JSW SA - Jastrzębska Spółka Węglowa SA

Execution of an agreement on the free-of-charge transfer of the Krupiński mine to Spółka Restrukturyzacji Kopalń S.A.

On 31 March 2017, an agreement was signed by and between JSW and Spółka Restrukturyzacji Kopalń S.A. in Bytom (“SRK”) pertaining to the free-of-charge transfer of an organized part of JSW’s business in the form of the Krupiński mine to SRK. These measures are being taken under the Group’s restructuring process while following the procedure contemplated by the Act of 7 September 2007 on the Functioning of the Hard Coal Mining Industry. As a consequence of the agreement signed, 1.1 thousand JSW employees moved to SRK under the procedure contemplated by Article 231 of the Labor Code. In 2007-2016 the Krupiński mine generated in total PLN 1.03 billion of cash loss, i.e. on average PLN 102.7 million per annum. Consequently, this transaction will contribute to cutting JSW’s operating expenses. At the same time, a new section called the Suszec Section in the Pniówek mine was opened, using the assets (property, plant and equipment) forming part of the Krupiński mine but which were not transferred to SRK, to realize the tasks associated with recovering and transferring the spunoff assets of the Krupiński mine contemplated to be utilized in JSW’s units.

JSW relisted on the WIG 20 index

After the session on 17 March 2017, JSW was relisted on WIG 20, the index of the biggest and the most liquid companies on the WSE. For international and domestic investors the WIG 20 index, which generates large part of the trade on the WSE, is a point of reference for their investments, and for the company an incentive to continue to build shareholder value..

Research program for the development of state-of-the-art mining

On 13 March in Katowice, JSW and the Central Mining Institute signed a letter of intent on a joint research program for the development of state-of-the-art coal mining technologies and revitalization of post-mining areas. The purpose of this research program is to maintain the competitiveness and security of the Polish fuel and power sector through the transfer of top knowledge and the implementation of innovative solutions and technologies.

World’s leading technological solutions at JSW

JSW, the Central Mining Institute and Joy Global (Poland) signed a trilateral memorandum of agreement regarding the use of independent bolting supports in JSW mines. They are the basic element ensuring safety of maintenance of headings. Implementation of efficient mining technologies in American and Australian mines is expected to contribute to real reduction of coal mining costs. The signatories will conduct research works and develop specialist documentation regarding the possibility of safe application of this technology in JSW mines.

Agreement between the township of Gierałtowice and JSW

JSW signed with the Gierałtowice Township a memorandum of agreement in which JSW’s Budryk mine undertook to supply the township with 10 cubic meters of methane per minute. Gierałtowice wants to use the methane of production of electricity and heat. However before the township starts generation of electricity and heat The memorandum allows the township to apply for subsidies for construction of a pipeline and a co-generation system. Methane will be transported to Gierałtowice from the methane removal station, which was built two years ago by shaft VI in Chudów. One year ago, a 2x4 MW co-generation system was commissioned by the methane removal system. The system generates electricity and heat. The production of electricity in this system will be 5,000 MWh per month, which is 30 percent of the current demand for electricity of the Budryk mine.

Jobs and internships at JSW

An agreement was signed on 19 April 2017 in Jastrzębie-Zdrój on the possibility of participating in blue-collar and student internships. Students of the Silesian University of Technology and the AGH University of Science and Technology will be able to participate in internships in JSW’s units. On the very same day, Jastrzębska Spółka Węglowa S.A. signed an agreement to cooperate with Gliwice County (Powiat) to organize practical vocational training and give a guarantee of employment in JSW’s units to the graduates of Vocational School Complex no. 2 in Knurów. This agreement pertains to pupils commencing their scholastic efforts in the 2016/2017 school year.

Agreement concluded by JSW with the Minerals Economy Research Institute at the Polish Academy of Sciences

JSW signed an agreement to collaborate with the Minerals Economy Research Institute at the Polish Academy of Sciences on 9 May 2017. The cooperation will involve the use of modern tools and scientific knowledge in relation to coal mining and processing and the reclamation of post-mining areas.

Implementing key investments

The first investments started in the coal preparation plants at JSW’s mines. They will enable JSW to produce more high quality coking coal. To accomplish this objective investments are indispensable, above all in the coal preparation plants at the Budryk mine and in both sections of the Knurów-Szczygłowice mine. The bulk of these investment tasks are at the stage of tendering and preparing technical documentation, while the initial work has been kicked off in the Knurów Section.

Modern drones in JSW

The first test flights of airborne unmanned systems were held in mid May 2017 on the premises of the Pniówek mine. Drones outfitted with special equipment (cameras, sensors, software) deliver comprehensive solutions to companies. The initial tests highlight their enormous potential. They deliver knowledge about the status of surface infrastructure, the contours of the terrain, information for geodetic work, monitoring and environmental protection.

JSW as host of the International Mining Forum

The International Mining Forum of 2017 was held on 28-30 June 2017. JSW hosted this conference attended by more than two hundred experts and practitioners from across the globe. The leading motive of this year’s International Mining Forum was innovation in the mining industry. The forum was a prime opportunity to establish direct business contacts, do some research into sales markets and investment conditions and entrench robust relations.

Compulsory redemption of bonds

On 4 September 2017, JSW carried out an early redemption of bonds issued under the bond issue program established by the issue program agreement of 30 July 2014, as amended (“Issue Program”). The total value of the bonds redeemed on that date by JSW is PLN 127,230,000 and USD 22,740,000. In connection with the redemption, the bondholders gave their consent for the release of some of the collateral related to the bond issue.

Entry into force of the Act on Compensation Benefit due to the Loss of the Right to Free Coal Allowance

In connection with the entry into force of the Act of 12 October 2017 on Compensation Benefit due to the Loss of the Right to Free Coal Allowance, JSW will disburse, on behalf of the State Treasury, compensation benefits to eligible old-age and disability pensioners who apply for such benefits. The compensation benefits are financed from a special-purpose grant awarded by the minister responsible for the area of managing mineral deposits, pursuant to an executed agreement. According to the justification accompanying the Act, the awarded grant for disbursing the compensation benefits is not public aid.

Execution of an agreement with trade union organizations

On 5 December 2017, the JSW Management Board and the representative trade union organizations operating in JSW entered into an agreement on withdrawing from certain provisions of the agreement of 16 September 2015 suspending the payment of certain benefits, and on reinstating their payment on the rules from before the execution of the agreement. The agreement of September 2015 provided for the possibility of shortening the suspension of payment of certain remuneration components should JSW’s economic standing change. JSW’s Management Board, having carried out negotiations with the trade unions and having analyzed the bondholder agreement of 29 August 2016, signed an agreement on 5 December 2017 under which JSW will pay out the reinstated benefits in 2018 and 2019.

Stabilization fund

On 21 December 2017, JSW signed a cooperation agreement with PGE Towarzystwo Funduszy Inwestycyjnych S.A. and ALTUS Towarzystwo Funduszy Inwestycyjnych S.A. acting jointly as a Consortium (“TFI”) for the establishment and management of a Closed-End Investment Fund (“FIZ”) created by JSW. FIZ will strive to stabilize JSW’s current liquidity and curtail the impact of the risk of volatility of coal and coke prices on maintaining the continuity of the JSW Group’s operations and investments.

Reversal of the provision for free coal allowance

Pursuant to the provisions of the Act of 12 October 2017 on the Compensation Benefit Payable Due to the Loss of the Right to Free Coal, JSW disbursed the compensation benefits. Accordingly, JSW reversed a portion of the provision for potential litigations related to the payment of free coal allowance to JSW’s old-age and disability pensioners established by JSW in 2015. Out of the current provision of PLN 1.9 billion, approx. PLN 1.3 billion was reversed. The reversal of the provision had a favorable impact on JSW’s operating result in 2017 but did not trigger any cash inflows to JSW’s bank account.

Approval of the JSW Group’s Strategy for 2018-2030

On 19 December 2017, the JSW Supervisory Board approved the Strategy for JSW and the Subsidiaries of the JSW Group for 2018-2030 (“Strategy”). The Strategy’s focus is on long-term, stable and sustainable development ensuring JSW’s value growth, taking into consideration the expectations of its shareholders. This objective will be pursued through increases in the volume of coal mined and sold.