Severstal agrees to sell Vorkutaugol to Russkaya Energiya

2021-12-02

Dec. 2, 2021 - PAO Severstal (“Severstal”, “The Group”), one of the world's largest vertically integrated steel and mining companies, announces that it has signed a binding agreement with OOO Russkaya Energiya to sell its coking coal assets, AO Vorkutaugol (“Vorkutaugol”). The transaction value is 15 billion roubles.

The deal is expected to be closed in the first quarter of 2022, once the relevant permits have been received from the Federal Antimonopoly Service of the Russian Federation and a number of other conditions have been fulfilled. The buyer intends to finance the transaction using its own and borrowed funds.

Alexander Shevelev, CEO of Severstal, said:

“The sale of Vorkutaugol will allow us to focus on delivering our strategy to develop our steel and iron ore assets to be the leader of the future steel industry and to reduce our carbon footprint consistently. Reducing our consumption of coking coal through the use of the latest technologies is part of our ambitious decarbonisation programme. We expect to accelerate this in the future, including through the use of hydrogen fuel.

At the same time, we understand that in the medium-term, coal will remain an integral component of steel production. The sale of Vorkutaugol to a strategic investor focused on the development of coal assets not only reflects our commitment to reducing CO2 emissions but will also allow this asset to maximise its potential.

Over many years, the Vorkutaugol team has become an important part of the Severstal family, and we are confident that the company's fate is in good hands. We look forward to working closely with the new owner of Vorkutaugol to support the transition of our workforce and maintain the highest standards of health and safety, and will continue our cooperation into the future, as we will remain a key consumer of Vorkutaugol coking coals. The terms of the agreement with the buyer include an off-take contract guaranteeing Severstal's supply of raw material for the next five years.”

Vorkutaugol contributed 14.3% of Severstal’s greenhouse gas emissions (scope 1 and 2) per annum. Part of the proceeds from the transaction will be used to finance the projects within Severstal’s ambitious decarbonisation strategy.

Andrey Tyasto, CEO of Russkaya Energiya, said:

“The purchase of Vorkutaugol confirms that we believe in the prospects for the development of the Russian coal industry and the great potential of the Arctic zone. Our corporation has extensive experience in the mining industry, which we plan to apply to develop this new asset in our portfolio. It is important for us that Vorkutaugol maintains and enhances the best practices in corporate culture, social guarantees and industrial safety that have been developed as part of Severstal. We thank our partner for their confidence in us and look forward to further fruitful cooperation.”