NEW WORLD RESOURCES N.V. ANNUAL REPORT AND ACCOUNTS 2015 Note: The average exchange rate for 2015 used throughout the report is 27.279 EUR/CZK, unless stated otherwise. All the forward-looking price guidance for 2016 is based on an exchange rate of EUR/CZK of 27.00. Prices are expressed as a blended average between the different qualities of coal and are ex-works. Final realised prices can be influenced by a range of factors including, but not limited to, exchange rate fluctuations, quality mix, timing of deliveries and flexible provisions in individual agreements. Thus, the actual realised price for the period may differ from the average agreed prices previously announced. The Directors’ report comprises the sections under Strategic Report. NWR or the ‘Company’ refers to New World Resources N.V. New World Resources Plc (‘NWR Plc’) is a holding company of New World Resources N.V. The ‘Group’ or ‘NWR Group’ refers to New World Resources Plc and its subsidiaries (including NWR). NWR Plc oversees the Group’s strategy and reviews management and financial performance 2 Content Overview .................................................................................................................................... 4 Who we are ............................................................................................................................ 4 What we do ............................................................................................................................ 4 Main subsidiaries ................................................................................................................... 4 Our strategy ........................................................................................................................... 6 Key performance indicators ................................................................................................... 7 Our customers ........................................................................................................................ 8 Strategic Report ......................................................................................................................... 9 Chairman’s statement .......................................................................................................... 10 Our business model ............................................................................................................. 14 Viability statement of NWR Plc ............................................................................................ 15 Principal risks and uncertainties .......................................................................................... 17 Sustainability ........................................................................................................................ 25 Financial review ................................................................................................................... 34 Business review ................................................................................................................... 36 Corporate governance ............................................................................................................. 39 Certain relationships and related party transactions............................................................ 53 Material contracts ................................................................................................................. 56 Remuneration report ................................................................................................................ 63 Financial statements ................................................................................................................ 69 Additional information ............................................................................................................ 124 Securities information ........................................................................................................ 124 Ancillary information for stakeholders ................................................................................ 128 3 Overview Who we are New World Resources Plc (‘NWR Plc’) is a Central European hard coal producer. It is headquartered in Amsterdam, with listings on stock exchanges in London, Prague and Warsaw. New World Resources N.V. (‘NWR’ or the ‘Company’) is a wholly owned subsidiary of NWR Plc. Headquartered in London, with bonds listed on the Luxembourg Stock Exchange. What we do Our principal mining assets are in the Czech Republic and we have several development projects in the Czech Republic and Poland. The Company employs around 13,800 people including contractors. As at 31 December 2015, coal reserves at NWR’s operating mines were estimated at 48 million tonnes, of which 4 million tonnes are in sensitive areas. We produce coking coal as well as thermal coal and supply to a blue-chip steel and energy customer base in Central Europe. Structure Chart The following chart shows the corporate structure of NWR Plc and its subsidiaries: NWR PLC NWR Services NWR NV Ltd. NWR NWR Holdings Communications BV s.r.o. OKD A.S. Karbonia S.A. OKD HBZS s.a. Ownership is 100% unless otherwise stated. 4 Key New World Resources Plc (‘NWR Plc’) — Holding company of the Group with management activities related to the Group. New World Resources NV (‘NWR’) — Holding company and borrower/issuer in respect of the majority of the Group’s financial indebtedness. NWR Holdings BV (‘NWR BV’) — Holding company and borrower in respect of the Super Senior Credit Facility (the ‘SSCF’). It is a wholly owned subsidiary of NWR NV. Headquartered in Amsterdam, it holds our main subsidiaries, OKD and NWR KARBONIA. NWR Communications s.r.o. — A subsidiary with limited activities related to certain advisory services, including PR in connection with listing of the Group on regulated markets. New World Resources Services Ltd — A subsidiary with limited activities in the UK related to services to the Executive Chairman and corporate finance activities to the Group. OKD, a.s. (‘OKD’) — Our principal wholly owned subsidiary OKD is the Czech Republic’s only hard coal mining company and one of its largest private employers. Its four operating mines are located in Northern Moravia, south of the Polish border and are a part of the Upper Silesian Coal Basin. NWR KARBONIA S.A. (‘NWR KARBONIA’) — NWR KARBONIA oversees two development projects in southern Poland, Debie ńsko and Morcinek. 5 Our strategy In October 2014, we completed the restructuring of the Group’s balance sheet. This restructuring was triggered by the prolonged decline in coal prices. With the support and participation of our stakeholders, an agreement was reached that led to the raising of EUR 185 million in new capital, reduced the nominal amount of our outstanding total debt by 35 % from EUR 825 million to EUR 535 million, extended the term of our senior notes to 2020, and significantly reduced our debt servicing costs. Throughout 2015, we have witnessed a further deterioration in the global coal market. Benchmark coking coal prices continued to decline, falling by 20% in 2015 and a cumulative 60% since 2011. The international price of thermal coal has followed a similar trajectory, with prices falling by 22% in 2015 and a cumulative 40% since 2011. Against this backdrop, management has been focused on achieving further optimisation of operational and overhead costs. Despite these efforts, at the present market prices of coal, the Group is cash flow negative even before any servicing of its existing financial indebtedness. The continuing low coal price environment has placed significant pressure on the Group’s liquidity position and its solvency. The Group has undertaken a detailed strategic review of its operations. Management's preliminary conclusion is that, absent a significant and near-term increase in coal prices, the Group will need to reduce costs yet further across its entire portfolio and to secure substantial additional liquidity. Also, while a number of the Group's mines clearly have potential, some do not. Therefore, as part of the strategic review process, the Group is evaluating its options for those low-potential mines. In parallel with this strategic review, the Group has undertaken negotiations with certain key stakeholders as to an appropriate way forward, including its noteholders and shareholders and the Czech Government. These negotiations, which are ongoing, are focused on securing a viable business for the Group, with a sustainable portfolio of cash-generative mines at the current price levels, a capital structure appropriate to allow that portfolio to operate as a going concern through the anticipated extended period of low coal prices, and clarity for employees. Negotiations with key stakeholders are underway. All stakeholders recognise that the Group’s current debt structure is unsustainable and that all stakeholders (i.e. including financial creditors, shareholders, Czech Government and employees) will need to contribute to achieve a consensual restructuring solution. NWR is facing exceptional challenges. With no sign of an upturn in global coal prices, the Group has been obliged to review all options as it seeks a way to ensure a commercially viable hard coal mining business. This will entail optimisation of our mining assets and might, absent of any stakeholder support, lead to the closure of mines and a reduction in our workforce. For further detail and for the current status, please refer