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Viable reserves mln ton Industrial reserves mln ton Operational reserves mln ton Easily accessible reserves mln ton HARD COAL RESERVES in POLAND as on

COAL BASINS IN POLAND

STAGES IN RESTRUCTURING OF POLISH HARD COAL INDUSTRY I - stage covering 1989÷1993, I - stage covering 1989÷1993, II - stage during 1994÷1995, II - stage during 1994÷1995, III - stage covering 1996÷1997, III - stage covering 1996÷1997, IV - stage from 1998 till present. IV - stage from 1998 till present.

Effects of restructuring processes in 1990÷2002

Hard coal production Hard coal production in 2003 – 100,4 m tones

Domestic sale of hard coal in years 1990 – 2003 and domestic sale trend SITUATION ON THE DOMESTIC HARD COAL MARKET

Number of active mines of hard coal In 2003 – 40 mines

Employment in hard coal industry In 2003 – 136,5 [thousand pers.]

PRODUCTIVITY tones/person and year

THE POLISH HARD COAL INDUSTRY in 2003 and strategy of the sector for years

ORGANISATIONAL SCHEME OF THE HARD COAL MINING SECTOR KHW SA Kompania Węglowa S.A. JSW SA Independent mines Non-productive entities SRK SA other stock companie s BSRK Sp. z o.o. liquidated mines As at Totally: 39 operating mines

LOCALISATION OF THE COAL PRODUCTION COMPANIES

HARD COAL PRODUCTION VOLUME PRODUCTION OF SIZE GRADES’ VOLUME Total production volume Steam coal lump coal fine coal type type Coking coal incl.: 1 No. Details Production volume [m tones]

The coal share in production of:  electricity amounts to 92%, with the hard coal share of approx. 55%,  heat amounts to approx. 77%. THE COAL SHARE IN ELECTRICITY AND HEAT PRODUCTION Structure of the domestic consumption of hard coal:  utility power plants and CHPs52%  heat only boilers, industry and other sectors27%  coking plants15%  industrial power generation 6%

STRUCTURE OF THE HARD COAL SALE Total sale Domestic market utility power generation industrial power generation industrial and communal heat only boilers other industrial receivers coking plants other domestic receivers Hard coal sale [m tones] 1 of which: Eksport No. Details steam coal coking coal of which: Export

EMPLOYMENT RESTRUCTURING Employment as at the end of 2003 amounted to 136,454 persons. Decrease in employment in 2003 amounted to 4,263 persons of which: coal processing including: on the surface underground 1 Totally Employment in hard coal mining sector Employment level as at: BalanceDetails [pers.]

BASIC ECONOMIC AND FINANCIAL INDICATORS

AMOUNT OF LIABILITIES AND RECEIVABLES As on As on m zł Total liabilities (long and short term) ReceivablesSurplus of liabilities over receivables

ECONOMIC AND FINANCIAL RESULTS OF HARD COAL MINING SECTOR within I – X 2004

BASIC ECONOMIC AND FINANCIAL INDICATORS FOR 10 MONTH OF 2004 No.Details Unit month 2004 Dynamics % 4: Total production volume m tones Total sale m tones incl.: domestic m tones export m tones Quantity of stock at the end of a period m tones Result on sale m zł , , Wages of basic coal employees according to GUS zł/person 3, , Net result m zł. 9, , Receivables m zł. 2, , Liabilities (long and short term) m zł. 8, ,

STRATEGY OF THE SECTOR TO YEAR 2010

Poland’s hard coal demand forecast until 2010 [ m tones ] POLAND’S HARD COAL DEMAND FORECAST

Under the continuous upward market trends with respect to power coal and compliance by companies of specific economic conditions, realisation may be extended in time. REDUCTION OF PRODUCTION CAPACITY IN YEARS Scenarios of reduction of production capacity I scenario of production volume reduction by 14 m tones by the end of 2006 (the base case scenario) – target model II scenario of less drastic reduction of production volume by 7.8 m tones by the end of 2006 – alternative variant.

In the alternative variant employment level will be reduced by 19.5 thousand. In the target model employment level will be reduced by 25.5 thousand. EMPLOYMENT RESTRUCTURING IN YEARS Target model of employment changes until 2006 Alternative variant of employment changes until 2006 miners’ benefit re-training scholarship re-training contract New recruits Employ- ment reduction Employ- ment level Year Zwolnienia pakiet socjalny other reduct. Total reduction

RESTRUCTURING IN YEARS 2004 – 2006  Maintenance of the energy security of the country and co-operation in improving the standard of energy security of the European Union;  Maintenance by mining enterprises of sustainable profitability, economic effectiveness and competitive advantage on the uniform market of the EU;  Securing satisfactory level of financial liquidity and creditworthiness in order to ensure sustained operation and development of mining enterprises;  Balancing of funds so as to enable current payment of liabilities, in particular those due to public sector creditors;  Adjustment of production capacity to the local market demand and economically viable exports to the uniform EU market and elsewhere;  Adjustment of employment to the actual production needs, along with ensuring a greater productivity and efficiency;  Actions towards a rational cost structure;  Privatisation of mining enterprises. RESTRUCTURING IN YEARS 2004 – 2006 Objectives and tasks

Aims will be achieved among others by:  cost reduction in all business areas,  conducting such a marketing policy that enables reduction of sale costs,  reduction of production capacity to approx. 88 m tones in 2006 (target model),  realisation of less drastic reduction of production capacity in the alternative variant, to the level not higher than 94.8 m tones by the end of 2006, provided the bullish market continues and mining enterprises retain sustainable profitability. RESTRUCTURING IN YEARS 2004 – 2006

 Business entities will be economically effective;  Primary focus of mines and other entities of the industry will be able to meet the national demand for coal;  Exports by the industry entities will be economically effective;  Costs will match revenues;  Employment in the industry will match the production capacity, itself matching the market demand;  Entities of the sector will finance upgrade and capital expenditure projects with their own funds;  Mining entities will not benefit from any public assistance not allowed under international treaties;  Mining entities will comply with the environment protection and work safety standards. RESTRUCTURING IN YEARS 2004 – 2006 Target status

Thank you

Primary fuel 2002 year Hard coal 51.7% Brown coal12.7% Oil19.9 % Natural gas10.8 % Renewable and waste energy 4.9 % THE STRUCTURE OF PRIMARY ENERGY UTYLISATION