Presentation at McCloskey Russian Coal Markets Conference at St.Petersburg, 2009

1. European, Asian or Domestic
- which market is to attract
Russian coal and which be left
short of it?
Russian Coal Markets Conference
2009

2. In spite of reduction in prices the volumes for export are still high
Russian coal supply by market segment for first 7 months 2009,
thousand tons.
185,699
‐14%
160,155
Source: TsDU TEK

3. It’s a common knowledge that Russia is a marginal supplier on the
world market…
$/t
Russian CIF ARA cash cost compeBBve posiBoning, $/t 2008
80
Current Price
level
60
Indonesia
Russia
USA
Russia
40
Australia
South Africa
Columbia
20 South Africa
40 80 120 160
Source: Wood & MacKenzie

4. …and as it is marginal it is a price setter on the market.
Russian Delivered Coal Cost vs Price on the market (API2)
(CIF ARA)
72 70
59
89
Source: TsDU TE, Rosinformugol, PlaGs

5. Export volumes of Russian coal are growing in spite of the crises
Reasons Outlook
Jump in China coal import to 23 mln. T in first 7 Most probably rapid growth of import in China
months 2009 (Russia increased supply from 0,2 will con[nue
to 3,81 same period)
Growth of coal demand in India (NTPC is
Gas wars between Europe, Russia and Ukraine conduc[ng nego[a[ons on mine purchases in
brought to decrease of gas supply and thus South Africa, Australia, Indonesia)
subs[tu[on of gas by coal in power genera[on.
Profitability of export may stay low for long
Decrease of supply of South‐African coal to period. Possible increase in railway tariffs.
Europe
BoGleneck on railway line to Vanino port will
New port capacity (Vanino ‐ +up to 6‐7 mtpa not allow port to operate at full capacity.
and Ust‐Luga +4‐8 mtpa) (According to some data only 6 mtpa of railway
capacity is available for Vanino coal terminal)
Inability of Russian coal producers and traders
to sa[sfy needs of Genco’s (Coal
contamina[on, flexibility in co‐investments)
Decrease of steam coal supply from 3,29 to
2,63 mt for the first 6 months 2009
Source: Rosinformugol, McCloskey Fax

6. Domestic power sector has decrease significantly and is expected to
recover slowly
Reasons Outlook
Industrial produc[on has decreased more then Slow industrial produc[on revival has started,
10% as a consequence growth of electricity demand
Decrease in electricity produc[on for 7 months Subs[tu[on of electricity genera[on ajer
2009 ‐ 6,4% (540 bln Kwt/h) with thermal Sayano‐Shushenskaya GES breakdown by
plants ‐ 11,6% (327,5 bln Kwt/h) thermal power plants
High water and thus high load of hydro power
plants.
Source: TsDU TEK

7. Additional demand for 3,2 mtpa of hard coal and 7,5 mtpa of lignite for domestic
power generation as a result of Sayano-Shushenskaya GES breakdown
Sayano-Shushenskaya GES full installed capacity - 6400 MWt.
Average annual load - 4500 MWt.
After the breakdown - 3 blocks are totally destroyed and will require about 4 years to reconstruct.
7 blocks are partially damaged and will require 1-1,5 years to relaunch.
Additional capacity put into operation from reserve to substitute Sayano-Shushenskaya GES capacity
Addi[onal capacity put into
Company Power plant Fuel type
opera[on
OGK‐3 Kostromskaya GRES +1200 MWt Gas
TGK‐12 Tom‐Usinskaya GRES +900 MWt Coal
Belovskaya GRES
Kemerovskaya GRES Up to + 3,2 mtpa
Novo‐Kemerovskaya GRES
TGK‐13 Nazarovskaya GRES +920 MWt Lignite up to +4.1 mtpa
OGK‐6 Krasnoyarskaya GRES‐2 + 750 MWt Lignite up to +3,4 mtpa
Irkutskenergo Bratskaya GES +1300 MWt Hydro
En+ Krasnayarskaya GES ? Hydro
TGK‐11 Tomskaya GRES + 500 MWt Gas
Omskaya TETs 3,4,5
Source: Vedomos[, Interfax, Rosinformugol

8. Russian coal prospects look quite optimistic on all three markets
Export Atlantic market - demand is strong, but supply of Russian coal is under pressure due
to high cost of transportation through Baltic countries ports and expected increase of railway
tariffs.
Export Pacific market - demand is strong and growing, thanks to China and India. New port
capacity launched in the beginning of this year.
Domestic market for power generation - weakness because of crises, but rebound due to
Sayano-Shushenskaya GES breakdown.

9. Thank you for your attention!
Igor Shelukhin
Director on Strategy and Development
Coal Market Research Institute
+ 7 926 535 3435
Ishell@post.ru