Activities supporting the strategy

Supporting activities are an important element in achieving the targets specified in the Strategy and generating substantial productivity improvements. These include the transport and logistics area, development of IT infrastructure and systems and introduction of solutions that reduce environmental impact. Supporting activities are performed within programmes and specific functional strategies.

JSW Group's Project and Programme Management Methodology

Implemented since 2017, project-based management of JSW Group's key investments, research and development and organisational activities is an inherent element of our Strategy.

The Project and Programme Management Methodology, adopted in 2018 and continuously updated, introduces structured and consistent management of strategic projects across all of the Group's companies. Cyclical information on progress in achieving strategic objectives, as defined in the Strategy, is delivered through a project management system.

JSW Group's gradual transformation into a project-based organisation is related to the dynamic development of project management processes across the entire organisation, an ever greater number of projects, the degree of their complexity and interdisciplinary nature mean that project management know-how is constantly being enhanced, which translates into stronger competences across the entire Group.

In June 2019, JSW Group launched a Project Management Academy, which aims to advance knowledge, develop competences and exchange good practices. This project covers a large portion of the Group's employees. The Academy is also tasked with harmonising rules for implementing projects. The Academy has held a range of workshops, including project and programme management methodologies, project planning and - an IT tool for project management. In effect, 228 people have been trained by the PMO team as part of the Project Management Academy. Thanks to these activities, the Academy's participants gained additional competences, without any additional training costs for JSW Group. Savings generated by these internal workshops exceeded PLN 150 thousand.

The Academy also held a preparatory workshop for IPMA level D. In this nine-day workshop, the Group's employees were presented with specialised theoretical and practical knowledge concerning project management, including the project approach, resource management, risk management, cost management, network diagrams, scheduling, communication and negotiation techniques. The workshop ended with an exam to obtain the certificate from IPMA Polska.

Functional strategies

Financial strategy

The Group's operations are highly susceptible to economic conditions, capital-intensive and feature long periods of return on investment. During prosperity on the coal market, the Group generates strong positive cash flows, while during downturns it needs financing for negative free cash flows. The financial institutions' perception of the coal industry as a high-risk industry is a very important element that causes difficulties in accessing stable short- and long-term debt financing and thus expands challenges related to managing the capital structure when the cyclical factor is high.

Due to the highly cyclical nature of financial results, JSW Group strives to maintain diversified financing sources also when it has cash surpluses. Equity is the key financing source for the Group's assets.

The main objectives of the Group's financing strategy include:

  • securing a stable financing structure by striving towards reaching and maintaining at least 50% of equity in the equity and liabilities structure and coverage of non-current assets with equity,
  • striving to adapt the average maturity of financing to the period of return on the assets being financed,
  • making decisions to ensure a level of funding that will be sufficient to maintain the continuity of operating and investing processes at an expected level,
  • searching for the most effective forms of financing in a given period,
  • striving to maintain a cash buffer for the Group,
  • striving to maintain a stabilisation fund in assets during good conditions on the coal market,
  • effectively managing the Group's financial risk.

Investments in FIZ asset portfolio

The fund JSW Stabilizacyjny FIZ was established in 2018. The net value of FIZ's assets at the end of 2019 was PLN 1.8 billion. The main purpose for creating the fund is to reduce the impact of the risk of product price volatility on the continuity of operating and investing activities by ensuring financial liquidity during weak conditions on the coking coal market. In accordance with the FIZ's Articles of Association, its assets may be used solely for the following purposes:

  • supporting and stabilising JSW's current liquidity during cash shortages caused by unfavourable prices of coal and coke,
  • financially supporting essential expenditures on JSW's investments, including expanding production capacities, increasing access to deposits, processing coal and coke.

A decision was made on 13 January 2020 to redeem the FIZ's investment certificates worth PLN 700.0 million. This decision was mainly dictated by the current market conditions and the upcoming substantial investment expenditures, which will take place during a period of higher demand for cash.

Credit facilities and loans

In connection with a necessity to secure long-term financing sources, the Group is negotiating with financial institutions. On 9 April 2019, the Group signed two material financing agreements: A financing agreement with financial institutions for a total amount of PLN 460.0 million and the USD equivalent of PLN 300.0 million, and an agreement with the European Investment Bank for EUR 58.5 million.

Given the very significant share that these agreements have in the financing structure and the complexity of covenants determining the Group's activities in the operating and strategic areas, financing documentation constitutes one of the more important elements in shaping the Group's financial strategy.

Real cash pooling

The Group has a real cash-pooling system. This is also an intra-group financing mechanism. The Group's financial strategy provides for active access to intra-group financing for each company within the structure.

In a strategic perspective, the Group is taking into consideration deploying other forms of managing the Group's liquidity, including an internal bond issue and intra-group loan programme.

Energy strategy

JSW Group is working on economic uses for the by-products of coal and coke production. This is intended to enhance security and improve the Group's operational performance. In 2019, JSW's Management Board adopted the JSW Group Energy Strategy 2020-2030, which sets out the key objectives and development directions for the Group in the area of producing and managing energy.

Aside from being an electricity customer, JSW Group also holds a concession for electricity generation, trade and distribution. One of the Group's strategic objectives is to become self-sufficient energy-wise. This is why we are implementing projects related to the economic use of methane and the construction of the Radlin CHP, which will use coke oven gas to produce energy and heat.

Energy self-sufficiency

87%
Planned energy utilization using methane captured in 2025
95%
Energy utilization using coke over gas in 2025
chart-36

Implementing a range of investments concerning the economic use of methane includes expansion of infrastructure for JSW to generate electric and thermal energy using methane from the Company's mines obtained through drainage. The investments are aimed at:

  • prevention in the area of occupational health and safety with regard to the methane hazard,
  • an environmental effect in the form of lower emissions,
  • obtaining economic benefits by using methane to produce energy,
  • becoming independent of external energy purchases.

Energy strategy of the JSW Capital Group for 2020-2030

02_strategia_energetyczna_en 60 MWe 1 2 3 4 13.8 MWe Construction of the Radlin Combined Heatand Power Plant in JSW KOKS until Q4 2021 Energy self-sufficiency in 2022, in some hours of the day with an option to sell surplus Energy on the power exchange. 138 MWe 110 MWe 1.5 TWh/year 99% 200 MWe 2x concession

Innovation strategy

High and stable production quality is playing an increasingly important role in view of the changes taking place on the coal and coke markets. Stricter requirements from the steel industry, supported by competitors from Asia and Australia, necessitate investments in innovations raising the quality of products and ensuring stability.

Using modern IT tools to obtain better knowledge of minerals, optimise production costs and increase safety is JSW Group's response to the development of industry 4.0 in global mining, as manifested in our R+D+I Strategy.

The main aim of the Group's innovativeness strategy is support for its business units. Achieving this objective will require:

  • a stronger pipeline of initiatives in the R+D+I area by enhancing cooperation with scientific partners and innovative firms in the sector and by developing a culture of innovating within the Group,
  • effectively selecting and implementing innovative projects, fully coordinated across the entire Group,
  • a long-term approach to implementing innovative tasks that ensures that the availability of funding for this area will be independent of current conditions on the Group's market, and acceptance for the risk of individual projects failing,
  • implementing an external financing strategy for projects and market commercialisation for innovations,
  • development of a culture of exchanging knowledge and experience in R+D+I at JSW Group.

IT/OT strategy

The role of IT in mining enterprises - so far usually understood as activities related to the processing of information, servicing of equipment, building networks, providing internet services or operating systems - is increasingly changing and becoming more important. Given the specific nature of JSW Group's activities, aside from its "traditional" definition, IT also applies to industrial IT, which supports coal mining and processing ("OT").

This change in approach results from the business needs that are specified in the Strategy, which explicitly emphasise the role of IT and OT in improving performance in coal mining and processing and other business processes. Four strategic areas have been defined in connection with this:

Safety

  • safety of mining crews,
  • operational safety, understood as the capacity to ensure continuity of production and operational processes,
  • technology safety - cybersecurity.

Integration and automation

  • integration and automation of implemented IT and ICT solutions,
  • wider and better use of ICT data to increase the performance of key production and organisational processes,
  • ensuring support for all technological processes throughout the coal and coke production cycle.

Development technologies

  • use of the latest technologies and operational methods,
  • implementing the latest methods for teamwork organisation and for managing IT/OT projects.

Organisation and competences

  • development and expansion of the IT team to a sufficient scale and with appropriate competences,
  • implementing IT management organisation and processes.

Strategic and tactical objectives in the IT/OT Strategy.

02_brak_tytulu_en By working with JSW Group companies in a partnership model, IT creates innovative ideas and delivers modern technological IT/OT solutions that enhance the efficiency, quality and security of key economic processes IT/OT systems integration and automation of business processes at JSW Group Use of simulation environment for deployment of JSW 4.0 technologies Greater maturity of IT/OT management processes Digitalisation of key processes in business strategy areas Platform build for IT/OT development process management Adaptation of resources and competences to IT/OT Strategy Expansion and integration of data exchange tools and development of analytical and reporting solutions Expansion of shared IT/OT infrastructure and architecture in the entire coal – coke cycle Greater IT/OT systems integration and automation of business processes Increase in the organisation’s IT/OT performance and competences 1 2 3 4 IT/OT mission IT/OT vision Strategic IT/OT objectives Tactical IT/OT objectives A B C D

Quality strategy

Dynamic changes in the global economy and in global fuel and commodity markets are forcing producers to maintain product quality parameters at precisely defined levels.

Modern management and planning of production processes assumes a far-reaching optimisation of multiple factors that affect the final product. As a leading supplier of high-quality coking coal and coke, JSW is continuously working on improving and monitoring the production process in order to meet market requirements.

The following documents concerning quality management were accepted for implementation in October 2019:

  • JSW Group's Product Quality Strategy 2020-2030 - outlines the business context and key activities as regards product quality, key challenges and expectations as well as overriding and strategic objectives.
  • JSW Group's deposit analysis and product quality management policy - outlines responsibilities and framework rules concerning the process of managing the quality of deposit analysis and products throughout the entire coal and coke production cycle at the Group and implements guidelines from the business strategy in the area of managing quality surveys, intended to ensure the on-going monitoring and supervising of product quality throughout each production stage.

The Quality Strategy's overriding target is to increase the effectiveness of managing deposit and product quality through:

  • stabilising the coking parameters of coal and coke,
  • achieving the expected quality parameters for commercial products,
  • optimising the cost of feedstock mixtures.

standardising, automating and integrating sampling and analysis processes for coal quality online.

Product Quality Policy in the JSW Group

02_polityka_jakosci_en Implementingorganizational changes Building the Quality Office team Organization Preparing the Quality Strategy Defining the list of strategic projects Acceptance of the SteeringCommittee and of the Management Board Strategy Implementingthe Quality Policy Continuing to develop and update the Quality Policy Quality Policy Planning and launchingthe portfolio of strategic projects Strategic projects Operations

Transport strategy

JSW Group's transport areas mainly cover the management of rail infrastructure, transport within railway sidings as well as transport and forwarding. The Group's transport and forwarding activities are focused on handling the sales of its products and include the purchase of transport services as well as port and forwarding services.

The Transport Strategy was developed in the light of the need to ensure that deliveries are on time and that the risk of a lack of rolling stock of appropriate quality to meet the Group's product sales needs. JSW Group's value will be built as part of this strategy through:
  • supporting the sales process by professionally cooperating with rail carriers,
  • optimising costs,
  • continuously analysing the process in terms of potential changes in how certain elements of logistics handling are performed, depending on business needs,
  • optimising rail infrastructure,
  • generating the effect of scale in relations with service providers by focusing supervision and competences in the area of transport and forwarding activities,
  • ensuring the continuity of comprehensive rail sidings services,
  • expanding our own carrier's rolling stock in order to secure a larger market share in cargo (rail) transport and ensure that costs are market-based.

Extractive waste management strategy

Geological and mining conditions in the mines and strict quality requirements that the production of commercial coal must meet result in large quantities of extractive waste being generated in mining and coal processing.

An analysis of the entire production cycle shows that there is room for reducing such waste and for using it in engineering or technical construction. Despite the Group's wide-ranging activities, because of the significant volume of waste, the options for its use are limited due to its physical and chemical properties and logistics problems. So far, it is still not possible to completely recycle it.

This is why it is exceptionally important to undertake activities intended to secure the existing volume reserves, intended to manage waste on the surface, and build new ones so that waste management is carried out in a rational and planned manner, taking into account economic, social and technical conditions.

JSW Group strives to very rationally approach the subject of generating and managing waste.  To this end, an Extractive waste management strategy was put in place in 2019. The strategy aims to indicate the directions and means for handling waste that is generated by JSW's mining facilities. The strategy sets out in detail the directions for extractive waste management currently and in the coming years and indicates activities that optimise the waste management process. The key directions emphasised in 2019 are as follows:

  • recovery of waste in waste management facilities,
  • recovery of waste on land subject to rehabilitation,
  • disposal of waste at the Central Extractive Waste Landfill,
  • use of extractive waste and mining rock aggregates to rectify mining damages,
  • sale and internal use of non-processed waste,
  • production and sale to external customers of mining rock aggregates or their use internally.