Contents Message to the Readers . 6 The Company's contribution to regional development . 62 SUEK today . 8 Socioeconomic partnership Social reporting in the Company . 12 agreements . 64 Compliance with the Global Major social projects . 67 reporting initiative . 13 Working with the youth . 69 The Company's social responsibility Charity . 70 principles: continuity and development . 15 Financing of educational events . 70 Content of the second social Environmental impact report . 17 of the Company's business . 72 SUEK: key 2006 results . 18 Investments in environmental measures . 78 Integral indicators . 19 Rational use of energy . 79 Corporate structure improvement . 19 Atmospheric emissions . 80 Power block reform . 20 Water management and waste water treatment . 81 Management system development . 21 Reclamation of land . 84 The Company's vision, mission, Production waste reduction . 86 long-term strategy . 22 Governmental and corporate environmental control . 87 Coal mining industry outlook . 23 Environmental management The Company's long-term goals improvement . 89 and objectives . 26 Corporate governance . 29 Enhancement of coal quality and environmental friendliness The Company's values . 33 of production . 90 Social policy and social investments . 34 Sectorial trends . 91 Personnel and social policies Coal benefication in SUEK . 92 in 2006 . 36 Conclusion . 94 Corporate culture development . 37 Systematic stakeholder Interaction with trade unions . 39 engagement . 94 Payment and incentive scheme . 40 Introduction of social reporting Personnel training results into the Company's and development . 45 management practice Occupational health and corporate culture . 95 and safety (OHS) . 52 Independent Auditor’s Statement . 96 Integrated occupational health GRI Reference Tables . 100 and safety plan . 53 Current status of occupational health and safety . 55 Methane safety . 58 OHS training . 59 Reduction of industrial injuries . 59 Occupational health and work-related disease prevention . 61 5 Message to the Readers We hereby present the 2006 Social develop innovative, safe and competitive coal Report of Siberian Coal and Energy OJSC. mining and processing, and coal-fired power This is the Company's second report compiled generation vigorously. SUEK invests in con- with reference to the international standards tinuous upgrading of skills at all managerial of GRI (Global Reporting Initiative). and operational levels. The report highlights the activities of The objective indicators testify to SUEK SUEK in the field of corporate social respon- being well on track: in 2006 the Company's sibility and discloses the Company's goals and enterprises raised the coal production rates by practical deeds in the area of human 6% reaching nearly 90 million tonnes. SUEK resources and contacts with local communi- increased its share in the volume of coal pro- ties, environmental protection and improve- duced in Russia and in exports, significantly ment of occupational safety. strengthening its positions as a leader of Russian coal mining. We proactively implement the principles of corporate social responsibility and sus- The Company implements a large-scale tained development widely pursued by the investment program: in 2006 the investment international business community. One of the volume amounted to USD265 million, a 26% instruments used for this purpose is the increase over the previous year. The invest- Social Report whose main goals are: ment areas include acquisition of up-to-date tunneling equipment, development of infra- - to analyze the Company's social per- structure for coal transportation, construction formance from the standpoint of of coal processing facilities. The implementa- international standards; tion of the investment programs is expected to - to ensure efficient feedback channels: enhance the Company's competitiveness and use the results of the analysis and efficiency. comments received when introducing modern instruments of social policy In 2006 the Company put considerable and the best examples of corporate effort into enhancing the efficiency of its cor- culture into the Company's practices; porate governance and the structure of busi- - to conduct a dynamic and construc- ness processes, and into the development and tive dialogue with stakeholders. introduction of corporate standards. SUEK has SUEK is Russia's biggest coal producer started to develop an integrated system of risk and a strategic investor in the energy sector. management and to introduce the uniform Our mission is to be a reliable energy suppli- ERP system at all enterprises of the Company. er for our customers, improving the living All these undertakings increase the conditions for future generations. Our strate- Company's value and its attractiveness for gy is aimed at achieving leading positions in investors. Russian and international energy sectors, maximizing the synergy between coal and SUEK's achievements and implementa- energy sectors, and ensuring the dominance of tion of its long-term plans are based on well- technical and managerial innovations and high coordinated and highly productive work of financial stability. The Company plans to the Company's employees. Labor relations at 6 SUEK-- rest on the principles of social partner- 20% decrease in the rates of occupational acci- ship; the Company takes steps to improve the dents at the Company in 2006 proves that the quality of life of its employees and their fam- Company is progressing in the right direction. ilies. In 2006 the wages at the enterprises and Regional authorities have repeatedly cited the the branch companies grew by more than 15% Company as a benchmark with respect to on the previous year. The company carries out raising the levels of occupational safety. housing projects for its employees, and admin- isters social benefit packages established In 2006 the Company adopted the under the collective contracts and agreements. Environmental Policy and a five-year In 2006 the Company actively participated in Environmental Àctivities Program. SUEK is the development of the Federal Industrial aware of its responsibility for preserving a Agreement for the Russian Federation coal stable environmental balance for the current mining industry, which will be governing the and future generations. The Company social policies in the sector through 2010. assumed clearly-defined responsibilities in terms of reducing and preventing the impact SUEK puts much effort into creating on the environment and spelled out its goals conditions favourable for realizing the poten- with respect to use of natural resources, tial of each employee. The Employee Code of nature conservation and environmental safety. Conduct adopted in the reporting year con- tributed to the formation of positive business The Company contributes a lot to social environment at the Company. The system of development of the areas where its enterpris- employee rewards is being improved consis- es are located. SUEK has agreements on tently. The Corporate University carries out a socioeconomic partnership in all regions of range of educational programs for the staff operation. By helping to implement high-pri- between the senior management level and ority national projects and regional social pro- supervising foreman's level. grams in the spheres of education, healthcare, housing construction and public utilities, SUEK attaches paramount importance SUEK applies in practice the principles of cor- to enhancing occupational and industrial safe- porate social responsibility. ty. The Company's management takes care of all components of occupational safety: person- Doing its best to satisfy the present and nel training, deployment of equipment for future energy needs of Russia and other coun- monitoring gas levels in mine workings, emer- tries, SUEK is engaged in a constructive dia- gency resilience programs, technical re-equip- logue with all stakeholders in order to pro- ping and organizational arrangements. The mote productive cooperation, trust and part- LTIFR index employed by coal business inter- nership relations. nationally is included in the incentives of all We invite you to take part in the dialogue! key managers at SUEK, which makes SUEK different from many Russian companies. A Alexander Landia Vladimir Rashevsky Chairman of the Board of Directors Chief Executive Officer 7 SUEK Today Siberian Coal and Energy OJSC (SUEK) is the biggest Russian coal producer, who makes big strategic investments in the energy sector. Producing about 30% of Russian coal SUEK is the leader in Russian coal exports – the Company is responsible for about 25% of coal exports to more than 30 nations of Europe and the Asia- Pacific region. SUEK is the only Russian company among the top ten global coal-mining corporations. The company occupies a steady position on the market and develops dynamically. SUEK's overall regis- tered in-situ reserves exceed 10.5 billion tons, with 8.7 billion tons of commercially viable resources. According to the Company's estimates, these reserves will last for 65 years. Geographically diverse, the Company's coal assets are located sites with the main coal-mining regions of Russia. These reserves are very well explored. SUEK operates underground and surface mines in the licensed sites with coal fields located in the Kemerovo, Irkutsk and Chita Regions, the Krasnoyarsk, Primorie and Khabarovsk Territories, and in the Republic of Khakassia and Buryat Republic. The most viable reserves of brown coal fit for surface mining are concentrated