Activities supporting the strategy

Supporting activities are an important element in achieving the targets specified in the Strategy and generating substantial productivity improvements. These include the transport and logistics area, development of IT infrastructure and systems and introduction of solutions that reduce environmental impact. Support activities are performed within programs and specific functional strategies.

JSW Group's Project and Program Management Methodology

Implemented since 2017, project-based management of JSW Group's key investments, research and development and organisational activities is an inherent element of our Strategy. The Project and Program Management Methodology, adopted in 2018 and continuously updated, introduces structured and consistent management of strategic projects across all of the Group's companies. Cyclical information on progress in achieving strategic objectives, as defined in the Strategy, is delivered through a project management system.

JSW Group's gradual transformation into a project-based organisation is related to the dynamic development of project management processes across the entire organisation, an ever-greater number of projects, the degree of their complexity and interdisciplinary nature mean that project management know-how is constantly being enhanced, which translates into stronger competences across the entire Group.

Project Management Academy

JSW Group's Project Management Academy, launched in 2019, went through profound changes in 2020, focusing on training related to Enterprise Project Management, which is being implemented. The SARS-CoV-2 pandemic very strongly influenced the decision to change the formula and limit training - training was mainly carried out online.

However, the main objective of the Project Management Academy remained unchanged. The Academy aims to advance knowledge, develop competences and exchange good practices. It is also tasked with harmonising rules for implementing projects and investments at JSW Group. The Academy's motto states that "all process participants must know and understand the existing rules." The following training is available at the Project Management Academy:

  • Training in Program and Project Management Methodology at JSW Group
  • Training concerning project planning
  • MS Project training (basic and extended)
  • Enterprise Project Management training

215 people were trained by the PMO team as part of the Project Management Academy. Thanks to these activities, the Academy's participants gained additional competences, without any additional training costs for JSW Group.

In 2020, additional people became certified by IPMA Polska Association. The people who received the certificate confirmed their highest competences in project management:

  • IPMA A for experienced project directors managing very complex projects, programs and portfolios at a strategic level (1 certificate).
  • IPMA B for experienced project managers managing complex projects, programs and portfolios (1 certificate).
  • IPMA C for people acting as project managers managing moderately complex projects and members of project teams (3 certificates).

Deployment of Enterprise Project Management (EPM)

Enterprise Project Management (EPM) is a comprehensive work environment for projects and project management that facilitates better access to EPM data. It will support projects and initiatives across the organisation, initially those that fall under the Program and Project Management Methodology and eventually the Group's entire investment portfolio.

Software development works were intensified in 2020 in line with the EPM system deployment schedule. The deployment is divided into two phases in line with the plan and pre-deployment analysis:

  • Phase I - June 2020 - the strategic module was launched, making it possible to develop scenarios for portfolios and programs through project prioritisation in support of decisions taken by JSW's Management Board in pursuing JSW Group's strategic objectives - this is the first deployment of the strategy module in Poland
  • Phase II - November 2020 - availability of full system functionality, encompassing the entire project management process described in the Program and Project Management Methodology.

The pace at which JSW Group's project management system is expanding and the number of projects being implemented mean that the next step will be to create a know-how library covering both the existing procedures, regulations and a comprehensive set of project documentation, starting from project initiative to lessons learned, and the EPM will be a support tool for this.

Functional strategies

Financial strategy

The Group's operations are highly susceptible to economic conditions, capital-intensive and feature long periods of return on investment. During prosperity on the coal market, the Group generates strong positive cash flows, while during downturns it needs financing for negative free cash flows. Financial institutions' perception of the coal industry as a high-risk industry is a very important element that causes difficulties in accessing stable short- and long-term debt financing and thus expands challenges related to managing the capital structure when the cyclical factor is high.

Due to the highly cyclical nature of its financial results, JSW Group strives to maintain diversified financing sources also when it has cash surpluses. Equity and debt (credit facilities, loans, leases, etc.) are the key financing sources for the Group's assets.

The main objectives of the Group's financing strategy include:

  • securing a stable financing structure by seeking to reach and maintain at least a 50% share of equity in the equity and liabilities structure and coverage of non-current assets with equity.
  • striving to adapt the average maturity of financing to the period of return on the assets being financed,
  • making decisions to ensure a level of funding that will be sufficient to maintain the continuity of operating and investing processes at an expected level,
  • searching for the most effective forms of financing in a given period, while ensuring appropriate maturities,
  • striving to maintain a cash buffer for the Group,
  • seeking to maintain a stabilisation fund during good conditions on the coal market, effectively managing the Group's financial risk.

Investments in FIZ asset portfolio

The fund JSW Stabilizacyjny FIZ was established in 2018, with PLN 1.5 billion in funding. A further PLN 300 million was injected into the fund at the end of 2018. The net value of FIZ's assets at the end of 2020 was PLN 490 billion. The main reason for the formation of JSW Stabilizacyjny FIZ was to limit the impact of product price volatility risk on the continuity of operating and investing activities by providing liquidity during down-turns on the coking coal market.

Activities undertaken in 2020:

In the light of JSW's difficult liquidity position, several decisions were taken to redeem JSW Stabilizacyjny FIZ's investment certificates totalling PLN 1 398.9 million. These decisions were mainly dictated by market conditions, including the coal prices prevailing in global markets, and major investment expenditures. The funds were used in accordance with the Fund's objective.

Credit facilities and loans

In connection with the necessity to secure long-term financing sources, the Group is negotiating with financial institutions. Hence, credit facilities and loans are one of the dominant financing sources. The following are key financial agreements ensuring long-term financing for assets: Financing agreement with financial institutions for a total amount of PLN 460 million and the USD equivalent of PLN 300.0 million, and loan agreements executed the Voivodship Fund for Environmental Protection and Water Management (WFOŚ) and National Fund for Environmental Protection and Water Management (NFOŚ) intended to finance major investments.

Activities undertaken in 2020:

As a result of a very difficult liquidity situation and the adverse impact of the coronavirus pandemic caused by the spread of COVID-19, the Group obtained financing under the "PFR Financial Shield for Large Corporates" in the form of a PLN 1 billion liquidity loan and a PLN 173.6 million preferential loan for JSW and a PLN 24.9 million preferential loan for JSW Koks.

Given the very significant share that these agreements have in the financing structure and the complexity of covenants and other obligations determining the Group's activities in the operating and strategic area, financing documentation constitutes one of the more important elements in shaping the Group's financial strategy.

Real cash pooling

The Group has a real cash-pooling system in order to more effectively manage current financial liquidity. This is also an intra-group financing mechanism. The Group's financial strategy provides for active access to intra-group financing for each company within the structure.

Energy strategy

JSW Group is working on economic uses for the by-products of coal and coke production. This is intended to enhance security and improve the Group's operational performance. In 2019, JSW's Management Board adopted the JSW Group Energy Strategy 2020-2030, which sets out the key objectives and development directions for the Group in the area of producing and managing energy.

Aside from being an electricity customer, JSW Group also holds a concession for electricity generation, trade and distribution. One of the Group's strategic objectives is to become self-sufficient in terms of energy. This is why we are implementing projects related to the economic utilisation of methane and the construction of the Radlin CHP, which will use coke oven gas to produce energy and heat.

Samowystarczalność energetyczna

96%
Energy consumption in 2025 will come from JSW's own sources
100%
Planned energy use of the included menthan in 2025
39%
Use of the captured methane in 2020
95%
Energy use of coke gas in 2025
1,5 TWh/year
The volume of genergy produced from methane and coke oven gas in the JSW Capital Group in 2025
222 Mwe
Installed production units capacity at the JSW Group in 2025

The implementation of the investment (budget about PLN 340 million) in KWK Knur & oacute; in Szygłowice and KWK Budryk related to the management of methane in 2018-2030 will allow for a potential more than fivefold increase in electricity production by gas engines from about 78,000 MWh in 2019 to about 312,000 MWh, starting from 2022 to approx. 450,000 MWh in 2025.

Main goals

  • Energy self-sufficiency of the JSW S.A.Group in 2030
    • Energy from coke oven gas
    • Energaia z metanu
    • Energy from methane
  • Production of ecological energy for own needs
  • Increase in economic efficiency

Investments related to the economic use of the included methane for the production of electricity will bring the economic effect in the form of reducing the costs of energy consumption by approx. PLN 65 million (approx. PLN 200 / MWh) in 2022. EU ETS the costs of obtaining these allowances for the mines Budryj and Knur & oacute; w-Szczygłowice are estimated at approx. PLN 0.5 billion / year (at a price of approx. EUR 40 / Mg).

Energy self-sufficiency

Aside from being an electricity customer, JSW Group also holds a concession for electricity generation, trade and distribution (JSW KOKS S.A.). One of JSW Group's strategic objectives is to strive for energy self-sufficiency by increasing the level of internal electricity generation. The program includes three projects: "Economic use of methane" being implemented in KWK Budryk and KWK Knurów and "Construction of Radlin CHP," which will use coke oven gas to produce energy and heat. JSW Group's installed generation capacities are currently at approx. 136 MW, including approx. 26 MWe at JSW's mines.

Economic utilisation of methane

This investment consists of expanding the infrastructure for JSW to generate electric and thermal energy using methane obtained by draining the Company's mines.

The investment's main objectives are as follows:

  • prevention in the area of occupational health and safety with regard to the methane hazard - sequestration,
  • environmental protection - reduction of methane emissions into the atmosphere,
  • larger economic benefits - utilisation of methane to produce energy.

Methane from coal seams will be processed into electricity used for internal purposes in the process of coal production.

JSW Group Energy Strategy 2020-2030

02_strategia_energetyczna_en 60 MWe 1 2 3 4 13.8 MWe Construction of the Radlin Combined Heatand Power Plant in JSW KOKS until Q4 2021 Energy self-sufficiency in 2022, in some hours of the day with an option to sell surplus Energy on the power exchange. 138 MWe 110 MWe 1.5 TWh/year 99% 200 MWe 2x concession

Innovation strategy

JSW Group's strategy for developing the innovation area (R+D+I) constitutes a response to the changing market, technological and regulatory conditions in which a modern extractive-industry enterprise operates. Given the globalisation of trade in coking coal and coke, being the EU leader in their production does not insulate JSW Group from challenges brought on by the market environment, instead forcing us to become a company that sets development directions for the entire industry. The sector's key challenges include production cost reduction by improving operational efficiency, continuous improvements in product quality and incorporating challenges related to safety, environmental protection and social responsibility in all aspects of the business.

High and stable production quality is playing an increasingly important role in view of the changes taking place on the coal and coke markets. Stricter requirements from the steel industry, supported by competitors from Asia and Australia, necessitate investments in innovations to raise the quality of products and ensure stability.

Using modern IT tools to obtain better knowledge of minerals, optimise production costs and increase safety is JSW Group's response to the development of industry 4.0 in global mining, as manifested in our R+D+I Strategy.

The main objectives of JSW's R+D+I activities are as follows:

  • improvement in workplace health, safety and culture,
  • diversification of JSW S.A.'s core business,
  • development of energy efficiency and reduction of environmental impact through optimal use of own energy resources.
  • transition to circular economy along with reduced environmental footprint.
  • continuously raising product quality and taking into account challenges related to safety and social responsibility in all aspects of the business.
  • digitalisation of production and technological processes in the area of coking coal mining and coke production.
  • rationalisation of resource management.

IT/OT strategy

The role of IT in mining enterprises - so far usually understood as activities related to the processing of information, servicing of equipment, building networks, providing internet services or operating systems - is increasingly changing and becoming more important. Given the specific nature of JSW Group's activities, aside from its "traditional" definition, IT also applies to industrial IT, which supports coal mining and processing ("OT").

This change in approach results from the business needs that are specified in the Strategy, which explicitly emphasise the role of IT and OT in improving performance in coal mining and processing and other business processes. Four strategic areas have been defined in connection with this:

Safety

  • safety of mining crews
  • operational safety, understood as the capacity to ensure continuity of production and operational processes
  • technology safety - cybersecurity

Integration and automation

  • integration and automation of implemented IT and ICT solutions
  • wider and better use of ICT data to increase the performance of key production and organisational processes
  • ensuring support for all technological processes throughout the coal and coke production cycle

Development technologies

  • use of the latest technologies and operational methods
  • implementing the latest methods for teamwork organisation and managing IT/OT projects

Organisation and competences

  • development and expansion of the IT team to a sufficient scale and with appropriate competences
  • implementing IT management organisation and processes

Strategic and tactical objectives in the IT/OT Strategy.

02_brak_tytulu_en By working with JSW Group companies in a partnership model, IT creates innovative ideas and delivers modern technological IT/OT solutions that enhance the efficiency, quality and security of key economic processes IT/OT systems integration and automation of business processes at JSW Group Use of simulation environment for deployment of JSW 4.0 technologies Greater maturity of IT/OT management processes Digitalisation of key processes in business strategy areas Platform build for IT/OT development process management Adaptation of resources and competences to IT/OT Strategy Expansion and integration of data exchange tools and development of analytical and reporting solutions Expansion of shared IT/OT infrastructure and architecture in the entire coal – coke cycle Greater IT/OT systems integration and automation of business processes Increase in the organisations IT/OT performance and competences 1 2 3 4 IT/OT mission IT/OT vision Strategic IT/OT objectives Tactical IT/OT objectives A B C D

Quality strategy

Dynamic changes in the global economy and in global fuel and commodity markets are forcing producers to maintain product quality parameters at precisely defined levels.

Modern management and planning of production processes assumes a far-reaching optimisation of multiple factors that affect the final product. As a leading supplier of high-quality coking coal and coke, JSW is continuously working on improving and monitoring the production process in order to meet market requirements.

The following documents concerning quality management were accepted for implementation in October 2019:

  • JSW Group's Product Quality Strategy 2020-2030 - outlines the business context and key activities as regards product quality, key challenges and expectations as well as overriding and strategic objectives.
  • JSW Group's deposit and product analysis quality management policy - outlines responsibilities and framework rules concerning the process of managing the quality of deposit analysis and products throughout the entire coal and coke production cycle at the Group and implements guidelines from the business strategy in the area of managing quality surveys, intended to ensure the on-going monitoring and supervising of product quality throughout each production stage.

The Quality Strategy's overriding target is to increase the effectiveness of managing deposit and product quality through:

  • stabilising the coking parameters of coal and coke
  • achieving the expected quality parameters for commercial products
  • optimising the cost of feedstock mixtures
  • standardising, automating and integrating sampling and analysis processes for coal quality online

Activities undertaken in 2020:

In October 2020, JSW S.A.'s Management Board set up a working team tasked with formulating an operational model where JSW would shift toward the production of coking coal predominately. The team analysed the coal resource base and the technological lines at processing facilities in terms of achieving the objective - coking coal representing 100% of production. It was assumed that after the change of operational model and with the implementation of replacement and development investments at the mechanical coal processing facilities at each mine, JSW could predominately produce coking coal from 2031.

One such investment was completed at the mine Ruch Szczygłowice in November 2020. The final handover process for a modernised mechanical coal processing facility at the mine Ruch Knurów began in the first quarter of 2021.

Product Quality Policy at the JSW Capital Group

02_polityka_jakosci_en Implementingorganizational changes Building the Quality Office team Organization Preparing the Quality Strategy Defining the list of strategic projects Acceptance of the SteeringCommittee and of the Management Board Strategy Implementingthe Quality Policy Continuing to develop and update the Quality Policy Quality Policy Planning and launchingthe portfolio of strategic projects Strategic projects Operations

Transport strategy

JSW Group's transport areas mainly cover the management of rail infrastructure, railway siding operations, transport and forwarding services. The Group's transport and forwarding activities are focused on supporting product sales processes and include the purchase of transport services as well as port and forwarding services.

The Transport Strategy was developed in the light of the need to ensure timely deliveries and reduce the the risk of insufficient rolling stock of appropriate quality to meet the Group's product sales needs. JSW Group's value will be built as part of this strategy through:

  • supporting the sales process by professionally cooperating with rail carriers
  • optimising costs
  • continuously analysing the process in terms of potential changes in how certain elements of logistics are performed, depending on business needs
  • optimising rail infrastructure
  • generating the effect of scale in relations with service providers by focusing supervision and competences in the area of transport and forwarding activities
  • ensuring the continuity of comprehensive rail sidings services
  • expanding our own carrier's rolling stock in order to secure a larger market share in cargo (rail) transport and ensure that costs are market-based.

Extractive waste management strategy

Geological and mining conditions in the mines and strict quality requirements that the production of commercial coal must meet result in large quantities of extractive waste being generated in mining and coal processing.

An analysis of the entire production cycle shows that there is room for reducing such waste and for using it in engineering or technical construction. Despite the Group's wide-ranging activities, because of the significant volume of waste, the options for its use are limited due to its physical and chemical properties and logistics problems. So far, it is still not possible to completely recycle it.

This is why it is exceptionally important to undertake activities intended to secure the existing volume reserves, intended to manage waste on the surface, and build new ones so that waste management is carried out in a rational and planned manner, taking into account economic, social and technical conditions.

JSW Group strives to very rationally approach the subject of generating and managing waste. To this end, an Extractive waste management strategy was put in place in 2019. The strategy aims to indicate the directions and means for handling waste that is generated by JSW's mining facilities. The strategy sets out in detail the directions for extractive waste management currently and in the coming years and indicates activities that optimise the waste management process and proposes promising directions. The key directions being pursued in 2020 were as follows:

  • production and sale to external customers of mine rock aggregates,
  • production and internal use of mine rock aggregates,
  • recovery of waste in waste management facilities,
  • recovery of waste on land subject to rehabilitation,
  • disposal of waste at the Central Extractive Waste Landfill,
  • use of extractive waste and mine rock aggregates to rectify mining damages, fill in land that was adversely transformed,
  • sale and internal use of unprocessed waste.