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7 November 2018

Russian coal producer SUEK to ramp up output, IPO back in focus

Russia’s largest coal producer SUEK plans to ramp up output by 20 million tonnes, or 18 percent, over the next four years and is gearing up for an initial public offering (IPO) when the time is right, Chairman Alexander Landia said.

SUEK is already the world’s third largest coal exporter after Glencore and BHP Billiton. Its plans to boost coal production will please the Kremlin, which has called for Russia to grab a larger share of the global market.

SUEK, controlled by businessman Andrey Melnichenko, plans to bump up output from 110 million to 130 million tonnes by 2022, Landia said.

“In the coming four to five years, we are going to invest something like $3 billion in further developing infrastructure,” he told Reuters in an interview.

SUEK, whose full name is the Siberian Coal Energy Company, was ranked the world’s sixth largest coal producer in 2017 with output of 107.8 million tonnes, of which 56.4 million tonnes were sold on international markets.

SUEK plans to increase the share of its coal it is able to wash - a process that removes impurities - from 40 percent to around 60 percent, Landia added.

The company, which already sells 30 percent of its product to the Asia-Pacific market, sees Asia as the prime market for its exports.

Russia has been seeking to double its coal exports to Asia by 2025 with China seen as particularly important.

As well as being a natural commodities trading partner for fast-growing China, Moscow has been seeking closer ties with Beijing since the West imposed sanctions on Russia in 2014.

Russian Energy Minister Alexander Novak said in August that Russia plans to produce around 420 million tonnes of coal this year, surpassing a Soviet record. By 2030, output could reach 590 million tonnes. Exports, currently at over 200 million tonnes, are also expected to grow, Novak said.

GOING PUBLIC

SUEK was ready to float its shares before it put its plans on hold due to market conditions in 2011. Since then, the stream of international Russian IPOs has largely dried up due to Western sanctions, but SUEK is still keen to become a listed company.

“Both public debt and public equity markets would be interesting for us,” Landia said.

There is no specific plan in place, Landia said, except to be prepared to make such a move when the time is right.

Media reports in 2011 said the company planned to list its shares in London and that a flotation at that time could have valued the company at close to $5 billion.

In August, SUEK merged with Melnichenko’s power-generating firm SGK to increase operational and financial effectiveness.

“That’s our plan, be prepared. Because the market is quite volatile... If there will be an attractive opportunity, we will be seriously looking at that,” Landia said. 

(Reporting by Polina Ivanova; Editing by Polina Devitt and Adrian Croft)

Source: Reuters News
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