Management Board Report on the activity of the JSW S.A. Capital Group for 2012

2.4. Contracts of material importance for the Group’s activity

In 2012, annual contracts for delivery of coking coal with all existing buyers were concluded, thus continuing the cooperation from the year before. The contracts define primarily such elements as the volume of deliveries, price, quality, delivery conditions and payment terms, payment security method, and provisions on contractual penalties for failure to perform the contract. Just like the year before, the prices were agreed through negotiations on the basis of the so-called coal benchmark, for quarterly periods. In respect of steam coal, JSW S.A. entered into a new contract with EDF Paliwa Sp. z o.o., thus maintaining the existing cooperation (a detailed description is provided later in this section).

Presented below is information about contracts of material importance for the Group’s activity, as disclosed in the current reports, i.e. contracts and revenues where the Parent Company or its subsidiary is a party and whose value is at least 10.0% of the JSW S.A.’s equity. These contracts regulated the sale of products of JSW S.A. or its subsidiaries:

• In Current Report no. 13/2012 of 22 February 2012, the Parent Company’s Management Board informed that the total estimate value of the contracts until the end of their term, concluded between the Capital Group companies and the ArcelorMittal Poland S.A. Capital Group in the period from the publication of Current Report no. 28/2011 (i.e. 20 September 2011) to 22 February 2012, reached PLN 2,330 million. The contract with the highest value is the contract signed on 22 February 2012 between JSW S.A. and ArcelorMittal Poland S.A. seated in Dąbrowa Górnicza for deliveries of coking coal.
  Material terms and conditions of the Contract: the pricing terms are agreed upon on a quarterly basis. The Contract is valid from 1 January 2012 to 31 December 2012. The settlement currency is PLN. The estimate net value of the Contract till the end of its term is PLN 1,800 million. The contract comprises mutual provisions on sanctions in the event of failure to perform the contractual obligations by any of the parties in the amount of 10.0% of the gross value of goods that have not been delivered/collected. In the event either party suffers a loss in excess of the amount of liquidated damages, it may pursue additional compensation. The other terms of the Contract do not differ from those commonly used in this type of contract.
• In Current Report no. 37/2012 of 10 July 2012, the Parent Company’s Management Board announced that the total value of revenues and the estimated value of contracts, for the period ending on their expiration date, entered into by and between the Capital Group companies and the companies of the voestalpine AG Capital Group (voestalpine Rohstoffbeschaffungs GmbH with its registered office in Linz, Importkohle GmbH with its registered office in Vienna, voestalpine Stahl Donawitz GmbH & Co KG with its registered office in Leoben-Donawitz and voestalpine Stahl GmbH with its registered office in Linz) during the preceding 12 months had reached the net amount of PLN 3,297 million. The highest-value contract is the contract for the deliveries of blast furnace coke with an estimated net value until the end of its term of PLN 1,287 million signed on 19 January 2006 by and between Jastrzębska Spółka Węglowa S.A. (appearing in the Contract as the Seller), KK Zabrze with its registered office in Zabrze (appearing in the Contract as the Coke Producer), Polski Koks S.A. with its registered office in Katowice (appearing in the Contract as the party exercising the rights and fulfilling the obligations of the Seller) – both of which are subsidiaries of JSW S.A. – and voestalpine Rohstoffbeschaffungs GmbH with its registered office in Linz and Importkohle GmbH with its registered office in Vienna acting for and on behalf of voestalpine Stahl Donawitz GmbH & Co KG with its registered office in Leoben-Donawitz and voestalpine Stahl GmbH with its registered office in Linz (appearing in the Contract as the Buyers).
  Material terms and conditions of the Contract: the Contract is in force from 1 April 2005 to 31 March 2016. The prices in the Contract are agreed upon on a quarterly basis per metric ton. The prices for the deliveries are agreed upon before the start of each new period of deliveries and are specified in a separate annex based on the Contract.
  The Contract does not contain any provisions regarding liquidated damages except for the customary clauses on the settlement of quality in the form of price reductions used in standard contracts for the deliveries of coke. The other terms of the Contract do not differ from those commonly used in this type of contract.
• In Current Report no. 41/2012 of 27 December 2012, the Parent Company’s Management Board announced that the total value of the contract entered into on 27 December 2012 by and between JSW S.A. and EDF Paliwa Sp. z o.o. with its registered office in Kraków and sales revenues during the most recent 12 months reached the total net value of approximately PLN 944.0 million. Of the largest value is the contract for the sale of steam coal signed on 27 December 2012 by and between Jastrzębska Spółka Węglowa S.A. (referred to in the Contract as the Seller) and EDF Paliwa Sp. z o.o. with its registered office in Kraków (referred to in the Contract as the Buyer). The term of the Contract is from 1 January 2013 to 31 December 2015, but may be extended thereafter. The prices are to be agreed upon separately for each year. The estimated net value of the Contract until the end of its term is approximately PLN 700.0 million.
  The Contract contains mutual provisions on sanctions in the event of failure to perform the contractual obligations by any of the parties in the amount of 20% of the gross value of goods that have not been delivered/collected, calculated according to the most recent contractual prices. If the parties to the Contract suffer a loss exceeding the payable contractual penalty, they can pursue supplementary compensation. The other terms of the Contract do not differ from those commonly used in this type of contract.