Environmental risks

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Level of risk

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Change in the level of risk compared to 2017:

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increase

ENVIRONMENTAL RISKS
RISKS CONCERNING ENVIRONMENTAL PROTECTION REGULATIONS	The legal regulations applicable to the environment and the usage of natural resources are subject to constant change and the trend over the most recent years has been toward making the binding standards more stringent. Consequently, the Group may be unable to comply with and act in compliance with provisions of law as amended in the future or such amendments may have an adverse effect on the Group’s business activity. Additionally, changes to the environmental protection law may force the Group to adapt to new requirements (e.g. adjusting the technologies used by the Group to curtail atmospheric emissions or changes to how waste is managed or water and sewage management), inclusive of obtaining new permits, or changes to the conditions of the current permits held by the Group. Such an obligation may require the Group to incur specific additional capital expenditures and may, by the same token, affect the its financial standing by increasing the costs of its activity. The Group strives to limit risk by constantly overseeing environmental protection legal requirements and making the necessary investments to meet all environmental requirements. Awareness and responsibility in acting on the basis of the highest environmental standards and consistency in fulfilling environmental tasks are among the Group’s priorities. Actions aimed at minimizing these risks include: constant oversight of environmental protection legal requirements and execution of necessary investment projects to meet all environmental requirements. In connection with the entry into force on 1 January 2018 of the new Water Law Act of 20 July 2017, in Q4 2018 activities were continued order to adapt the operations of the Group’s units to the new water and sewage management conditions and to comply with all legal requirements. Because the amendments to waste management regulations introduced in the current year and planned to be introduced were significant, an analysis of the amended legal regulations was carried out and the actions were identified that were necessary to adapt the operations of the Group’s units to the new waste management requirements within the time limits set in the regulations.
HAZARDS ARISING FROM THE OCCURRENCE OF MINING DAMAGE ON THE SURFACE	The risk is connected with that fact that the Group, because of coal reserves being located under forest and intensely urbanized areas, will have to incur high costs to carry out land rehabilitation in advance and repair mining damage. According to the Geological and Mining Law, the Group is obligated to repair mining damage in facilities and structures and it may be obligated to reinstate land to its state from before the mining activity commenced. Actions taken to minimize these risks include: coordination of activities associated with the preparation of the geological works program, geological and hydrological documentation, deposit development plan and operations plan, planning of locations endangered with mining damage, oversight over compliance with provisions of concessions and environmental decisions, monitoring the performance of repairs of mining damage, monitoring of a provision recognized for this purpose, cooperation with local government units, exclusion of land from development or a deposit from mining, mining damage prevention at the construction stage and actions to make sure that gravitational flow of water is preserved.
RISK ASSOCIATED WITH ADAPTATION OF THE GROUP’S ACTIVITY TO THE EU CLIMATE POLICY	One of the priorities of the European Union is to prevent climate change, among others through limiting the consumption of natural energy resources, introducing modern and efficient energy generation technologies, limiting carbon dioxide emissions, reducing energy consumption and increasing the importance of renewable energy generation.In order to achieve these objectives, the European Union has introduced a package under the name of „3×20% by 2020”. In addition, the European Commission is currently working on what is referred to as the “winter package” constituting a series of legislative solutions striving to attain the objectives specified above within the EU of its current energy and climate policy for 2030. The active climate policy pursued by the European Union adversely affects the steel industry due to the elevated operating expenses. As a consequence, the poor standing of the metallurgical industry sector may cause a decline in revenues. Activities related to risk minimization include: continuous analysis and evaluation of the situation in the area of changes to the EU Climate Policy and resulting changes in national legislation, execution of projects by the Group intended to reduce greenhouse gas emissions by making maximum use of the methane captured in the coal production process for the purposes of electricity, heat and cool air production.

ENVIRONMENTAL RISKS

RISKS CONCERNING ENVIRONMENTAL PROTECTION REGULATIONS

The legal regulations applicable to the environment and the usage of natural resources are subject to constant change and the trend over the most recent years has been toward making the binding standards more stringent. Consequently, the Group may be unable to comply with and act in compliance with provisions of law as amended in the future or such amendments may have an adverse effect on the Group’s business activity. Additionally, changes to the environmental protection law may force the Group to adapt to new requirements (e.g. adjusting the technologies used by the Group to curtail atmospheric emissions or changes to how waste is managed or water and sewage management), inclusive of obtaining new permits, or changes to the conditions of the current permits held by the Group. Such an obligation may require the Group to incur specific additional capital expenditures and may, by the same token, affect the its financial standing by increasing the costs of its activity. The Group strives to limit risk by constantly overseeing environmental protection legal requirements and making the necessary investments to meet all environmental requirements. Awareness and responsibility in acting on the basis of the highest environmental standards and consistency in fulfilling environmental tasks are among the Group’s priorities.

Actions aimed at minimizing these risks include: constant oversight of environmental protection legal requirements and execution of necessary investment projects to meet all environmental requirements. In connection with the entry into force on 1 January 2018 of the new Water Law Act of 20 July 2017, in Q4 2018 activities were continued order to adapt the operations of the Group’s units to the new water and sewage management conditions and to comply with all legal requirements. Because the amendments to waste management regulations introduced in the current year and planned to be introduced were significant, an analysis of the amended legal regulations was carried out and the actions were identified that were necessary to adapt the operations of the Group’s units to the new waste management requirements within the time limits set in the regulations.

HAZARDS ARISING FROM THE OCCURRENCE OF MINING DAMAGE ON THE SURFACE

The risk is connected with that fact that the Group, because of coal reserves being located under forest and intensely urbanized areas, will have to incur high costs to carry out land rehabilitation in advance and repair mining damage. According to the Geological and Mining Law, the Group is obligated to repair mining damage in facilities and structures and it may be obligated to reinstate land to its state from before the mining activity commenced.

Actions taken to minimize these risks include: coordination of activities associated with the preparation of the geological works program, geological and hydrological documentation, deposit development plan and operations plan, planning of locations endangered with mining damage, oversight over compliance with provisions of concessions and environmental decisions, monitoring the performance of repairs of mining damage, monitoring of a provision recognized for this purpose, cooperation with local government units, exclusion of land from development or a deposit from mining, mining damage prevention at the construction stage and actions to make sure that gravitational flow of water is preserved.

RISK ASSOCIATED WITH ADAPTATION OF THE GROUP’S ACTIVITY TO THE EU CLIMATE POLICY

One of the priorities of the European Union is to prevent climate change, among others through limiting the consumption of natural energy resources, introducing modern and efficient energy generation technologies, limiting carbon dioxide emissions, reducing energy consumption and increasing the importance of renewable energy generation.In order to achieve these objectives, the European Union has introduced a package under the name of „3×20% by 2020”.

In addition, the European Commission is currently working on what is referred to as the “winter package” constituting a series of legislative solutions striving to attain the objectives specified above within the EU of its current energy and climate policy for 2030. The active climate policy pursued by the European Union adversely affects the steel industry due to the elevated operating expenses. As a consequence, the poor standing of the metallurgical industry sector may cause a decline in revenues.

Activities related to risk minimization include: continuous analysis and evaluation of the situation in the area of changes to the EU Climate Policy and resulting changes in national legislation, execution of projects by the Group intended to reduce greenhouse gas emissions by making maximum use of the methane captured in the coal production process for the purposes of electricity, heat and cool air production.

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