Russian Severstal sells its major coal asset

Roman Trotsenko. Photo: Andrew Lybimov, RBC

Severstal, one of Russia’s leading steel producers has reached an agreement to sell its Vorkutaugol coal asset to Russian Energy, the company, which is owned by a well-known Russian businessman Roman Trochenko.

 

The amount of the deal is 15 billion rubles. The sale is explained by Severstal's plans for decarbonization.

 

Vorkutaugol is one of the largest coal mining companies in Russia. It accounts for about 11% of coking coal output in Russia. It works on the territory of the Pechora coal basin. The company consists of five underground mines, one open-pit mine and auxiliary facilities. The volume of production in 2020 amounted to 10.3 million tons of coal. The company employs about 5,900 people.

 

Russian Energy is owned by Roman Trotsenko, Chairman of the Board of Directors of AEON Corporation (70%) and Andrey Tyasto (30%).

 

Severstal is one of the world's largest vertically integrated steel and mining companies. The main beneficiary is Alexey Mordashov, the richest Russian according to Forbes (along with his family).

 

The parties plan to close the deal in Q1 2022 after obtaining permission from the Russian regulator FAS and "meeting a number of other conditions." Russian Energy plans to buy Vorkutaugol "at the expense of its own and borrowed funds."

 

Severstal CEO Alexander Shevelev explained the deal by Severstal plans to focus on strategies for the development of steel and iron ore assets, as well as plans to reduce the carbon footprint. After the withdrawal of Vorkutaukl from Severstal, the company's greenhouse gas emissions are expected to decrease by 14.3%.

 

At the same time, Severstal believes that coal in the medium term will remain "an integral component of metallurgical production." The

company plans to remain "a key consumer of Vorkuta coals." The deal involves signing of a long-term contract.

 

The general director of Russian Energy Andrey Tyasto sees the prospects for the development of the Russian coal industry and the "great potential of the Arctic zone." “It is important for us that Vorkutaugol maintains and enhances the best practices in the field of corporate culture, social guarantees and industrial safety that have been developed as part of Severstal,” he said in a statement.

By: Eugene Gerden