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Lubelski Węgiel
Lubelski Węgiel Bogdanka S.A.

LW Bogdanka S.A.’s Strategy for 2013-2020 And Dividend Policy

Tuesday, 2013-06-04

On 3 June 2013, the Company announced its Development Strategy for 2013-2020. The most important aspects of the strategy include: completing the investment programme aimed at doubling the output and doubling the recoverable reserves of the Company in the Lublin Coal Basin by 2015, and thereby prolonging the mine's life until about 2050. Following the increase in its output, LW BOGDANKA S.A. intends to gain a 20% share in the domestic power coal supplies market by 2015.

LW BOGDANKA also wishes to remain a leader in effective mining by undertaking such projects as the construction of an "intelligent mine". Further development of the deposit management system and continued computerisation and automation of the production process at the Company will make it possible. Coupled with constant streamlining of the work organisation and further development of outsourcing, this is to bring a decrease of Unit Mining Cash Cost by 15% until 2017 (in real terms). 


The Company also intends to benefit from potential synergies with energy producers and considers two projects: modernisation and expansion of Łęczyńska Energetyka, and cooperation with GDF SUEZ Polska Energia Group as part of a project for the construction of a power plant with a capacity of 500 MWe in the vicinity of LW BOGDANKA. 


The Company also announced its dividend policy for the following years. In accordance with the policy, a recommendation will be made to allocate 60% of the consolidated net profit for 2013-2015 for dividends.


COMPLETION OF INVESTMENT PROCESS TO DOUBLE PRODUCTION


By 2015, the Company intends to complete an investment programme aimed at doubling the output in relation to 2011. Following the increase in its output, the Company intends to gain a 20% share in the domestic power coal supplies market by 2015 (as compared to a 10% share at the end of 2011, and a 14% share at the end of 2012). 


In addition, the Company also intends to increase its production capacity to approx. 12 million tonnes in 2018 as a result of modernising shaft 1.5 in Nadrybie. 


DOUBLING RESERVES AND PROLONGING MINE LIFE UNTIL 2050


LW BOGDANKA intends to almost double its recoverable reserves in the Lublin Coal Basin. The Company seeks to obtain new licences in the Lublin Coal Basin in order to increase its recoverable reserves from the current level of approx. 237 million tonnes up to approx. 450 million tonnes.
Given the average annual net level of production of approx. 12 million tonnes of coal, this would result in prolonging the life of the mine until about 2050 (with current reserves the life of the mine ends in 2034). 


FURTHER EFFECTIVENESS ENHANCEMENT AND INTELLIGENT MINE


LW BOGDANKA wishes to remain a leader with regard to effectiveness and innovative solutions in the mining industry by undertaking such projects as the construction of an "intelligent mine".
Further development of the deposit management system and continued computerisation and automation of the production process at the Company will make it possible. 


LW BOGDANKA is already using underground solutions that are unique to the Polish mining industry. These are the solutions used to support decisions during the process of preparing a deposit for an investment, which are adapted to the latest technical solutions in the global mining industry. 


The Company wishes to further improve its deposit management system (developed in cooperation with the Polish Academy of Sciences), which includes a digital deposit model (currently the only one in the Polish hard coal mining industry), digital map of mining excavations, and a digital schedule of opening-out, preparatory and exploitation works. 


In addition, as part of the project involving the construction of the "intelligent mine", LW BOGDANKA is also developing an object-oriented map of underground infrastructure. The next step will consist in introducing active tags in order to monitor the condition of underground infrastructure on the map of mining excavations. 


As a result of the activities mentioned above, as well as continuous improvement of work organisation and making use of outsourcing, the Company intends to reduce the Unit Mining Cash Cost by 15% until 2017 (in real terms) in relation to 2012.

POTENTIAL SYNERGIES WITH ENERGY PRODUCERS


The Company intends to benefit from potential synergies with energy producers and considers two projects: 


• executing an investment programme of the subsidiary Łęczyńska Energetyka Sp. z o.o. which provides for the construction of a power unit with a capacity of 69 MWt and 77 MWe together with necessary auxiliary installations;


• cooperation with GDF SUEZ Polska Energia Group as part of a project for the construction of a power plant with a capacity of 500 MWe in the vicinity of LW BOGDANKA - the Company would be a key supplier of fuel in the form of hard coal as well as coal slimes and their mixtures.

The final decision regarding the choice between the two investment options depends on the results of the analyses which are currently in progress. 


FINANCING AND DIVIDEND POLICY


The Company decided that the amount of necessary cash security against operational risks for 2013-2015 will be equivalent to monthly revenue on sales or approx. PLN 200-250 million. The Company intends to hold a debt (interest-bearing debt and employee liabilities) at the level of EBITDA x 1.50 or lower. 


At the same time, the Company developed a dividend policy under which 60% of consolidated net profit for 2013-2015 will be allocated to dividends. In the Company's opinion, such dividend policy will allow it to further enhance its value in the long-term perspective, and at the same time, ensure that shareholders receive the payment of dividend on profits at a level which complies with best practice of global raw material companies. 


Please feel free to view the files listed below:


- Presentation detailing key elements of LW BOGDANKA Strategy for 2013-2020 (pdf, 1.79 MB)
- Presentation of the Incentive Scheme (Managerial Options Scheme) (pdf, 985 KB), which is subject to the vote at the Annual General Shareholders Meeting on 27 June 2013.

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© LW „Bogdanka” S.A. - 2018
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