SCM Public Report 2010

2010 Financial Results

2010 2009 Dynamics, %

assets, $ MILLION

22,788 18,539 +22.92

sales volume, $ MILLION

12,819 8,151 +57.27

net pRoFit, $ MILLION

850 97 +776.29

eBitDa, $ MILLION

3,376 1,735 +94.58
002

contents

2 2010 financial results 26 SCM Group business
4 CEO Statement 28 Metals and mining

6 SCM Group events calendar 2010 36 Energy

International Financial Reporting Standards. Consolidated Financial Statements and Auditors’ Report
41 Financial services

43 Telecommunications
10 About SCM Group 45 Real estate
10 SCM Group history
47 Media
13 Corporate culture: mission, vision, values
52 Clay mining
14 SCM Group management
54 Retail trade
20 SCM Group corporate structure – 2010 56 Petroleum products retailing

SCM Group corporate transformation 57 Heave Engineering
22
program 2010
60 Pharmaceuticals
24 SCM Group business structure
61 Transport and logistics

62 Associated companies

64 Football

66 Corporate social
responsibility and
sustainable
development

72 Key post-reporting
period events – 2010
003

CEO Statement

Dear Colleagues and Partners,

Two years ago, in the midst of the global eco- growth of our business and a further $204m
nomic recession, I made a promise that SCM in mergers and acquisitions1.
would emerge stronger, more effective, and
better prepared for intensive growth after the In 2010, Metinvest became the controlling
recession ended. I am proud to let you know shareholder in the Ilyich Steel Plant, based in
that is precisely what we have achieved. Our Mariupol, one of Ukraine’s largest enterpris-
1
While Ukraine remains the financial indicators in 2010 are close to pre- es with a full metal production cycle. Acquir-
main focus of our activity and recession levels. We have strengthened our ing the plant to become part of Metinvest
investment, we significantly competitive advantages, while continuing Group was an important step in implement-
expanded our presence in to invest in development. We enhanced our ing SCM Group’s long-term strategy of en-
international markets. leadership and corporate culture, at the core hancing vertical integration, achieving maxi-
of which is our management team. mum production effectiveness in Ukraine,
and strengthening our market position. The
This is the basis for further sustainable total volume of investment in the develop-
growth in the new economic reality, where ment of Metinvest Group in 2010 amounted
instability has become an integral part of our to $582m (excluding M&A).
lives. In this new reality, to be successful, we
continue to focus on investing in growth as During 2010, DTEK’s enterprises demon-
we did previously, however, we have become strated significant growth. The volume of
more efficient, adaptive, and effective. coal mined increased by almost 1.5m tonnes
to 19.2m tonnes. One of the key growth
We optimized the Group’s business port- factors was the increased investment in
folio, exited from non-core business areas, highly efficient mining equipment and in-
and prepared ourselves for entering new, novative technologies during 2008-2010.
promising areas. We secured control of our The total output of DTEK’s power genera-
liquidity and this gave us financial mobility tion companies (including Dneproenergo)
as the global and the national economies also increased by 34% to 30.7bn kW/hour,
began to recover. while the total volume of power distributed
increased to 13.3bn kW/hour - a 13% in-
As a result of these actions, SCM was suc- crease compared to 2009.
cessful in 2010, when we saw the first signs
of the economic growth, and delivered re- In the reporting year, our energy business
sults that make us rightly proud. Our revenue strengthened its presence in international
was $12,819m, profit was $850m, while markets. DTEK exported approximately
004

more than $1,807m was paid in taxes, and 2m tonnes of coal, thus, exceeding the
approximately $1,162m was paid in remu- 2009 figure by almost two-fold. The coal
neration to our employees. Additionally, was shipped to customers in Turkey, Bulgar-
we invested over $1,118m in the organic ia, Poland, Romania, India, USA, and Brazil.

SCM Group Public Report 2010

Also in 2010, DTEKbegan supplying power main goals. It has to grow shareholder value,
to consumers in Hungary, Slovakia, Roma- while remaining a positive force of change
nia, Moldova, and Belarus. Last year, DTEK in society. We at SCM consider both of these
exported 1.21bn kW/hour of power. The to- goals as strategic and are determined to fur-
tal investment in DTEK’s organic growth in ther grow and develop in this new, balanced
2010 amounted to $276m. paradigm. Moreover, we believe that the val-
ue we create will be greater than merely the
To strengthen its position in the domestic fi- sum of SCM’s shareholder and societal value.
nancial market, SCM made a decision to con-
solidate First Ukrainian International Bank and In terms of business goals, SCM Group’s pri-
Dongorbank into a single entity by merging orities for 2011 remained unchanged. They
Dongorbank into First Ukrainian International include the organic development of our ex-
Bank. The consolidation is planned to be com- isting assets, boosting their operational ef-
pleted in the second half of 2011. fectiveness, through continual investment in
modernization and personnel development,
To manage its media assets in television as well as entering new and attractive sectors
and digital media, SCM created the Ukraine of economy which have significant growth
Media Group. This new holding includes: potential. In 2011, the new sectors we will
Ukraine Television Channel, Football sports focus on will be agriculture and the expan-
channel, Donbass regional channel, Media sion of our transportation business which we
Partnership sales house, and Digital Ventures intend to grow and to add value.
(tochka.net portal).
We will also strive for SCM’s growth to facilitate
In 2010, we also made a decision to enter the development of the regions where we are
several new business areas, among which present. This is not only due to the taxes and
was pharmaceuticals. SCM Group acquired salaries we pay, we have been doing this since
Pharmacy of Donbass, which owned a net- SCM Group was created2.
work of more than 120 pharmacies. To man-
2
age the new business area, Ukrainian Phar- At SCM, we feel that our success is con- What we want is to create
macy Holding was created, with its strategic nected with the way the society progresses. a clear, direct connection
goals being to grow market share and geo- We know, every time our employee comes between our economic growth
graphical expansion. to a factory, goes down a mine, enters an of- and society’s social progress.
fice, or drives a excavator, that he or she is

CEO Statement
The decision was also made to organize changing not only their lives, but the lives of
transport and logistics into a separate busi- hundreds of people. What we do and how
ness area, concentrated around Avlita Ste- we do it is important, not only for us and our
vedoring Company, the company specializes employees, but also for hundreds and thou-
in grain and metal transshipment through its sands of people outside SCM.
facilities in the non-freezing Sevastopol Bay
on the Black Sea.
005
Overall, the reporting year helped us rec- Sincerely,
ognize that in the 21st century a successful Oleg Popov
business has to move forward, driven by two Chief Executive Officer

SCM Group events calendar 2010

JanuaRy

15 January 4 March
Service-Invest (DTEK) completed the $4m Metinvest joined the UN Global Compact
reconstruction of Vozrozhdenie substation
17 March
26 January DTEK’s corporate university was launched
DTEK joined EURACOAL, the European Asso-
ciation of Coal and Lignite producers 22 March
DTEK and Dnepropetrovsk National Mining
27 January University signed a long-term cooperation
SCM participated in the annual meeting of agreement
the World Economic Forum in Davos for the
fourth consecutive year. SCM is a strategic 30 March
partner of the Forum DTEK, Kurakhovo (Donetsk Oblast) City
Council, and USAID Municipal Heating Re-
27 January form Project in Ukraine signed a memoran-
First Ukrainian International Bank completed dum of cooperation
the restructuring of its obligations to bond
holders and creditors
apRil

FeBRuaRy 12 April
Yenakiyevo Steel Plant (Metinvest) success-
18 February fully completed the product quality supervi-
Stepnaya mine (DTEK) put a new rock wind- sory audit, conducted by CARES, the UK Cer-
ing set into operation at its Unit #2 tification Agency of Reinforcing Steels

24 February 12 April
Vega launched its services in Zhitomir, Uzh- SCM Group established Mining Machines
gorod, Rovno, and Khartsyzsk (Donetsk Oblast) Company to become the holding for its heavy
engineering businesses

maRch 20 April
SCM was ranked #1 in Gvardia Rating of So-
3 March cially Responsible Companies for the third
SCM Limited (Cyprus), a holding company, paid consecutive time
006

a further $82.9m installment on its $545m syn-
dicated loan, secured in March 2007


22 April 25 May
Yenakiyevo Steel Plant (Metinvest) launched Metinvest successfully placed a $500m Eu-
the preparations to certify its environmental robonds issue with a 5-year term
management system to ISO 14001:2004
standard
June
28 April
DTEK successfully placed a $500m Eurobond 24 June
issue with a 5-year term Metinvest Eurasia opened a new warehouse
in Mineral Waters (Russia)
30 April
System Capital Management General Share-
holders’ Assembly made a decision to allo- July
cate $92.4m of company profits for 2009
for business development 13 July
DTEK made a decision to invest $63m in
Rovenkyanthracite and Sverdlovanthracite
may state-owned companies within the frame-
work of renovation projects, using a public-
13 May private partnership mechanism
SCM presented the results of the Ukrainian
National Higher Educational Institutions Rat- 14 July

SCM Group events calendar 2010
ing, Compass 2010 DTEK joined EURELECTRIC, the association
uniting the electricity industry companies in
14 May Europe
The portfolio of individual clients’ deposits at First
Ukrainian International Bank exceeded $500m 29 July
Metinvest signed a $700m three-year syndi-
18 May cated pre-export loan facility
Khartsyzsk Pipe Plant (Metinvest) complet-
ed the construction of new X80 straight-
seamed electro-welded large diameter steel august
piping production line
2 August
21 May Brusnytsya retail chain expanded add-
007
ESTA Group completed the purchase of 50% ing stores in Kramatorsk (Donetsk Oblast),
stake in Kiev Hotel (Donetsk) Melitopol (Zaporozhye Oblast), and 2 stores
in Zaporozhye

septemBeR novemBeR

2 September 4 November
SCM Limited (Cyprus), a holding company, SCM made a decision to create Ukraine
paid a further $81m installment on its $545m Media Group on the basis of Ukraine Televi-
syndicated loan, secured in March 2007 sion Channel

The Supervisory Councils of First Ukrainian DTEK began exporting electric power to
International Bank and Dongorbank made Belarus
the decision to consolidate the banks by
merging Dongorbank into First Ukrainian In- 17 November
ternational Bank Metinvest became the controlling sharehold-
er of the Ilyich Steel Plant in Mariupol
22 September
Pharmacy of Donbass became part of SCM 19 November
Group SCM celebrated its 10th anniversary

Vesko (United Minerals Group) obtained the Metinvest’s Makeyevka Steel Plant became the
approval of the Anti-Monopoly Committee first company in Ukraine to launch the produc-
of Ukraine to concentrate a stake of more tion of reinforcing bars with negative tolerance,
than 50% in the statutory capitals of Keram- according to DSTU 3760-2006 standard
mekhanizatsiya and Capital-Service, which
both specialize in the geological research of 29 November
clay deposits First Ukrainian International Bank became
the first bank in Ukraine to be successfully
30 September audited for compliance with the international
DTEK and other SCM Group companies in- information security standard, PCI DSS
creased their stake in Zapadenergo’s statu-
tory capital to 24.99%
DecemBeR
30 September
C4Gas S.A. (France), the main common 1 December
sourcing portal of major European oil and The Parallel chain of gas stations expanded,
gas companies, completed the certification adding 3 new gas stations in Lugansk
procedure of Metinvest Group’s products
and sales system
008


6 December 22 December
Metinvest Group enterprises completed the Metinvest began rolling reinforcing rods at
registration procedure, in compliance with Makeyevka Steel Plant
the EU’s REACH directive
22 December
9 December SCM and Renaissance Credit Group signed
DTEK increased its share in Kievenergo statu- an agreement for SCM to purchase a 100%
tory capital to 39.98% stake in Renaissance Capital Bank (Ukraine)

17 December 31 December
ESTA Group purchased Kiev’s Central Univer- Ukraine Television Channel was ranked #2
mag Shopping Mall among Ukraine’s television channels in 2010
(audience of 18 years+ in cities with popula-
17 December tion of 50,000+) – for the first time
Brusnytsya retail chain expanded adding 3
stores in Kharkov and Kharkov Oblast and
one store in Zaporozhye

20 December
Mining Machines Company secured a $35m
credit line from Prominvestbank

20 December
DTEK signed an agreement with state-owned
NEK Ukrenergo, securing access to the inter-
state electric power export networks for 2011

009 SCM Group events calendar 2010

About
SCM Group

SCM Group history
System Capital Management (SCM) was
founded by Rinat Akhmetov (100% owner) in
2000 in Donetsk, Ukraine. Its main purpose is
to be a strategic investor in key segments of the
Ukrainian economy. These are, primarily, min-
ing, metals, and energy. Since its foundation,
SCM has been developing its business, based
on the industrial assets it owns and making
large-scale investments, both in Ukraine and
internationally. SCM is constantly seeking to
expand its business by gaining presence in
other dynamic sectors of economy including:
banking, insurance, telecommunications, real
estate, media, clay mining, heavy engineering,
retail trade and others.
010

2000-2002
growing the portfolio

SCM expands its investment portfolio. It is during, metals, energy, and financial sector. The
ing this period that the company acquires most company institutes the preparation of con-
of its businesses and begins introducing a sin- solidated financial statements in accordance
gle standard of management across the Group. with International Financial Reporting Stand-
ards (IFRS) and begins the process of build-
ing a transparent business and management
2002-2004 investing structure for the Group.

During this period, the main focus is on es-
tablishing international standards of business 2007-2008 creating stability
management at all of the company’s key as-
sets. Meanwhile, enterprises are modernized SCM group develops a distinct business de-
and production indicators are raised, where velopment strategy. Business expansion is
possible, using experience and know-how, based on organic growth, as well as on new
accumulated by SCM professionals. The acquisitions in strategically important seg-
company begins to implement its long-term ments of the economy and industry (min-
growth strategy and to increase the effec- ing and metals, energy, financial sector, tel-
tiveness of its business. This means building ecommunications, real estate, retailing, and
vertically-integrated industrial businesses others). Simultaneously, SCM begins exiting
and forming a team of world-class managers from sectors, presence in which does not
capable of running them. comply with the approved business develop-
ment strategy. During this period the Group
also accumulates the necessary financial
2004-2006 expansion and reserves to ensure business stability during
transparency volatile economic periods. At the foundation
of this stability are balanced approach to do-
During this period, SCM begins actively ex- ing business, effective and efficient decision-
panding its corporate transformation pro- making, conservative approach to borrow-
gram, aimed at increasing the effectiveness ing, clear priority setting, and, undoubtedly,
of the Group’s corporate structure and cor- the team of talented professionals.
porate governance. The first steps within the
program’s framework are forming Metinvest
and DTEK holdings to exercise strategic and 2009-present time.
operational management of the Group’s as- Looking to the future
sets in metals, mining, and energy, respec-
tively. During this period, SCM also actively By the 10th year of operations SCM becomes
012

invests in the new areas: media, real estate, Ukraine’s largest private national investor. The
and telecommunications. SCM also grows Group’s share in the country’s GDP amounts
its presence in its main business areas: min- to 7%, while its enterprises employ approxi-


mately 200,000 people. SCM’s geography as well as long-term investment in businesses
of presence includes Ukraine, Russia, Swit- with high growth and ROI potential. The main
zerland, Italy, Bulgaria, United Kingdom, and goal also remains constant – to become not
USA. In spite of the global economic changes, only Ukraine’s leading financial and industrial
the Group’s approach to doing business re- group, but also a truly competitive and suc-
mains unchanged: balanced diversification, cessful global business.

Corporate culture: mission, vision, values

The SCM mission: success, ƒ constantly improving the processes and
together methods of doing business;

We invest in the continuous growth and ef- ƒ rational allocation and use of resources;
fectiveness of our business, and through this
support the economic and social develop- ƒ seeking new opportunities;
ment of society as a whole.
ƒ preparedness for change.

The SCM vision: creating through Professionalism in doing business, includ-
development ing investing in people and stimulating inno-
vation and enthusiasm towards work. For us,
We build effective businesses and manage there is particular importance in:
them according to the best world standards
and practices, ensuring long-term returns on ƒ meeting the highest standards;
our investment and participation in the devel-

About SCM Group
opment of the regions in which we are present. ƒ stimulating initiative and innovation;

ƒ investing in professional development and
The SCM values: effectiveness, loyalty of employees;
professionalism, accountability
ƒ attracting and retaining highly qualified
Effectiveness as a means to achieve the best re- personnel;
sults in everything we do. For us, effectiveness is:
013
ƒ evaluating achievements fairly.
ƒ reaching the goals we set;
Accountability to our employees, our part-
ƒ applying contemporary technologies and ners, our communities, and society as a whole.
approaches to doing business;

OlegPopov Margarita Povazhnaya
Chief Executive Officer Chief Financial Officer

SCM Group
management
ƒ CEO of SCM since January 2006. ƒ SCM’s Financial Director since September 2009.
ƒ 2001-2006 – Executive Director of SCM. ƒ July 2008 – September 2009 – Deputy
ƒ 2000 – Joined SCM as Deputy to the CEO. Financial Director of SCM.
ƒ 1992-2000 – Worked in various ƒ 2003 – Joined SCM as Chief Accountant.
government offices.
Prior to joining SCM, Ms. Povazhnaya worked as
Chairman of the Board of FC Shakhtar. Chief Accountant in various large Ukrainian com-
panies (Scandic South, Artemovsk Champagne
Represents SCM interests on the Supervisory Winery, etc.).
Boards of Metinvest, DTEK, First Ukrainian Inter-
national Bank, Dongorbank, and Ukraine Media Started her career in 1996 by being accepted to the
Group. Donetsk Oblast State Tax Inspection as State Tax In-
spector for the Individual Persons’ Audit Department.
Areas of responsibility: taking and approval of the
key financial, investment, and personnel deci- Member of Metinvest and DTEK Audit Committees.
sions, both directly at SCM and in the Group’s as- Chairs the Audit Committees of Bureau of Economic
sets, as well as evaluating the performance of top and Social Technologies (BEST) Analytical Center,
management of these assets. and SCM Finance.

Education: Areas of responsibility: organizing tax and financial
Graduated from Donetsk State University in 1996. audit of SCM Company and SCM Group’s foreign
assets, budgeting and cash flow planning for SCM
Graduated from Donetsk Polytechnical Institute in Group.
1991.
Education:
Graduated from Donetsk State University of Man-
agement with a postgraduate degree in 2008.

Other credentials include: Ph.D. in Public Adminis-
tration, International Financial Reporting ACCA Di-
ploma, mini-MBA diploma.
014

Graduated from Donetsk State Commercial Univer-
sity with major in Industrial Management in 1995.

Amir Aysautov Sergey Korovin
Metals and mining Energy Business
Business Development Director Development Director

ƒ SCM Metals and mining Business ƒ SCM Energy Business Development
Development Director since November 2009. Director since March 2010.
ƒ August 2008-November 2009 – Strategy ƒ 2008-2010 – member of Microsoft Russia
and Investment Director, Clever Management. Board of Directors, responsible for cooperation
ƒ 2003-2008 – Senior Project Manager, with telecommunications sector.
McKinsey & Company, Moscow ƒ 2002-2008 – advanced from Consultant
and Dubai offices. to Junior Partner in McKinsey & Company,
Denmark and Moscow offices.
Represents SCM interests on the Metinvest Hold-
ing Supervisory Board. Represents SCM interests on the DTEK Supervisory
Board.
Areas of responsibility: strategy, investment, fi-
nance, and risk management for SCM’s metals Areas of responsibility: strategy, investment,
and mining business. finance, and risk management for SCM’s energy
business.
Education:
Graduated from Georgetown University School Education:
of Business (Washington, USA) with an MBA in Graduated from Moscow State University named
2003. after M.V. Lomonosov with major in Computational
Mathematics and Cybernetics in 1993.
Graduated from Kazakhstan National Technical
University with major in Economics and Enterprise
Management in 2001.

015 About SCM Group

Ilya Arkhipov Nikolai Nesterenko
Business Development Director New Business Development Director

ƒ Business Development Director at SCM ƒ New Business Development Director
since November 2005. at SCM since September 2007.
ƒ 2001-2005 Consultant, McKinsey & Co, ƒ 2002-2007 – Senior Manager for Strategy
Moscow. Development for a range of the Group’s new
ƒ 2000-2001 – Operations Manager businesses, such as heavy engineering,
for Russia’s largest on-line auction resource, real estate, etc.
Molotok.ru for NetBridge, an internet company. ƒ 2001 – Joined SCM as Manager of the
ƒ 1995-2000 – Consultant, Coopers & Lybrand Financial Control Department.
and PriceWaterhouseCoopers, Moscow. ƒ 1997-2001 – Worked at Keramet Invest,
having grown from Stock Broker to
Represents SCM’s interests on the Supervisory General Manager.
Boards of Farlep-Invest, First Ukrainian Interna-
tional Bank, Dongorbank, ASKA Insurance Com- Currently is heading ESTA Holding – SCM sectoral
pany. holding, managing its real estate projects, as well
as is chairing the Supervisory Board of ESTA Prop-
Areas of responsibility: participating in determin- erty Management. Sits on the Supervisory Boards
ing the Group’s business strategy for telecommu- of SCM Group hotels.
nications, banking, and insurance sector.
Areas of responsibility: determining SCM’s strate-
Education: gic business development in real estate, heavy en-
MBA from INSEAD (France), a leading European gineering, pharmaceuticals, and transport sectors,
business school, in 2004. as well as seeking new areas for investment.

Graduated from the Plekhanov Academy of Eco- Education:
nomics in Russia as a Specialist in Enterprise Man- MBA from INSEAD (France), a leading European
agement in 1999. business school, in 2007.

Graduated from the Financial Accounting Depart-
ment of Donetsk State University in 1998.
016

Yekaterina Lapshina Natalia Yemchenko
Media Business Public Relations
Development Director and Communications Director

ƒ Media Business Development Director ƒ Public Relations and Communications Director
at SCM since August 2010. at SCM since December 2006.
ƒ November 2008 - August 2010 – Investment ƒ 2005-2006 – Public Relations Manager for
Director and Junior Partner at Adela Holding SCM Group.
Limited (Russia). ƒ 2003 – Joined SCM Group as a Sector Group
ƒ August 2006 - September 2008 – Deputy Manger.
Business Development Director at Energoprom ƒ 2001-2003 – Director, Keramet Invest.
Management. ƒ 1998-2001 – Financial Manager at KOLO,
ƒ March 2004 - August 2006 – Senior an investment company.
Consultant at Ernst & Young.
Chairs the Audit Committee and the Editorial
Represents SCM’s interests on Supervisory Boards Council of Ukraine Television Channel.
of the Group’s media businesses.
Areas of responsibility: communicating with stake-
Areas of responsibility: strategy, investment, fi- holders, including media, employees, residents in
nance, and risk management for SCM’s media regions of company presence, government au-
business. thorities, community organizations, and the gen-
eral public, as well as company reputation man-
Education: agement.
Graduated from the Russian Federation State Fi-
nancial Academy with Masters Degree in Econom- Represents SCM’s interests on the Supervisory
ics in 2005. Board of Ukraine Media Group, as well as Chairs
the Audit Committee and the Editorial Board of

About SCM Group
Graduated from the Institute of International Eco- Ukraine Television Channel.
nomic Relations (Moscow) with a Bachelor’s De-
gree in Economics in 2003. Education:
Currently enrolled in EMBA program at INSEAD
Other credentials include: CMA (Certified Financial (France), a leading European business school.
Manager) Certificate, 2nd level candidate for CFA
(Certified Financial Analyst) Program. Graduated from Donetsk National University as a
Specialist in Finance and Credit in 1998.
017

Jock Mendoza-Wilson Roman Bugayov
International and Investor Corporate Rights and Foreign Asset
Relations Director Management Director

ƒ International and Investor Relations Director ƒ Corporate Rights and Foreign Asset
at SCM since 2006. Management Director at SCM since
ƒ 2005-2006 – Director of Corporate September 2007.
Communications for the SCM Group. ƒ 2005-2007 – Manager of the
ƒ 1989 – Launched his own PR consultancy Corporate Rights Department for SCM Group.
in London. ƒ 2003 – Joined SCM Group as Economist.
ƒ 1984 – Began his career with Ford ƒ 2002-2003 – Economist at Keramet Invest.
Europe Company. ƒ 1996-2002 – Worked in the Donetsk Oblast
Office of the Anti-Monopoly Committee of
Worked Regional Director for Middle East and Ukraine as a Specialist, Senior Specialist, then
North Africa at Promoseven Weber Shandwick PR Department Manager.
(Dubai), later – as Regional Director for Eastern
Europe at Mmd. Advised U.S. Government agen- Serves as Director of a range of SCM’s foreign
cies on their public diplomacy programs in the companies. Represents SCM interests on the Su-
Middle East. pervisory Board of DTEK. Sits on the Audit Com-
mittee of Ukraine Television Channel.
Areas of responsibility: developing and imple-
menting communications strategies and pro- Areas of responsibility: determining and implement-
grams, aimed at establishing contacts with both ing company policy regarding the management of
government authorities and NGOs; developing re- corporate rights; organizing and handling operations
lations with international governments, business, involving corporate rights belonging to the company
and media, as well as maintaining relations with and its subsidiaries; and organizing the activities of
the investment and finance community. foreign companies belonging to SCM.

Education: Education:
Graduated as an Economist from Herriot-Watt Graduated from the Donetsk Institute of Entrepre-
University (Edinburgh, Scotland) in 1984. neurship as a Specialist in Organizational Manage-
ment in 2000, with major in Economic and Legal
Aspects of Commercial Activity.
018

Marta Moonen
Human Resources Director

ƒ Human Resources Director at SCM since
August 2010.
ƒ 2007 – Joined SCM as Human Resources
Manager.
ƒ 2005-2007 – Worked as Head of
HR Department at Baker Tilly Ukraine.
ƒ 2002-2004 – Worked as Leading
HR Specialist at UTEL Telecommunications
company.

Areas of responsibility: personnel selection, devel-
opment and implementation of human resources
management policies, development of KPI for per-
sonnel evaluation and career planning, designing
motivation, rotation, and promotion programs for
personnel.

Education:
Graduated from Kiev National Linguistic Univer-
sity with major in Organizational Management in
2008.

019 About SCM Group

SCM Group corporate structure

SCM Group
1. SCM Company
target corporate

Operational companies
3.1. Sectoral Holding
governance system

4. Supervisory Boards of
Supervisory Board
2. Minority
shareholders

5. Operational
companies
when decision is made 3.2. Sectoral Holding Managing Company
not to create a sectoral
holding
3.3.Holding General 3.4.Holding
Director Board
when decision is made
to create a sectoral
holding

3.1.1.Auditing Committee
* Applies only to
Metinvest and DTEK

3.1.2.Strategy and Investment
Committee

3.1.3.Appointment and Compensation
Committee

3.1.4. Health, Occupational Safety,
and Environment Committee*
020


SCM’s system of corporate governance is in of accounting policy and procedures for
line with the highest international standards preparing financial reports; the depth and
and is based on world best practice. It allows accuracy of financial reporting provided
the company to quickly and effectively make by each holding; the reliability and effec-
the decisions, necessary to ensure the stability tiveness of the internal auditing system,
and growth of all the Group’s sectoral hold- internal oversight and risk management;
ings and business areas. the independence of internal and external
audits; and ensuring compliance with the
As the majority shareholder and the main in- laws and norms governing business ethics.
vestor, SCM Group governs its sectoral hold-
ings by delegating its representatives to sit ƒ The Strategy and Investment Committee
on the respective Supervisory Boards. The prepares and submits for review to the Su-
participation of minority shareholders in the pervisory Board the necessary recommen-
governance of these holdings is also executed dations regarding the opportunities for
through their representatives on the Supervi- the holdings to be involved in investment
sory Boards. projects and exit strategies for specific
projects. The Committee also prepares
The Supervisory Boards govern the sectoral recommendations regarding the strategic
holdings. These Boards include representa- goals and objectives of the various hold-
tives of SCM, minority shareholders, and ex- ings, as well as the implementation of
ternal experts. The members of each Board agreements on mergers and acquisitions
vote to elect a Chair from among their num- (M&A).
ber. The Supervisory Boards determine busi-
ness development areas and the standards for ƒ The Appointment and Compensation
engaging in specific businesses; they approve Committee recommends to the Supervi-
strategies, budgets and major transactions, sory Boards candidates for management
as well as oversee their implementation; they positions in the sectoral holdings. With
track business indicators, appoint top manag- this purpose in mind, the Committee or-
ers, establish incentives for them, and evalu- ganizes interviews with applicants for

About SCM Group
ate their performance. The members of the specific positions and decides whom to
Supervisory Boards, along with independent recommend for those positions. The Com-
experts, may also participate in specialized mittee also prepares recommendations
committees including: the Audit Committee, regarding the rotation of top managers
the Strategy and Investment Committee, the within the sectoral holdings, proposes
Appointment and Compensation Committee, ways to incentivize top managers, as well
and the Health, Occupational Safety, and En- as participates in shaping the corporate
vironment Committee. culture and staffing, and in determining
021
the prospects for personal development
ƒ The Audit Committee prepares recom- of managers.
mendations for the sectoral holdings’ Su-
pervisory Boards regarding the approval

ƒ The Health, Occupational Safety, and Envi- collegially. The Chair of the Executive Council
ronment Committee was created to insti- is the General Director of the holding.
tute the highest health and occupational
safety standards across the Group, as well The Supervisory Boards of operating compa-
as to control the environmental impact nies are responsible for their sustainable fi-
of the Group’s industrial enterprises. The nancial and commercial growth, improved ef-
Committee develops SCM Group’s strat- ficiency, and increased competitiveness of their
egy for the areas of its authority; prepares operations. They keep track of the upholding of
budgets to finance modernization of, and shareholder rights, make decisions regarding
equipment purchase, for the Group’s in- the time to hold General Shareholders’ Assem-
dustrial assets; ensures the compliance blies, establish the agenda for such assemblies,
of all industrial enterprises with the ap- draft corporate policy, and so on. The members
proved health and safety standards; as of the Supervisory Boards of operating com-
well as annually submits the Group enter- panies are appointed by the Executive Council
prises’ quarterly management reports to and are approved by the Supervisory Board of
the Supervisory Board for review. the relevant sectoral holding.

The General Director of a sectoral holding is For individual areas of business where there
appointed by the Supervisory Board and is are no sectoral holdings, the system of cor-
tasked with managing the holding’s opera- porate governance works through the im-
tions. As a member of the Board, this person mediate Supervisory Boards of the operating
takes an active part in the strategic planning of companies.
the holding’s activities.
Through time, this corporate governance
The Executive Council is the highest body in structure has demonstrated its effectiveness
the operational management of the holding. for achieving SCM Group’s goals and is being
Each holding’s Executive Council is established constantly improved.

SCM Group corporate transformation
program 2010
Metals and mining Energy
Ilyich Steel Plant in Mariupol was acquired by DTEK Holdings B.V. (Netherlands) became a
Metinvest Group. holding company for DTEK.

Metinvest Group completed the process of DTEK and other SCM Group companies in-
022

integrating Makeyevka Steel Plant into its creased their stake in the statutory capital of
Steel and Rolled Products Division. Zapadenergo to 24.99%.


DTEK increased its stake in Kievenergo’s stat- Heavy Engineering
utory capital to 39.98%. SCM Group purchased 11.54% stake in Sver-
dlovskiy Heavy Engineering Plant and 4.57%
Financial Services stake in Donetskiy Energozavod Engineering
SCM made a decision to consolidate First Plant and now holds a 61.55% and 90.65%,
Ukrainian International Bank and Dongor- respectively in these enterprises.
bank into one organization.
UMBH Ltd. (Cyprus) increased its stake in
SCM and Renaissance Credit Group signed Kamensky Heavy Engineering Plant (Russia)
an agreement for SCM to purchase a 100% by participating in the statutory capital in-
stake in Renaissance Capital Bank (Ukraine). crease and purchasing a 6.58% stake, thus,
increasing its shareholding to 82.74%.
Telecommunications
Within the framework of structural changes, SCM completed purchase of a 6.4% stake in
the following companies became part of Donetskgormash Heavy Engineering Plant,
Farlep-Invest, managing company for Vega thus, acquiring a controlling stake (50.05%)
Telecommunications Group: Vilcom, Farlep, in the enterprise.
Matritsa, PP-Sveton, BTSTK, IP-Telecom,
ORT-SOUTH, Telecom Ukraine, Optima Tele- Pharmaceuricals
com-Crimea, Altek. SCM Group made a decision to develop
its pharmaceutical business by purchasing
Real Estate Pharmacy of Donbass Company, which owns
ESTA Group purchased the Kiev’s Central a network of more than 120 pharmacies.
Univermag Shopping Mall. To manage this business area, SCM created
Ukrainian Pharmacy Holding.
ESTA Group completed the purchase of 50%
stake in Kiev Hotel (Donetsk). Transportation and Logistics
SCM Group made a decision to develop
Media transportation and logistics as separate busi-
Ukraine Media Group was created to include ness area and transferred its 100% stake
Ukraine Television Channel, Football (Sport Tel- in Avlita Stevedoring Company to SCM Ltd.
evision Channel), Donbass (Regional Television At the same time a transportation business

About SCM Group
Channel), Media Partnership sales house, and strategy is being developed.
Digital Ventures (www.tochka.net portal).

SCM Group acquired a 22% stake in the
statutory capital of Dnepropetrovsk Televi-
sion Service.
023

scm group business structure – 2010

metals & eneRgy Financial telecommuni Real estate
mining seRvices cations

METinvEsT DTEK EsTA

iron ore Division coal mining and Banking vega telecom investment
enrichment munications group projects
ƒ Northern Ore Mining ƒ First Ukrainian
and Enrichment Plant ƒ Pavlogradugol International Bank ƒ Donbass Palace Hotel
(SevGOK) ƒ Komsomolets ƒ Dongorbank ƒ Opera Hotel
ƒ Central Ore Mining and Donbassa Mine
ƒ Leonardo Business
Enrichment Plant (CGOK) ƒ Mospinskoye CEP Center
ƒ Inguletsky Ore Mining insurance
ƒ Pavlogradskaya CEP ƒ Kiev's Central Univermag
and Enrichment Plant
ƒ Kurakhovskaya CEP ƒ ASKA Shopping Mall
(InGOK)
ƒ Dobropolskaya CEP ƒ Office and logistics
ƒ Danube Shipping and ƒ ASKA-Life centers in Kiev and
Stevedoring ƒ Oktyabrskaya CEP
Donetsk

coke and coal power generation esta property
Division management
ƒ Vostokenergo
ƒ Avdeyevka Coke and
Chemical Plant (AKHZ) power Distribution ongoing projects
ƒ Krasnodonugol
ƒ PES Energougol ƒ Pushkinskiy multi-
ƒ INKOR & Co
functional complex
ƒ United Coal Company ƒ Service Invest
ƒ Andreyevskiy multi-
functional complex
steel and Rolled trading ƒ Kiev Hotel
products Division ƒ DTEK Trading
ƒ Power Trade projects at devel
ƒ Azovstal Steel Plant
opment stage
ƒ Ilyich Steel Plant in
Mariupol alternative energy
land bank
ƒ YeMZ Group
(Yenakiyevo Steel Plant, ƒ Wind Power
Metalen)
ƒ Makeyevka Steel Plant
ƒ Khartsyzsk Pipe Plant
(KHTZ)
ƒ Promet Steel JSC
ƒ Metinvest Trametal S.p.A.
ƒ Spartan UK Ltd
ƒ Ferriera Valsider
ƒ Prometei phaRmaceuticals
ƒ Skif Shipping
UKrAiniAn PhArMAcy holDing
tRanspoRt anD logistics
Zdravitsa chain
sales Department, Avlita
steel and Rolled Dobri Liky chain
products Division
Tsentralnaya Pharmacy
024

ƒ Metinvest International
S.A.
ƒ Metinvest Ukraine
ƒ Metinvest Eurasia
ƒ Metinvest SMC


meDia clay mining Retail tRaDe petRoleum heavy
pRoDucts engineeRing
Retailing
UniTED MinErAls UKrAiniAn
groUP rETAil PArAllEl Mining MAchinEs

ukraine media Vesko Brusnytsya Retail Chain Parallel Chain Druzhkovka Heavy
Engineering Plant
group
Druzhkovskoe Mines Gefest Chain
ƒ Ukraine Television Management Gorlovskiy Mashinostroitel
Channel PitStop Chain Engineering Plant
ƒ Football Television Ogneupornerud
Channel Donetskgormash
ƒ Donbass Television
Kerammekhanizatsiya
Channel
Donetskiy Energozavod
ƒ Digital Ventures Engineering Plant
Capital-Service

segodnya Kamensky Heavy
multimedia Engineering Plant

Sverdlovskiy Heavy
Engineering Plant
associateD companies*
Mining Machines
Engineering Technical Center

metals & mining:
Mining Machines – Quality
ƒ Zaporozhkoks (Zaporozhye Coke and Chemical Plant) System
ƒ Donetskkoks (Donetsk Coke and Chemical Plant)

ƒ Dokuchayevsk Flux and Dolomite Plant (DFDK)

ƒ Novotroitskoye Mines Management

ƒ Krivbassvzryvprom Explosives Company

ƒ Krivoy Rog Iron Ore Plant

energy:
ƒ Dneproenergo

ƒ Donetskoblenergo

ƒ Kievenergo

ƒ Zapadenergo

About SCM Group
telecoms:
FootBall ƒ Astelit

ƒ MMDS Ukraine

FC Shakhtar

other
Donbass Arena
ƒ Krasnaya Polyana Sand Quarry
025
ƒ Dnepropetrovsk Television Service

*Associated companies – are businesses where SCM
Group, in its role as an investor, is capable of significant
influence, but where it does not exercise full control.

SCM Group
bussiness

SCM Group consists of SCM, the manag-
ing company, and all businesses, in which
SCM invests. The Group integrates over 100
enterprises and companies in Ukraine, Rus-
sia, Europe (Italy, Bulgaria, Great Britain,
Switzerland), and the USA. SCM Group’s
enterprises employ approximately 200,000
people.
026

Metals and
mining. Metinvest
1
SCM Group’s 75% stake Metinvest Group is an international verti- Main2 Metinvest Group
and Smart Group’s 25% stake cally integrated metals and mining company enterprises
represent statutory legal owner- which includes 37 enterprises in Ukraine,
ship structure of Metinvest as of Europe, and the USA. The company controls IROn ORE DIvISIOn
December 31, 2010. Metinvest’s every stage of the production cycle – from northern Ore Mining and Enrichment
IFRS Financial Statements for mining iron ore and coal, to coke and cok- Plant (SevGOK) is one of the largest mining
2010 were prepared, based on ing coal production, to smelting steel, and companies in Europe with a full production
the share holdings structure, producing rolled steel sections, structural cycle for raw iron ore (concentrate and pel-
formed after the completion of shapes, large diameter pipes, and other steel lets) for metallurgy.
the transaction for purchasing products with high added value.
Ilyich Steel Plant in Mariupol, Central Ore Mining and Enrichment Plant
which is disclosed in Key post- Metinvest B.V. (Netherlands) is a holding (CGOK) specializes in mining, processing,
reporting period events 2010 company for Metinvest Group. Metinvest and production of raw iron ore (concentrate
chapter. Group’s shareholders are SCM Group (75%) and pellets) for metallurgy.
and Smart Group (25%) and they manage
2
Main enterprises, consoli- the Group on a partnership basis1. Inguletsky Ore Mining and Enrichment
dated in 2010 into Metinvest Plant (InGOK) specializes in mining and
B.V. (Metinvest Group holding Metinvest Holding is a managing company processing iron ore.
company) reporting, according for Metinvest Group.
to the IFRS. Danube Shipping and Stevedoring is a
Metinvest Group’s enterprises are located in shipping and logistics company.
close proximity to key transportation routes
and sea ports, providing the company with COKE AnD COAL DIvISIOn
additional competitive advantages when Avdeyevka Coke and Chemical Plant
making shipments to customers in Ukraine, (AKHZ) is the largest high-technology com-
CIS, Europe, Middle East, and South-East pany in Europe’s coking coal industry pro-
Asia. Metinvest exports the majority of its ducing coke and chemical products.
products to more than 1000 customers in 75
countries worldwide, using its own interna- Krasnodonugol is one of the biggest coal
tional sales network which covers most of the mining companies in Ukraine and both mines
key regional markets. and enriches coking coal.

Metinvest Group’s enterprises employ ap- InKOR and Co is one of the largest chemi-
proximately 117,000 people. cal products manufacturers in the CIS and
Europe.
028

United Coal Company is one of the leading
producers of coking coal in the USA.


3
STEEL AnD ROLLED PRODUCTS DIvISIOn Skif Shipping provides cargo transportation Metinvest Group exercises
Azovstal Steel Plant is a modern, high- and dispatch services for vessels in the Sea of strategic management of Do-
technology company producing a wide Azov ports. kuchayevsk Flux and Dolomite
range of steel products. Plant, Novotroitskoye Mines
SALES DEPARTMEnT, STEEL AnD ROLLED Management, Krivbassvz-
Ilyich Steel Plant in Mariupol is one of the PRODUCTS DIvISIOn ryvprom Explosives Company,
largest companies in Ukraine and has a full Metinvest International S.A. is responsible and Krivoy Rog Iron Ore Plant
steel production cycle. for the sale and export of Metinvest Group within the framework of the
rolled steel products. share holdings it belonging
Yenakiyevo Steel Plant (YeMZ) and Met- to the Group. SCM Limited
alen (together – YeMZ Group) are the Metinvest Ukraine is responsible for sales (Cyprus) owns the shares of the
world leaders in steel billet production. and marketing of the steel products pro- stated enterprises.
duced by Azovstal Steel Plant, Yenakiyevo
Makeyevka Steel Plant is high-technology Steel Plant, and Makeyevka Steel Plant in
company with the most modern steel rolling Ukraine and CIS countries.
mills in Ukraine: medium-section mill-390
and wire mill-150. Metinvest Eurasia is responsible for selling
Azovstal Steel Plant, Yenakiyevo Steel Plant,
Khartsyzsk Pipe Plant (KHTZ) is the largest and Makeyevka Steel Plant’s products in Russia.
producer of straight-seamed electro-welded
large diameter steel piping in the CIS. Metinvest SMC is a steel stockholding com-
pany selling the products of Metinvest Group
Promet Steel JSC is a steel rolling plant, pro- Enterprises to customers in Ukraine and East-
ducing rolled sections and structural shapes. ern Europe.
It is located in Burgas (Bulgaria).
ASSOCIATED COMPAnIES3
Metinvest Trametal S.p.A. is a leader in Zaporozhkoks (Zaporozhye Coke and

SCM Group bussiness
Italian and European markets for structural Chemical Plant) is Ukraine’s leading coke
carbon steel plates. and chemical enterprise.

Spartan UK Ltd. is the only producer of Donetskkoks (Donetsk Coke and Chemi-
high-quality steel plates in the United King- cal Plant) is one of Ukraine’s largest coke
dom. and chemical enterprises.

Ferriera valsider (Italy) is a steel plant pro- Dokuchayevsk Flux and Dolomite Plant
ducing structural rolled steel. (DFDK) is one of Ukraine’s largest mining
029
enterprises, specializing in fluxing limestone
Prometei is among the most important play- and dolomite extraction and processing.
ers in Ukraine’s iron and steel scrap market.

novotroitskoye Mines Management is a Krivoy Rog Iron Ore Plant is Ukraine’s larg-
large mining enterprise, specializing in lime- est producer of iron ore.
stone and dolomite extraction and processing.

Krivbasszvryvprom Explosives Company
is an industrial production enterprise, spe-
cializing in explosion works in Ukraine’s open
cast mines.

metinvest gRoup Financial inDicatoRs, $ m
Indicators 2009 2010 Dynamic,%

Asset Value 12,170.0 14,668.0 +20.53

Sales Volume 6,026.0 9,357.8 +55.29

Net profit (loss) 334.0 437.0 +30.84

EBITDA 1,400.0 2,552.0 +82.29

Metinvest Group
key production
indicators
dynamics,
thousand tonnes
030


Production
indicators, iron
ore division,
thousand tonnes

Production
indicators,
steel and rolled
products division,
thousand tonnes

031 SCM Group bussiness

Production
indicators, coke
and coal division,
thousand tonnes

Metinvest Group
sales geography
2010,
%
032


metinvest gRoup sales geogRaphy 2010, $ m
Indicators Steel Coke and coal Raw iron ore Total

Ukraine 1,282 681 1,490 3,453

South-East Asia 855 3 625 1,483

Europe 1,898 17 348 2,263

CIS 880 34 - 914

Middle East and North Africa 729 37 38 804

North America 10 358 - 368

Other 54 19 - 73

Total 5,708 1,149 2,501 9,358

Focus points of the year

Metinvest became the controlling share- by CARES, the British Certification Agency of
holder of Ilyich Steel Plant in Mariupol. The Reinforcing Steel. As result, the plant’s prod-
acquisition of the plant is an important step ucts were declared compliant with technical
towards implementing the Group’s long- processes and met the UK’s quality standard
term strategy, aimed at enhancing vertical BS4449:11997 (reinforcing steel).
integration, achieving maximum production
effectiveness in Ukraine, and strengthening Metinvest became the first company in
the company’s market positions. Ukraine to launch production of reinforcing
bars with negative tolerance, according to
Metinvest completed the process of integrat- DSTU 3760-2006. In November 2010, the
ing Makeyevka Steel Plant into its Steel and first shipment of reinforcing bars, produced
Rolled Products Division. in compliance with the new quality stand-
ard, was made.

SCM Group bussiness
Metinvest Eurasia opened new warehouses
in Voronezh, Volgograd, and Mineral Waters Metivnest successfully completed the regis-
(Russia). Currently, Metinvest Group has 16 tration procedure, in compliance with EU’s
regional warehouses in Russia. directive #1907/2006 (REACH). Comply-
ing with REACH ensures that the Group’s
C4Gas S.A. (France), the main common enterprises will be able to continue shipping
sourcing portal of major European oil and products to clients in EU after November 30,
gas companies, successfully completed the 2010.
certification procedure of Metinvest Group’s
033
products and sales system. Green Gas International B.V. and Krasno-
donugol signed an agreement for the utili-
Yenakiyevo Steel Plant successfully completed zation of methane from the Sukhodolskoe-
a product quality supervisory audit, conducted Vostochnoe Mines Management Company.

The project will allow ultilisation of close to $187.6m, while in 2010 the total invest-
20m3 of methane per year. The annual de- ment was $12.9m. The implementation of
crease of greenhouse gas emissions into the this project will allow the plant to increase
atmosphere resulting from the project will annual production capacity to 14.7m tonnes
amount to 200-250 thousand tonnes in of concentrate and 13.7m tonnes of pellets.
CO2 equivalent. InGOK continued the construction of a sec-
ond launching platform for magnetic floata-
Metinvest was awarded another Climate Ac- tion beneficiation of iron ore concentrate.
tion certificate for participating in environ- The new platform will increase volume of
mental programs, aimed at following CO2 iron ore concentrate with 67% of iron con-
emission norms. According to the preliminary tent and lowered content of silicon dioxide
calculations, the planned environmental activi- (4.3%) produced from 3.2m tonnes to 6.8m
ties will allow Metinvest Group’s enterprises to tonnes annually. The volume of investment in
decrease the volume of greenhouse gas emis- 2010 amounted to $7.3m. The total volume
sions into the atmosphere by more than 8m of investment will amount to $38.8m.
tonnes in CO2 equivalent during 2008-2012.
The total volume of investment in upgrading
the main production equipment of Metinvest
Investments Group’s three ore mining and enrichment
plants amounted to $51.6m.
The total volume of Metinvest Group’s in-
vestment in 2010 amounted to $582m (ex- The total volume of investment in maintain-
cluding M&A). ing the production capacity and capital re-
pairs of Iron Ore Division amounted to ap-
Iron Ore Division proximately $200m.
SevGOK began iron ore mining at Pervomay-
sky open cast mine, using cyclic-and-continu- Coke and Coal Division
ous technology, which will allow it to maintain During the year, Krasnodonugol put 8 new
the level of iron ore output at 22.5m tonnes coal faces into operation, with total project
per year. In 2010, the volume of investment in investment volume amounting to $32.1m.
the necessary production equipment amount- The total investment in upgrading production
ed to $14.7m. The total volume of project in- equipment and implementing environmental
vestment will amount to $315.3m. and occupational safety programs at Krasno-
donugol amounted to $48.9m.
Also, in 2010 SevGOK renewed its program
of upgrading the equipment, used to pro- The volume of investment of Avdeyevka Coke
duce pellets and to enrich iron ore concen- and Chemical Plant in maintenance and up-
trate. The total project budget amounts to grading of production equipment, aimed at
034


producing high quality coking coal, as well as The overall level of investment in maintenance
in environmental, resources efficiency, and IT- and capital repairs of Steel and Rolled Products
development programs amounted to $9.4m. Division amounted to approximately $70m.

The total amount of the plant’s investment in
equipment maintenance and retrofitting to Loans
achieve the strategic goal of satisfying 100% of
Meinvest’s internal demand for proper quality In May 2010, Metinvest B.V. (Netherlands)
coke for steel production amounted to $13.6m. placed $500 Eurobonds at a coupon rate of
10.25%, due on May 20, 2015. The fund-
United Coal Company continued implementing will be used for further modernization of
ing the construction of the Affinity Coal Min- the Group’s enterprises.
ing Complex project. The mining complex
consists of the mine with four mining sections On July 29, 2010 Metinvest signed a $700m
and a coal enrichment factory, equipped with three-year syndicated pre-export loan facility.
high-speed railway shipping station. In 2010,
the project investment was $19.5m.

Steel and Rolled Products Division
Azvostal Steel Plant continued the construc-
tion of a controlled cooling system for its steel
plate production facilities. The project will allow
the plant to expand its range of sheet produc-
tion and roll products using high durability steel
grades, with lower production costs. The sum
invested in 2010 amounted to $3.1m. The to-
tal project investment to date is $14.9m.

Yenakiyevo Steel Plant continued the con-
struction of blast furnace #3, which will al-
low it to reduce the amount of coke used in

SCM Group bussiness
cast iron production to 463 kg / tonne and
to minimize the intensity of iron discharge – to
1000 kg / tonne. In 2010, the project invest-
ment volume amounted to $57.8m. The total
investment volume will amount to $220.9m. 035

Energy. DTEK

DTEK is the largest private vertically integrat- Komsomolets Donbassa Mine is one of the
ed energy company in Ukraine, and includes largest producers of thermal coal in Ukraine.
20 enterprises, located in Donetsk, Dnepro-
petrovsk, Lugansk, and Zaporozhye Oblasts. Mospinskoye Coal Enrichment Plant
(CEP) is a producer of enriched coal and con-
The company occupies leadership positions centrate for thermal power plants (TPPs).
in Ukraine’s coal mining, thermal power gen-
eration, and distribution industries, as well as Pavlogradskaya Coal Enrichment Plant
implements a range of projects in alternative is one of the largest coal enrichment enter-
energy. prises in Ukraine.

DTEK Holdings B.V. (Netherlands) is the Kurakhovskaya Coal Enrichment Plant
holding company for DTEK and is 100% produces coal concentrate for thermal power
owned by SCM Group. plants.

Donbass Fuel and Energy Company (DTEK) is Dobropolskaya and Oktyabrskaya Coal En-
the managing company for DTEK. richment Plants are producers of enriched coal.
4
The total number of DTEK
employees (including associated DTEK enterprises employ approximately POWER GEnERATIOn
companies) exceeds 80 thousand 42,000 people4. vostokenergo is a power-generating company.
people
POWER DISTRIBUTIOn
DTEK enterprises PES Energougol manages 395 substations in
Dnepropetrovsk and Donetsk Oblasts.
COAL MInInG AnD EnRICHMEnT
Pavlogradugol is the largest coal mining en- Service Invest manages 81 substations in
terprise in Ukraine. Dnepropetrovsk and Donetsk Oblasts.

DteK Financial inDicatoRs, $ m
Indicators 2009 2010 Dynamic,%

Asset Value 2,531.5 3,219.9 +27.19

Sales Volume 1,926.4 3,061.6 +58.93
036

Net profit (loss) 109.9 360.0 +227.57

EBITDA 402.0 722.0 +79.60


TRADInG kets. In Ukraine, its main customers are local
DTEK Trading carries out coal trading opera- energy generation companies, large metal-
tions in Ukrainian and international markets. lurgy companies, and other industrial en-
terprises. Last year, the company exported
Power Trade exports electricity to European approximately 2m tonnes of coal, exceeding
and CIS markets. the 2009 results two-fold (764 thousand
tonnes). The coal was exported to customers
ALTERnATIvE EnERGY in Turkey, Bulgaria, Poland, Romania, India,
Wind Power implements wind energy projects. Brazil, and the USA. Besides, the company im-
ported 1.3m tonnes of coal to supply DTEK’s
ASSOCIATED COMPAnIES thermal power plants.
Dneproenergo is Ukraine’s second largest
electric power producer. Since January 2010, DTEK has been distrib-
uting electric power to consumers in Hun-
Donetskoblenergo specializes in electric gary, Slovakia, Romania, Moldova, and Be-
power distribution and supply. larus. During 2010, the company exported
1.21bn Kw/hour of electric power.
Kievenergo is a thermal and electric power
producer and supplier. DTEK increased its stake in the statutory capital
of Kievenergo to 39.98%. The company oper-
ates a unique power complex with a full produc-
Focus points of the year tion cycle in Kiev covering thermal and electric
energy generation, transport, and distribution.
By the end of the year, DTEK’s enterprises
demonstrated substantial growth in their DTEK and other SCM Group companies in-
production indicators. Coal mining increased creased their stake in the statutory capital of
significantly, amounting to 19.2m tonnes; Zapadenergo to 24.99%.
total electric power output (including Dne-

SCM Group bussiness
proenergo) increased to 30.7bn Kw/hour The company launched DTEK Academy, the
while total power distribution increased to corporate university, to serve as a unified
13.3bn Kw/hour. One of the key factors in center for knowledge management for all the
the high growth of coal production was the Group’s enterprises. Annually, DTEK Acad-
use of high-capacity mining equipment and emy accepts 1,500 of the company’s best
innovative technologies in 2008-2010. employees who study within the framework
of specialized programs. DTEK top manag-
In 2010, DTEK Trading carried out coal trad- ers and tutors from the best local and foreign
ing operations in domestic and foreign mar- business schools teach at DTEK Academy.
037

DteK Key pRoDuction inDicatoRs, $ m
Indicators 2009 2010 Dynamics, %

Coal mining, thousand tonnes: 17,635.8 19,164.5 +8.67

Thermal coal 14,618.1 17,134.1 +17.21

Coking coal 3,017.7 2,030.4 (32.72)

Coal enrichment, thousand tonnes:

Raw coal enrichment 11,607.4 12,490.0 +7.6

Concentrate production 7,625.8 7,738.0 +1.47

Power generation, m, KW/h

Power generation, Vostokenergo 14,504.7 16,352.6 +12.74

Power generation, Dneproenergo 11,788.6 14,331.9 +21.57

Power distribution, m, KW/h

Volume of power purchased from Wholesale
11,802.0 13,287.0 +12.58
Energy Market

Power distribution
dynamics,
m Kw/h
038


Investments

The total volume of DTEK investment in 2010 DTEK’s coal enrichment enterprises imple-
amounted to $276m (excluding M&A). mented a range of investment projects,
including the installation of centrifuges at
Coal mining and enrichment Dobropolskaya CEP; modernization of wa-
Pavlogradugol put into operation a new rock ter-slurry system at Oktyabrskaya CEP; and
winding set at Stepnaya mine. This set serves development of a water-slurry system at
as important link in the technological chain Mospinskoye CEP.
of mining coal from the field of 37m tonnes.
The new set will also allow faster preparation DTEK signed investment agreements with two
and lower energy consumption (25% less) state-owned enterprises: Rovenkyanthracite
when making Stepnaya mines coal faces and Sverdlovanthracite. The respective invest-
ready for mining. The total investment was ment agreements were approved by the Minis-
$5.2m. try of Coal Industry of Ukraine on July 9, 2010.
The investment agreements with both enter-
Blagodatnaya mine (Pavlogradugol) com- prises are valid for five years and are subject to
missioned a new heat pump system which possible extension. Under the signed agree-
allows it to use the warm water discharged ments, DTEK will finance technical upgrading
from the mine to heat the mining facilities. projects at both enterprises, using a public-pri-
Gradually, the implementation of the new vate partnership mechanism. Cooperation with
system will fully replace the current coal-fired these enterprises will allow DTEK to provide
boiler system, thus, significantly lowering the its power-generating plants with anthracite
water heating costs and reducing emissions. coal. The total volume of DTEK’s investment in
The total investment was $0.4m. Rovenkyanthracite and Sverdlovanthracite will
amount to $37.9m and $25.3m, respectively.
Pavlogradugol purchased 18 tunneling ma-
chines and 7 coal cutters, 13 belt conveyors Power generation
and 7 scraper conveyors, at a total cost of Dneproenergo renovated 18 of the 25 power
$29m. generating units it operates. The renovations
were aimed at prolonging the service life of

SCM Group bussiness
Komsomolets Donbassa mine purchased the units and increasing the reliability of boil-
new modern equipment: 9 belt conveyors, er and turbine equipment. The reconstruc-
80 powered roof support sections, a coal tion of power generating units #9 at Pridne-
cutter, and a scraper conveyor, at the total provskaya TPP and #3 at Krivorozhskaya TPP
cost of $14m. is approaching completion. Both units are 039

scheduled to be put back into operation in increase the reliability of energy supply to
the second half of 2011. end-consumers. Additionally, 6 kV electric
wiring was installed at Oktyabrsky Rudnik
Following the reconstruction of generating and Skochinskogo mines, to secure the back-
unit #1 at Zuevskaya TPP (Vostokenergo) its up energy supply to the mines.
energy output increased from 300 to 325
MV. The total volume of investment amount-
ed to $23m. Loans
Following the reconstruction of generating In April 2010, DTEK Finance B.V. (daughter
unit #7 at Kurakhkovsaya TPP (Vostokener- company of DTEK Holdings B.V.) placed a
go) its energy output increased from 210 to $500m Eurobond issue with a coupon value
225 MV. The total volume of investment in of 9.5%, due on April 28, 2015.
2010 amounted to $15.4m.

Power distribution
Service Invest completed the reconstruc-
tion of Vozrohdenie substation, resulting in
increasing its power from 35kV to 110 kV.
The total volume of investment amounted to
$3.8m.

Service Invest also completed retrofitting
the equipment of HSKPZ-1 substation with
110/35/6 kV voltage indicators, which
supplies power to the largest enterprises of
Donetsk Oblast, to increase the reliability of
power supply. The total volume of invest-
ment amounted to $1.6m.

PES Energougol installed 26 km of 0,4 KWt
electric wiring, using the self-carrying iso-
lated cable, which allowed it to significantly
040

SCM Public Report 2010

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