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On the sidelines of the Eastern Economic Forum, SUEK’s CEO spoke about the company's strategy and current coal industry trends

 Maxim Basov was appointed CEO of SUEK in April 2022, after his 12 years of service as CEO of Rusagro.  In an exclusive interview with PrimaMedia at the Eastern Economic Forum, Maxim Basov spoke about the current strategy of the major Russian coal company, coal market environment and prospects for a turn to the East. He also touched on the upcoming large-scale upgrades to the Primorskaya GRES, the largest power plant in Primorye.

–When introducing you in April as the new head of SUEK, Samir Brikho, Chairman of the Board of Directors of SUEK, said that the main task would be the transformation of SUEK as a coal company. Does this mean that SUEK will diversify its business and buy new assets?

–Our top priority is to improve management efficiency, reduce costs and accelerate the introduction of advanced technologies, including digital ones. This makes us competitive in global markets. We are also looking at new assets. So far, no decisions have been made on this matter.

–What projects is SUEK presenting at the Eastern Economic Forum?

We are not presenting new projects. In the Far East, we have many current projects, which are important for the development of the regions.

SUEK includes 25 underground and open-pit mines, 10 washing plants and processing facilities, 27 thermal power plants (Siberian Generating Company (SGC), a Vanino Port terminal (Khabarovsk region), and the Murmansk Commercial Seaport .

–What is your forecast for coal production in Russia this year and in the near future? Where is the coal mined by SUEK sold?

–According to the current forecast of the Ministry of Energy, a slight decrease in coal production can be expected, around 5-8%. The data of the first half of the year confirm this forecast, as Russian coal production shrank by about 1%. In SUEK, this is around the same, although the situation varies across the regions. In Kuzbass and Khakassia, we see a noticeable decrease in production due to restrictions on the export of products to the East. In the Krasnoyarsk region and Far Eastern regions, production is growing because they have fewer transport restrictions and stable domestic demand. In the future, this trend will persist, and production growth in the Far East will outpace other regions.

Talking about export destinations, we had to redistribute shipments that used to go to Europe to the markets of Southeast Asia, China, Africa and the Middle East. This process is not fast, we have to deal with many challenges related to logistics, freight and insurance, but, thanks to the favourable market conditions, these problems are entirely solvable. We do not sit around as well, opening new offices in friendly countries, investing in the development of eastern ports, our bulk fleet, launching new customer services. This work is paying off.

Now coal supplies, for example, to India (where we plan to open an office) have weak profitability, but in a year or two, our transport costs will begin to decline, while deliveries to this country will grow. I think that we will be able to replace the entire lacking supplies to the European market in the next 2-3 years.  

–In March last year, President Vladimir Putin ordered to ramp up coal exports from Kuzbass to the East by 30% in two years. However, market participants note a lack of transportation capacity at Eastern Polygon of the Trans-Siberian rail line, which at times seriously complicates deliveries. In your opinion, what actions can be taken to improve this situation? 

–Orders were given not only for Kuzbass coal, but also for Buryatia and Khakassia exports. Therefore, all bottleneck-related work, scheduled as part of the first and second upgrade stages of the Baikal-Amur Mainline and the Trans-Siberian Railway, should be accelerated rather then postponed. I think Russian Railways, the Ministry of Construction and other government departments have all the necessary resources.

There are other measures like increasing the number of high-capacity railcars, which account for the bulk of SUEK fleet, using heavy locomotives or promoting electrification. The departments are now looking for ways to address these challenges.

–SUEK runs two coal terminals in the Far East - Maly Port (coal terminal operator at Vostochny Port, Primorye) and Daltransugol (coal terminal at Vanino Port, Khabarovsk region). How busy are they? Do you have plans for their further expansion?

The ports are busy, and all our plans to expand capacity are relevant. We are going on with our Vanino terminal expansion to 40 Mt.

–How is SUEK developing coal assets in Primorye (Primorskugol) and Khabarovsk (Urgalugol)? Do they have enough resources?

–In connection with the turn to the East, our Primorye and Khabarovsk assets are in a better position than the Siberian ones. They have no problems with resources. Urgal coal production is expected to stay the same as last year, although below the target. At the same time, our investment in the key Far Eastern projects, such as the development of the Pravoberezhny open-pit mine and Vanino terminal in the Khabarovsk region, will grow significantly this year. Similar dynamics can be seen in Primorye. In the future, Urgal production will grow and Primorskugol will show consistent results.

–On which principles are your relations with regional authorities based? 

–Our principles of interaction with regional authorities stay the same: social and economic partnership. We support the government efforts to develop the regions, reduce the outflow of local people and develop the labour market. We honour all our commitments. Simply put, we cooperate to improve the standard of living in the territories where we operate. One of the best examples is the joint participation, with the population and authorities, in the Ministry of Construction's competitions. These are projects for the improvement of our single-industry towns and settlements. This year, three of our towns have received funding to renovate parks and other public spaces. 

–Are you facing problems with the supply and maintenance of imported equipment?

–Some traditional suppliers have refused to work with Russian companies or limited service. Others continue to work, although they try not to advertise it. Accordingly, we have to respond to these risks. We have created a service business directorate to develop our machine-building assets. We run six plants in the regions of Siberia and the Far East, including the local Artemovskoe Repair and Mechanical Directorate (RMD). They regularly expand their range of products, and we attract partners from Russia, China, India and Latin America for production development purposes. Of course, we are looking for and finding alternative suppliers in China and other friendly countries. 

–SGC, which is part of SUEK, in the course of an asset swap deal with the energy division, took ownership of the Primorskaya GRES, which is in need of a major revamp. How are you tackling this task?

Today, four of our power plants in several regions are undergoing a large-scale modernisation; each project costs tens of billions of roubles. The Primorskaya GRES stands out. First, this power plant is responsible for half the electricity consumption in Primorye. You cannot replace it. Second, the plant entered the SGC perimeter in 2020 with extremely worn-out equipment. Therefore, we began to work on its upgrade immediately, without further ado.

We are upgrading each of the nine power units in such a way that the plant can keep to its dispatch schedule. The programme is to be completed in 2024. Now the plant can bear more load than in the past, which shows that we are doing the job well.

I would like to emphasise that we are not just replacing old equipment with new one. We are improving the environmental performance of the Primorskaya GRES. This year, we began to upgrade Power Unit No. 8, with the installation of a modern electrostatic precipitator to achieve a fivefold decrease in particulate matter emissions. 

Along with environmental protection, it is important for us to upgrade the utility infrastructure of Luchegorsk. In two years, we got the local heat networks up and running by relying on the standards adopted for Siberian cities. And you can see the result: the heat supply system is now much better. Besides, we know that the residents are satisfied, and almost every one of them has a direct bearing on our production activities. 

On 1 September, we began financing a dedicated class in one of Luchegorsk schools; this is our common practice in other cities as well. We do hope and expect that its graduates will come to work to the power plant or coal mine. 

Our principle, optimal solutions at a reasonable cost, is fully applicable to the Primorskaya GRES. We see and really appreciate that the regional authorities pay close attention to our shared large construction site. The company is open to public scrutiny. We are always happy to see Vladivostok journalists in Luchegorsk. This is your power plant, too. Let me remind you that every second kilowatt-hour that powers your gadget is generated at Primorskaya GRES.

Maxim Basov was born in Moscow on 8 May 1975. In 1996, he graduated from New York University (USA). He specialised in economics, finance and international business, in addition to philosophy. Maxim served as CEO of Metalloinvest, CEO of Gazmetall holding company and Metalloinvest holding company, First Deputy Chairman of the Management Board at Interpipe corporation. He also worked for Emax, Severstal, Kuzbassugol and McKinsey&Co. From 2009 to 2021, he headed Rusagro.

More details: https://primamedia.ru/news/1353472/