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1 DRAFT [work-in-progress] NOT for distribution Unsaved Document / 04/02/2010 / 00:43 SIBERIAN COAL ENERGY COMPANY Investor presentation April 2017 DRAFT [work-in-progress] NOT for distribution

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

Content Company Strategy and Overview Performance Highlights Our Assets Key Operational Figures Coal Market Review SUEK Sales Key Financial Highlights Corporate Governance Structure Our

3 Content Company Strategy and Overview Performance Highlights Our Assets Key Operational Figures Coal Market Review SUEK Sales Key Financial Highlights Corporate Governance Structure Our Corporate Social Responsibility Social Investments and Community Development Environmental Protection Personnel Development and Health&Safety Contacts 22 2

4 Company Overview SUEK is one of top-10 coal producers and exporters: - 5 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 - 33,429 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 12,000 higher-capacity railcars - 3 ports shipping almost 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 : 2.94x - Ba3 Moody's credit rating, stable outlook Сoal 2 production by leading Russian companies, million tonnes SUEK UGMK SDS-Ugol Mechel Evraz Group Sibuglemet En+ Group Russian coal KTK Severstal Coal 2 export sales by leading global producers, million tonnes Glencore BHP Billiton 5 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 Bumi Anglo American SUEK Rio Tinto Adaro UGMK Banpu Kideco Peabody

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

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 : - EBITDA margin solid at 24% - Net Debt / EBITDA stable at 2.94x, 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 % Revenue 4,002 4,132 (3%) EBITDA % EBITDA margin 24% 21% 3% Capital expenditures % Net debt 2,978 2,786 7% Net debt/adjusted EBITDA x 2.96x 0.02 Net profit % Million tonnes Production % Sales % 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 Kemerovo Krasnoyarsk Khakasia Buryatia Zabaikalye Khabarovsk Primorye Hard coal 9 underground mines 2 open pits 4 washing plants Domestic/export market Brown coal 3 open pits Domestic/ export market Production in Mt Hard coal 1 underground mine 3 open pits 1 washing plant Domestic/export market Hard coal 2 open pits 1 washing plant Domestic/export market Murmansk Commercial Seaport Brown coal, coking coal 3 open pits Domestic/export market Brown coal 1 underground mine 1 open pit 1 processing facility 1 washing plant Domestic/export market Brown coal, hard coal 1 underground mine 1 open pit 1 processing facility Domestic/export market 32% 68% Hard coal Brown coal 6 Vanino Bulk Terminal 34% 66% 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 70% of our transportation needs are aimed to be operated by our own and leased railcars 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 Share of export sales in total volume million tonnes Share of hard coal in total production million tonnes Coal washing million tonnes Lost-Time Injury Frequency Rate

10 million tonnes Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar Coal Market Overview and Outlook International prices dynamics Thermal coal, $ per tonne Forecast 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 to control production during the year to avoid loss making mines In the demand in the international market remained stable and amounted to 879 mln tonnes 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 1 800, , , , ,0 800,0 600,0 Forecast 30,00% 25,00% 20,00% 15,00% 10,00% In the long term, the demand for energy coal is expected to grow Despite the decline in demand in Western Europe, the markets of Eastern Europe and Asia are still growing, and many countries are considering the import of higher quality coal 400,0 200,0-5,00% 0,00% In the long term, it is expected that about 50% of coal imports will relate to China and India China JKT (Japan/Korea/Taiwan) ROW Rest of the world % India India SEA (Malaysia/Phil/Thai/Viet) % China Sources: Wood Mackenzie Report 9

$ per tonne Global Cash Cost Curve Global cash cost curve, FOB basis, 01/17 160 140 120 100 SUEK Other exporters 80 60 FOB Newcastle FY average 66.

tonnes In 1H about 30% of coal producers were below profitability threshold SUEK export cost structure, FOB basis (US$ per tonne) The SUEK s assets are in

11 $ per tonne Global Cash Cost Curve Global cash cost curve, FOB basis, 01/ SUEK Other exporters FOB Newcastle FY average Sources: Wood Mackenzie, SUEK estimates mln tonnes In 1H about 30% of coal producers were below profitability threshold SUEK export cost structure, FOB basis (US$ per tonne) The SUEK s assets are in the 1 st tercile of the global cost curve due to efficient cost management and developed logistics network 3 Railway (international market) 11 $33 19 Cash cost Ports 10

12 SUEK Sales Geography Due to favorable geographic location, SUEK services both the Atlantic and Asia-Pacific regions. Our trading offices and distribution network in Russia, Switzerland, Poland, 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 1 1 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). 11

13 SUEK Coal Sales International sales account for 50% of SUEK physical volumes and 76% of sales revenue Revenue, US$ million 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 23% 3% 4,002 74% International market Russian market Other Customers in Russia, million tonnes Sales of own coal with calorific value >6,000 kcal/kg million tonnes 15% 8% 46% SGK Other power plants Public utilities Other %

14 Key Financial Figures Despite falling prices over the past four years, SUEK s focus on cost control and operational efficiency protected the EBITDA margin at a healthy level Revenue $m Bank EBITDA 1 margin 4,002 25% 4,132 23% 5,053 22% , % , % Bank EBITDA 1 $m $m Capital expenditure 1, , , , Note: 1 Bank EBITDA is calculated in accordance with SUEK s loan agreements 13

15 Export volumes Export prices Domestic volumes Domestic prices Exchange rate effect in Russia Third party coal Cost of sales Cost of coal sold Transportation volume Transportation costs Exchange rate effect G&A and others EBITDA Bridge In spite of decline in export prices, the volume of export sales increased, we focused on premium markets and highly profitable products EBITDA Bridge ($m) International market Domestic market Expenses The volume of sales in the domestic market decreased because of the growth in hydroelectricity due to high water levels of the rivers The growth of transportation costs was mainly caused by the lengthening of transportation routes, due to the increase in the number of export deliveries in the structure of freight turnover 14

16 SUEK s cost structure Due to the devaluation of the rouble, the cost in $ has not changed. The cost in RUB rose by 8% due to inflation and increase in coal mining by a more expensive underground method Average cash cost of coal sold (US dollar per tonne) (RUB per tonne) % CCCS Structure % 22% 33% 36% Labour Consumbles and spares Repair and maintenance Others The increase in the cost of transportation by railway was caused by the lengthening of routes due to the growth of export deliveries Rail costs (International market) (US dollar per tonne) (RUB per tonne) Rail costs (Russian market) (US dollar per tonne) 5 5 (RUB per tonne) Freight and shipment costs decreased as a result of lower cost of freight and increased capacity of own ports Shipment costs (International market) (US dollar per tonne) 8 Freight (International market) (US dollar per tonne)

17 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 Net debt and covenant ratios $m Debt structure as of 31 December Debt repayment profile $m 8% 1% 5% 5% 6% 75% 7% 8% 85% PXF ECA Loan Bonds Swap USD RUR RUB EUR ,342 3,444 2,978 2, Чистый Net debt долг Чистый Net Debt/EBITDA долг/ebitda EBITDA/Расходы EBITDA/Interest Expense по процентам 10 9,5 9 8,5 8 7,5 7 6,5 6 5,5 5 4,5 4 3,5 3 2,5 2 1,5 1 0,5 0 Other Debt 1, ECA Loan PXF Total Note: 1 Bank EBITDA is calculated in accordance with SUEK s loan agreements 16

18 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 17

19 Sustainable development 18

Social Investments and Community Development The strategic goal of our social activity is the comprehensive development of the regions where we operate.

20 Social Investments and Community Development The strategic goal of our social activity is the comprehensive development of the regions where we operate. This means improving quality of life for our employees, their families and local people and communities Our priorities Revitalise local communities Expand and diversify our social programmes Promote local employment Expand the range of local social welfare services Introduce innovative technologies and approaches within the social sphere Focus areas Environment Education Sport and healthy lifestyle Healthcare Improving and developing infrastructure Leisure, culture and unlocking creative potential Improving local self-government Developing local social and business activity, increasing personal fulfilment opportunities Affordable housing, services and utilities $15m Spent on social and community projects in 19

21 Environmental Protection We aim to develop our business in a sustainable manner, ensuring our present activities enhance, rather than compromise, environmental conditions and quality of life for future generations Our priorities Further improve our environmental management system and production indicators Facilitate employee involvement in environmental risk mitigation activities Ensure transparency of environmental information Engage public and local authorities in discussing, making and implementing environmental decisions Air safety Water safety Energy efficiency Methane utilisation for power generation million m 3 of CH 4 We take care of: Suspended and dissolved solids in wastewater kg per tonne of production $11m Spent on environmental projects in ISO International certification

22 Personnel Development and Health&Safety Our people are our key asset. We aim to create safe working conditions and prospects for professional and career growth Our priorities in personnel development Effectively employ the talents and skills of our staff Create good conditions for work and recreation Offer training and career opportunities Build and promote a corporate culture 33,429 Employees work for SUEK OHSAS Standards sertification Our priorities in H&S Reduce negative impacts of coal production on employee health Continually improve the mechanisms and methods for ensuring occupational and workplace safety Address atmospheric safety issues to prevent accidents and minimise the negative impact of coal dust on employees Ensure our production sites have the latest equipment and introducing modern safety and monitoring systems Ensure all employees are supplied with modern, highquality work clothes and protective equipment Improve safety skills and capabilities through dedicated training provision and promotion of workplace discipline Implement special preventive medical programmes $48m Spent on labor protection and industrial safety programmes in Lost time injury frequency rate (LTIFR) 0,94 1,23 1,57 21

Contacts For more information please visit www.suek.

23 Contacts For more information please visit Contact us: Investor Relations Tel.: +7 (495)

Fuelling industry Powering the world

SIBERIAN COAL ENERGY COMPANY Fuelling industry Powering the world Investor presentation January 2017 Disclaimer This presentation has been prepared by SUEK Group (the Company ). The information in this