Integrated Annual Report 2020
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RESILIENCE THROUGH DIVERSIFICATION INTEGRATED REPORT 2020 WHAT’S INSIDE Strategic report 2 At a glance RESILIENCE 12 Q&A with Chairman 16 Q&A with CEO THROUGH 20 Investment case REPORTSTRATEGIC 22 Our operations DIVERSIFICATION 24 Business model 26 Global trends and SUEK 32 Our strategy 34 Group financial review 38 Business review 58 Stakeholder engagement and materiality 60 Q&A with HR Director 62 Risk management 70 Our approach to sustainability 74 Environment 80 Climate projects and OUR PURPOSE is energy efficiency GOVERNANCE CORPORATE Andrey Melnichenko 86 Health & Safety 92 Our people and to meet the energy needs SUEK’S BENEFICIARY corporate culture 98 Supply chain of communities across 102 Community development the world by producing In recent years, SUEK necessary, affordable heat and Corporate has evolved from a single- electricity to millions of our governance and transporting product company into domestic customers, kept 107 Chairman’s introduction a diversified organisation. our logistics running efficiently 108 Board of Directors Our energy, logistics and to support the critical 111 Management heat, electricity and 114 Corporate governance commodity businesses now transportation of goods and overview commodities safely and operate as independent profit maintained supplies of premium 116 Board of Directors' report centres, whilst benefitting from fuels to our export customers. STATEMENTS FINANCIAL 120 Board Committees’ sustainably. the functions the Group's report To support our new model, 124 Compliance system platform offers. By identifying we enhanced our leadership 126 Internal audit new products, services and teams with the expertise to Financial statements markets, and developing unlock further opportunities 127 Independent auditor’s internal synergies, we have across our business sectors report ensured the business resilience . 129 Consolidated financial We will continue to embrace the statements and notes and profitability and our ability benefits of digital technologies Additional to create sustainable value for and embed sustainability into information our stakeholders. 163 GRI content index our culture and commitment 173 Reserves report Our performance this year has as a responsible, best-in-class 174 Glossary been a testament to the strength company. 175 Information on INFORMATION ADDITIONAL the company and Report of this diversified business model. Faced with COVID-19, Despite the ongoing global we prioritised the health of uncertainties, the future for our our employees and their Group is bright. SUEK, Siberian families and supported our Generating Company and the local communities' most newly created National vulnerable members. Despite Transportation Company have the significant challenges strengthened their positions as presented by the pandemic, the business partner of choice, a responsible employer and In this Report, each of the terms ‘SUEK’, ‘SUEK Group’, ‘the Group’, ‘the company’, ‘we’ refers to all companies consolidated we ensured business continuity. Online version of in the IFRS financial statements of JSC SUEK (Russia), including, inter alia, International Company SUEK LTD (LLC), corporate citizen. 2020 Report SUEK AG, SGC, NTC and their subsidiaries. The financial and operational performance is presented in the Report in line In doing so, we provided vitally is available at with IFRS statements and includes the results of acquired Krasnoyarskaya GRES-2 from March 2020, of Primorskaya GRES ar2020.suek.com/en from June 2020, of Murmansk and Tuapse Bulk Terminals from 1 January 2019. SUEK INTEGRATED REPORT 2020 – 1 – AT A GLANCE DIVERSIFYING REVENUE STREAMS We provide high-quality utilities and transportation REPORTSTRATEGIC services as well as a range of commodities to millions of consumers and enterprises in Russia and globally. 1.ОСНОВНЫЕ ЭЛЕМЕНТЫ ФИРМЕННОГО СТИЛЯ 1.5. АНГЛОЯЗЫЧНЫЙ ВАРИАНТ Revenue ($m) ФИРМЕННОГО БЛОКА HEAT SUPPLIES Англоязычный вариант фирменного блока состоит из фирменного знака, аббревиатур- TO 5.5 M PEOPLE ного логотипического написания SGС и слогана. В некоторых случаях (одинаково справедливых как для англоязычной, так и для русско- язычной версии фирменного блока) слоган может отсутствовать в составе фирменного ENERGY 2,374 блока, однако обязательно присутствует на одной с ним площади носителя — как 2,189 2,130 самостоятельный элемент. 6% OF RUSSIAN Siberian Generating ELECTRICITY 1,695 Company (SGC) provides 1,445 SUPPLY GOVERNANCE CORPORATE millions of households and enterprises from the Urals to Сокращенный фирменный блок со слоганом Сокращенный фирменный блок без слогана the Russian Far East with 35.4 mGcal co-generated heat and OF HEAT SUPPLIED IN 2020 16 17 18 19 20 electricity. +64% SEE PP. 38–43 68.2 TWh FOR MORE DETAILS OF POWER SUPPLIED Полная версия фирменного блока со слоганом Полная версия фирменного блока без слогана IN 2020 Внимание! Фирменный блок используется только в строгом соответствии с приведенным видом и пропорциями Revenue ($m) BRANDBOOK SGK 2016 RAILCARS AND 8 SIBGENCO.RU PORTS IN THE 583 750 LOGISTICS STATEMENTS FINANCIAL EAST, NORTH- 2,212 2,010 National Transportation WEST AND SOUTH- 1,918 Company (NTC) transports WEST OF RUSSIA 1,800 1 bulk and specialised loads in 1,334 $1,973m a speedy, cost-efficient and 50.3 Mt EBITDA environmentally safe way OF LOADS TRANSSHIPPED IN 2020 IN 2020 1 using higher-capacity2 railcars and modern ports. 16 17 18 19 20 SEE PP. 44–49 109.8 Mt FOR MORE DETAILS OF LOADS TRANSPORTED +44% IN 2020 Intragroup External 675 3 4 ADDITIONAL INFORMATION ADDITIONAL COMMODITY Revenue ($m) COAL SUPPLIES TO 49 COUNTRIES 6,599 5,804 Our mining and processing 5,594 facilities with state-of-the-art 4,817 112.7 Mt 4,002 equipment and health and OF COAL PRODUCTS safety controls supply SOLD IN 2020, INCLUDING high-quality coal-based products, including low-sulphur 53.8 Mt 16 17 18 19 20 thermal, metallurgical, sized SOLD INTERNATIONALLY and smokeless coal. SEE PP. 50–57 +20% FOR MORE DETAILS Intragroup External 1 The total Group EBITDA includes -$35m EBITDA of the Corporate Centre. – 2 – SUEK INTEGRATED REPORT 2020 SUEK INTEGRATED REPORT 2020 – 3 – NAVIGATION_HEAD / CONTINUED DIVERSIFYING ENERGY BUSINESS STRATEGIC REPORTSTRATEGIC VLADIVOSTOK, RUSSIA In 2020, SUEK expanded its presence in the Far East, as we acquired the region’s leading power plant – BUILDING Primorskaya GRES. LONG-TERM TRUST WITH CUSTOMERS GOVERNANCE CORPORATE ELECTRICITY OUTPUT (TWH) 81.0 FINANCIAL STATEMENTS FINANCIAL 63.7 51.5 46.2 36.0 35.2 16 17 18 19 20 25F MEETING HEAT CARING FOR DRIVING INNOVATION INFORMATION ADDITIONAL CUSTOMERS' NEEDS ENVIRONMENT SUEK is expanding Transfer to long-term turbine generator tariff will enable us to 1 Mt CO2 production for hydro, invest $800m in annual emissions nuclear and thermal renovation of central savings from 2025 by power plants heating by 2025 substituting standalone boilers with co-generated heat SEE P. 32 SEE PP. 82–83 SEE P. 43 FOR MORE FOR MORE FOR MORE DETAILS DETAILS DETAILS – 4 – SUEK INTEGRATED REPORT 2020 SUEK INTEGRATED REPORT 2020 – 5 – NAVIGATION_HEAD / CONTINUED DIVERSIFYING LOGISTICS BUSINESS STRATEGIC REPORTSTRATEGIC TUAPSE, RUSSIA After acquiring Murmansk and Tuapse bulk terminals, SUEK is now Russia's leading bulk stevedoring company, transshipping coal, iron ore, EXPANDING fertilisers and other loads to the Atlantic and Asia-Pacific GEOGRAPHY AND markets. SERVICE PROPOSITION GOVERNANCE CORPORATE PORT TRANSSHIPMENT (MT) Coal Murmansk 16.3 and Maly Coal Vanino 40.0 FINANCIAL STATEMENTS FINANCIAL 16.5 19.1 18.0 17.5 17.0 23.2 Other 20.5 bulk loads 22.0 19.5 19.5 20.0 10.6 0.8 0.8 1.1 8.6 16 17 18 19 20 25F EXPANDING NON-COAL DRIVING INNOVATION PIONEERING HEAVY INFORMATION ADDITIONAL TRANSPORTATION TRAINS SUEK is implementing the best available In 2020, SUEK became >20% technologies at our ports the first to send trains non-coal and using higher- entirely comprised of transshipment capacity railcars to higher-capacity railcars, minimise our impact on which increased the environment throughput SEE P. 32 SEE PP. 74–79 SEE P. 47 FOR MORE FOR MORE FOR MORE DETAILS DETAILS DETAILS – 6 – SUEK INTEGRATED REPORT 2020 SUEK INTEGRATED REPORT 2020 – 7 – NAVIGATION_HEAD / CONTINUED DIVERSIFYING COAL BUSINESS STRATEGIC REPORTSTRATEGIC TOKYO, JAPAN SUEK’s sales to Japan increased by 28% in 2020 to 8.8 Mt, making it SUEK’s No. 1 importer. SUEK supplies high-quality coal PRIORITISING for Japanese high-efficiency low-emission (HELE) power HIGH-QUALITY plants. PRODUCTS FOR GOVERNANCE CORPORATE PREMIUM MARKETS INTERNATIONAL SALES (MT) Atlantic 16.0 FINANCIAL STATEMENTS FINANCIAL 23.3 17.4 22.6 20.3 19.6 Asia-Pacific 42.5 36.5 33.5 31.7 32.0 31.5 16 17 18 19 20 25F HIGH-QUALITY DRIVING INNOVATION MEETING CUSTOMERS' INFORMATION ADDITIONAL PRODUCTS FOR NEEDS PREMIUM MARKETS SUEK launched a world- class deep flotation unit SUEK expands at Kirov WP for production of smokeless converting fines into briquettes for private +16% high-CV product households sales to Asia by 2025 SEE P. 32 SEE P. 54 SEE P. 105 FOR MORE FOR MORE FOR MORE DETAILS DETAILS DETAILS – 8 – SUEK INTEGRATED REPORT 2020 SUEK INTEGRATED REPORT 2020 – 9 – 2020 HIGHLIGHTS NEW MANAGEMENT TEAM DEMONSTRATING STRONG FOUNDATIONS RESILIENCE A focus on business diversification and the development Our new management team supports our purpose and REPORTSTRATEGIC of synergies over the past five years has strengthened SUEK’s values and is transforming the company to be closer to our resilience to market bottoms. customers, innovative and responsible. Revenue ($m) Net debt/EBITDA1 EBITDA ($m) and Financial EBITDA margin (%) SOCIAL STABILITY AND highlights RESPONSIBILITY DEVELOPMENT 31% 30% 30% 28% SEE FINANCIAL REVIEW ON PP. 34–37 25% The health of our employees and local M&A in recent years have CORPORATE GOVERNANCE CORPORATE 8,296 7,638 residents, and their trust in SUEK expanded our offer, 3.3 2,541 3.1 6,939 2.9 6,683 are of vital importance to us. diversified revenue 2,168 2,069 1,973 We work closely with them streams and enhanced 2.0 to understand their our ability to generate 1.6 4,002 989 needs and strive strong cash flow and to find the best solutions.