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Key events 2018

Operational highlights and investment projects

Metalloinvest completed the construction of the Stary Oskol Data Processing Centre where the Company's IT infrastructure is consolidated.

Ural Steel completed an upgrade project on a vacuum degasser in its electric arc furnace shop (EAFS), which increased the unit’s capacity by 50% to 1.8 million tonnes per year.

The Company launched its electronic catalogue products.metalloinvest.com. The online platform provides information on the Company’s product range across its operations and enables online submission of commercial batch requests to the sales team.

Mikhailovsky GOK commissioned a concentrate intake facility. The facility has a design capacity of 3.2 million tonnes of concentrate per year. The new complex will allow production of premium-quality pellets to be increased using high-quality concentrate from Lebedinsky GOK.

Metalloinvest and KAMAZ held a second Coordination Committee meeting. The parties agreed to implement initiatives to increase the efficiency of interaction between the companies related to SBQ supplies, including creating stock reserves of the products needed by KAMAZ and transitioning to electronic document management.

Metalloinvest signed a contract with Danieli Centro Combustion, part of Danieli Group, for equipment for the construction of a heat-treatment facility for hot-rolled steel products at OEMK. The new facility, with a capacity of 70,000 tonnes of SBQ (Special Bar Quality) bars per year, will be established within the enterprise's finishing plant and complement the existing heat-treatment capacities at OEMK.

Metalloinvest signed a contract with the Italian company Tenova, which specialises in innovative solutions for the steel and mining industry, for the refurbishment of two electric arc furnaces at Ural Steel. The furnaces will be transitioned to Flexible Modular Furnace (FMF) technology, which will provide flexibility in the use of various charge components (hot metal, pig iron, HBI, scrap) with the possibility of increasing the share of hot metal in the charge to 85%.

The scientific and technical steel-smelting laboratory set up at OEMK by the A.A. Ugarov Stary Oskol Technological Institute, a branch of National University of Science and Technology MISiS, began development work on new steel grades.

On 1 July 2018, as part of the first wave of Industry 4.0, Lebedinsky GOK and Mikhailovsky GOK commissioned an integrated financial and business management system based on SAP S/4HANA.

Metalloinvest opened an Innovation Centre at Stary Oskol. It will concentrate all the Company's skills in digital technology and advanced solutions for the management of production and business processes together with expertise in SAP solutions.

As part of the opening ceremony of the Innovation Centre, Metalloinvest signed memorandums of strategic collaboration with SAP, a global leader in the development of enterprise application software to transform businesses in all industries, and Accenture, a leading global professional services and digital technology firm.

Metalloinvest commissioned the Roller Hearth Heat Treatment Furnace #1 and Rolling Quenching Machine #1 at Ural Steel. The new complex enables the plant to increase the production capacity of the heat treatment furnace from 28.6 to 30.7 tonnes per hour and boosts the Company's position in the market for heat-treated rolled steel products. Roller Hearth Heat Treatment Furnace #1 and Rolling Quenching Machine #1 will also help to improve the characteristics of heavy plate, ensuring the physical uniformity of the rolled steel products following heat treatment, by improving heating and cooling conditions.

OEMK commissioned a warehouse for the storage and shipment of finished products. It enabled OEMK to increase production of rolled steel products including SBQ by 60,000 tonnes per year.

На Михайловском ГОКе начато внедрение технологии тонкого грохочения. Использование новых грохотов Derrick на обогатительной фабрике позволит улучшить качественные показатели товарного концентрата - повысить содержание железа c 65% до 67% при снижении содержания диоксида кремния, и окатышей, производимых из концентрата.

Metalloinvest signed an agreement with TAKRAF of Germany, part of the Tenova group, for equipment for the construction of open-pit crushing and conveying facilities to transport mined rock at Lebedinsky GOK and Mikhailovsky GOK. A cyclical and continuous transportation system will be built at Lebedinsky GOK, while a crushing and conveyor facility will be constructed on the north-eastern side of Mikhailovsky GOK.

Signify (formerly Philips Lighting), the world leader in lighting technology, carried out modernisation on the lighting systems at Lebedinsky GOK, Mikhailovsky GOK and OEMK. More than 5,000 light fittings were replaced in 15 shops at the three plants. This marked the completion of the second stage of major modernisation works on the lighting at Metalloinvest companies. Light levels have increased by up to ten times, depending on the region, but electrical energy usage has been reduced by 73%.

Metalloinvest signed a long-term agreement with The Linde Group to supply air separation products to Ural Steel. Linde will invest approximately EUR 50 million in the construction of the new Air Separation Unit (ASU) #6 for oxygen production at Ural Steel.

Metalloinvest modernised the production process at Pellet Plant #3 (PP-3) at Mikhailovsky GOK to increase the efficiency of pellet production from mixes of iron ore concentrates from Mikhailovsky GOK and Lebedinsky GOK. As a result, the productivity of PP-3 increased by 5%, or 250,000 tonnes of iron ore pellets per year.

OEMK commissioned new water descaling equipment at Rolling Mill 350 at Rolling Unit #2. The new equipment efficiently removes furnace scale and ensures the finished product is free of surface defects.

Metalloinvest signed a contract with Danieli Corus (Netherlands) for the supply of equipment for the technical re-equipping of blast furnaces #2 and #3 at Ural Steel.

Financial highlights

Over the course of the year Metalloinvest continued to work on improving the debt repayment schedule and optimising its debt portfolio.

Metalloinvest’s proactive debt management strategy in 2018 helped it reduce the average debt servicing cost and cut 2019 scheduled loan payments to almost zero.

Signing of an agreement for a syndicated pre-export finance facility of USD 240 million (PXF-2018) to refinance all existing USD-denominated debt of the Company due in 2018–2019 and to improve the maturity profile and cost of borrowings.

Successful execution of a put option on series 02 and 03 RUB-denominated bonds for a total amount of RUB 10 billion. As a result, the Company achieved a historic low 7.65% p.a. coupon on rouble bonds. All the bonds remain on the market.

Signing of a credit agreement with CRÉDIT AGRICOLE CIB for a term of 12 years under the guarantee of the Euler Hermes Aktiengesellschaft credit agency (Germany). The EUR 72 million raised will finance the procurement of equipment as part of the project to increase operating efficiency through the construction of a cyclical and continuous transportation system for ore at the Lebedinsky GOK open-pit mine.

Signing of a supplementary agreement amending the terms of the pre-export finance facility of 2017 (PXF-2017). On Tranche A, the interest rate margin linked to LIBOR has been reduced by USD 800 million and the term of the credit has been extended: the debt now matures in 2021–23 instead of 2020–22.

Partial refinancing of loan portfolio following signing of new credit line agreement with Gazprombank. Under the credit agreement the Company has raised RUB 18.8 billion with maturity in six years. The funds raised will be spent entirely on redeeming the Company's debt to Sberbank, due in the first half of 2019.

Metalloinvest and ING BANK signed an additional loan agreement extending to November 2020 the maturity of committed revolving credit line of USD 200 million and also improving the commercial terms of the financing. This credit line secures Metalloinvest additional liquidity, increasing its financial stability and resilience.

In January 2018 the international ratings agency Moody’s revised its outlook on Metalloinvest’s rating from Stable to Positive, and also affirmed the Company’s ‘Ba2’ corporate rating.

In July 2018 the Russian ratings agency RAEX (Expert RA) revised its outlook from Stable to Positive on the Company's credit rating, which was affirmed at ‘ruAA-’.

In August 2018 the international agency Fitch revised its outlook on Metalloinvest’s rating from Stable to Positive. The long-term issuer default rating was affirmed at ‘BB’.

Events after the reporting date

In February 2019 the international agency Standard & Poor’s upgraded the Company's long-term credit rating to BB+, outlook Stable, from BB, outlook Stable.

In March 2019 the international ratings agency Moody's upgraded Metalloinvest's corporate rating to Ba1, outlook Stable, from Ba2, outlook Positive.

In May 2019 the international agency Fitch upgraded the Company's corporate rating to BB+, outlook Stable from BB, outlook Positive.

In May 2019 the Russian ratings agency Expert RA upgraded the Company's credit rating to ruAA, outlook Stable from ruAA-, outlook Positive.

Corporate governance

An election for the Board of Directors of the Company took place in April 2018. Those elected to the Board of Directors were: Ivan Streshinsky (Chairman), Galina Aglyamova, Andrey Varichev, Valery Kazikaev, Irina Lupicheva, Pavel Mitrofanov, Gleb Kostikov and Dmitry Tarasov.

Socio-economic partnership

Between March and April 2018 Metalloinvest signed socio-economic partnership agreements for 2018 with the Administrations of the Kursk, Belgorod and Orenburg Regions and the municipalities of Zheleznogorsk, Stary Oskol, Gubkin and Novotroitsk.