Fuelling industry Powering the world

Transcription

1 SIBERIAN COAL ENERGY COMPANY Fuelling industry Powering the world Investor presentation January 2017

2 Disclaimer This presentation has been prepared by SUEK Group (the Company ). The information in this presentation is provided in a summary form and does not purport to be complete. This presentation contains certain forward-looking statements. All statements, other than statements of historical fact, are forward-looking statements that involve risks and uncertainties. There can be no assurances that such statements will prove accurate and actual results and future events could differ materially from those anticipated in such statements. Such information contained herein represents management s best judgement as of the date hereof based on information currently available. The Company does not assume the obligation to update any forward-looking statement. This presentation does not constitute or form part of, and should not be construed as, an offer, invitation or recommendation with respect to any of the facilities of the Company, or an offer, invitation or recommendation to sell or issue, or the solicitation of an offer to buy or acquire, the facilities or any of the securities of the Company in any jurisdiction or an inducement to enter into any investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied upon in connection with, any contract or commitment or investment decision whatsoever. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change. This presentation contains information derived from public sources that have not been independently verified. 1

3 Content Company Overview Our Strategy Key Performance Highlights Production Assets Logistics Key Operational Figures Coal Market Overview and Outlook Global Cash Cost Curve SUEK Sales Key Financial Figures Debt Snapshot Corporate Governance Contacts 16 2

4 Company Overview SUEK is one of top-10 coal producers and exporters: - 4 th largest company in the world by international sales volume - 6 th largest company in the world by reserves 5.4 Bt 1, average life of hard coal deposits 30 years - No.1 Russian coal producer and exporter - 1,700 customers from 38 countries - 33,665 employees Vertically integrated business model enabling cost and operational efficiency: - 27 underground and open-pit mines - 9 washing and processing plants - 48,500 railcars in use including own 12,000 higher-capacity railcars - 3 own ports shipping over 80% of SUEK s exports - wide trading and distribution network: Russia, Switzerland, Poland, China, Japan, South Korea, Indonesia, US, Lithuania Stable financial position: - EBITDA in : $965m - EBITDA margin in : 24% - Net Debt / Bank EBITDA 3 in : 2.9x - Ba3 Moody's credit rating, stable outlook Сoal 2 production by leading Russian companies, million tonnes SDS-Ugol Mechel Evraz Group Sibuglemet En+ Group Russian coal Severstal KTK Glencore BHP Billiton Anglo American SUEK Bumi Adaro Peabody Banpu Rio Tinto Kideco Coal 2 export sales by leading global producers, million tonnes Sources: SUEK estimates, public filings Notes: 1 SUEK s proved and probable reserves, according to the April 2011 report by SRK Consulting, amounted to 5.9 billion tonnes. Including extraction between April 2011 and December and SRK assessment of the Apsatsky coalfield carried out in, these reserves stood at 5.4 billion tonnes as at 31 December. 2 Production and export sales include all types of coal 3 Bank EBITDA is calculated in accordance with SUEK s loan agreements SUEK UGMK in in

5 Our Strategy Already the top coal producer in Russia, we want to be one of the leading coal companies in the world. We continually look for opportunities to reinforce our competitive advantage and develop a socially responsible business through the following strategic priorities: Focusing on efficient growth Increasing production of high-quality coal products Balanced management of the reserves portfolio Strengthening presence in Asia-Pacific and Atlantic markets Retaining our position as the largest coal producer and supplier of thermal coal in Russia Increasing sales of metallurgical and premium sized coal Improving operational efficiency and productivity Ongoing programme for modernisation of mining equipment and production processes Expansion of washing capacities to improve coal quality Developing coal supply logistics Improvement of own rail infrastructure and railcar fleet Efficient management and expansion of our export transshipment capacity Achieving high safety standards Promoting high international standards in occupational health and safety Committed to sustainable development Developing social infrastructure in the regions where we operate Reducing adverse environmental impact 4

6 Key Performance Highlights SUEK demonstrates strong performance in spite of volatile market environment Financial highlights Operational highlights Solid EBITDA despite low coal prices in 1H 16: - EBITDA margin solid at 24% - Net Debt / EBITDA stable at 2.9x, below covenant of 4.0x stated in loan agreements - Ba3 credit rating, stable outlook confirmed by Moody s CAPEX priorities: - Productivity - Product quality - Health, safety and environment Record production of Mt: - Stable operations at most production facilities - Washing volumes steadily increasing, in line with strategic priorities - LTIFR at 0.94x, one of the lowest in global coal industry Record sales: - Strong demand in Asia - Stable domestic market - Broad distribution network - International presence in all key markets US$ million, unless otherwise stated Δ % Revenue 4,002 4,132 (130) (3%) EBITDA % EBITDA margin 24% 21% 3 pts 14% Net debt 2,978 2, % Net debt/ Bank EBITDA 1 2.9x 3.0x (0.1) (3%) Capital expenditure % Net profit % Production, mln tonnes % Sales, mln tonnes % International sales % Domestic sales (6%) Note: 1 Bank EBITDA is calculated in accordance with SUEK s loan agreements 5

7 Production Assets We are highly competitive in the coal industry thanks to our well-developed assets. These include high-quality coal deposits and modern washing plants connected to key markets through efficient logistics 1 Kemerovo Hard coal 9 underground mines 2 open pits 4 washing plants Domestic/export market 2 Krasnoyarsk Brown coal 3 open pits Domestic/ export market Production in Mt 3 Khakasia Hard coal 1 underground mine 3 open pits 1 washing plant Domestic/export market 4 Buryatia Hard coal 2 open pits 1 washing plant Domestic/export market Murmansk Commercial Seaport 5 Zabaikalye Brown coal, coking coal 3 open pits Domestic/export market 6 Khabarovsk Brown coal 1 underground mine 1 open pit 1 processing facility 1 washing plant Domestic/export market 7 Primorye Brown coal, hard coal 1 underground mine 1 open pit 1 processing facility Domestic/export market Hard coal Brown coal 6 Vanino Bulk Terminal Over 30 years Average life of hard coal deposits Maly Port Open pit Underground 6

8 Logistics SUEK s logistics and transportation system includes our own railway assets and ports, enabling us to deliver to domestic customers and to ship coal to multiple export markets in Atlantic and Asia-Pacific regions Ports Railcars More than 80% of all export shipments to Atlantic and Asia-Pacific markets are covered by SUEK s own ports Transhipment through own ports, million tonnes Murmansk Commercial Seaport Maly port Murmansk Commercial Seaport Vanino Bulk Terminal Mt capacity 21 Mt capacity Vanino Bulk Terminal Maly port 2 3 Mt capacity SUEK operates one of the largest railcar fleets in Russia, utilising 48,500 railcars monthly, which provides time and cost efficient coal transportation 12,000 fleet of higher capacity 75 and 77-tonne railcars with a service life of up to 32 years 6.5% of total cargo turnover on Russian railways Vanino Bulk Terminal: annual capacity to be increased to 24 Mt a year by 2018 Murmansk Commercial Seaport: annual capacity to be increased to 16 Mt by 2017 Notes: 1 SUEK has a 75.5% shareholding in Murmansk Commercial Seaport 2 SUEK has a 49.9% shareholding in Maly Port 7

9 Key Operational Figures We have been steadily increasing production of high-margin export-quality coal in line with our strategic focus on premium markets Health and safety remain a major priority for us Total sales volume million tonnes International sales million tonnes Own coal Purchased coal Coal washing million tonnes Lost-Time Injury Frequency Rate

10 Coal Market Overview and Outlook International prices dynamics Thermal coal, $ per tonne Thermal coal market overview and outlook prices were very volatile, with multi-year lows in 1Q and a 4-year peak in 4Q The major reason was the regulations by the Chinese government during the year to avoid loss making mines Overall seaborne thermal coal demand is expected to grow in the long-term 40 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Deb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Despite reduction in Western Europe, Eastern Europe and Asia are still growing and many countries are looking at higher calorific value imported coals API2 - NW Europe, CIF Rotterdam globalcoal NEWC, FOB Newcastle Sources: Argus/McCloskey Index (API2) and globalcoal (Newcastle index) Seaborne thermal coal demand Key opportunities for SUEK million tonnes 1 800, , , , ,0 800,0 600,0 400,0 200,0 Forecast 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% The geographic spread of our operations and access to key transport infrastructure enable us to supply coal effectively to Russian, Western and Eastern markets SUEK s modern washing facilities and high-quality coal enable us to satisfy demand from Asian countries, which are shifting from sub-bituminous coal to higher calorific value products SUEK has trading offices in premium markets, such as Japan and South Korea, with direct access to our customers ,00% SUEK is located in the 1 st quartile of the global cost curve China JKT (Japan/Korea/Taiwan) ROW Rest of the world % India India SEA (Malaysia/Phil/Thai/Viet) % China Sources: Wood Mackenzie Report 9

11 Global Cash Cost Curve In 1H 30% of exporters were loss-making SUEK s assets are situated in the 1 st quartile of the global cost curve on FOB basis due to cost efficiency and logistics capabilities Global cash cost curve, FOB basis, 01/ $ per tonne FOB Newcastle FY average mln tonnes SUEK Other exporters Sources: Wood Mackenzie, SUEK estimates 10

12 1 1 SUEK Sales Geography We are well positioned to service both the Atlantic and Asia-Pacific markets. Our trading offices and distribution network in Russ ia, Switzer land, Pola nd, China, Japan, South Korea, Indonesia, USA and Lithuania cover almost all our key markets, including premium markets, and enable us to build direct relationships with final customers Murmansk Commercial Seaport International sales Mt* SUEK s total sales Russian 51.2 sales Hard coal assets Brown coal assets Railways Shipping Our port facilities Third-party ports Sales offices Railways Shipping Ust-Luga Port Vanino Bulk Terminal Azov Port Vostochny Port Maly Port Atlantic 19.8 Mt 1 38% of export sales Asia-Pacific 32.1 Mt 2 62% of export sales Netherlands Germany Morocco Other South Korea Japan China Other 4.1 Mt 2.2 Mt 2.0 Mt 11.5 Mt 7.9 Mt 7.0 Mt 6.7 Mt 10.5 Mt Sales volumes to the Atlantic region comprise sales of own coal mined by SUEK (16.8 million tonnes) and sales of coal purchased from third parties (3.0 million tonnes). 2 Sales volumes to the Asia-Pacific region comprise sales of own coal mined by SUEK (26.1 million tonnes) and sales of coal purchased from third parties (6.0 million tonnes). Note: *All figures are given for FY 11

13 SUEK Coal Sales Highlights International sales account for 50% of SUEK physical volumes and 76% of sales revenue In line with our strategy, over 50% of SUEK s international sales go to premium markets SUEK is the largest supplier of thermal coal to the Russian market, with a share of about 40% Sales to SGK, a SUEK s sister company and one of the largest power generation companies in Russia provide us with secure market for brown coal Customers in Russia, million tonnes Sales volume, million tonnes 50% Sales revenue, $m 51.9 Russian market % International market 18% 9.0 5% 2.7 SGK % % Other power plants Public utilities Other Russia Export 31% %

14 Key Financial Figures Despi te falling prices over the past four years, SUEK s focus on cost control and operati onal effici ency protected the EBITDA margin at a healthy level Revenue $m Bank EBITDA 1 margin % % % % % Bank EBITDA 1 $m $m Capital expenditure Note: 1 Bank EBITDA is calculated in accordance with SUEK s loan agreements 13

15 Debt Snapshot as of 31 December Net debt/ Bank EBITDA 1 ratio: 2.94x, below covenant of 4.0x Moody s: Ba3 Stable confirmed in October February : $1,252m PXF October : issue of 3-year RUB 8bn bonds Debt structure as of 31 December 1% 5% 5% 8% 6% 75% 7% 8% 85% PXF Bonds Net debt and covenant ratios Bilateral $m Debt repayment profile ECA Loan Swap Short term loans USD RUR RUB EUR 'Jun 'Dec 'Jun 'Dec 'Jun 'Dec 'Jun Dec' $m Other Debt 364 ECA Loan PXF TOTAL Net Debt Net Debt/EBITDA EBITDA/Interest Expense Note: 1 Bank EBITDA is calculated in accordance with SUEK s loan agreements 14

16 Corporate Governance Structure Our corporate governance system aims to ensure that we run our business efficiently, responsibly and create value for all stakeholders We are committed to international best practices Board of Directors Chairman Alexander Landia BoD Committees CEO Management Board Andrey Melnichenko Non-Executive Director Klaus-Dieter Beck Independent Director Stefan Judisch Independent Director Kuzma Marchuk Non-Executive Director Vladimir Rashevsky CEO Natalia Izosimova Independent Director Iain Macdonald Independent Director Olga Vysotskaya Independent Director Strategy Committee Nomination and Compensation Committee Audit Committee Executive Management Internal Audit Department (IAD) - Independent director 15

17 Contacts For more information please visit or contact our Investor Relations