmental Protection

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

Communities

• 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’