annual report 2004 - Severočeské doly a.s.
annual report 2004 - Severočeské doly a.s.
annual report 2004 - Severočeské doly a.s.
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SEVEROČESKÉ DOLY a.s. — <strong>annual</strong> <strong>report</strong> <strong>2004</strong><br />
SEVEROČESKÉ DOLY a.s.<br />
<strong>annual</strong> <strong>report</strong> <strong>2004</strong>
Nature has endowed the area<br />
around the Krušné hory mountains<br />
with a high concentration<br />
of resources in the form of a coal<br />
bed. It has influenced the lives and<br />
fates of the many people who have<br />
been, are, and will be involved<br />
in mining. Their relationship<br />
to mining, the shaft, and their<br />
fellow workers is evidenced by<br />
numerous historical documents,<br />
photographs, songs, and the jargon<br />
that has been passed down<br />
the generations. As a result,<br />
professional slang, which is full<br />
of words, meanings, and terms<br />
used by those in the mining<br />
industry, has been preserved. It<br />
brings people together and forms<br />
a bond of common interests among<br />
those who have devoted their lives<br />
to the mines.
<strong>Severočeské</strong> <strong>doly</strong> a.s.<br />
is the largest brown coal<br />
mining company<br />
in the Czech Republic.<br />
The company was<br />
established<br />
on 1 January 1994 by<br />
the merger of Doly Bílina<br />
and Doly Nástup Tušimice.<br />
The company operates<br />
in the North Bohemian<br />
brown coal basin. Its core<br />
businesses are<br />
the extraction, preparation,<br />
and sale of brown coal and<br />
related materials.<br />
The company’s domestic<br />
market share in <strong>2004</strong> was
44.9%. Its largest customer<br />
is the electricity company<br />
ČEZ. The majority<br />
shareholder is the National<br />
Property Fund of the Czech<br />
Republic. <strong>Severočeské</strong><br />
<strong>doly</strong> a.s. is a stable,<br />
successful corporation,<br />
a major participant<br />
in the development of both<br />
its sector and the region,<br />
with a traditional corporate<br />
culture, known and<br />
appreciated for being open<br />
and fair towards its<br />
business partners,<br />
the public, its employees,<br />
and its shareholders.
RAM<br />
The operating part of a heavy tup or ram. Used for forging,<br />
ramming, and nailing.
04<br />
——<br />
05<br />
Key Figures<br />
Indicator Unit of measure <strong>2004</strong> 2003 2002 2001 2000<br />
Market share % 44.9 45.2 43.8 44.4 44.0<br />
Gross amount of coal<br />
extracted tonnes thousands 22,023 23,440 21,812 23,095 22,872<br />
Amount of coal sold tonnes thousands 21,753 22,739 21,387 22,563 22,115<br />
Revenues from<br />
operating activities CZK millions 7,801 7,954 7,610 7,999 7,918<br />
Operating costs CZK millions 6,645 6,898 8,630 7,726 8,345<br />
Value added CZK millions 4,279 4,477 3,876 4,792 4,335<br />
Operating profit CZK millions 1,439 1,307 685 1,008 518<br />
Financial profit CZK millions 390 457 549 502 477<br />
Net earnings CZK millions 1,365 1,294 963 1,113 827<br />
Fixed assets CZK millions 17,040 17,556 16,854 14,938 13,915<br />
Equity CZK millions 16,339 17,065 16,468 15,850 14,745<br />
Liabilities CZK millions 5,932 6,034 5,809 6,576 5,535<br />
Statutory reserves CZK millions 4,034 3,972 3,858 3,893 3,552<br />
Capital investment CZK millions 1,255 1,084 1,370 1,549 2,040<br />
Environmental<br />
expenditure CZK millions 572.7 565.6 505.2 432.4 492.7<br />
Depreciation level % 61.8 59.8 57.7 55.8 59.1<br />
Average number<br />
of employees persons 3,724 3,934 4,154 5,510 5,800<br />
Average monthly wage CZK 20,892 19,596 18,360 16,438 15,361<br />
Closing PSE share price<br />
at 31 December CZK 1,480.0 935.0 433.9 286.6 244.1<br />
P/E 9.76 6.50 4.05 2.32 2.62<br />
Dividend per share CZK 240 234.75 60 40 20
CONCERTINA<br />
The protective concertina-type section of machinery. Used<br />
to protect telescopic chutes when loading coal, or the bolts<br />
of jacking and tensioning devices.
06<br />
——<br />
07<br />
Contents<br />
Most Important Events of <strong>2004</strong> 8<br />
Interview with the Chairman of the Board 11<br />
Directors and Officers 13<br />
Corporate Governance 16<br />
Company Profile 19<br />
Report of the Board of Directors on Company Business Activities and Assets 21<br />
Business Environment 21<br />
Sales and Marketing 23<br />
Production 26<br />
Investment 28<br />
Financial Activities 30<br />
Capital Interests 31<br />
Personnel and Social Policies 32<br />
Social Responsibility 34<br />
The Environment 36<br />
Cleanup and Reclamation 37<br />
Research and Development 38<br />
Information System 38<br />
Financial Performance Commentary 41<br />
Shares and Shareholders 45<br />
Strategy and Outlook for 2005 49<br />
Supervisory Board Report 52<br />
Financial Section 53<br />
Report of Independent Auditors 53<br />
Consolidated Financial Statements in Accordance with IFRS 54<br />
Post Balance Sheet Date Events 68<br />
Cash and In-kind Income 69<br />
Events Forecast in 2005 70<br />
Organizational Chart 71<br />
Glossary 72<br />
Shareholder Financial Calendar 73<br />
Contact Addresses 74<br />
Persons Responsible for the Annual Report 75
Most Important Events of <strong>2004</strong><br />
January — 10 years of company operations<br />
— conversion to a new organizational structure<br />
February — SAP ČR, s.r.o. wins a tender to supply a new information<br />
system<br />
— the audit of the financial statements for 2003 returns<br />
a verdict of ‘unqualified’<br />
March — approval of the business plan for <strong>2004</strong><br />
— the process of privatizing the state-held stake<br />
in the company is halted<br />
— Annual General Meetings held at all subsidiaries<br />
— contract concluded for the supply of an integrated<br />
information system customized for the mining industry<br />
April — signing of a long-term contract sale contract with<br />
Teplárna Ústí nad Labem, a.s. for coal supplies until<br />
2020<br />
— sale of a stake in Teplárna Ústí nad Labem, a.s.<br />
— implementation of the SAP information system kicked off<br />
May — assembly of the SchRs 1320 excavator kicked off<br />
at Doly Nástup Tušimice<br />
— the reserve KU 800/K 65 large-scale excavator is put<br />
into service following a long-term gearbox breakdown<br />
in the bucket wheel of the KU 800/K 98 excavator<br />
June — the company’s Annual General Meeting, which inter alia<br />
approves a dividend payment of CZK 234.75 per share<br />
and changes to the company bodies<br />
July — the Controlling Department starts operating<br />
— completion of the construction of an ancillary pumping<br />
station at Doly Nástup Tušimice as anti-flood protection<br />
August — reclamation of an extraction shaft at the former Ludmila<br />
Underground Mine run by Doly Nástup Tušimice<br />
— shutdown of the K 2000/K 101 large-scale excavator<br />
for a general overhaul
08<br />
——<br />
September — transfer of the relocation of the second overburden<br />
09<br />
bench of the K 99 long-distance conveyor line over<br />
the northern wing of the quarry to the internal spoil<br />
heap at Doly Bílina<br />
— continuation of the rerouting of the railway track<br />
at Březno u Chomutova – Chomutov and resumption<br />
of the boring of a tunnel in a direction away from<br />
the municipality of Droužkovice<br />
October — completion of the first stage of a construction project<br />
to increase the capacity of the Březno mine water<br />
treatment plant, and the commencement of trial<br />
operations at Doly Nástup Tušimice<br />
November — conclusion of a purchase agreement with Severočeská<br />
energetika for the supply of electricity in 2005<br />
— reconstruction of the radius of the bucket-wheel boom<br />
of the KU 300/K 91 excavator at Doly Bílina<br />
December — conclusion of a purchase agreement with ČEZ for coal<br />
supplies in 2005<br />
— signing of the collective agreement for 2005<br />
— launch of talks with ČEZ on a programme to retrofit<br />
existing power plants and build new power plants<br />
in upcoming years<br />
— in cooperation with the Economic and Social Council<br />
of the Ústecko Region, a study is completed called<br />
‘The Role of Brown Coal Mining in the Structure<br />
of the Czech Republic’s Energy Sources’, as the basis<br />
for decision-making on the region’s area plan and<br />
energy policy<br />
— approval of mine planning maps for 2005<br />
— termination of operations and abandonment of buildings<br />
in the Málkov complex at Doly Nástup Tušimice<br />
— completion of the main stage in the implementation<br />
of the new information system
10<br />
——<br />
11<br />
Interview with the Chairman of the Board<br />
Which events had a significant effect on the activities of <strong>Severočeské</strong> <strong>doly</strong> in <strong>2004</strong>?<br />
Mining sites where we use advanced mining technology presented us with a whole range of new situations<br />
during the year. We have had to cope with breakdowns in mechanical equipment that have been of varying<br />
sizes and complexity, and nature tested our ability to handle mining anomalies. Fortunately we managed<br />
to avoid incidents that could have had a fundamental impact on the company’s economic situation.<br />
How is the management satisfied with the results achieved by the company and what did<br />
you personally take most pleasure in?<br />
A company’s reputation hinges on its earnings. Our company has earned its place in the sun thanks<br />
to the solid results it has posted over the past ten years. I am particularly pleased by the fact that these<br />
quality financial results have been achieved without record coal output.<br />
How do you view the position of <strong>Severočeské</strong> <strong>doly</strong> in the context of the Czech Republic’s accession<br />
to the EU last year?<br />
<strong>Severočeské</strong> <strong>doly</strong> has been involved in various professional initiatives in Europe for many years<br />
now through the foreign section of the Mining and Oil Refining Industry Employers Union. Longterm<br />
cooperation, particularly in the fields of legislation and the environment, is well worth it.<br />
What does <strong>Severočeské</strong> <strong>doly</strong> mean for the region and what role does the region play in your<br />
corporate strategy?<br />
Cooperation with the region began as soon as the company was founded in 1994. This sort of cooperation<br />
is an integral part of our business plans and is just as important as production. Specifically, this means<br />
relations with towns and villages on the edges of our mining sites or the social and civic institutions<br />
in the areas of Chomutovsko and Teplicko. The primary aims are to provide financial assistance<br />
and have a positive influence on society.<br />
In your opinion, is <strong>Severočeské</strong> <strong>doly</strong> a socially responsible corporation? How is this social<br />
responsibility manifested?<br />
The very fact that <strong>Severočeské</strong> <strong>doly</strong> is at the start of the economic chain places it in the category<br />
of socially responsible companies. Opencast mining is unthinkable without primary, and often very<br />
extensive, defacement of the landscape. These operations have been carried out to the benefit of the whole<br />
of society for several decades. We round off the process by regenerating the natural environment.<br />
We view our efforts to revitalize the landscape as a public issue.<br />
What does the management of <strong>Severočeské</strong> <strong>doly</strong> want to achieve in 2005? What economic and<br />
business goals does it have?<br />
This year we expect to discuss the region’s land-use plan and energy policy. These talks will have a bearing<br />
on the company’s mining strategy for decades to come. The business and economic goals are linked to the programme<br />
drawn up by our largest customer, ČEZ, to retrofit its power plants. This year, we will also complete<br />
the assembly of a new large-scale excavator, which will be put into service at the Libouš North site.<br />
<strong>Severočeské</strong> <strong>doly</strong> is one of the largest employers in the region. How do you rate the contribution<br />
of your employees and what do you expect of them in 2005?<br />
The company’s success depends on the professional potential of employees, the corporate culture, and<br />
healthy patriotism. <strong>Severočeské</strong> <strong>doly</strong> a.s. and its subsidiaries can draw on such a team of several<br />
thousand employees. Therefore I expect each of them to perform to a quality, professional standard.<br />
Vratislav Vajnar<br />
Chairman of the Board of Directors and Chief Executive Officer
PEAR<br />
The socket of a tram rope, which is used when loading coal<br />
products into wagons, or part of a gearbox. In mining jargon,<br />
this term is also used for a specific method of developing<br />
an opencast mine.
12<br />
——<br />
13<br />
Directors and Officers<br />
Board of Directors<br />
Chairman of the Board of Directors<br />
Vratislav Vajnar (*1944)<br />
Chief Executive Officer of <strong>Severočeské</strong> <strong>doly</strong> a.s., member of the Supervisory Board of Coal Energy, a.s.,<br />
member of the Board of Directors of Výzkumný ústav pro hnědé uhlí a.s., member of the Board of Directors<br />
of SHD – KOMES a.s., member of the Board of Directors of the Mining and Oil Refining Industry Employers<br />
Union, member of the State Raw Material Policy Commission at the Ministry of Industry and Trade,<br />
member of the Board of Governors of the Ostrava Mining and Technical University<br />
— Graduate of the Mechanical and Power Engineering Faculty, Ostrava Institute of Mining, 36 years’ mining<br />
industry experience, employed in various technical positions at Doly Nástup Tušimice since 1969<br />
Vice-Chairmen of the Board of Directors<br />
Erich Grünbaum (*1929)<br />
Company Proxy and Financial Director of <strong>Severočeské</strong> <strong>doly</strong> a.s., Chairman of the Board of Directors<br />
of Výzkumný ústav pro hnědé uhlí a.s., Vice-Chairman of the Board of Directors of SHD – KOMES a.s.<br />
— Graduate of the University of Economics, Prague, and the Ostrava Institute of Mining, 51 years’ mining<br />
industry experience<br />
Aleš Cincibus (*1956)<br />
Chief Adviser to the Minister of Industry and Trade, associate of R.G.I., spol. s r.o., associate<br />
of B.R.G., spol. s r.o., associate of A.R.G., spol. s r.o., associate of R.I.G.I., spol. s r.o.<br />
— Graduate of the Institute of Chemical Technology, Prague, 25 years’ experience<br />
Members of the Board of Directors<br />
Daniel Beneš (*1970)<br />
ČEZ, a.s. Executive Director for Purchasing, Chairman of the Supervisory Board of ČEZ Logistika, s.r.o.,<br />
member of the Supervisory Board of ŠKODA PRAHA a.s.<br />
— Graduate of the Faculty of Mechanical Engineering, Ostrava Institute of Mining, 12 years’ experience<br />
Jan Demjanovič (*1953)<br />
Sales Director of <strong>Severočeské</strong> <strong>doly</strong> a.s., Vice-Chairman of the Board of Directors of Coal Energy, a.s.,<br />
Vice-Chairman of the Supervisory Board of SD – Kolejová doprava, a.s., member of the Supervisory<br />
Board of ČEZ, a.s.<br />
— Graduate of the Faculty of Mechanical Engineering, Liberec Institute of Mechanical Engineering and<br />
Textiles, 25 years’ mining industry experience<br />
Karel Goldemund (*1968)<br />
Adviser to the Minister of Finance, member of the Board of Directors of Municipální finanční společnost a.s.,<br />
member of the statutory body of Nadace Duhová energie, member of the Supervisory Board of První<br />
česko-ruská banka, s.r.o., member of the statutory body of the State Housing Development Fund<br />
— Graduate of the Brno Institute of Agriculture, 15 years’ experience<br />
Pavel Kuta (*1968)<br />
Vice-Chairman of the Executive Committee of the National Property Fund of the Czech Republic, member<br />
of the Supervisory Board of UNIPETROL, a.s., member of the Supervisory Board of ČESKÝ TELE-<br />
COM, a.s., Vice-Chairman of the Supervisory Board of MERO ČR, a.s.<br />
— Graduate of The Master’s College (USA), London Business School (UK), 13 years’ experience
Supervisory Board<br />
Chairman of the Supervisory Board<br />
Robert Sýkora (*1964)<br />
External specialist at the Ministry of Industry and Trade of the Czech Republic, Chairman of the Board<br />
of Directors of OXO GROUP a.s., Chairman of the Supervisory Board of Alfa Plastik, a.s., associate<br />
of KAPSTOP s.r.o., member of the advisory body of the Czech Mining Office responsible for opencast<br />
coal mining<br />
— Graduate of the Faculty of Civil Engineering, Brno Technical Institute, and the Open University<br />
Business School, 16 years’ experience<br />
Vice-Chairman of the Supervisory Board<br />
Jiří Zahradník (*1956)<br />
Member of the Supervisory Board elected by employees, Head of the Planning and Controlling Department<br />
of <strong>Severočeské</strong> <strong>doly</strong> a.s., Chairman of the Supervisory Board of SD – Vrtné a trhací práce, a.s., member<br />
of the Supervisory Board of PRODECO, a.s., member of the Board of Directors of SHD – KOMES a.s.<br />
— Graduate of the Institute of Mechanical and Power Engineering, Plzeň, 26 years’ mining industry<br />
experience<br />
Members of the Supervisory Board<br />
Martin Engel (*1971)<br />
Lawyer at the National Property Fund of the Czech Republic, Chairman of the Supervisory Board of THER-<br />
MAL–F, a.s.<br />
— Graduate of the Faculty of Law, Charles University, Prague, 6 years’ experience<br />
Ivan Hink (*1950)<br />
Head of the legal section at the National Property Fund of the Czech Republic, member of the Executive<br />
Committee of the National Property Fund, member of the Supervisory Board of Východočeská energetika,<br />
a.s., member of the Supervisory Board of MERO ČR, a.s.<br />
— Graduate of the Faculty of Law, Charles University, Prague, 19 years’ experience<br />
Josef Hutař (*1947)<br />
Member of the Supervisory Board elected by employees, Chairman of the trade union at Doly Nástup<br />
Tušimice<br />
— Graduate of the secondary power engineering technical school in Chomutov, 39 years’ mining<br />
industry experience<br />
Jan Kobes (*1946)<br />
External Specialist of the National Property Fund of the Czech Republic<br />
— Graduate of the Institute of Chemical Technology, Prague, 37 years’ experience<br />
Alexandr Novák (*1956)<br />
Senator, associate of OMC s.r.o.<br />
— Graduate of secondary energy industry school, 27 years’ experience<br />
Šimon Vohár (*1954)<br />
Member of the Supervisory Board elected by employees, Chairman of the Union of Labour Organizations<br />
of Doly Bílina and subsidiaries<br />
— Graduate of the secondary power engineering technical school, 24 years’ mining industry experience
14<br />
——<br />
15<br />
Jaroslav Volšický (*1947)<br />
Director of the Production Section, ČEZ, a.s., member of the Supervisory Board of LOMY MOŘI-<br />
NA, spol. s r.o., member of the Supervisory Board of KOTOUČ ŠTRAMBERK, spol. s r.o.<br />
— Graduate of the Institute of Mechanical and Power Engineering, 36 years’ experience<br />
Management<br />
Vratislav Vajnar (*1944)<br />
Chief Executive Officer – for information on membership of the bodies of other companies, education,<br />
and experience, see his entry as Chairman of the Board of Directors<br />
Erich Grünbaum (*1929)<br />
Financial Director – for information on membership of the bodies of other companies, education,<br />
and experience, see his entry as Vice-Chairman of the Board of Directors<br />
Jan Demjanovič (*1953)<br />
Sales Director – for information on membership of the bodies of other companies, education, and<br />
experience, see his entry as a member of the Board of Directors<br />
Miroslav Eis (*1957)<br />
Technical Director, Vice-Chairman of the District Economic Chamber, Chomutov, Chairman<br />
of the Supervisory Board of SD – Kolejová doprava, a.s., Chairman of the Supervisory Board of Skládka<br />
Tušimice, a.s., member of the Academic Council of the Faculty of Mining and Geology, Institute<br />
of Mining – Ostrava Technical University<br />
— Graduate of the Faculty of Mining and Geology, Ostrava Institute of Mining, 22 years’ mining<br />
industry experience<br />
Josef Molek (*1956)<br />
Human Resources Director, Chairman of the Supervisory Board SD – Autodoprava, a.s., member<br />
of the Board of Governors of the J. E. Purkyně University in Ústí nad Labem<br />
— Graduate of the Faculty of Production and Economics, University of Economics, Prague, 25 years’<br />
mining industry experience<br />
Antonín Vincenc (*1950)<br />
Director of Doly Bílina, Chairman of the Supervisory Board of SD – 1.strojírenská, a.s., Chairman<br />
of the Supervisory Board of SD – Humatex, a.s., Vice-Chairman of the Supervisory Board of<br />
SD – Autodoprava, a.s.<br />
— Graduate of the Faculty of Mechanical Engineering, Czech Technical University, Prague, 32 years’<br />
transport and mining industry experience<br />
Jiří Neruda (*1957)<br />
Director of Doly Nástup Tušimice, Vice-Chairman of the Supervisory Board of SD – 1.strojírenská, a.s.<br />
— Graduate of the Mechanical and Power Engineering Faculty, Ostrava Institute of Mining, 23 years’<br />
mining industry experience<br />
Changes in Company Bodies<br />
In November 2003, Jan Škurek resigned from his position of member of the Board of Directors. At the General<br />
Meeting held on 25 June <strong>2004</strong>, Josef Sedlák and Jaroslav Šulc were recalled. The new members of the Board<br />
of Directors elected by the General Meeting were Daniel Beneš, Karel Goldemund, and Pavel Kuta. In June<br />
<strong>2004</strong>, Miroslav Šifner resigned from his position of member of the Supervisory Board. Michael Šenberger<br />
was recalled from his office by the General Meeting held on 25 June <strong>2004</strong>. Ivan Hink and Robert Sýkora<br />
were elected new members of the Supervisory Board by the General Meeting.
Corporate Governance<br />
The management principles of <strong>Severočeské</strong> <strong>doly</strong> a.s. (the ‘company’) are defined in the company’s Articles<br />
of Association, which stipulate the rights and obligations of the company’s bodies and fully respect all<br />
legal requirements in the management of the company.<br />
Although the company has not ascribed to the voluntary Corporate Governance Code, based on OECD<br />
Principles and recommended by the Czech Securities Commission, corporate governance principles<br />
under this Code are either respected or being developed further.<br />
General Meeting<br />
The company’s supreme body is the General Meeting, which is composed of company shareholders.<br />
The General Meeting makes decisions on fundamental economic, organizational, and operating affairs.<br />
The General Meeting’s competence and powers are defined by the Commercial Code and the company’s<br />
Articles of Association. The Board of Directors convenes an Ordinary (Annual) General Meeting<br />
at least once per accounting period. The first General Meeting in the year must be held within six<br />
months of the end of the preceding accounting period. Other General Meetings convened by the Board<br />
of Directors, the Supervisory Board, or a qualified minority are Extraordinary General Meetings.<br />
Board of Directors<br />
The seven-member Board of Directors is the statutory body managing the company and acting in the name<br />
of the company. The Board of Directors makes decisions on all matters which are not in the competence<br />
of the General Meeting or Supervisory Board, in accordance with legislation in force and the<br />
company’s Articles of Association. The Board of Directors is responsible for the business management<br />
of the company. The members of the Board of Directors are appointed by the General Meeting for a fouryear<br />
term of office. The Board of Directors is composed of three representatives of the company’s executive<br />
management, a representative of the majority shareholder (the National Property Fund of the Czech<br />
Republic), a representative of the energy company ČEZ, which is a significant shareholder,<br />
a representative of the Ministry of Industry and Trade, and a representative of the Ministry of Finance.<br />
All members of the Board of Directors have the relevant professional qualifications, education, and<br />
experience required for this position. The Board of Directors elects a Chairman and two Vice-Chairmen<br />
from its midst. The members of the Board of Directors are obliged to exercise their powers with the due<br />
care of a good husbandman and to keep secret all confidential information and facts. The obligation<br />
of confidentiality remains in force even after a member of the Board of Directors ceases to hold this<br />
office. The Board of Directors meets at least once every three months.<br />
Supervisory Board<br />
The Supervisory Board has nine members and monitors the exercise of powers by the Board of Directors<br />
and the fulfilment of the company’s business plan. It informs the General Meeting of the results<br />
of its supervisory activities. The composition, competence, and powers of the Supervisory Board are<br />
defined in the Commercial Code and the company’s Articles of Association. Two thirds of the Supervisory<br />
Board’s members are appointed and recalled by the General Meeting; one third of its members are<br />
appointed and recalled by the company’s employees. The term of office of a Supervisory Board<br />
member is four years. The Supervisory Board contains three representatives of the majority shareholder<br />
(the National Property Fund of the Czech Republic), one representative of the energy company<br />
ČEZ, a senator or former Mayor of Chomutov, an external specialist from the Ministry of Industry<br />
and Trade, and three employee representatives. One of the employee representatives is the Vice-<br />
Chairman. All the members of the Supervisory Board have the relevant professional qualifications,<br />
education, and experience required for this position. The Supervisory Board elects a Chairman and<br />
Vice-Chairman from its midst. The members of the Board of Directors are obliged to exercise their powers<br />
with the due care of a good husbandman and to keep secret all confidential information and<br />
facts. The obligation of confidentiality remains in force even after a member of the Supervisory<br />
Board ceases to hold this office. The Supervisory Board meets at least three times a year.
16<br />
——<br />
17<br />
Executive Management<br />
The company has a Chief Executive Officer, who is also the Chairman of the Board of Directors. The Chief<br />
Executive Officer is appointed and recalled by the Board of Directors. The Chief Executive Officer is<br />
responsible for the business management of the company and for the implementation of decisions<br />
made by the Board of Directors, the General Meeting, or the Supervisory Board. The Chief Executive<br />
Officer has a CEO Council, which is his advisory body and is composed of members of the company’s<br />
executive management and the director of the Chief Executive Officer’s Office. The status<br />
of the Council and its tasks are regulated in its Statutes.<br />
Members of the executive management are also appointed and recalled by the Board of Directors,<br />
based on a proposal from the Chief Executive Officer.<br />
The Board of Directors acts in the name of the company. The Board of Directors is represented in external<br />
relations either by the Chairman of the Board of Directors alone or by one of the Vice-Chairmen together<br />
with one member of the Board of Directors. The Company Proxy, authorized to carry out all legal actions<br />
except property conveyancing and mortgaging, may also act in the name of the company.<br />
The company’s employees also carry out legal transactions on behalf of the company based on authorization<br />
awarded in accordance with the company’s internal regulations and signing rules.<br />
Relations between the Company and Shareholders<br />
The company respects all the provisions of the Commercial Code concerning the protection of shareholder<br />
rights, and in particular provides all relevant information about the company promptly and<br />
convenes General Meetings as required. In addition, the company ensures that all shareholders are<br />
treated equally.<br />
Shareholder Rights<br />
No special rights are attached to the ownership of company shares. The basic rights of shareholders,<br />
the way these rights are exercised, and transferability are regulated by Act No 513/1991,<br />
the Commercial Code, and the Articles of Association. Where rights are not exercised, the resultant<br />
procedure is laid down in the Articles of Association in accordance with generally binding legal<br />
regulations in force in the Czech Republic.<br />
Rights attaching to shares are exercised by the person listed in the statutory records at the Prague<br />
Securities Centre, unless the law specifies to the contrary.<br />
1. Shareholders have one vote per CZK 1,000 of nominal value. If one share is owned by several<br />
persons the co-shareholders are obliged to agree on which of them shall exercise the rights attaching<br />
to the share or to appoint a joint representative.<br />
2. A shareholder has the right, subject to the conditions laid down in Section 178 of the Commercial Code,<br />
to a share in the company’s profits (i.e. a dividend) as approved for distribution by the General Meeting.<br />
a) This share is determined by the ratio of the nominal value of a shareholder’s shares to the<br />
nominal value of the shares of all shareholders.<br />
b) The dividend is payable within three months of the date the General Meeting resolution<br />
on the distribution of profits is adopted. The time limit for the payment of a dividend relates<br />
both to holders of bearer shares and holders of registered shares. The General Meeting shall<br />
decide, pursuant to a proposal from the Board of Directors, on the dividend payment date, place,<br />
method of payment, and decisive day for the payment of the dividend.<br />
c) The right to the payment of a dividend is time-barred once four years have elapsed as of the<br />
decisive date for the dividend payment.<br />
d) A shareholder is not obliged to return a dividend to the company which is received in good faith.<br />
3. Over the life of the company, and subsequent to the winding-up of the company, a shareholder is<br />
not entitled to demand the return of his contributions. Only the considerations allowed under<br />
the law shall not be deemed to be the return of contributions. If the company is wound up with<br />
liquidation, a shareholder has the right to a share in the liquidation balance.<br />
4. A shareholder has the right to participate in the management of the company, i.e. to attend the General<br />
Meeting and cast votes, demand and receive explanations relating to the company where such
explanations are required for an assessment of an item on the agenda of the General Meeting,<br />
and to make proposals and counterproposals at the General Meeting.<br />
a) If a shareholder intends to make counterproposals to proposals at a General Meeting, the<br />
content of which is specified in the invitation to the General Meeting or notification of the General<br />
Meeting, or in cases where a notarial deed must be drawn up on a decision of the General Meeting,<br />
the shareholder is obliged to deliver the written text of his proposal or counterproposal to the company<br />
no later than five working days before the date of the General Meeting. A shareholder has<br />
the same right to demand and receive explanations regarding affairs related to persons<br />
controlled by the company.<br />
b) A shareholder may request the Board of Directors for the issue of a copy of the minutes<br />
of the General Meeting or part thereof at any time during the existence of the company. Copies<br />
are made at the shareholder’s expense.<br />
c) A shareholder may petition a court to declare a resolution of the General Meeting null and void<br />
should it contravene legal regulations, the Memorandum of Association, or the Articles<br />
of Association. If this right is not exercised within three months of the date of the General Meeting<br />
or, if a General Meeting has not been duly convened, within three months of the date the shareholder<br />
could have learnt that the General Meeting had taken place, but no later than one<br />
year, this right shall cease to exist. If the reason for the action is that the General Meeting<br />
did not adopt the claimed resolution or that the content of the claimed resolution does not<br />
correspond to the resolution adopted by the General Meeting, the action may be filed within<br />
three months of the day the petitioner learnt of the claimed resolution but no later than one<br />
year as of the date the General Meeting is held. A statement declaring a decision of the General<br />
Meeting null and void may only be sought in cases specified by law.<br />
5. A shareholder has the preferential right to subscribe to a portion of new company shares underwritten<br />
to increase the registered capital in the scope of his share in the company’s registered<br />
capital, provided that the shares are being subscribed to with monetary contributions. This right<br />
may be restricted or suspended only by a decision of the General Meeting and only provided this<br />
decision is in the important interests of the company.<br />
6. A shareholder or shareholders who hold shares or interim certificates with a value of more than<br />
three per cent of the registered capital (hereinafter referred to as ‘qualified minority’) may request<br />
the Board of Directors for an Extraordinary General Meeting to be convened in order to discuss<br />
proposed affairs. The manner in which such a General Meeting is convened and the coverage<br />
of the costs thereof are regulated by law.<br />
Openness and Transparency of Information<br />
<strong>Severočeské</strong> <strong>doly</strong> has been a long-standing advocate of the openness of information in relation to current<br />
and potential investors and in relation to other parties similarly involved with the company.<br />
The company respects the guidelines of the Czech Security Commission regarding the publication of all<br />
material information. The company also consistently ensures that all information requirements under<br />
the regulations of the Prague Stock Exchange, the RM-System, and the Prague Securities Centre are<br />
met. In this respect, all shareholders and potential shareholders, without discrimination, have an overview<br />
of the financial situation, performance, ownership, and management of the company for their investment<br />
decisions.<br />
The trustworthiness and transparency of the financial figures released by the company is<br />
guaranteed by the fact that the company’s financial statements are subjected to an independent audit<br />
by Ernst & Young ČR, s.r.o. The independent auditor, approved by the Supervisory Board, also<br />
examines the Report on Relations between Related Entities and the correctness of the information disclosed<br />
in the Annual Report.<br />
Company Policy in Relation to Involved Parties<br />
The company consistently discharges all its statutory obligations in relation to involved parties, including<br />
employees, creditors, customers, and suppliers. In addition, the company is aware of its broader<br />
duties to the local community and the environment.
18<br />
——<br />
19<br />
Company Profile<br />
<strong>Severočeské</strong> <strong>doly</strong> a.s., company registration number: 49901982, is a company established by a decision<br />
to privatize significant parts of the assets of two state enterprises, Doly Nástup Tušimice and Doly<br />
Bílina, of 1 January 1994, based in Chomutov. The company was established in accordance with<br />
the Commercial Code (Act No 513/1991), as amended, pursuant to generally binding legal regulations<br />
in force in the Czech Republic. The company’s core business is the excavation, processing, and<br />
sale of brown coal and by-products. Information about the company is entered in the Commercial Register<br />
kept by the Regional Court in Ústí nad Labem under Section B, Entry 495. The company’s majority shareholders<br />
are the National Property Fund of the Czech Republic (55.4%) and ČEZ, a.s. (37.2%).<br />
The company’s mining activities take place in two separate localities in the North Bohemian brown-coal<br />
basin, Tušimice and Bílina. Doly Bílina produces low-sulphur graded and boiler coal. Doly Nástup Tušimice<br />
mainly produces boiler coal. Although the two localities differ in terms of specific natural and historical<br />
characteristics, they were successfully integrated right at the beginning of the company’s ten-year history.<br />
Proof of this is the company’s leading position on the brown coal market, where it enjoyed a market<br />
share of 44.9% in <strong>2004</strong>. Further developments on the fuel market will be influenced by the Government<br />
Energy Concept as the basic document expressing targets in the energy sector. The liberalization of the energy<br />
markets in the EU is in full swing, and will gradually spread to the Czech Republic under the relevant<br />
measures which have been adopted. These factors, which influence the consumption of energy in the Czech<br />
Republic and have an impact on the demand for coal, are a decisive element in determining how the business<br />
activities of <strong>Severočeské</strong> <strong>doly</strong> will progress in the future. The company is prepared to be one of the stable<br />
pillars of the Czech and European energy sectors in the decades to come.<br />
In relation to customers, a large emphasis is placed on the quality and reliability of supplies and<br />
on accommodating other customer requirements. The dominant customer is ČEZ, a.s. The company’s<br />
production range is very broad; the structure of customers, who benefit from guaranteed quality<br />
and standards of coal produced by the company, is just as wide and diverse. The company <strong>annual</strong>ly<br />
produces approximately 20 million tonnes of coal, making it the market leader. Significant competitors<br />
remain Mostecká uhelná společnost, a.s., právní nástupce, and Sokolovská uhelná, a.s.<br />
The company’s mission is not just the excavation of coal for the energy sector. The company is<br />
fully aware of the need to compensate for the natural sources it exploits by cleaning up the consequences<br />
of its mining activities. The thorough preparation and implementation of re-landscaping and<br />
restoring environmental stability on completion of brown-coal mining is one of the company’s basic<br />
areas of activity. To this end, the company creates financial reserves for cleanup and reclamation<br />
and provisions to settle mining damage. The company invests resources from these reserves into financial<br />
instruments in accordance with a suitably conservative risk policy.<br />
The company pays considerable attention to its human resources policy and communication with<br />
trade unions, especially during collective bargaining. In this respect, the company also strives to protect<br />
the health and safety of its employees and the inhabitants in all municipalities affected by mining<br />
activities. The company has a headcount of approximately 3,700 employees; thousands of other people<br />
have found work at subsidiaries and supplier companies. In terms of its economic and social power,<br />
<strong>Severočeské</strong> <strong>doly</strong> is also a stabilizing element in the region, and helps to find solutions to a number<br />
of problems faced by local municipalities. In its communications, the company respects the principle<br />
of the openness of information, not only in relation to employees and shareholders, but also in relation<br />
to business partners and the public.<br />
The company’s main goals include, but are not limited to:<br />
long-term and stable increases in the capital invested by shareholders, reinforcement of the company’s<br />
market position, preservation of the company’s financial stability, the posting of reasonable yields<br />
on disposable financial assets, an increase in the profitability of assets, consolidation of social<br />
peace within the company, the fulfilment of environmental protection requirements, the cleanup<br />
and reclamation of land affected by mining, the reinforcement of good relations with municipalities.
WASHING<br />
Technological premises for processing feed coal by means<br />
of gravitational separation (washing). Every year, an average<br />
of 3 million tonnes of feed coal with a granularity of<br />
10–100 mm are processed.
20<br />
——<br />
21<br />
Report of the Board of Directors<br />
on Company Business Activities and Assets<br />
Business Environment<br />
Significant Events of <strong>2004</strong><br />
On 1 May <strong>2004</strong>, the Czech Republic and another nine candidates joined the European Union. An amendment<br />
to the Energy Act and the draft National Allocation Plan (NAP) for CO 2 emission trading, which<br />
will enter into force after endorsement within the EU, were approved.<br />
In the coal industry, Sokolovská uhelná, a.s. was privatized, and the privatization of OKD, a.s., KAR-<br />
BON INVEST Group member was completed.<br />
A bill to promote the generation of electricity from renewable energy sources is still at the stage<br />
of discussion, and has had a first reading in Parliament.<br />
Negotiations on the Ústecko Region Land-Use Plan 2006–2020, including the validity of and changes<br />
to Area Environmental Limits for Coal Mining, kicked off.<br />
In March <strong>2004</strong>, the Government halted the process of privatization the state-held stake in<br />
<strong>Severočeské</strong> <strong>doly</strong> a.s.<br />
The Czech Economy in <strong>2004</strong><br />
The Czech Republic’s gross domestic product went up by 4.0% in <strong>2004</strong>. Consumer prices climbed by<br />
2.8% year on year. The unemployment rate fell to 9.5%, mainly thanks to a change in the calculation<br />
methodology to conform to EU standards. Labour offices had 541,675 unemployed registered in their<br />
books; unemployment kept to the same level as in 2003. In the scope of the reform of public finances,<br />
the value added tax standard rate was cut from 22% to 19% as of 1 May <strong>2004</strong>. The corporate income tax<br />
rate was reduced to 26%. Brown-coal mining <strong>report</strong>ed a 4% decrease year on year. The prices of electricity,<br />
gas, and district heating went up and the cost of acquiring electricity from renewable energy sources<br />
was reduced. Hard-coal mining posted a moderate 2.2% rise year on year; the selling price of coking<br />
coal went up.<br />
The Czech crown appreciated against both the euro and the US dollar. As at 31 December <strong>2004</strong>,<br />
the exchange rates were 30.465 CZK per EUR and 22.365 CZK per USD.<br />
Generation of Electricity in the Czech Republic<br />
There was a year-on-year rise in total electricity generation by 1.3% (1.1 TWh) to 84.3 TWh. Electricity<br />
generation at nuclear power plants rose by 1.7%, and in steam power stations fell by 0.4%.<br />
The excavation of brown coal and lignite dipped year on year from 50.3 to 48.5 million tonnes; hardcoal<br />
mining fell from 13.8 to 13.3 million tonnes.<br />
Power generation in the Czech Republic in <strong>2004</strong> (%)<br />
0 10 20 30 40 50 60 70<br />
Coal power stations<br />
62.6%<br />
Nuclear power stations<br />
31.2%<br />
Vapour gas and gas power<br />
stations — 3.1%<br />
Hydro, wind, solar, and other<br />
alternative power plants<br />
3.1%<br />
Market Share<br />
<strong>Severočeské</strong> <strong>doly</strong> achieved sales of 21.8 million tonnes of coal in <strong>2004</strong>, thus recording a drop in sales<br />
production by almost 1 million tonnes (4.33%) compared to 2003, mainly because of a fall in boiler-coal<br />
supplies to ČEZ power plants. Compared to the other brown-coal producers, <strong>Severočeské</strong> <strong>doly</strong> confirmed<br />
its status as the number-one player on the brown-coal market with a market share of 44.85%.
Market share by brown-coal mining company in the Czech Republic in <strong>2004</strong> (%)<br />
<strong>Severočeské</strong> <strong>doly</strong> a.s.<br />
44.9%<br />
Mostecká uhelná společnost, a.s.<br />
33.4%<br />
Sokolovská uhelná, a.s.<br />
20.8%<br />
Lignit Hodonín, s.r.o.<br />
0.9%<br />
1994<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
2000<br />
2001<br />
2002<br />
2003<br />
<strong>2004</strong><br />
0 10 20 30 40 50<br />
Developments in market share by mining company (%)<br />
1994<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
2000<br />
2001<br />
2002<br />
2003<br />
<strong>2004</strong><br />
<strong>Severočeské</strong> <strong>doly</strong> a.s.<br />
Mostecká uhelná společnost, a.s.<br />
0 10 20 30 40 50 60 70 80 90 100<br />
Palivový kombinát Ústí, s.p.<br />
Sokolovská uhelná, a.s.<br />
Lignit Hodonín, s.r.o.<br />
Developments in brown coal sales by mining company (millions of tonnes)<br />
<strong>Severočeské</strong> <strong>doly</strong> a.s.<br />
Mostecká uhelná společnost, a.s.<br />
0 10 20 30 40 50 60<br />
Palivový kombinát Ústí, s.p.<br />
Sokolovská uhelná, a.s.<br />
Lignit Hodonín, s.r.o.
22<br />
——<br />
23<br />
Sales and Marketing<br />
Sales Strategy and Contractual Arrangements<br />
<strong>Severočeské</strong> <strong>doly</strong>’s strategy in sales is centred on <strong>annual</strong>, medium- and long-term coal supply contracts<br />
respecting mutually beneficial business conditions. Contractual relations form the basis for long-term<br />
stable use of brown coal as a source of quality, reasonably priced energy which is strategically<br />
important today and will remain so in the future.<br />
In 1997, <strong>Severočeské</strong> <strong>doly</strong> a.s. and ČEZ, a.s. entered into an agreement on future coal supply purchase<br />
contracts up to 2015 with an option to renew until 2030. The conclusion of long-term sales contracts<br />
with ČEZ in 1997 enabled <strong>Severočeské</strong> <strong>doly</strong> to structure and implement an efficient long-term investment<br />
programme. In 1996, <strong>Severočeské</strong> <strong>doly</strong> entered into business cooperation with Teplárna Ústí nad Labem.<br />
Under long-term contracts the company provided the heat plant with an interest-bearing loan<br />
in 1996–1997 and the heat plant agreed to buy a minimum of 0.9 million tonnes of brown coal from<br />
<strong>Severočeské</strong> <strong>doly</strong> each year. In <strong>2004</strong>, the business cooperation was extended by a long-term purchase<br />
contract valid until mid–2020. At the end of 1997, a long-term contract was signed with ECK Generating<br />
Kladno for coal supplies to the Kladno Energy Centre in the period until 2020. The specific parameters<br />
of these long-term agreements are subject to <strong>annual</strong> clarification in annexes signed for each individual<br />
year, which form the basis of flexible mutual trade. This ensures that the sale of three quarters<br />
of production is guaranteed each business year and means the company has some idea of how to proceed<br />
in its other business and investment programmes and what decisions to make. In <strong>2004</strong>, a number<br />
of other sales contracts were also concluded with smaller and medium-sized customers for supplies<br />
of graded coal and coal dust in the various regions of the Czech Republic.<br />
Supplies of Output<br />
The output of <strong>Severočeské</strong> <strong>doly</strong> a.s. is supplied to several market segments. Fuel compounds are intended<br />
for the ‘large power industry’, which is dominated by ČEZ. Highly calorific rough powders and additive<br />
dust coal are intended for the industrial and municipal sectors (large and medium-sized industrial<br />
and municipal heat plants). Sorted coal in the categories of Cube ko2, Nut o1 and Nut o2, with a low<br />
content of aggressive substances, is supplied to small and medium-sized plants in the municipal<br />
sector and to the public. Another market segment is exports of output to Slovakia, Austria, Slovenia,<br />
Croatia, Poland, and Hungary, mediated by CARBOUNION BOHEMIA, spol. s r.o.<br />
The parameters of the fuel generated from coal mined at Doly Bílina comply with the requirements<br />
laid down in Regulation of the Ministry of the Environment No 357/2002, on the quality<br />
of solid fuels supplied for combustion in energy plants. Nut o2 is a suitable fuel for grate boilers and<br />
automatic boilers with a high combustion efficiency (e.g. Carborobot, Ekoefekt), NOX boilers, and other<br />
coal-fired boilers.<br />
Besides coal products, <strong>Severočeské</strong> <strong>doly</strong> also offers a number of by-products, such as ceramic, brick,<br />
and plugging clay, and ceramsite.<br />
Coal Products<br />
<strong>Severočeské</strong> <strong>doly</strong> sold graded coal in the categories of Cube ko2 (granularity of 40–100 mm), Nut o1<br />
(granularity of 20–40 mm), and Nut o2 (granularity of 10–25 mm) to selected industrial customers<br />
and consumers in the tertiary sphere (i.e. households, schools, authorities and hospitals). Rough powder<br />
(granularity of 0–10 mm) and industrial mixes (granularity of 0–30 mm) were supplied to producers<br />
of heat and electricity, in particular ČEZ power stations and large heat plants.<br />
Despite the impact of certain negative effects, especially the full operation of the two units at Temelín<br />
Nuclear Power Station, the company <strong>report</strong>ed sound coal sale results in <strong>2004</strong>. Exports of electricity from<br />
ČEZ, a.s. and Coal Energy, a.s. (a direct link to the need for additional purchases of coal for ČEZ power<br />
stations during the year), the high quality of the coal produced by the company, and suitable incentives<br />
(discounts, financial bonuses, extended payment periods) all contributed substantially to this situation.<br />
A significant item of <strong>Severočeské</strong> <strong>doly</strong> coal sales in <strong>2004</strong> comprised graded coal from Doly Bílina,<br />
which recorded sales of 2.2 million tonnes. Sales of rough powder coal slipped by 24,400 tonnes<br />
(2.9%) year on year to 826,000 tonnes. In <strong>2004</strong>, supplies of industrial mixtures amounted to 18.8 mil-
Coal customer structure in <strong>2004</strong> (%)<br />
ČEZ, a.s.<br />
78.7%<br />
power plants over 50 MW<br />
8.0%<br />
power plants 50 MW and<br />
under — 0.5%<br />
fuel dealers<br />
11.5%<br />
exports to Slovakia<br />
0.6%<br />
other exports<br />
0.7%<br />
Developments in exports (kt)<br />
1994<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
2000<br />
2001<br />
2002<br />
2003<br />
<strong>2004</strong><br />
Slovakia<br />
Hungary<br />
Croatia<br />
0 10 20 30 40 50 60 70 80<br />
0 200 400 600 800 1,000 1,200<br />
Slovenia<br />
Germany<br />
Austria<br />
Macedonia<br />
Poland<br />
lion tonnes, a year-on-year fall by 906,000 tonnes (4.6%) resulting from lower supplies to ČEZ power<br />
stations, where 17.1 million tonnes were supplied, i.e. 708,000 tonnes (4%) less than in 2003. Revenues<br />
were down by CZK 159 million (2.1%) to CZK 7,391.3 million (including the change in inventories).<br />
Non-Coal Products<br />
A significant area of company trading is the sale of non-coal products and services. The main byproducts<br />
offered by the company included gravel, kaolin, marlite, and plugging and brick clay.<br />
Revenues in <strong>2004</strong> amounted to CZK 11.4 million, a rise by CZK 4.6 million (67%).<br />
Coal Sale Distribution Routes in the Czech Republic<br />
There are several different distribution routes from the mining company to the end consumer.<br />
Key industrial customers are supplied with a substantial portion of sales under medium-term and<br />
long-term sales contracts.<br />
Coal wholesalers are another market area. This market segment is smaller than the segment of direct<br />
customers. It distributes products to companies, the municipal sphere, and the retail network. The network<br />
of coal dealers is illustrated on the map.<br />
A nationwide network of retailers is in direct contact with end customers. Despite competition from<br />
other types of energy, the company has not recorded a reduction in the number of points of sale or
24<br />
——<br />
25<br />
Product structure (%)<br />
industrial mixes<br />
86.3%<br />
Cube ko2<br />
2.5%<br />
Nut o1<br />
4.0%<br />
Nut o2<br />
3.4%<br />
rough powder<br />
3.8%<br />
0 10 20 30 40 50 60 70 80 90 100<br />
uneven distribution over the territory of the Czech Republic. Retail distributors respond very flexibly<br />
to market requirements. Their mutual competition affects pricing, as well as the quality and availability<br />
of products.<br />
The company is in direct contact with all links in the distribution chain. Information analysed by<br />
the company underlines the positive developments in demand for the fuel sold by <strong>Severočeské</strong> <strong>doly</strong>.<br />
Coverage of the Czech Republic by significant dealers in fuel from <strong>Severočeské</strong> <strong>doly</strong>:<br />
Significant fuel dealers of <strong>Severočeské</strong> <strong>doly</strong> a.s. in the Czech Republic<br />
Expositions and Trade Fairs<br />
<strong>Severočeské</strong> <strong>doly</strong> profiles its activities and consolidates its corporate image by participating<br />
in expositions and trade fairs. In <strong>2004</strong>, the company took part in top international trade fairs, including<br />
the International Mechanical Engineering Fair in Brno. The company also attended the prestigious<br />
Aqua-therm Praha fair, which specializes in the energy sector, heating systems for buildings, and<br />
the environment.<br />
In the scope of the side programmes of fairs and expositions, <strong>Severočeské</strong> <strong>doly</strong> organizes expert<br />
seminars, focusing on new progressive technologies of brown-coal combustion which reduce<br />
the environmental burden at power plants certified in accordance with European standards and meeting<br />
criteria laid down in the Clean Air Act. Specialized seminars were also held outside the scope<br />
of expositions and fairs (e.g. for army representatives from VUSS, the Military Accommodation and<br />
Facility Management Authority) in order to address the broader professional public active in various<br />
sectors. Target groups are mayors and parish chairmen, the owners and operators of small and mediumsized<br />
plants, and the general public.
Future Trends<br />
Developments on the fuel market will hinge on the success achieved in fulfilling the goals<br />
of the Government Energy Concept, as the key document laying down the paths to be followed in energy<br />
management, the National Allocation Plan (the fulfilment of the conclusions of the Kyoto Protocol<br />
concerning reductions in the quantities of greenhouse gas discharged into the atmosphere), and<br />
the related energy policies in place in the individual regions of the Czech Republic.<br />
These are measures aimed at energy plants included in the company’s trading operations, which<br />
will have to achieve the required cut in energy sector emissions generated by the combustion of fossil<br />
fuels.<br />
The aim is to implement new, efficient combustion technology and to promote the use of renewable<br />
energy sources and gas fuels.<br />
The impact of the liberalization of energy markets in the Czech Republic and the pricing policies<br />
of rival producers will also affect the prospects of the brown-coal market.<br />
Production<br />
In <strong>2004</strong>, the company extracted a total of 22.02 million tonnes of coal and 77.03 million m 3 of overburden.<br />
Doly Nástup Tušimice<br />
Doly Nástup extracted 12.9 million tonnes of coal. All of DNT’s production was supplied to ČEZ. Overburden<br />
extraction totalled 33.6 million m 3 .<br />
Libouš-West Quarry, North Quarry<br />
The North Quarry, in operation since 1997, is located in the western portion of Libouš-East Quarry, and<br />
follows up on advances from 1988–1992. The quarry is at the edge of the mining area, where the coal<br />
seam runs deep. It is advancing via overburden and coal sections in a southward direction towards<br />
Libouš Quarry, eliminating the danger of instability in the closing banks.<br />
Libouš-East Quarry<br />
The quarry is advancing in a northerly direction towards the border of the mining area near the town<br />
of Černovice. The town is protected from the adverse effects of the quarry by earth embankments.<br />
The border of the mining area will be reached by the overburden section in 2006, and by the coal quarry<br />
in 2014.<br />
Libouš-West and Libouš-East Quarries run extraction programmes in accordance with approved<br />
project documentation and the resulting Plan of Development, Preparation and Extraction, approved<br />
under mining authorization from the Most District Mining Authority of 4 December 1998.<br />
Libouš II Quarry<br />
After Libouš-East is mined out in both directions, the extraction of overburden from 2006 and coal<br />
from 2015 will continue in the final part of the mining area, in the newly opened quarry Libouš II Before<br />
the new quarry can be developed, it will be necessary to complete the rerouting of a section<br />
of the Chomutov – Březno railway line in order to take it out of the mining area; this stretch of relaid<br />
track should enter into operation in 2007.<br />
The quarry in the current mining area, compliant with the ecological limits imposed by Government<br />
Resolution No 444/1991, is expected to be shut down between 2030 and 2035.<br />
Overburden Disposal<br />
Extracted overburden materials are disposed of exclusively by back filling into internal spoil heaps.<br />
In order to free up the advancement of back-filling, conveyor technology from the former coal corridor<br />
has been dismantled.
26<br />
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27<br />
Developments in coal extraction (millions of tonnes)<br />
1994<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
2000<br />
2001<br />
2002<br />
2003<br />
<strong>2004</strong><br />
Doly Nástup Tušimice Doly Bílina<br />
0 5 10 15 20 25<br />
Technologies Used<br />
Overburden is extracted using KU 800 and SchRs 1550 excavators of the TC2 range. Overburden is<br />
transported by 1,800 mm gauge conveyor belt and deposited in spoil benches adjacent to the ZP 5500,<br />
6600 and ZPDH 6300 spreaders of the same series.<br />
In the coal quarry, we use KU 300S and K 800 excavators of the TC1 range. Coal is extracted by<br />
1,200 mm gauge conveyor belt and transported by 1,600 and 1,800 mm gauge conveyor belt<br />
to the Tušimice II Power Station or to a loading facility for the power stations Prunéřov I, Prunéřov II,<br />
and Chvaletice.<br />
A homogenization depot, through which most extracted coal passes, ensures consistent quality<br />
of coal extracted for supply to ČEZ power stations.<br />
Estimate of Economically Usable Stocks of Doly Nástup Tušimice<br />
At the end of <strong>2004</strong>, 320 million tonnes of usable stocks were available in the Tušimice mining area<br />
as set by the Most District Mining Authority on 9 August 1994.<br />
Doly Bílina<br />
In <strong>2004</strong>, Doly Bílina extracted 9.2 million tonnes of coal and 43.4 million m 3 of overburden.<br />
In the years to come, mining activity at Doly Bílina will continue at just two sites: the quarry itself<br />
and the external Pokrok overburden dumping area. The mining front is advancing in a parallel westerly<br />
direction.<br />
Bílina Quarry<br />
At an estimated <strong>annual</strong> coal extraction volume of 8.0–8.5 million tonnes, the Bílina Quarry mining<br />
operation in its current spatial figuration, given by environmental protection restrictions under<br />
Government Resolution No 444/1991, will be shut down between 2030 and 2035. Under a Decision<br />
of the Most District Mining Authority of 23 January <strong>2004</strong>, the mining operations of Doly Bílina are<br />
permitted in accordance with the approved Plan of Development, Preparation and Extraction<br />
for the period up to the end of 2010, or until such time as the permitted limits are reached.<br />
Overburden Disposal<br />
The bulk of extracted overburden is deposited at an internal spoil heap. Only overburden from the first<br />
overburden section is disposed of at the external Pokrok dumping area.
Ledvice Coal Preparation Facility<br />
Coal processing at the preparation facility in Ledvice produced 8.75 million tonnes of coal in a wide<br />
range of types graded in accordance with the requirements of customers on the brown-coal market,<br />
including coal with additives containing a calcium hydroxide mix.<br />
Technologies Used<br />
Overburden at Doly Bílina is extracted using a single TC3 technological configuration consisting<br />
of a K 10 000 excavator, 2,200 mm gauge trunk conveyor, and ZP 10 000 belt spreader, as well as<br />
TC2 technology composed of four KU 800 excavators and one K 2000 excavator, and 1,600 mm, 1,800 mm,<br />
2,000 mm, and 2,200 mm gauge belt conveyors. The overburden excavated by the TC2 excavators is<br />
disposed of by ZPD 8000 and ZP 5500 spreaders and two spreaders of the ZP 6600 type.<br />
The technology of the coal quarry comprises TC1 excavators of the KU 300/S type and a K 650<br />
excavator. Non-coal materials from the quarry are transported by 1,200 mm and 1,600 mm gauge<br />
belt conveyors to ZP 2500 and ZP 3500 spreaders for back-filling into mined-out areas. A total of six<br />
TC1 excavators were used at the coal quarry, of which five were KU 300/S and one was a K 650.<br />
Estimate of Economically Usable Stocks of Doly Bílina<br />
At the end of <strong>2004</strong>, 232.6 million tonnes of usable stocks were available in the planned mining area,<br />
as set by the Most District Mining Authority on 4 September 1996.<br />
Coal Production Quality Management<br />
Both mines operate homogenization depots of extracted coal, which are equipped with stockyard<br />
machinery.<br />
These transfer points allow the mines to respond flexibly to current developments in sales. The company<br />
pays maximum attention to the quality of charge coal during extraction. The company’s top-class<br />
control centre monitors sulphur and ash content non-stop. Other parameters, such as water content,<br />
calorific value, and combustion heat, are assessed in the coal laboratory. This information enables<br />
the company to react promptly to customer needs and requirements. The final products are therefore<br />
assured of a standard quality conforming to the parameters specified in the Coal Catalogue.<br />
Authorization to Operate Mining Activities<br />
The main terms and conditions relating to the mining and economical use of mineral deposits are laid<br />
down by Act No 44/1988, on the protection and use of mineral resources (the Mining Act), and by<br />
Act No 61/1988, on mining, explosives and the State Mining Authority; the company fully respects<br />
these terms and conditions. The District Mining Authority in Most, which gave <strong>Severočeské</strong> <strong>doly</strong> authorization<br />
to carry out mining activities, is tasked with inspecting observance of these conditions. In accordance<br />
with the Mining Act (No 44/1988), the company creates legal reserves for cleanup, reclamation,<br />
and mining damage in order to eliminate the consequences of mining operations and remove<br />
damage associated with extraction activities. Under this Act, the company also makes contributions<br />
from mining-area and extracted-mineral proceeds.<br />
Mining at individual mining localities is carried out in an area restricted by ecological limits set<br />
under Government Resolution No 444 of 1991. The company’s mining activities are also affected by Act<br />
No 100/2001, on environmental impact assessments.<br />
Investment<br />
Capital Investment in <strong>2004</strong><br />
<strong>Severočeské</strong> <strong>doly</strong> expended CZK 1,255 million on capital investments in <strong>2004</strong>. The investment programme<br />
focused on projects related to requirements stemming from mining processes at the quarries.<br />
Besides the acquisition of new mining technology, and the reconstruction and modernization of existing<br />
mining technology, the programme also included the resumption of mechanization and construction<br />
of an ecological nature.
28<br />
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29<br />
Developments in investments (CZK billions)<br />
1999<br />
2000<br />
2001<br />
2002<br />
2003<br />
<strong>2004</strong><br />
0 0.5 1 1.5 2 2.5<br />
Capital expenditure Investments into excavating technology<br />
Capital Investment Projects at Doly Bílina<br />
The following significant projects were completed in <strong>2004</strong>:<br />
— third stage of the construction of the third coal exhaust,<br />
— modernization of the crushing machines in the boiler coal crushing plant at the Ledvice Coal<br />
Preparation Facility,<br />
— acquisition of a new belt conveyor for the coalface side of the third coal exhaust,<br />
— reconstruction of the vehicle scales at the coal dust dump in Ledvice,<br />
— modernization of the drive unit of 1,200 mm belt conveyor No 57,<br />
— rerouting, modernization, and overhaul of the conveyor line from the Radovesice external spoil heap<br />
to the internal spoil heap,<br />
— reconstruction of the radius of the bucket-wheel boom of the KU 300/91 excavator, and<br />
— reconstruction of the driver’s cabin of the KU 800/19 excavator.<br />
Capital Investment Projects at Doly Nástup Tušimice<br />
The following significant projects were completed in <strong>2004</strong>:<br />
— modernization of the TR II transformer station,<br />
— reduction in the transport distance of the tandem conveyors at the S1 overburden,<br />
— increase in the capacity of the Černovice pumping station,<br />
— new pumping station for belt conveyor No 105, and<br />
— modernization of belt conveying at the S1 overburden.<br />
The following projects were in progress:<br />
— supply of a new SchRs 1320 excavator (due for completion in January 2006),<br />
— increase in the capacity of the Březno mine water treatment plant (due for completion in February 2005),<br />
and<br />
— fourth stage of the construction of the Quarry Operation central control centre (due for completion<br />
in March 2005).<br />
Company Administration Investment Projects<br />
The following modules have in productive operation since 1 January 2005 as part of the programme<br />
to implement the new SAP information system: financial accounting, tangible and intangible assets,<br />
treasury, controlling, sales, supply and warehouses, document management, and workflow.<br />
Principal Future Investments<br />
At Doly Bílina, the Libkovice pumping station will be relocated, the Hrdlovka pumping station will<br />
be replaced, and the capacity of Nut o2 fuel production will be increased.<br />
At Doly Nástup Tušimice, the technology of the crushing plant (ÚDUT II) and the loading bin<br />
(NZ II) will be modernized together with the TR IV transformer station.
Significant Contractual Relations<br />
The company entered into major contracts with PRODECO, a.s., KLEMENT a.s., První Elektro, a.s.,<br />
SD – 1.strojírenská, a.s. and Elektroprim – Koutník, a.s. The main building contractors are SMP CON-<br />
STRUCTION, a.s. and KLEMENT a.s. PRODECO has been contracted to supply a new SchRs 1320<br />
excavator to Doly Nástup Tušimice in January 2006. PRODECO modernized the crushing machine<br />
in the boiler coal crushing plant for Doly Bílina, the third stage of the third coal exhaust was completed,<br />
and the radius of the bucket-wheel boom of KU 300/91 was modernized.<br />
KLEMENT relocated the belt conveying exhaust from the external Radovesice spoil heap to the internal<br />
spoil heap at Doly Bílina. První Elektro modernized the TR II transformer station for Doly Nástup<br />
Tušimice and is now completing the fourth stage of the construction of the Quarry Operation central<br />
control centre. Elektroprim – Koutník supplied a new belt conveyor for the third coal exhaust line<br />
at Doly Bílina. The subsidiary SD – 1.strojírenská reconstructed the drive unit of the 1,200 mm gauge<br />
belt conveyor No 57 at Doly Bílina, and reduced the transport distance of the tandem conveyors<br />
at the overburden section. SMP CONSTRUCTION completed a project to modernize and increase<br />
the capacity of the mine water treatment plant at Doly Nástup Tušimice.<br />
Financial Activities<br />
In <strong>2004</strong>, <strong>Severočeské</strong> <strong>doly</strong> made a profit from financial operations of CZK 390 million, which is CZK 68 million<br />
(14.8%) less compared with the previous year. The year-on-year fall can be attributed to an absolute<br />
fall in the improved financial assets by CZK 820 million as a result of an exceptionally high dividend<br />
payout of CZK 2.1 billion for 2003.<br />
Financial Strategy<br />
<strong>Severočeské</strong> <strong>doly</strong> applies a conservative financial risk management policy, which entails diversification<br />
of financial activities among top quality financial institutions and various types of investment instruments<br />
from issuers with a high credit rating. Temporarily idle assets from reserves created to eliminate<br />
the effects of mining operations are appreciated via liquid financial instruments with a quality rating<br />
and sufficient term of investment. To this end they respond to new investment opportunities<br />
on the financial market in accordance with the company’s investment strategy.<br />
Financial Risk Management<br />
The weighted rating of the company portfolio according to Standard & Poor’s is A, which corresponds<br />
to the Czech Republic’s rating. The company monitors fundamental interest rate risk management<br />
indicators in order to eliminate the undesirable impacts of interest rate movements. Standard financial<br />
market instruments were used to manage interest rate and foreign currency risk.<br />
Financial Investments<br />
Financial investments consisted of a portfolio of government bonds, corporate and bank bonds,<br />
mortgage bonds, and Eurobonds of top-class issuers, long-term deposit bills at leading banks, an interest-bearing<br />
cash loan and equities, as well as the spin-off of certain assets to subsidiaries. The equity<br />
and loan investments are strategic in character.<br />
The company made active use of money market instruments, i.e. short-term financial assets, in its<br />
cash flow management programme. It generated revenues on treasury bills, bank deposits, deposit<br />
certificates, deposit bills, and the share certificates of open-ended mutual funds. Daily current account<br />
balances were placed in overnight and atvis deposits. At year-end, the company held bonds and<br />
Eurobonds with a total book value of CZK 6,317 million, down CZK 720 million from year-end 2003.<br />
Teplárna Ústí nad Labem repaid another CZK 34 million on a loan, of which CZK 120 million remained<br />
outstanding at the end of the year. The company also held long-term deposit bills with a total book<br />
value of CZK 128 million, treasury bills in the amount of CZK 2,606 million, share certificates amounting<br />
to CZK 150 million, and deposit instruments totalling CZK 1,235 million. Overall, the book value<br />
of financial investments fell by 6.2% and the book value of financial assets by 7.6% over the year.
30<br />
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31<br />
How Investments are Financed<br />
The company financed its investments in tangible and intangible fixed assets solely from depreciation.<br />
Thanks to its long-term stable financial strength, the company did not have to draw on any external<br />
sources of financing (i.e. loans, bank credit, bonds, or bills of exchange).<br />
Capital Interests<br />
Subsidiaries at 31 December <strong>2004</strong><br />
Company Number of shares Shareholding at nominal Share in registered<br />
value (CZK’000) capital (%)<br />
SD – Vrtné a trhací práce, a.s. 12,308 83,694 100.00<br />
Skládka Tušimice, a.s. 13,735 137,350 98.00<br />
SD – Autodoprava, a.s. 317,294 330,785 100.00<br />
SD – 1.strojírenská, a.s. 67 67,000 100.00<br />
SD – Kolejová doprava, a.s. 400 370,000 100.00<br />
SD – Humatex, a.s. 25 25,000 100.00<br />
PRODECO, a.s. 253 10,036 50.50<br />
Subsidiaries total 1,023,865<br />
SD – Vrtné a trhací práce was established in 1997 by the spin-off of <strong>Severočeské</strong> <strong>doly</strong>’s drilling and<br />
blasting unit to form a separate company. The core business of the company is blasting work and<br />
the research, production, disposal, defusing, processing, purchase, and sale of explosives.<br />
In November <strong>2004</strong>, this subsidiary’s capital structure was optimized when the registered capital<br />
was reduced by CZK 9,846,000.<br />
The company’s stake in Skládka Tušimice indicates its organizational and legal interest<br />
in the management of solid municipal and other hazardous waste. This subsidiary’s co-shareholders<br />
are large towns and cities in the region. Its core business is waste management and the mediation<br />
of waste management services.<br />
In November 1997, <strong>Severočeské</strong> <strong>doly</strong>’s Doly Bílina truck transport operations were spun off and now<br />
do business as a subsidiary of <strong>Severočeské</strong> <strong>doly</strong> a.s. under the name SD – Autodoprava. Later, in 2001,<br />
part of the truck operations at Doly Nástup Tušimice were integrated into this subsidiary. This<br />
company’s core business is road freight and passenger transport, motor vehicle repairs, and motor<br />
vehicle rentals. In October <strong>2004</strong>, this subsidiary optimized its capital structure by reducing its registered<br />
capital by CZK 36,422,000.<br />
The subsidiary SD – 1.strojírenská was established at the end of 2001. At the beginning of 2002,<br />
<strong>Severočeské</strong> <strong>doly</strong>’s workshop unit and mine technology operating unit were spun off from <strong>Severočeské</strong><br />
<strong>doly</strong> and transferred to this subsidiary, which is involved in the mechanical engineering sector.<br />
SD – Kolejová doprava was founded at the end of 2001 to run the operations of selected railway<br />
activities which were spun off from <strong>Severočeské</strong> <strong>doly</strong> at the beginning of 2002.<br />
In the wake of a decision to spin off the manufacture of oxyhumolite-based chemical products<br />
from <strong>Severočeské</strong> <strong>doly</strong>, the subsidiary SD – Humatex was established at the end of 2002. This company<br />
launched operations at the beginning of 2003.<br />
By making a joint capital investment with Sokolovská uhelná into PRODECO (formerly VÍTKOVICE –<br />
PRODECO), in 2002 <strong>Severočeské</strong> <strong>doly</strong> gained control of this supplier of important excavating technology.<br />
During 2003, <strong>Severočeské</strong> <strong>doly</strong> purchased an additional 1% of shares, making PRODECO a subsidiary.
Other Capital Interests at 31 December <strong>2004</strong><br />
Company Number of shares Shareholding at nominal Share in registered<br />
value (CZK’000) capital (%)<br />
Equity investments in associates<br />
Výzkumný ústav pro hnědé uhlí a.s. 27,399 27,399 38.97<br />
SHD – KOMES a.s. 168,235 168,235 46.33<br />
Coal Energy, a.s. 1 10,000 20.00<br />
ENETECH a.s. 56 10,500 50.00<br />
Other investment securities and participating interests<br />
Sokolovská uhelná, a.s. 1 1 0.00<br />
Total other capital interests 216,135<br />
The company’s stake in Výzkumný ústav pro hnědé uhlí (the Brown Coal Research Institute) allows<br />
it to participate in the management and supervision of the activities of the Institute, which is a key<br />
institution for applied research in fields crucial to the development of the brown coal industry.<br />
The stake in SHD – KOMES is an instrument of control over one of the largest suppliers of materials<br />
consumed by <strong>Severočeské</strong> <strong>doly</strong>’s operations. At the same time, the stake is a long-term investment<br />
in SHD – KOMES’s fixed tangible assets that are useful in the commercial, service and tourism sectors.<br />
In April <strong>2004</strong>, <strong>Severočeské</strong> <strong>doly</strong> sold a 34.22% stake in the registered capital of Teplárna Ústí nad Labem.<br />
In 2002, a project was implemented with ČEZ, Mostecká uhelná společnost, Sokolovská uhelná, and<br />
CARBOUNION BOHEMIA to establish the joint venture Coal Energy. This company started operating<br />
as an exporter of electricity generated at conventional Czech coal power stations in a move intended<br />
to eliminate the negative impact of putting Temelín Nuclear Power Station into service.<br />
The main incentive behind the investment into ENETECH was to acquire a stake in a company<br />
with important mining technology know-how.<br />
Personnel and Social Policies<br />
The aim of the company’s personnel and social strategy is to ensure the development of skilled, highly<br />
motivated employees, who are the cornerstone of success as the company seeks to meet its targets.<br />
The incentive programme focuses on employee bonuses, financial and non-financial employee benefits,<br />
and employee training. The social programme concentrates on promoting safety and health at work.<br />
The basic document for the company’s personnel and social policy is the collective agreement concluded<br />
for the period from <strong>2004</strong> to 2006.<br />
Number of Employees<br />
At the end of <strong>2004</strong>, the company had a headcount of 3,685 employees, i.e. 97 employees fewer than<br />
at year-end 2003, continuing the downward trend of previous years. By reducing its number of employees,<br />
the company was responding to influences from the energy market, in particular the startup<br />
of Temelín Nuclear Power Station and the need to increase the efficiency of production, ensuring a rise<br />
in labour productivity. In 2001–2003, the company released 1,084 employees to subsidiaries. In <strong>2004</strong>,<br />
Employee age structure (%)<br />
up to 25<br />
1.6%<br />
25–35<br />
17.8%<br />
35–45<br />
26.5%<br />
45–55<br />
36.9%<br />
over 55<br />
17.2%<br />
0 10 20 30 40
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33<br />
Employee education structure (%)<br />
primary school<br />
13.0%<br />
apprenticeship<br />
59.3%<br />
secondary school<br />
22.6%<br />
university<br />
5.1%<br />
Employee process structure (%)<br />
0 10 20 30 40 50<br />
Overburden<br />
33.0%<br />
Coal extraction and dressing<br />
46.5%<br />
Administration<br />
20.5%<br />
Developments in productivity and monthly wages<br />
105,000<br />
100,000<br />
95,000<br />
90,000<br />
85,000<br />
80,000<br />
75,000<br />
70,000<br />
65,000<br />
60,000<br />
55,000<br />
50,000<br />
45,000<br />
40,000<br />
35,000<br />
8,500<br />
8,000<br />
7,500<br />
7,000<br />
6,500<br />
6,000<br />
5,500<br />
5,000<br />
4,500<br />
4,000<br />
3,500<br />
0 10 20 30 40 50 60<br />
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 <strong>2004</strong><br />
Labour productivity from value added Average monthly wage<br />
Developments in workforce size and coal extraction<br />
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 <strong>2004</strong><br />
Average number of employees Gross amount of coal extracted (kt)<br />
21,000<br />
19,000<br />
17,000<br />
15,000<br />
13,000<br />
11,000<br />
the company implemented the next stage of a plan to reduce the number of white-collar workers, as<br />
laid down in the project ‘Optimization of the Organizational Structure’.<br />
Wages and Labour Productivity<br />
The average monthly wage at the company in <strong>2004</strong> was CZK 20,892 per employee (year-on-year growth<br />
of 6.6%). The rise in average earnings was achieved by increasing the tariff-based wages of employees<br />
by 5.5% and raising the supplementary wage. The company fulfilled all its obligations under the col-<br />
9,000<br />
7,000<br />
24,000<br />
23,500<br />
23,000<br />
22,500<br />
22,000<br />
21,500<br />
21,000<br />
20,500
lective agreement. Labour productivity measured by value added remained more or less at the same<br />
level year on year.<br />
Social Policy<br />
The company’s social programme fully respected the provisions of the collective agreement and other<br />
legal regulations. In the field of social policy, the company spent resources primarily on works catering,<br />
pension funds, protective equipment, cleaning and washing products, and protective drinks.<br />
In <strong>2004</strong>, there was a change in the system used to make the employer’s contribution to pension funds.<br />
The employer’s contribution had been taken up by 80% of employees by the end of the year.<br />
Resources from the social fund were used mainly for recreational, cultural, and sports activities, and<br />
for the promotion of employees’ health. Overall, CZK 16.7 million was drawn from the social fund.<br />
Education Programme<br />
The employee training programme focused on increasing, complementing, and maintaining<br />
the qualifications of employees. Employees participated in compulsory training sessions and courses,<br />
the individual management groups continued their training programmes, and language courses were<br />
held again for employees. In the scope of the company’s support of improved qualifications and retraining,<br />
selected employees were given the opportunity of acquiring a certificate of apprenticeship; 19 employees<br />
studied at secondary school or university with assistance from their employer. CZK 4.6 million was<br />
spent on education and training.<br />
Social Responsibility<br />
Business Principles<br />
In its business activities, <strong>Severočeské</strong> <strong>doly</strong> is not only governed by the principle of maximizing economic<br />
value for its shareholders, but also respects and makes a significant contribution to the creation<br />
of social and environmental values. An important element of corporate culture is fairness in business;<br />
the company’s finances are transparent. In its communications, the company respects the principle<br />
of the openness of information, not only in relation to employees and shareholders, but also in relation<br />
to business partners and the public. In relation to customers, a large emphasis is placed on the quality<br />
and reliability of supplies and on accommodating other customer requirements. The company is<br />
aware that employees are a valuable source of success, and therefore it pays considerable attention<br />
to its human resources policy and communication with trade unions, especially during collective bargaining.<br />
In this respect, the company also strives to protect the health and safety of its employees and<br />
the inhabitants in all municipalities affected by mining activities. With this in mind, the company consistently<br />
respects safety rules and invests in environmentally-friendly modern technology and production<br />
processes. Respect for the environment has become an integral part of all company activities.<br />
In terms of its economic and social power, <strong>Severočeské</strong> <strong>doly</strong> is also a stabilizing element in the region,<br />
and helps to find solutions to a number of problems faced by local municipalities.<br />
Environmental Responsibility<br />
A significant element in the company’s business plans is measures to eliminate negative environmental<br />
effects and to improve the environment. In the scope of its efforts to minimize the effects of mining<br />
on the surrounding area, <strong>Severočeské</strong> <strong>doly</strong> spends considerable amounts of money on land reclamation<br />
and environmental investments. To this end, it creates cleanup and reclamation reserves and reserves<br />
for the settlements of anticipated mining damage. Therefore, in the long term the company is laying<br />
conceptual, technological, and financial foundations for the landscape to be returned to a condition<br />
corresponding to the region’s requirements once mining activities are discontinued.<br />
Regional and Public Relations<br />
The company’s means and opportunities to promote the development of public life in its place of business<br />
(and in several cases further afield) were used on a broad scale. In <strong>2004</strong>, the company cooperated with
34<br />
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35<br />
municipalities and other organizations, assisting their operations in various forms. The basis of financial<br />
assistance was resources provided in accordance with a General Meeting resolution and a government<br />
resolution on the provision of gifts and donations.<br />
Municipalities were provided with donations of more than CZK 16 million to develop their infrastructure<br />
and implement regional development projects. CZK 11 million was channelled into health care<br />
and social and charity purposes. In the field of physical education and sport, especially the use of free<br />
time and the development of talent among children and young people, the company made CZK 5.8 million<br />
available. Small and large sports clubs received sponsorship; some of them were dependent on this<br />
support as they sought to continue training young people. These beneficiaries included young wrestlers,<br />
softball players, junior football teams, ice-hockey clubs, and handicapped athletes. Further funds were<br />
donated to voluntary fire brigades in the region to safeguard the protection of the public against fire,<br />
and to social service institutions so that they could buy the equipment they needed.<br />
CZK 8.6 million was gifted to cultural projects recommended by the Ministry of Culture and to environmental<br />
protection. These beneficiaries included the Chomutov District Museum, the Teplice Regional<br />
Museum, the Chomutov Municipal Theatre, Duchcov Castle, and Chomutov Forest Park. The North<br />
Bohemian Philharmonic Orchestra received sponsorship for a Beethoven festival. CZK 5.1 million was<br />
donated to science and education, primarily to equip schools with modern teaching aids and to nurture<br />
the talent of children and young people. Funds were made available to nursery, primary, and<br />
secondary schools, selected universities and colleges, children’s homes, and youth centres.<br />
Sports, cultural, educational and other social organizations received more than CZK 16.7 million<br />
in the form of consideration paid for advertisements and promotion.<br />
In <strong>2004</strong>, <strong>Severočeské</strong> <strong>doly</strong> supported the publication of a number of publications and textbooks<br />
(e.g. Mining Maps and Measuring Devices). The company worked in association with the Czech<br />
Agricultural University to prepare an exhibition of photographs detailing the reclamation and field<br />
engineering of the landscape affected by opencast coal mining; this exhibition was shown in exhibition<br />
halls in Teplice, Bílina, Chomutov and Ostrava. <strong>Severočeské</strong> <strong>doly</strong> a.s. is a permanent member of the Mining<br />
and Oil Refining Industry Employers Union and the Czech Managers Association. It was also an active<br />
participant in the activities of the District Economic Chambers and Economic and Social Councils<br />
of Chomutov and Teplice.<br />
Responsibility to Employees<br />
<strong>Severočeské</strong> <strong>doly</strong> offers reliable employment and good social security for the workforce, especially<br />
in the districts of Chomutov and Teplice, where unemployment is rife. Besides stable employment<br />
in a good working environment and the corresponding level of pay, employees enjoy a number of special<br />
benefits. In its personnel policy, the company tries to motivate employees to put in higher, betterquality<br />
performance, to communicate openly, to improve qualifications, to improve the corporate<br />
culture, and to consolidate the company’s identity. These factors make a significant contribution<br />
to social peace within the company, as evidenced by the bilaterally correct and conflict-free collective<br />
bargaining between the management and the trade unions.<br />
Relations with Business Partners<br />
<strong>Severočeské</strong> <strong>doly</strong> places a large emphasis on the quality of production, on the reliability of supplies,<br />
and on ensuring an accommodating approach to customers. The company actively helps to find<br />
Use of funds from net earnings in <strong>2004</strong> approved by the General Meeting<br />
(CZK millions)<br />
Infrastructure — 16.0<br />
Health care, charity, social services — 11.0<br />
Sport — 5.8<br />
0 10 20 30 40 50<br />
Arts and the environment — 8.6<br />
Young people, education, and science — 5.1
solutions to customers’ problems related to transportation, environmentally-friendly technology, waste<br />
management, financing, etc. The company’s main customers are the regional CHP plants operated<br />
by ČEZ. The long-term successful cooperation between <strong>Severočeské</strong> <strong>doly</strong> and ČEZ forms a key pillar<br />
of the Czech energy sector and makes a major contribution to regional development.<br />
The company presents itself in the form of expert seminars, focusing on new progressive technologies<br />
of brown-coal combustion which reduce the environmental burden. Seminars are organized with<br />
the aim of addressing the professional and lay public in the various regions.<br />
Although the company is aware of its prominent position as a major customer of mining technology,<br />
reclamation work, materials, and energy, it always behaves correctly and with respect in its relations<br />
with suppliers. The company primarily makes use of services offered by local suppliers in order to help<br />
regional development. The company prefers to cooperate with suppliers who pursue similar principles<br />
of social responsibility.<br />
Openness of Information<br />
Communication has become an important part of company policy and culture. The aim is to keep<br />
the broader environs informed of our activities and to provide assistance in finding solutions to problems<br />
suffered by the region and areas further afield. <strong>Severočeské</strong> <strong>doly</strong> provides regular information<br />
via the media and competent institutions concerning its financial results, major events within the organization,<br />
and circumstances relating to external affairs.<br />
The Environment<br />
Ecology and environmental protection are fundamental priorities of <strong>Severočeské</strong> <strong>doly</strong>. In <strong>2004</strong>, the company<br />
spent CZK 572.7 million on environmental protection, which is CZK 7 million more than in 2003.<br />
State of reclamation at year-end <strong>2004</strong> (ha)<br />
in progress<br />
completed<br />
0 500 1,000 1,500 2,000 2,500 3,000<br />
agricultural forested water<br />
other<br />
The harmonization of Czech protection legislation with European Union legislation is placing increasing<br />
demands on the construction or modernization of certain structures and technologies, especially<br />
in terms of water protection and restrictions in noise and dust (clean air). In <strong>2004</strong>, work continued<br />
on increasing the capacity of the mine water treatment plant for Doly Nástup Tušimice, and a similar<br />
structure will be built for Doly Bílina, where a construction project intended to cut down on noise and<br />
dust in Ledvice is ready for implementation.<br />
Clean Air<br />
In terms of air protection, the company has taken measures intended to reduce the dust generated<br />
during mining and during the transportation of coal and overburden. The company operates a dust<br />
monitoring programme involving continuous measurements and remote data transmission; this<br />
monitoring is carried out by an independent accredited laboratory. Every month, the latest recorded<br />
measurements are made available to the municipalities affected by mining operations. The company’s<br />
activities in this area also take into account consumers, who are offered graded and boiler coal<br />
with a low sulphur and additive content.<br />
Water Protection<br />
<strong>Severočeské</strong> <strong>doly</strong> places great emphasis on the technical standard of its waste and mining water treatment<br />
technologies. Mining water is treated in sedimentation tanks and then in mining water purifica
36<br />
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37<br />
tion plants based on the oxidation neutralization principle. Waste water is treated in highly effective<br />
mechanical and biological purification plants. Besides the quality of discharge water, the company<br />
also monitors the amount discharged. Monitored discharge water quality is guaranteed by the company’s<br />
own laboratory, which is equipped with state-of-the-art analytical equipment. In <strong>2004</strong>, the company<br />
completed the first stage of a project to increase the capacity of the mine water treatment plant for Doly<br />
Nástup Tušimice Březno, and this structure was put into trial operation.<br />
Waste Management<br />
The number-one priority for <strong>Severočeské</strong> <strong>doly</strong> is to minimize waste generation, especially with regard<br />
to hazardous waste. The company organizes waste collection, sorting and reuse. Waste that cannot be<br />
reused is liquidated by incineration or, if it cannot be incinerated, by landfill disposal.<br />
Noise<br />
Sources of noise at both mines are large machinery, conveyor belts, and supplementary mechanical<br />
equipment. The distance of the source and the terrain are key factors determining how far noise<br />
will spread. Noise levels are monitored on a regular monthly basis in all towns affected by the mining<br />
operations. The monitoring is carried out by independent accredited laboratories and the relevant<br />
municipalities receive results every month.<br />
Outlook<br />
In connection with an upcoming ecological audit, an agreement was concluded with the National<br />
Property Fund of the Czech Republic in 2002 on the settlement of ecological liabilities occurring<br />
prior to privatization. In <strong>2004</strong>, intensive work continued in accordance with negotiated processes,<br />
as set forth in the agreement.<br />
The audit of results in the field of environmental protection suggests that the trend pursued by<br />
the company is the right path to take. The approach to this issue will not change much in the upcoming<br />
period, although the company will be subject to more stringent requirements as Czech law is<br />
harmonized with EU legislation.<br />
Environmental expenditure in <strong>2004</strong> (CZK millions)<br />
water protection — 19.4<br />
clean air and climate protection — 33.2<br />
waste management — 3.5<br />
Cleanup and Reclamation<br />
0 100 200 300 400 500 600<br />
reclamation — 312.4<br />
other projects — 89.2<br />
capital expenditure — 115.0<br />
Thoroughly prepared and executed post-mining land reclamation and environmental stability is an integral<br />
part of the company’s activities. Current reclamation practices, based on a landscaping concept,<br />
do not just focus on reclaiming land for agricultural purposes; reclamation measures are being<br />
introduced which correspond to the social and economic conditions throughout the region. The company<br />
also takes into account non-mining industrialization, urbanization of the landscape, population<br />
density, employment, and the agricultural and forest land resources. Reclaimed land must fulfil<br />
basic functions – it must be ecologically balanced, free of health and hygiene defects, economically<br />
exploitable, and, not least, aesthetically pleasing. The results achieved so far by the company reveal<br />
that, with a knowledge of the nature of the excavation of relocated rock formations and all natural<br />
relations in the area, solutions can be found which significantly reduce the negative impacts on the environment.<br />
Thanks to its extensive research, differentiated approach to individual localities, and financial<br />
power, <strong>Severočeské</strong> <strong>doly</strong> has all that is required for the organic re-incorporation of areas devastated<br />
by mining into the landscape under the Krušné Hory mountain range.
The main aim of reclamation activities is to create a new landscape, restoring its basic functions<br />
and integrating it smoothly into the surrounding area. This is a long-term, technically and economically<br />
demanding process. The basic conditions for comprehensive cleanup and reclamation are drawn<br />
up in conceptual documentation of summary plans and specialized studies to handle territorial and<br />
reclamation issues. The result is a coherent picture of how the newly created and integrated area will<br />
fit into the surrounding landscape, including the need to ensure sufficient financial reserves for this<br />
activity in the period after the decommissioning of mining operations.<br />
Cleanup and Reclamation Reserve<br />
In order to cover future financial requirements, the company creates a statutory financial reserve<br />
for cleanup and reclamation. In <strong>2004</strong>, the company increased this reserve from CZK 2,597 million<br />
to CZK 2,730 million. It drew CZK 312.4 million from this reserve.<br />
Land Clearance Programme<br />
In clearing land for mines and spoil heaps, the company must consider how to deal with the clearance<br />
of vegetation, structures, and roads. The company paid considerable attention to the mining of reclaimable<br />
soil, before the advance of quarries and dumps, sufficiently in advance. The company spent CZK 57.1 million<br />
on excavating 439,000 m 3 of this soil. The company had an outlay of CZK 8.5 million on land<br />
purchases. Construction of premises continued after the resumption of work with a total financial<br />
volume of CZK 163.2 million.<br />
An important fact is that mining activity in the set mining area does not require the relocation<br />
of human settlements.<br />
Road and Track Rerouting<br />
Of pivotal importance was the continuation of the rerouting of the ČD–DDC railway track from Březno<br />
u Chomutova to Chomutov. In <strong>2004</strong>, work resumed on the boring of a tunnel in a direction away<br />
from the municipality of Droužkovice.<br />
Mining Damage Settlement Reserve<br />
To cover the increased need for funds in future years, the company has set up a statutory financial<br />
reserve for the settlement of anticipated mining damage claims. In <strong>2004</strong>, the company drew CZK 164.2 million<br />
from this reserve.<br />
Research and Development<br />
The research and development programme covered set themes in the form of technical development<br />
tasks in line with the company’s requirements, concentrating on technological and technical<br />
innovations, research and evaluation of mining conditions for coal seam overburden, and pit-water<br />
research. These tasks focus on the company’s core business activities. These tasks were handled<br />
in cooperation with mining plants and the specialist sections of the two mines, and in association with<br />
external centres, including universities.<br />
In the field of improvements, five improvement proposals were made at the company in <strong>2004</strong>, of which<br />
three were accepted.<br />
The company owns registered trademarks entered in the trademarks register: the combined trademark<br />
SD (the company logo) and the verbal graphic sign S1. The company does not own patents or hold<br />
licences to use the patents of other organizations.<br />
Information System<br />
<strong>Severočeské</strong> <strong>doly</strong> used an S1 integrated information system, rolled out in cooperation with its former<br />
subsidiary SHD – SOFT (ware). Based on a decision of the Board of Directors of 12 May 2003,
38<br />
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39<br />
on the innovation of the current information system, a call for tenders was advertised at the end of 2003<br />
for the supply of a mining industry information system.<br />
The winning bid was placed by SAP ČR, spol. s r.o., and a contract was signed on 25 March <strong>2004</strong>.<br />
The following modules were implemented in <strong>2004</strong>: financial accounting, tangible and intangible assets,<br />
treasury, controlling, sales, supply and warehouses, document management, and workflow.<br />
These modules were put into live operation on 1 January 2005. On this date, the part of the sales<br />
module intended for the support of non-coal sales was put into operation. Coal sales are currently being<br />
temporarily managed in the form of cooperation between the existing S1 information system and<br />
the implemented modules of the SAP system. Coal sales will be transferred to the SAP system during<br />
2005.<br />
Advantages of the New System<br />
Thanks to the perfectly designed client-server architecture, compared with the current system it is<br />
possible to reduce the number of servers and situate them all in a single locality. This makes system<br />
administration much simpler and centralized. In order to safeguard maximum security and reliability,<br />
part of the centre is physically separate from the IT centre. Other advantages are the carefully formulated<br />
controlling tools and support of European Union legislation in accounting and logistics.<br />
Plans and Objectives<br />
The repairs and maintenance module will be ready by 1 June 2005, and the human resources (HR)<br />
module will be put into operation on 1 January 2006. The company is also considering whether<br />
to use modules for investment management, which would meet all requirements related to the planning<br />
of investment acquisition resources, the management of capital construction and evaluations thereof,<br />
and a strategic controlling module, making it possible to monitor company performance and manage<br />
shareholder relations.
SLIPPER<br />
The track chain link of an excavator conveyor belt.
40<br />
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41<br />
Financial Performance Commentary<br />
Evaluation of the Company’s Financial Position in <strong>2004</strong><br />
In <strong>2004</strong>, <strong>Severočeské</strong> <strong>doly</strong> underscored its long-term stable and strong financial position with successful<br />
financial results. It continued the trend of the past few years by implementing a policy of cutting<br />
operating costs. Investment activities were funded solely out of the company’s own resources. All<br />
loans taken over by the company on its foundation from its legal predecessor were prepaid in previous<br />
years. The company’s <strong>annual</strong> profits enable it to pay a dividend to shareholders without threatening<br />
its financial stability.<br />
The company consistently meets all its legal obligations, the most significant of which include<br />
the creation of cleanup and reclamation reserves and mining damage reserves. These statutory provisions<br />
are fully covered by a portfolio of financial assets, made up of liquid financial instruments with<br />
quality ratings. Financial instruments, in accordance with the conservative risk policy, generate yields<br />
which contribute significantly to the company’s overall earnings.<br />
<strong>Severočeské</strong> <strong>doly</strong> was not party to, and does not expect to be a party to, any judicial, administrative,<br />
or arbitration proceedings which could have a significant impact on the company’s financial situation.<br />
Structure of Assets<br />
At the end of <strong>2004</strong>, the company’s total assets stood at CZK 22,272 million. The year-on-year decline<br />
by CZK 828 million can be attributed to the record dividends, which were reflected in assets in the form<br />
of a reduction in financial investments by CZK 482 million and in short-term financial assets by<br />
CZK 339 million.<br />
Financial investments comprised bonds, strategic ownership interests, and a loan to Teplárna<br />
Ústí nad Labem. Short-term financial assets were mainly composed of deposit instruments of selected<br />
financial institutions, bonds, share certificates, and treasury bills.<br />
Depreciation of current assets pushed down the net book value of tangible fixed assets by CZK 80 million.<br />
The rise in intangible assets by CZK 46 million was mainly the result of SAP licence purchases.<br />
Inventories rose by CZK 30 million to CZK 144 million. The calculated deferred tax receivable<br />
at 31 December <strong>2004</strong>, which changed the deferred tax receivable for 2003 into deferred tax payable,<br />
reduced long-term receivables by CZK 50 million. At the end of <strong>2004</strong>, the company <strong>report</strong>ed no longterm<br />
receivables; short-term receivables went up year on year by CZK 43 million to CZK 970 million.<br />
Sources of Financing<br />
At the end of <strong>2004</strong>, there was an increase in the registered capital by CZK 80.6 million. This was<br />
inscribed in the Commercial Register on 18 February 2005. The increase took the form of a nonmonetary<br />
contribution of land from the residual state enterprise.<br />
The increase in the ‘reserve fund and other funds’ item by CZK 84 million to CZK 5,893 million is<br />
the result of an allocation from the 2003 profit to the reserve fund, the municipal donations fund,<br />
the social fund, and the drawing on the social fund and the municipal donations fund.<br />
Retained earnings and the 2003 result were used, in <strong>2004</strong>, for the payment of dividends, directors’<br />
fees, and for an appropriation to the reserve fund and other funds created out of profit.<br />
Reserves, the largest liability item, rose by CZK 62 million to CZK 4,886 million. At the same time as<br />
the ongoing concentration of financial resources for the remediation of mining activities, the company<br />
drew on reserves to finance reclamation and provide compensation – resources for the relaying<br />
of the ČD – DDC track at Březno u Chomutova.<br />
The rise in long-term payables by CZK 58 million can be attributed to the recognition of the deferred<br />
tax receivable for 2003 which, based on the calculation of tax deferred as at 31 December <strong>2004</strong>, was<br />
transformed into deferred tax payable.<br />
Short-term payables went down year on year by CZK 221 million to CZK 988 million, which was influenced<br />
not only by a fall in tax payable and trade payables, but also by the drop in estimated accrued<br />
items, a reduction in pro-forma invoices for coal, and the refund of principals remitted in a tender.<br />
<strong>Severočeské</strong> <strong>doly</strong> has no bank loans, confirming its financial strength and stability.
Creation of Earnings<br />
In <strong>2004</strong>, <strong>Severočeské</strong> <strong>doly</strong> made an operating profit of CZK 1,439 million, i.e. CZK 132 million and 10.1%<br />
more than in the previous year. Total operating revenues and costs came to CZK 8,084 million and<br />
CZK 6,645 million respectively.<br />
The year-on-year comparison reveals that, in particular, operating costs registered a positive tendency.<br />
The company’s lower sales pushed down revenues from coal sales by CZK 158.5 million. The con-<br />
Developments in asset structure (CZK billions)<br />
2000<br />
2001<br />
2002<br />
2003<br />
<strong>2004</strong><br />
Developments in liability structure (CZK billions)<br />
2000<br />
2001<br />
2002<br />
2003<br />
<strong>2004</strong><br />
Intangible fixed assets<br />
Tangible fixed assets<br />
Financial investments<br />
Equity<br />
Reserves<br />
Long-term payables<br />
0 5 10 15 20 25<br />
Inventories<br />
Receivables<br />
Financial assets<br />
0 5 10 15 20 25<br />
Short-term payables<br />
Long-term bank loans<br />
Current bank loans<br />
Developments in profit structure (CZK millions)<br />
2000<br />
2001<br />
2002<br />
2003<br />
<strong>2004</strong><br />
Operating profit<br />
Profit from financial operations<br />
Other assets<br />
Other liabilities<br />
-500 0 500 1,000<br />
1,500<br />
Extraordinary profit<br />
Income tax<br />
Net profit
42<br />
——<br />
43<br />
sumption of materials and energy fell by CZK 11.3 million, and the cost of services rose by CZK 38.4 million.<br />
In the field of depreciation, there was a year-on-year reduction by CZK 63.5 million.<br />
The company made a profit from financial operations of CZK 390 million, which is CZK 68 million<br />
(14.8%) less compared with the previous year. This year-on-year reduction can mainly be attributed<br />
to the posting of a provision of CZK 55 million for the equity interest in Teplárna Ústí nad Labem<br />
at the end of 2003 and an absolute fall in appreciated financial assets, which is due to the exceptionally<br />
high dividends for 2003. In order to improve the value of its idle assets, much of which is composed<br />
of reserves to eliminate the effects of mining activities, the company used liquid financial instruments<br />
with a quality rating and with an adequate term of investment, in accordance with the company’s conservative<br />
risk policy. In <strong>2004</strong>, the company recorded no interest expense based on credits or loans.<br />
Net profit amounted to CZK 1,365 million, i.e. CZK 70 million (5.4%) more than in 2003.<br />
Distribution of company net earnings (CZK’000)<br />
<strong>2004</strong> 2003 2002 2001 2000<br />
Net profit<br />
Allocation to:<br />
1,364,798 1,294,309 962,859 1,113,183 826,926<br />
reserve fund<br />
other funds<br />
68,240 64,716 48,143 55,659 41,347<br />
social fund 23,948 23,416 27,480 26,859<br />
municipal donations fund 50,000 30,000 50,000 50,000<br />
investment fund 313,397 613,993 494,670<br />
capital interest to reduce unemployment 30,000<br />
Dividends 2,160,013* 2,112,763* 540,003 359,901 179,950<br />
Board member bonuses 13,650 11,350 7,900 6,150 4,100<br />
Transfer to retained earnings 409<br />
* in addition to the current-year profit, retained earnings were also used for the dividend payout
TART<br />
The product of filtering equipment used to process slurry<br />
coal. Ninety 'slurry tarts' are filtered in one filter press cycle.<br />
Approximately 30,000 m 3 of slurry is processed every month.
44<br />
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45<br />
Shares and Shareholders<br />
Information on the Company’s Shares at 31 December <strong>2004</strong><br />
I. Dematerialized bearer shares<br />
Name: SEVEROČ. DOLY<br />
ISIN: CZ0005102350<br />
Total value of issue: CZK 7,516,485,000<br />
Nominal value per share: CZK 1,000<br />
Number of shares: 7,516,485<br />
Year of issue: 1994<br />
II. Dematerialized registered shares<br />
ISIN: CZ0005102467<br />
Total value of issue: CZK 1,483,570,000<br />
Nominal value per share: CZK 1,000<br />
Number of shares: 1,483,570<br />
Year of issue: 1994<br />
Shareholder Structure at 31 December <strong>2004</strong><br />
Shareholder Number of shares Share in registered capital (%)<br />
A. Legal entities 8,776,740 97.52<br />
A.I. Domestic legal entities 8,755,442 97.28<br />
National Property Fund of the Czech Republic 4,985,692 55.40<br />
ČEZ, a.s. 3,347,950 37.20<br />
Municipalities (11 towns and cities) 402,105 4.47<br />
Other legal entities 19,695 0.21<br />
A.II. Foreign legal entities 21,298 0.24<br />
B. Private individuals 223,315 2.48<br />
B.I. Domestic private individuals 219,984 2.44<br />
B.II. Foreign private individuals 3,331 0.04<br />
Number of shares 9,000,055 100.00<br />
Shareholder structure at 31 December <strong>2004</strong> (%)<br />
National Property Fund<br />
of the Czech Republic — 55.40%<br />
ČEZ, a.s.<br />
37.20%<br />
Municipalities<br />
(11 towns and cities) — 4.47%<br />
Other legal entities<br />
0.21%<br />
Private individuals<br />
2.48%<br />
Foreign legal entities<br />
0.24%<br />
0 10 20 30 40 50 60<br />
The Company has issued 7,516,485 bearer shares with CZK 1,000 nominal value and 1,483,570 registered<br />
shares with CZK 1,000 nominal value. Both share issues are publicly tradable, however registered<br />
shares may only be transferred using the procedure set forth in the Articles of Association. Shareholder<br />
rights are set forth in the Articles of Association and are in accordance with the valid version<br />
of the Commercial Code (Act No 513/1991).
At year-end <strong>2004</strong>, the National Property Fund of the Czech Republic controlled 55.4% of the company’s<br />
equity, of which 47.6% in the form of bearer shares. In 1998, ČEZ gradually increased its holding<br />
in the company to a strategic stake of 37.2%, of which 33.8% is held in the form of bearer shares.<br />
The registered shares are held by the National Property Fund of the Czech Republic (7.8%),<br />
municipalities (4.5%), and ČEZ (3.4%).<br />
Changes in Registered Capital<br />
In 1997, in conjunction with asset transfers from residual state owned enterprises pursuant to amendments<br />
to the privatization project, the company increased its registered capital by CZK 107,368,000.<br />
In 2000, the registered capital was increased by a further CZK 163,282,000.<br />
A part of the increase (CZK 10,670,000) was registered in the Commercial Register in 1998. The remaining<br />
portions of the aggregate registered capital increase, totalling CZK 259,980,000, were registered<br />
in 2000; this resulted in an increase in the number of bearer shares by 141,306. The remaining<br />
129,344 new shares arising out of the capital increases materialized in 2001, and were credited<br />
to the National Property Fund of the Czech Republic.<br />
In 2002, the registered capital was increased by a further CZK 2,525,000. The entry in the Commercial<br />
Register and the subsequent clearance of shares to the National Property Fund of the Czech Republic<br />
took place in 2003.<br />
At the end of <strong>2004</strong>, the registered capital was increased by a further CZK 80,576,000 to<br />
CZK 9,080,631,000. The entry in the Commercial Register was made on 18 February 2005 and the subsequent<br />
clearance of shares to the National Property Fund of the Czech Republic took place in 2005.<br />
Trading in the Company’s Shares<br />
The company’s shares were first accepted for trading on the Prague Stock Exchange PSE in early March<br />
1995; the shares were moved to the former Listed Market of the Prague Stock Exchange on 27 June 1995.<br />
On 4 September 1995, as part of a reorganization of the PSE, the shares were transferred to the PSE’s First<br />
Tier; under a bourse decision dated 1 January 1998, the shares were moved to the Second Tier. When<br />
the shares were first listed in March 1995, the initial price was CZK 650 per share. The shares are also<br />
traded in the RM–System.<br />
<strong>2004</strong> 2003 2002 2001 2000 1999<br />
Minimum price (CZK) 935.0 433.9 258.7 226.0 211.0 506.3<br />
Maximum price (CZK) 1,580.0 965.0 433.9 330.0 810.0 1,000.0<br />
Last quoted price in year (CZK) 1,480.0 935.0 433.9 286.6 244.1 506.3<br />
Dividend per share (CZK) 240 234.75 60 40 20 35<br />
Earnings per share (CZK) 151.6 143.8 107.0 123.7 93.2 119.8<br />
Developments in the share price and trading volume on the PSE<br />
1,600<br />
1,400<br />
1,200<br />
1,000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
I. 2001 VI. 2001 I. 2002 VI. 2002 I. 2003 VI. 2003 I. <strong>2004</strong> VI. <strong>2004</strong> I. 2005<br />
8,000,000<br />
7,000,000<br />
6,000,000<br />
5,000,000<br />
4,000,000<br />
3,000,000<br />
2,000,000<br />
1,000,000<br />
0<br />
Share price (CZK) Trading volume (CZK)
46<br />
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47<br />
Right to a Dividend<br />
1. The General Meeting shall decide, pursuant to a proposal from the Board of Directors, on the dividend<br />
payment date, place, method of payment, and decisive day for the payment of the dividend.<br />
The dividend is payable within three months of the date the General Meeting resolution<br />
on the distribution of profits is adopted.<br />
The right to the payment of a dividend is time-barred once four years have elapsed as of the decisive<br />
date for the dividend payment.<br />
2. Rights attaching to shares are exercised by the person listed in the statutory records at the Prague<br />
Securities Centre, unless the law specifies to the contrary.<br />
a) If one share is owned by several persons the co-shareholders are obliged to agree on which<br />
of them shall exercise the rights attaching to the share or to appoint a joint representative.<br />
b) Should a shareholder die, his heir is entitled to exercise rights attaching to a share, unless<br />
the law specifies to the contrary. Where there is more than one heir, the co-shareholders are<br />
obliged to agree on which of them shall exercise the rights attaching to the share, or to appoint<br />
a joint representative. Should the heirs be unable to reach agreement, a court shall decide,<br />
pursuant to a proposal from the company, on the person entitled to exercise rights attaching<br />
to a share until such time as the end of proceedings.<br />
c) The right to the payment of a dividend may be transferred independently by registration<br />
of the transfer in the records of dematerialized shares.<br />
Detailed information about shareholder rights can be found in the chapter entitled ‘Corporate<br />
Governance’.
DOLL<br />
A screw or hydraulic jack with a lifting capacity of 5 tonnes<br />
(some types have a lifting capacity of up to 50 tonnes). Used<br />
to lift loads, during the repair of machinery, etc.
48<br />
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49<br />
Strategy and Outlook for 2005<br />
The prospects of the market in brown coal are affected by developments in the gross domestic product<br />
in the Czech economy and EU Member States, the energy requirements behind the formation of GDP,<br />
the structure of power generation (the share of brown coal, hard coal, lignite, oil, hydro-energy, natural<br />
gas, nuclear energy, and renewable resources), exports and imports of energy, and power consumption.<br />
Forecasts of developments in demand for fuel and energy are connected with the general predictions<br />
of economic development in the Czech Republic.<br />
2005 will focus on reforms of the social, education, and healthcare system. We can assume that trading<br />
in emissions will begin in accordance with the approved NAP, and that the bill on the promotion<br />
of the generation of electricity from renewable energy sources will be passed. Following the appointment<br />
of Mr Andris Piebalgs as the new EU Energy Commissioner, it is expected that a new energy platform<br />
will be introduced – the Hydrocarbon Forum – and that, in this context, further discussions<br />
will be held on hydrocarbon tax and clean coal technologies.<br />
Energy management is currently undergoing privatization and restructuring. The liberalization<br />
of the energy markets in the EU has started, and will gradually spread to the Czech Republic under<br />
the relevant measures which have been adopted. An integral element of this process is to define<br />
the legislative environment, especially in the fields of power engineering, the heat industry, the gas<br />
industry, and environmental protection. In this respect, it is necessary to harmonize Czech law and<br />
European regulations (e.g. the Energy Act, the Energy Management Act, the Clean Air Act).<br />
The amendment to the Energy Act appoints time limits for the liberalization of the electricity market,<br />
including the categorization of the corresponding customers.<br />
When balancing all factors, developments in emissions of pollutants are taken into account. Every<br />
year, there is a reduction in the production of SO 2 , NO X , and solids, but the quantity of CO 2 is rising.<br />
Measures aimed at achieving the required effect of reduced emissions in the energy sector concentrate<br />
on enhancing energy efficiency, implementing economical combustion technologies, and using<br />
renewable energy sources and gas fuels.<br />
These are the fundamental factors affecting the consumption of energy in the Czech Republic,<br />
and they will have an impact on the demand for coal. Therefore, they determine <strong>Severočeské</strong> <strong>doly</strong>’s business<br />
strategy.<br />
Production Strategy and Sales Activities<br />
<strong>Severočeské</strong> <strong>doly</strong>’s strategy in sales is centred on medium- and long-term contractual relations respecting<br />
mutually beneficial business conditions. Contractual relations form the basis for long-term stable<br />
use of brown coal as a source of quality, reasonably priced energy which is strategically important<br />
today and will remain so in the future. Long-term business relations with ČEZ and several other<br />
customers operating in North Bohemia remain the kernel of the company’s strategy in sales. The company<br />
views the Czech market as its main territory of business interest. The sales policy includes ensuring<br />
reliability in the fulfilment of contracts from the aspects of volume, range, and pricing. Relations<br />
with consumers will continue to be cemented with activities aimed at finding solutions to the need<br />
for more environmentally-friendly energy plants. In order to meet this goal, the company draws on stateof-the-art<br />
technological facilities for coal mining and processing, and cutting-edge systems to control<br />
the quality of production.<br />
Financial Strategy<br />
The company’s main goal is to ensure lasting, stable increases in the value of the capital invested<br />
by shareholders. <strong>Severočeské</strong> <strong>doly</strong> will continue its successfully established policy of making cuts<br />
in operating costs, and will strive to increase the profitability of its assets. The company’s financial<br />
power will enable it to continue funding its investments solely out of its own resources. The company<br />
regularly creates land cleanup and reclamation reserves and mining damage settlement reserves;<br />
it puts its cash surpluses from these reserves and other sources to work by investing them in liquid<br />
financial instruments a quality rating and with adequate investment terms. The company monitors
fundamental interest rate risk management indicators in order to eliminate the undesirable impacts<br />
of interest rate movements. Standard financial market instruments are used to manage interest<br />
rate and foreign currency risk.<br />
Personnel Strategy<br />
The targeted application of personnel and social policies helps foster conditions ensuring the accomplishment<br />
of principal targets, i.e. the posting of competitive results and economic growth of the company.<br />
In this respect, the company is responding to a situation where the launch of the full operation<br />
of Temelín Nuclear Power Station is being felt. The incentive programme focuses on employee<br />
bonuses, financial and non-financial employee benefits, and employee training. In the field of social<br />
standards, the company places the main emphasis on promoting safety and health at work. Good communication<br />
with the trade unions, combined with a high standard of corporate culture, make a significant<br />
contribution to the social peace.<br />
Communication Strategy<br />
In its corporate communication strategy, <strong>Severočeské</strong> <strong>doly</strong> strives to be perceived by the public as<br />
a stable, successful, competitive, trustworthy company of great importance for the development<br />
of the sector and the region, a company that works to minimize the impact of its business<br />
on the environment. Great emphasis is placed on openness and honesty in our dealings with business<br />
partners, the public, our employees, and shareholders, as well as on strengthening the corporate image<br />
and culture. The company employs an accommodating approach as it seeks to maintain and develop<br />
relations with neighbouring municipalities. The company will continue to contribute to the development<br />
of employment, health care, education, sports and physical education, the arts and other areas of public<br />
life.<br />
The Environment<br />
In realizing its strategy for protecting the environment, the company pays very close attention to environmental<br />
needs and relationships in its area, especially with regard to the towns and cities located<br />
near its mines. Our systematic preparation and realization of cleanup and reclamation work on land<br />
affected by mining activity is a unique aspect of this relationship.<br />
Investment Strategy<br />
The anticipated decline in brown coal sales will necessitate certain cutbacks in capital investment.<br />
However, investment focused primarily on renewing and modernizing excavation technology, and<br />
on environmentally-friendly construction, will continue to ensure that the necessary approach to mining<br />
and environmental requirements is maintained. The approval of the Government Energy Concept<br />
and the related ČEZ decision on how to modernize its CHP plants will have a significant impact<br />
on the investment strategy.<br />
Information on the Company’s Conversion to International Accounting Standards<br />
As an issuer of shares listed on the regulated market, as of 1 January 2005 <strong>Severočeské</strong> <strong>doly</strong> a.s. is obliged<br />
to use International Accounting Standards, modified by the legislation of the European Communities,<br />
for its bookkeeping and the preparation of its financial statements. Considering the significant disparities<br />
between Czech accounting legislation and the International Accounting Standards, in previous<br />
years the company has identified material differences and has transformed its financial statements<br />
for internal requirements based on these differences. For 2003, the company used the legal<br />
possibility of applying International Accounting Standards in the preparation of its consolidated financial<br />
statements. These financial statements were audited with a verdict of ‘no reservations’ and<br />
were part of the information published in the company’s <strong>annual</strong> <strong>report</strong> for 2003. For <strong>2004</strong>, the company<br />
is presenting its consolidated financial statements prepared in the same manner. As of 1 January<br />
2005, the company has therefore applied accounting methods and procedures which it has already<br />
become accustomed to in accordance with International Accounting Standards.
50<br />
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51<br />
Outlook for 2005<br />
Territorial ecological mining limits will be set as part of the process of approving the Ústecko Region<br />
Land-Use Plan. Brown-coal mining will continue its downward trend, which means that <strong>Severočeské</strong><br />
<strong>doly</strong> will have to try to cut costs further. In order to fulfil the Government Energy Concept, a number<br />
of conceptual decisions are expected from energy producers regarding the reconstruction or<br />
new construction of operating technologies; based on these decisions, the company will elaborate<br />
on its investment plans for the upcoming period.<br />
The company forecasts total coal mining of 20.5 million tonnes; the main customer, ČEZ, will account<br />
for approximately 80% of the company’s total sales. A 5.7% year-on-year drop in coal product sales<br />
is expected. Depending on the volume of coal sales, it will be necessary to make arrangements<br />
for the removal of overburden and free up the coal substance in the seam in good time. Therefore, it<br />
will be necessary to excavate at least 75 million m 3 of overburden.<br />
In its business plan, the company has set itself the goal of making a net profit of CZK 1.2 billion, even<br />
though there will be a year-on-year reduction in coal sales. The successfully established policy of making<br />
savings in operating costs and in enhancing the profitability of total assets will continue.<br />
There are plans to invest more than CZK 900 million. Besides the acquisition of new mining technology,<br />
the approved investment programme includes the reconstruction and modernization of existing<br />
equipment, dressing operations, and the replacement of ancillary mechanical facilities. The transport<br />
and drainage systems required by the quarries will be set up along with a power supply and<br />
the implementation of environmental projects. In 2005, work will continue on implementing the new<br />
SAP integrated information system.<br />
The reclamation process will advance in accordance with long-term plans for the final formation<br />
of the landscape over a total area of 2,567 ha. A cleanup and reclamation reserve of CZK 432 million<br />
will be created based on the estimated volume of coal excavation in 2005.<br />
There will be no more large-scale redundancies of the kind we have witnessed in recent years.<br />
The average headcount will be 3,637 employees, i.e. a year-on-year fall by 87 persons. A rise in tariff-based<br />
wages by 5.5% to 6.0% was agreed for 2005 in the collective agreement; the average monthly<br />
wage should therefore rise to CZK 21,860.
Supervisory Board Report<br />
Supervisory Board on the ordinary and consolidated financial statements, on the proposed<br />
distribution of the <strong>2004</strong> profit, and on its examination of the <strong>report</strong> on relations between related<br />
entities<br />
The Supervisory Board met six times in <strong>2004</strong>. At its meetings, the Supervisory Board discussed<br />
the economic development of the Company, including related fields affecting profit generation. At the<br />
end of the <strong>2004</strong> accounting period, the Supervisory Board discussed the projected financial results<br />
and primarily paid attention to the preparation of the financial statements for <strong>2004</strong>. After<br />
31 December <strong>2004</strong>, the Supervisory Board discussed the financial statements, the proposed distribution<br />
of the profit from <strong>2004</strong>, and the auditor's <strong>report</strong> for <strong>2004</strong>. Considerable attention was also<br />
paid to collective bargaining with the trade unions and the conclusion of the collective agreement<br />
for 2005. At its meeting in March 2005, the Supervisory Board approved the auditor for 2005.<br />
Representatives of the Company's management were invited to Supervisory Board meetings where<br />
required by the items on the agenda. The Company's management arranged for replies to be prepared<br />
in response to all necessary information concerning the Company's finances and supplied all<br />
requested background documentation and <strong>report</strong>s.<br />
The Supervisory Board makes the following statements:<br />
1) the Company's business activities and the exercise of powers by the Board of Directors complied<br />
with the Company's Articles of Association and the instructions of the General Meeting.<br />
2) The Supervisory Board has examined the Company's ordinary and consolidated financial statements<br />
and discussed the auditor's <strong>report</strong>. The Supervisory Board recommends that the General Meeting<br />
approve the presented ordinary and consolidated financial statements.<br />
3) The Supervisory Board was informed of the proposal presented by the Board of Directors for the distribution<br />
of profit once the financial statements for <strong>2004</strong> had been drawn up. The Supervisory Board<br />
recommends that the General Meeting approve the proposed profit distribution.<br />
4) The Supervisory Board has examined the Report on Relations between Related Entities in accordance<br />
with Section 66a(9) of the Commercial Code and has no comments or suggestions regarding<br />
this Report.<br />
Chomutov, 15 June 2005<br />
Robert Sýkora<br />
Chairman of the Supervisory Board
52<br />
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53<br />
Report of Independent Auditors<br />
To the Board of Directors and the Supervisory Board of <strong>Severočeské</strong> <strong>doly</strong> a.s.:<br />
We have audited the accompanying consolidated balance sheet of <strong>Severočeské</strong> <strong>doly</strong> a.s. and its subsidiaries (“the Group”)<br />
as of December 31, <strong>2004</strong> and the related consolidated statements of income, shareholders’ equity, cash flows and<br />
the related notes 1 to 18 for the year ended December 31, <strong>2004</strong>. These consolidated financial statements are the<br />
responsibility of the management of <strong>Severočeské</strong> <strong>doly</strong> a.s. Our responsibility is to express an opinion on these financial<br />
statements based on our audit.<br />
We conducted our audit in accordance with International Standards on Auditing. Those standards require that<br />
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of<br />
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures<br />
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates<br />
made by management, as well as evaluating the overall consolidated financial statement presentation. We believe<br />
that our audit provides a reasonable basis for our opinion.<br />
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the<br />
financial position of the Group as of December 31, <strong>2004</strong>, and the results of its operations and its cash flows for<br />
the year ended December 31, <strong>2004</strong>, in accordance with International Financial Reporting Standards.<br />
Ernst & Young ČR, s.r.o.<br />
February 18, 2005
Consolidated Financial Statements in Accordance with<br />
IFRS<br />
Consolidated Balance Sheets at December 31, <strong>2004</strong> and 2003 (in CZK million)<br />
Note <strong>2004</strong> 2003<br />
ASSETS<br />
Property, plant and equipment:<br />
Plant in service 28,483 28,052<br />
Less accumulated provision for depreciation (17,216) (16,318)<br />
Net plant in service 4 11,267 11,734<br />
Construction work in progress 684 518<br />
Total property, plant and equipment 11,951 12,252<br />
Other non-current assets:<br />
Investments 5 6,544 6,819<br />
Investments in associates 6 304 789<br />
Deferred tax assets 12 449 140<br />
Intangible assets, net 84 105<br />
Total other non-current assets 7,381 7,853<br />
Current assets:<br />
Cash and cash equivalents 8 233 258<br />
Investments 5 4,078 4,373<br />
Accounts receivable, net 7 939 957<br />
Materials and supplies, net 164 141<br />
Other current assets 31 28<br />
Total current assets 5,445 5,757<br />
Total assets 24,777 25,862<br />
LIABILITIES AND SHAREHOLDERS’ EQUITY<br />
Shareholders’ equity:<br />
Share capital 11 9,081 9,000<br />
Net unrealized gains on available-for-sale assets 54 49<br />
Retained earnings 11 5,646 7,569<br />
Total shareholders’ equity 14,781 16,618<br />
Minority interests 3 3<br />
Non-current liabilities:<br />
Provision for decommissioning, reclamation and mining damages 3 8,792 7,783<br />
Deferred tax liability 12 44 53<br />
Total non-current liabilities 8,836 7,836<br />
Current liabilities:<br />
Accounts payable 9 665 814<br />
Income tax payable 207 298<br />
Accrued and other liabilities 10 285 293<br />
Total current liabilities 1,157 1,405<br />
Total liabilities and shareholders’ equity<br />
The accompanying notes are an integral part of these financial statements.<br />
24,777 25,862
54<br />
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55<br />
Consolidated Statements of Income for the Years Ended December 31, <strong>2004</strong><br />
and 2003 (in CZK million)<br />
Note <strong>2004</strong> 2003<br />
Revenues:<br />
Sales of coal 7,361 7,520<br />
Other sales 592 594<br />
Total revenues 7,953 8,114<br />
Expenses:<br />
Repairs, maintenance and other services (1,620) (1,517)<br />
Personnel 13 (1,752) (1,721)<br />
Depreciation and amortization (1,478) (1,573)<br />
Spare parts and other materials (892) (824)<br />
Energy (629) (674)<br />
Other operating expenses, net (970) 283<br />
Total expenses (7,341) (6,026)<br />
Operating income 612 2,088<br />
Other income/(expenses):<br />
Income from associates 6 28 60<br />
Interest income 394 397<br />
Interest on provisions 3 (420) (414)<br />
Other financial expenses, net (363) (16)<br />
Total other income/(expenses) (361) 27<br />
Profit before income taxes 251 2,115<br />
Income taxes 12 (72) (704)<br />
Profit after income taxes 179 1,411<br />
Minority interests — —<br />
Net profit from ordinary activities 179 1,411<br />
Net profit per share (CZK per share) (Note 11)<br />
Basic 20 157<br />
Diluted 20 157<br />
Average number of shares outstanding (shares) (Note 11)<br />
Basic 9,000,055 8,999,958<br />
Diluted<br />
The accompanying notes are an integral part of these financial statements.<br />
9,006,898 8,999,958<br />
Consolidated Statements of Shareholders’ Equity for the Years Ended<br />
December 31, <strong>2004</strong> and 2003 (in CZK million)<br />
Note Number Share capital Net unrealized Retained Total equity<br />
of shares gains/(losses) earnings<br />
Balance at December 31, 2002 8,997,530 9,000 106 6,698 15,804<br />
Dividends paid — — — (540) (540)<br />
Capital contribution 11 2,525 — — — —<br />
Net loss on available-for-sale investments — — (57) — (57)<br />
Net profit — — — 1,411 1,411<br />
Balance at December 31, 2003 9,000,055 9,000 49 7,569 16,618<br />
Dividends paid — — — (2,113) (2,113)<br />
Capital contribution 11 — 81 — 11 92<br />
Net gain on available-for-sale investments — — 5 — 5<br />
Net profit — — — 179 179<br />
Balance at December 31, <strong>2004</strong> 9,000,055 9,081 54 5,646 14,781<br />
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Cash Flows for the Years Ended December 31,<br />
<strong>2004</strong> and 2003 (in CZK million)<br />
<strong>2004</strong> 2003<br />
Operating activities:<br />
Profit before income taxes 251 2,115<br />
Adjustments to reconcile profit before income taxes to net cash provided by operating activities:<br />
Depreciation and amortization 1,478 1,573<br />
Interest income, net (394) (397)<br />
Change in provisions 1,650 420<br />
Change in allowances — 18<br />
Gain on fixed asset retirements (29) (37)<br />
Loss from the sale of associate 308 —<br />
Income from associates (28) (60)<br />
Changes in assets and liabilities:<br />
Receivables and other current assets 57 153<br />
Spare parts and other materials (25) (35)<br />
Accounts payable, accrued and other liabilities (74) (88)<br />
Cash generated from operations 3,194 3,662<br />
Income taxes paid (682) (493)<br />
Net cash provided by operating activities 2,512 3,169<br />
Investing activities:<br />
Purchase of property, plant and equipment (1,360) (1,047)<br />
Payments for financial investments (1,144) (3,441)<br />
Proceeds from sale of property, plant and equipment 37 57<br />
Proceeds from sale of financial investments 2,101 2,129<br />
Interest received 218 165<br />
Payments for reclamation and restoration of mining damages (477) (576)<br />
Total cash used in investing activities (625) (2,713)<br />
Financing activities:<br />
Dividends paid (1,912) (521)<br />
Total cash used in financing activities (1,912) (521)<br />
Net decrease in cash and cash equivalents (25) (65)<br />
Cash and cash equivalents at beginning of year 258 323<br />
Cash and cash equivalents at end of year<br />
The accompanying notes are an integral part of these financial statements.<br />
233 258
56<br />
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57<br />
Notes to Consolidated Financial Statements for the Year Ended<br />
December 31, <strong>2004</strong><br />
1. General<br />
<strong>Severočeské</strong> <strong>doly</strong> a.s. (“<strong>Severočeské</strong> <strong>doly</strong>” or “the Company”) is a Czech Republic joint-stock company, which was<br />
established on January 1, 1994 and its registered seat is in Chomutov, Czech Republic. The Company was established<br />
by merging of two state owned enterprises Doly Nástup Tušimice and Doly Bílina. As of December 31, <strong>2004</strong> the state<br />
represented by National Property Fund held 55.4% of its shares.<br />
<strong>Severočeské</strong> <strong>doly</strong> is a mining company, which has approximately 45% share in lignite market in the Czech Republic.<br />
The Company has an agreement with ČEZ, a.s., the dominant electricity producer in the Czech Republic and<br />
a holder of 37.2% of the Company’s outstanding shares, to supply lignite to ČEZ’s five fossil power plants in the North<br />
Bohemia region and certain large fossil power plants elsewhere in the Czech Republic. As a result, approximately<br />
79% of the lignite production was supplied to ČEZ, a.s., which represented 60% of ČEZ’s coal consumption. The Company<br />
operates two separate mines; the Nástup Tušimice (“DNT”) mine and the Bílina (“DB”) mine. The geological reserves<br />
of the mines amount to 1,019 million tons of lignite from which 549 million tons can still be mined. Annual production<br />
of the mines is about 22 million tons of lignite, with an overburden roof approximately 77 million cubic meters<br />
of earth.<br />
The financial statements were authorised for issue by Erich Grünbaum, Chief Financial Officer of <strong>Severočeské</strong><br />
<strong>doly</strong> a.s., on February 18, 2005.<br />
2. Summary of Significant Accounting Policies<br />
Statement of Compliance<br />
The consolidated financial statements of <strong>Severočeské</strong> <strong>doly</strong> a.s. have been prepared in accordance with International<br />
Financial Reporting Standards (“IFRS”).<br />
Basis of Preparation<br />
The consolidated financial statements are prepared under the historical cost convention, except that available-forsale<br />
investments are stated at their fair value (see Note 5).<br />
Changes in IFRS<br />
The International Accounting Standards Board (IASB) introduced many changes to the International Financial<br />
Reporting Standards and issued new standards and interpretations during 2003 and <strong>2004</strong> that will be valid from<br />
1 January 2005 or later. Therefore, it is possible that the IFRS financial statements for the year ended 31 December<br />
2005 or later will contain comparative data for the year <strong>2004</strong> that will differ from the data presented in these financial<br />
statements. The Company is currently assessing the impact that new or revised standards will have on the Group<br />
accounting policies and financial data presented.<br />
Principles of Consolidation<br />
The consolidated financial statements of <strong>Severočeské</strong> <strong>doly</strong> (“the Group”) include <strong>Severočeské</strong> <strong>doly</strong> a.s. and<br />
the companies that it controls (see Note 17). This control is normally evidenced when the Company owns, either<br />
directly or indirectly, more than 50% of the voting rights of a company’s share capital or is able to govern the financial<br />
and operating policies of an enterprise so as to benefit from its activities. The equity and net income attributable<br />
to minority shareholders’ interests are shown separately in the Consolidated Balance Sheets and the Consolidated<br />
Statements of Income, respectively.<br />
The purchase method of accounting is used for acquired businesses. Companies acquired or disposed of during<br />
the year are included in the consolidated financial statements from the date of acquisition or to the date of disposal.<br />
Intercompany balances and transactions, including intercompany profits and unrealized profits and losses are<br />
eliminated. Unrealized losses are eliminated similarly but only to the extent that there is no evidence of impairment<br />
of the asset transferred.<br />
Investments in associates are accounted for by the equity method of accounting. Associates are entities over<br />
which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant<br />
influence, but which it does not control. Unrealized gains on transactions between the Group and its associates are<br />
eliminated to the extent of the Group’s interest in the associates; unrealized losses are also eliminated unless<br />
the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in associates<br />
includes goodwill (net of accumulated amortization) on acquisition. When the Group’s share of losses in an associate<br />
equals or exceeds its interest in the associate, the Group does not to recognize further losses, unless the Group<br />
has incurred obligations or made payments on behalf of the associates.<br />
Consolidated financial statements are prepared using uniform accounting policies for like transactions and other<br />
events in similar circumstances.
Basis of Accounting<br />
The Group maintains its books and records in accordance with accounting principles and practices mandated by<br />
the Czech Law on Accounting. Czech Accounting Standards and IFRS differ in certain respects. The accompanying<br />
financial statements reflect certain adjustments and reclassifications not recorded in the accounting records<br />
of the Group in order to conform the Czech statutory balances to financial statements prepared in accordance<br />
with IFRS issued by the International Accounting Standards Board. The adjustments are summarized in Note 18.<br />
Change in Classification of Items<br />
Certain prior year financial statement items have been reclassified to conform to the current year presentation.<br />
Measurement Currency<br />
Based on the economic substance of the underlying events and circumstances relevant to the Group, the measurement<br />
currency of the Group has been determined to be the Czech crown (CZK).<br />
Estimates<br />
The preparation of financial statements in conformity with IFRS requires management to make estimates and<br />
assumptions that affect the <strong>report</strong>ed amounts of assets and liabilities, disclosure of contingent assets and liabilities<br />
at the date of the financial statements and the <strong>report</strong>ed amount of revenues and expenses during the year. Actual<br />
results could differ from those estimates.<br />
Revenue Recognition<br />
Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow<br />
to the enterprise and the amount of the revenue can be measured reliably. Sales are recognized net of sales taxes<br />
and discounts.<br />
Revenue from sales of goods are recognized when delivery has taken place and transfer of risks and rewards<br />
has been completed.<br />
Revenues from sales of services are recognized on providing services to third parties.<br />
Interest is recognized on a time proportion basis that reflects the effective yield on the asset.<br />
Dividends are recognized when the shareholder’s right to receive payment is established.<br />
Property, Plant and Equipment<br />
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment<br />
loss. When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts and<br />
any gain or loss resulting from their disposal is included in the Consolidated Statement of Income.<br />
The initial cost of property, plant and equipment comprises its purchase price, including import duties and<br />
non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and<br />
location for its intended use. The original cost also includes the estimated cost of dismantling and removing the asset<br />
and restoring the site to the extent that it is recognized as a provision under IAS 37, Provisions, Contingent Liabilities<br />
and Contingent Assets.<br />
Expenditures incurred after the fixed assets have been put into operation, such as repairs and maintenance<br />
and overhaul costs, are normally charged to income in the period the costs are incurred. In situations where it<br />
can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits<br />
expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed<br />
standard of performance, the expenditures are capitalized as an additional cost of property, plant and equipment.<br />
Depreciation is computed on a straight-line basis over the following estimated useful lives:<br />
Years<br />
Buildings and structures 15.0 – 45.0<br />
Machinery and equipment 3.0 – 14.5<br />
Furniture and fixtures 3.0 – 14.5<br />
Motor vehicles 3.0 – 14.5<br />
The useful life and depreciation method are reviewed periodically to ensure that the method and period of depreciation<br />
are consistent with the expected pattern of economic benefits from items of property, plant and equipment.<br />
Construction-work-in-progress represents plant and properties under construction and is stated at cost. This<br />
includes cost of construction, plant and equipment and other direct costs. Construction-work-in-progress is not<br />
depreciated until such time as the relevant assets are completed and put into operational use.<br />
Investments<br />
The company applies IAS 39, Financial Instruments: Recognition and Measurement. As a result, financial investments<br />
are classified into the following categories: held-to-maturity and available-for-sale. Investments with fixed or<br />
determinable payments and fixed maturity that the Company has the positive intent and ability to hold to maturity<br />
other than loans and receivables originated by the Company are classified as held-to-maturity investments. All other<br />
investments, other than loans and receivables originated by the Company, are classified as available-for-sale.
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59<br />
Held-to-maturity investments are included in non-current assets unless they mature within 12 months of the balance<br />
sheet date. Available-for-sale investments are classified as current assets if management intends to realize them<br />
within 12 months of the balance sheet date.<br />
All purchases and sales of investments are recognized on the settlement date.<br />
Investments are initially measured at cost, which is the fair value of the consideration given for them, including<br />
transaction costs.<br />
Gains or losses on measurement to fair value of available-for-sale investments are recognized as a separate<br />
component of Shareholders Equity, until the investment is sold or otherwise disposed of, or until it is determined<br />
to be impaired, at which time the cumulative gain or loss previously recognized in equity is included in net profit or<br />
loss for the period.<br />
Held-to-maturity investments are carried at amortized cost using the effective interest rate method.<br />
Receivables, Payables and Accrual<br />
Receivables are stated at the fair value of the consideration given and are carried at amortized cost, after provision<br />
for any uncollectible amounts. At December 31, <strong>2004</strong> and 2003 the provision for uncollectible receivables amounted<br />
to CZK 94 and 136 million, respectively.<br />
Payables are recorded at invoiced values and accruals are <strong>report</strong>ed at expected settlement values.<br />
Cash and Cash Equivalents<br />
Cash includes cash on hand and cash with banks. Cash equivalents are short-term, highly liquid investments<br />
that are readily convertible to known amounts of cash with original maturities of three months or less and that<br />
are subject to an insignificant risk of change in value.<br />
Materials and Supplies<br />
Materials and supplies are principally composed of plant maintenance materials and spare parts. These items<br />
are valued at cost after provision for obsolete items. These materials are recorded in inventory when purchased and<br />
then expensed or capitalized to plant, as appropriate, when used. Accumulated provisions for obsolete items<br />
of CZK 56 million and CZK 54 million were created against materials and supplies as of December 31, <strong>2004</strong> and 2003,<br />
respectively.<br />
Intangible Assets<br />
Intangible assets consist mainly of software and are valued at their acquisition cost and related expenses. Intangible<br />
assets are recognized if it is probable that the future economic benefits that are attributable to the asset will<br />
flow to the enterprise; and the cost of the asset can be measured reliably. After initial recognition, intangible assets<br />
are measured at cost less accumulated amortization and any accumulated impairment losses. Intangible assets are<br />
amortized on a straight-line basis over the best estimate of their useful lives of 4 years. The amortization period and<br />
the amortization method are reviewed <strong>annual</strong>ly at each financial year-end.<br />
Income Taxes<br />
The provision for corporate tax is calculated in accordance with Czech tax regulations and is based on the income<br />
or loss <strong>report</strong>ed under Czech accounting regulations, adjusted for appropriate permanent and temporary differences<br />
from Czech taxable income. In the Czech Republic, income taxes are calculated on an individual company basis<br />
as the tax laws do not permit consolidated tax returns. Current income taxes are provided at a rate of 28% and<br />
31%, respectively for the years ended December 31, <strong>2004</strong> and 2003 after adjustments for certain items which are not<br />
deductible for taxation purposes.<br />
Certain items of income and expense are recognized in different periods for tax and financial accounting purposes.<br />
Deferred taxes are calculated using the balance sheet liability method. Deferred income taxes are provided on temporary<br />
differences between the carrying amounts of assets and liabilities for financial <strong>report</strong>ing purposes and the amounts<br />
used for income tax purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply<br />
to taxable income in the years in which those temporary differences are expected to be recovered or settled<br />
based on tax rates enacted or substantially enacted at the balance sheet date.<br />
Based on the Income Tax Act valid in the Czech Republic at <strong>2004</strong> year-end, the income tax rates will be 26%<br />
and 24% in the years 2005 and 2006 and on, respectively (see Note 12).<br />
Deferred tax assets and liabilities are recognized regardless of when the timing difference is likely to reverse.<br />
Deferred tax assets and liabilities are not discounted and are classified as non-current assets (liabilities)<br />
in the Consolidated Balance Sheets. Deferred tax assets are recognized when it is probable that sufficient taxable<br />
profits will be available against which the deferred tax assets can be utilized. A deferred tax liability is recognized<br />
for all taxable temporary differences.<br />
Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are credited<br />
or charged, in the same or a different period, directly to equity.<br />
Provisions<br />
A provision is recognized when, and only when, the company has a present obligation (legal or constructive) as<br />
a result of a past event and it is probable that an outflow of resources will be required to settle the obligation,
and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance<br />
sheet date and adjusted to reflect the current best estimate.<br />
The Company has recognized provisions for its obligations to decommission and reclaim its mines at the end<br />
of their operating lives. The provisions recognized represent the best estimate of the expenditures required to settle<br />
the present obligation at the current balance sheet date. Such cost estimates, expressed at current price levels,<br />
are discounted using a long-term real rate of interest of 2.5% per annum to take into account the timing of payments.<br />
The initial discounted cost amounts are capitalized as part of property, plant and equipment and are depreciated<br />
over the lives of the mines. Each year, the provisions are increased to reflect the accretion of discount and to accrue<br />
an estimate for the effects of inflation, with the charges being recognized as a component of interest expense.<br />
The estimate for the effect of inflation is approximately 3.5%, which is based on the current risk free rate of interest<br />
of approximately 6% and the 2.5% real rate of interest.<br />
Changes in a decommissioning liability that result from a change in the current best estimate of cash flows required<br />
to settle the obligation or a change in the discount rate are added to (or deducted from) the amount recognized<br />
as the related asset. However, to the extent that such a treatment would result in a negative asset, the effect<br />
of the change should be recognized in the income for the current period.<br />
The decommissioning and reclamation process is expected to continue for an approximate fifteen-year period<br />
subsequent to the end of operation of the mines, which is currently estimated in 2035. While the Company has made<br />
its best estimate in establishing its provisions, because of potential changes in technology as well as safety and<br />
environmental requirements, plus the actual time scale to complete decommissioning and reclamation activities,<br />
the ultimate provision requirements could either increase or decrease significantly from the Company’s current<br />
estimates.<br />
Foreign Currency Transactions<br />
Asset acquisitions or production costs which were denominated in foreign currencies were translated to Czech<br />
crowns at the exchange rates prevailing at the date of each acquisition or at the date on which the related items<br />
were included in assets.<br />
Foreign currency on hand, bank accounts, receivables and payables denominated in foreign currencies are<br />
translated to Czech crowns at the exchange rates existing at the transaction date and are adjusted at year-end<br />
to the exchange rates at that date as published by the Czech National Bank.<br />
Exchange rate differences arising on settlement of transactions or on <strong>report</strong>ing foreign currency transactions<br />
at rates different from those at which they were originally recorded are included in the Statement of Income as they<br />
occur.<br />
Impairment of Assets<br />
Financial instruments<br />
Financial instruments are reviewed for impairment at each balance sheet date. For financial assets carried at amortized<br />
cost, whenever it is probable that the company will not collect all amounts due according to the contractual<br />
terms of receivables or held-to-maturity investments, an impairment or bad debt loss is recognized in the Consolidated<br />
Statement of Income. Reversal of impairment losses previously recognized is recorded when the decrease in impairment<br />
loss can be objectively related to an event occurring after the write-down. Such reversal is recorded in income.<br />
However, the increased carrying amount is only recognized to the extent it does not exceed what amortized cost<br />
would have been had the impairment not been recognized.<br />
For available-for-sale financial assets, the cumulative gain or loss previously recognized in equity is included<br />
in net profit or loss for the period when there is objective evidence that the asset is impaired. The recoverable amount<br />
of a debt instrument remeasured to fair value is the present value of expected future cash flows discounted at the current<br />
market interest rates for a similar financial asset. A reversal of an impairment loss is recorded when the decrease<br />
in the impairment loss can be objectively related to an event occurring after the write down. Such reversal is recorded<br />
in income.<br />
Other assets<br />
IAS 36, Impairment of assets, applies to all assets other than inventories, deferred tax assets and financial instruments.<br />
Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying<br />
amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable<br />
amount, an impairment loss is recognized in income. The recoverable amount is the higher of an asset’s net<br />
selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length<br />
transaction less the costs of disposal while value in use is the present value of estimated future cash flows expected<br />
to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts<br />
are estimated for individual assets or, if this is not possible, for the cash-generating unit to which the asset belongs.<br />
Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment<br />
losses recognized for the asset no longer exist or have decreased. The reversal is recorded in income. However,<br />
the increased carrying amount of an asset due to a reversal of an impairment loss is recognized to the extent it does<br />
not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no<br />
impairment loss been recognized for that asset in prior years.
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Segments<br />
The Group has only one distinguishable business segment being the mining and selling of lignite. None of the waste<br />
disposal, transportation, engineering and blasting business segments are considered as a <strong>report</strong>able segment as<br />
their respective segment revenues, results and total assets are immaterial compared to those of the mining segment.<br />
Contingencies<br />
Contingent assets and liabilities are not recognized in the financial statements. Contingent liabilities are disclosed<br />
unless the possibility of an outflow of economic resources is remote. Contingent assets are disclosed when an inflow<br />
of economic benefits is probable.<br />
Subsequent Events<br />
Post-year-end events that provide additional information about the company’s position at the balance sheet date<br />
(adjusting events), are reflected in the financial statements. Post-year-end events that are not adjusting events<br />
are disclosed in the notes when material.<br />
3. Provisions for Decommissioning, Reclamation and Mining Damages<br />
Composition of provisions for decommissioning, reclamation and mining damages is as follows<br />
(in CZK million):<br />
<strong>2004</strong> 2003<br />
Decommissioning and Reclamation 7,553 7,307<br />
Mining Damages 1,216 456<br />
Other 23 20<br />
Total provisions 8,792 7,783<br />
Decommissioning and Reclamation<br />
The Czech Republic has adopted a series of environmental acts and laws and regulations (“the Acts”) concerning<br />
reclamation of damaged lands and can impose fines and penalties for not meeting the requirements of the Acts.<br />
The Company is liable under the Acts for continuing restoration of land damaged by its mining activities.<br />
The Company has been restoring areas damaged by mining since 1950. As of the end of <strong>2004</strong> approximately 30 square<br />
kilometers has been fully restored and an additional 26 square kilometers is under restoration. Additional restoration<br />
of land damaged as of December 31, <strong>2004</strong> of approximately 65 square kilometers will be carried out in the future.<br />
The Company has established provisions, as described in Note 2, to recognize its estimated liabilities<br />
for decommissioning and reclamation of the areas damaged by mining. The following is a summary<br />
of the provisions for the years ended December 31, <strong>2004</strong> and 2003 (in CZK million):<br />
Decommissioning and reclamation<br />
Balance at December 31, 2002 7,285<br />
Changes made during 2003:<br />
Discount accretion and effect of inflation 414<br />
Current cash expenditures (392)<br />
Balance at December 31, 2003 7,307<br />
Changes made during <strong>2004</strong>:<br />
Discount accretion and effect of inflation 420<br />
Current cash expenditures (312)<br />
Provision 302<br />
Effect of change in estimate (164)<br />
Balance at December 31, <strong>2004</strong> 7,553<br />
The provision relates to the extension of the mining area in the respective years. The current cash expenditures<br />
reflect the payments for decommissioning and reclamation works carried out in the year.<br />
In <strong>2004</strong> the Company reassessed the estimated decommissioning and reclamation costs at Mine Bílina and Nástup<br />
resulting in a decrease of CZK 164 million in the present value of best estimate of the expenditures required to settle<br />
the present obligation. Change in estimate was reflected in the accompanying consolidated financial statements as<br />
the deduction from the amount recognized as the related asset included in Property, Plant and Equipment (see Note 4).<br />
The actual decommissioning and reclamation costs could vary substantially from the above estimates because<br />
of new regulatory requirements, changes in technology, increased costs of labor, materials, and equipment and/or<br />
the actual time required to complete all decommissioning and reclamation activities.<br />
Mining Damages<br />
The Company is liable to cover the cost of railway track replacement. The railway track connection Prague – Chomutov<br />
operated by Czech Railways crosses mining areas of the Company. The Company has recorded a provision for such<br />
liability in the total amount of CZK 1,442 million till December 31, <strong>2004</strong>. The provision was already draw on as<br />
of December 31, <strong>2004</strong> in total amount of CZK 1,084 million. The total volume of liability at the end of the year
<strong>2004</strong> represents CZK 358 million. Due to the change in the technology of tunnelling of railway track replacement,<br />
the liability of the Company will increase. In <strong>2004</strong> the Company created a provision in the amount of CZK 853 million<br />
for this increase. The creation of provision is <strong>report</strong>ed in the Consolidated Statement of Income in Other operating<br />
expenses, net.<br />
4. Property, Plant and Equipment, Net<br />
Property, plant and equipment at December 31, <strong>2004</strong> and 2003 is as follows (in CZK million):<br />
Buildings Plant Land and other Accumulated Total<br />
and constructions and equipment tangibles depreciation<br />
and accumulated<br />
impairment loss<br />
December 31, 2002 8,369 18,907 750 (15,589) 12,437<br />
Additions 213 689 9 — 911<br />
Retirements (164) (721) — 848 (37)<br />
Depreciation — — — (1,515) (1,515)<br />
Impairment loss — — — (62) (62)<br />
December 31, 2003 8,418 18,875 759 (16,318) 11,734<br />
Additions 254 830 100 — 1,184<br />
Retirements (26) (563) — 587 (2)<br />
Depreciation — — — (1,445) (1,445)<br />
Impairment loss — — — (40) (40)<br />
Change in IAS 37 estimate (164) — — — (164)<br />
December 31, <strong>2004</strong> 8,482 19,142 859 (17,216) 11,267<br />
Buildings and constructions include capitalized costs of provisions (see Note 2) in the amount of CZK 2,353 million.<br />
At December 31, <strong>2004</strong> and 2003 the accumulated depreciation of the capitalized costs of provisions was CZK 731<br />
and 673 million, respectively. In <strong>2004</strong>, the decrease of CZK 164 million was recorded in the capitalized costs of provisions<br />
in respect of change in estimate of related provision for decommissioning and reclamation (see Note 3).<br />
At December 31, <strong>2004</strong> and 2003 fully depreciated tangible assets still in active use amounted to CZK 6,735 million<br />
and CZK 5,510 million, respectively, at cost.<br />
At December 31, <strong>2004</strong> and 2003 the Group discloses a total impairment loss of CZK 271 million and CZK 231 million,<br />
respectively, related particularly to electric engines, ash manipulating equipment and a group of assets at Radovesice<br />
location, which are not used and a hotel, which is held for sale. The change in impairment loss in the period is<br />
reflected in the Consolidated Statement of Income in Other operating expenses, net.<br />
5. Investments<br />
Investments as of December 31, <strong>2004</strong> and 2003 are as follows (in CZK million):<br />
<strong>2004</strong><br />
Investments – non current<br />
2003<br />
Held to maturity investments 989 985<br />
Available-for-sale investments 5,410 5,680<br />
Loan to Teplárna Ústí nad Labem, a.s. 145 154<br />
Total non current investments 6,544 6,819<br />
Investments – current<br />
Held to maturity investments 3,927 4,128<br />
Available-for-sale investments 151 245<br />
Total current investments 4,078 4,373<br />
Non current held-to-maturity investments comprise long-term deposits with a redemption date in 2010, eurobonds<br />
and mortgage certificates with redemption dates ranging from 2006–2009, which the Company intends and is<br />
able to hold until their redemption dates.<br />
Non current available-for-sale investments consist primarily of government bonds, commercial debentures<br />
and eurobonds. The fair value of available-for-sale investments was assessed by reference to the quoted price<br />
on the relevant Stock Exchange.<br />
Current held-to-maturity investments comprise state treasury bills, commercial debentures and certificates<br />
of deposits, which the Company holds until redemption date.<br />
Current available-for-sale investments consist of mutual fund units.
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63<br />
6. Investments in Associates<br />
The following is a list of the principal investments in associates at December 31, <strong>2004</strong> (in CZK million):<br />
Entity Place Principal activity Ownership interest Group’s share<br />
of incorporation of income<br />
PRODECO, a.s. Czech Republic Projections and constructions 50.50% 4<br />
SHD – KOMES, a.s. Czech Republic Purchase and sale of goods 46.33% 3<br />
Výzkumný ústav pro hnědé uhlí a.s.` Czech Republic Research 38.97% 1<br />
ENETECH a.s. Czech Republic Engineering 50.00% —<br />
Coal Energy, a.s. Czech Republic Energy trading 20.00% 20<br />
Although the interest in share capital of PRODECO, a.s., is 50.50%, the Company does not exercise control and<br />
thus the investment is accounted for using the equity method of consolidation.<br />
In <strong>2004</strong> the Company sold the share in Teplárna Ústí nad Labem, a.s. for the price of CZK 194 million. The net book<br />
value of sahe sold is in the Consolidated Statement of Income <strong>report</strong>ed in Other financial expenses, net.<br />
7. Accounts Receivable, Net<br />
The composition of accounts receivable at December 31, <strong>2004</strong> and 2003 is as follows (in CZK million):<br />
<strong>2004</strong> 2003<br />
Trade receivables 1,018 1,057<br />
Other receivables 15 36<br />
Less: allowance for doubtful accounts (94) (136)<br />
Total 939 957<br />
8. Cash and Cash Equivalents<br />
The composition of cash and cash equivalents at December 31, <strong>2004</strong> and 2003 is as follows<br />
(in CZK million):<br />
<strong>2004</strong> 2003<br />
Cash in hand 1 1<br />
Bank accounts 232 257<br />
Total 233 258<br />
9. Accounts Payable<br />
The composition of accounts payable at December 31, <strong>2004</strong> and 2003 is as follows (in CZK million):<br />
<strong>2004</strong> 2003<br />
Trade payables 423 529<br />
Wages, social and health insurance payable 128 119<br />
Other 114 166<br />
Total 665 814<br />
10. Accrued and Other Liabilities<br />
The composition of accrued and other liabilities at December 31, <strong>2004</strong> and 2003 is as follows<br />
(in CZK million):<br />
<strong>2004</strong> 2003<br />
Accruals 99 147<br />
Social and donations fund 186 146<br />
Total 285 293<br />
11. Shareholders’ Equity<br />
As of December 31, <strong>2004</strong>, the share capital of <strong>Severočeské</strong> <strong>doly</strong> consisted of 7,516,485 registered shares and 1,483,570<br />
bearer shares with a nominal value of CZK 1,000 each.<br />
In <strong>2004</strong> the National Property Fund contributed assets with a total value of CZK 89 million, which resulted<br />
in an increase in share capital and non-distributable reserve fund.<br />
In 2002 the National Property Fund contributed land with a total value of CZK 2 million, which resulted in an increase<br />
in share capital. The increase was registered in 2003.<br />
28
Reserve Fund<br />
In accordance with Czech regulations, joint stock companies are required to establish a non-distributable reserve<br />
fund for contingencies against possible future losses and other events. Contributions must be a minimum of 20%<br />
of after-tax profit in the first year in which profits are made and 5% of profit each year thereafter, until the fund<br />
reaches at least 20% of share capital. As of December 31, <strong>2004</strong> and 2003, the balance was CZK 1,537 million and<br />
CZK 1,460 million, respectively, and is reflected as a component of retained earnings.<br />
Net Profit per Share<br />
<strong>2004</strong> 2003<br />
Numerator – basic and diluted (CZK millions)<br />
Net Profit 179 1,411<br />
Denominator (shares)<br />
Basic:<br />
Weighted average shares outstanding 9,000,055 8,999,958<br />
Diluted:<br />
Adjusted weighted average shares 9,006,898 8,999,958<br />
12. Income Taxes<br />
Income Tax Legislation<br />
Corporate income tax is calculated in accordance with Czech tax regulations at the rate of 28%. The corporate income<br />
tax rate for 2005 and 2006 will be 26% and 24%, respectively.<br />
The Czech Republic currently has a number of laws related to various taxes imposed by governmental authorities.<br />
Applicable taxes include value-added tax, corporate tax, and payroll (social) taxes, together with others. In addition,<br />
laws related to these taxes have not been in force for significant periods, in contrast to more developed market<br />
economies. Accordingly, few precedents with regard to issues have been established. Often, differing opinions<br />
regarding legal interpretations exist both among and within government ministries and organizations; thus, creating<br />
uncertainties and areas of conflict. Tax declarations, together with other legal compliance areas (as examples,<br />
customs and currency control matters) are subject to review and investigation by a number of authorities, who<br />
are enabled by law to impose extremely severe fines, penalties and interest charges. These facts create tax risks<br />
in the Czech Republic substantially more significant than typically found in countries with more developed tax<br />
systems. Management believes that it has adequately provided for tax liabilities in the accompanying financial<br />
statements; however, the risk remains that those relevant authorities could take differing positions with regard<br />
to interpretive issues and the effect could be significant.<br />
Income Tax Provision<br />
The components of the income tax provisions for the years ended December 31, <strong>2004</strong> and 2003 are as<br />
follows (in CZK million):<br />
<strong>2004</strong> 2003<br />
Current 390 401<br />
Deferred (318) 303<br />
Total 72 704<br />
Reconciliation of expected income tax expense to the actual tax expense is as follows (in CZK million):<br />
<strong>2004</strong> 2003<br />
Profit before income taxes 251 2,115<br />
Statutory income tax rate 28% 31%<br />
‘Expected’ income tax expense 71 655<br />
Add/(deduct) the effect of:<br />
Czech/IFRS accounting differences 31 36<br />
Tax exempt income (24) (32)<br />
Investment tax relief (8) (10)<br />
Income already taxed (11) (20)<br />
Final withholding income tax on security income 3 9<br />
Tax credits (1) (41)<br />
Additional tax assessments/(recoveries) (2) (4)<br />
Change in tax rates 13 80<br />
Other items, net — 31<br />
Income taxes 72 704<br />
Effective tax rate 28% 33%
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Deferred Taxes, Net<br />
At December 31, <strong>2004</strong> and 2003 deferred tax assets (liabilities) were comprised of the following<br />
(in CZK million):<br />
<strong>2004</strong><br />
Deferred tax assets:<br />
2003<br />
Accumulated provision for decommissioning, reclamation and mining damages 1,158 1,130<br />
Accumulated provision for mining damages 213 —<br />
Allowance for uncollectable receivables 5 6<br />
Allowance for obsolete inventory 15 15<br />
Allowance for impairment of fixed assets 115 159<br />
Investments at fair value 1 3<br />
Total deferred tax assets 1,507 1,313<br />
Deferred tax liabilities:<br />
Depreciation of fixed assets (418) (393)<br />
Repairs and maintenance accrual (233) (248)<br />
Capitalized costs of provisions (390) (446)<br />
Investments in associates (61) (139)<br />
Total deferred tax liabilities (1,102) (1,226)<br />
Total deferred tax, net 405 87<br />
Deferred tax assets are recorded at an amount which management believes will ultimately be realized. Realization<br />
of deferred tax assets is dependent upon sufficient future taxable income during the periods that temporary differences<br />
are expected to be available to reduce taxable income.<br />
13. Personnel Expenses and Average Number of Employees<br />
Average number of employees and the composition of personnel expenses (in CZK million):<br />
<strong>2004</strong> 2003<br />
Wages and salaries 1,238 1,226<br />
Social and other personnel expenses 514 495<br />
Total personnel expenses 1,752 1,721<br />
Number of employees 5,038 5,242<br />
14. Financial Instruments<br />
The Company, in the normal course of business, uses various types of financial instruments, including items such<br />
as cash, cash equivalents, short-term securities and trade receivables, which expose the Company to market or<br />
credit risk. Management believes that the estimated fair values of these financial instruments approximate their<br />
carrying amounts.<br />
The Company pursues a conservative risk management and investment policy, which entails diversifying financial<br />
instruments with reputable financial institutions. There is a written internal policy “Investment strategy and financial<br />
assets management” that governs the allowed types of financial instruments and the rules of risk management<br />
(credit risk, interest rate risk, foreign exchange risk, liquidity risk).<br />
The Company investments contain a portfolio of liquid financial instruments with high quality ratings and<br />
with suitable time horizons. The financial instruments used by the Company for investments include government<br />
bonds, treasury bills, commercial and bank debentures, eurobonds, term deposits and mutual fund units.<br />
The Company monitors the basic market indicators for management of interest rate risk.<br />
15. Commitments and Contingencies<br />
By 2006 the Company will purchase one piece of heavy mining machinery having a value of CZK 906 million.
16. Related Party Transactions<br />
The balance sheet includes the following amounts resulting from transactions with related parties<br />
(in CZK million):<br />
<strong>2004</strong><br />
Trade receivables<br />
2003<br />
ČEZ, a.s. 536 509<br />
Teplárna Ústí nad Labem, a.s.* — 29<br />
Other 1 2<br />
Total trade receivables 537 540<br />
Trade payables<br />
SHD – KOMES a.s. 44 41<br />
ČEZ, a.s. 10 10<br />
PRODECO, a.s. 24 26<br />
Other 10 8<br />
Total trade payables<br />
* The Company was sold in <strong>2004</strong>.<br />
88 85<br />
Sales and purchases with related parties amounted to the following (in CZK million):<br />
<strong>2004</strong><br />
Sales<br />
2003<br />
ČEZ, a.s. 5,076 5,179<br />
Teplárna Ústí nad Labem, a.s.* 289 317<br />
Other 6 8<br />
Total sales 5,371 5,504<br />
Purchases<br />
PRODECO, a.s. 167 109<br />
SHD – KOMES a.s. 435 367<br />
ČEZ, a.s. 47 49<br />
Other 14 14<br />
Total purchases<br />
* The Company was sold in <strong>2004</strong><br />
663 539<br />
The Group mostly sells lignite and provides services to related parties. Purchases from related parties comprise<br />
purchases of machinery, transport and other services in particular. All transactions are concluded under normal<br />
terms and conditions.<br />
17. List of Subsidiaries<br />
Entity Place of incorporation Principal activity Ownership interest<br />
SD – Vrtné a trhací práce, a.s. Czech Republic Drilling and blasting 100.00%<br />
SD – Autodoprava, a.s. Czech Republic Transportation 100.00%<br />
SD – 1.strojírenská, a.s. Czech Republic Engineering 100.00%<br />
SD – Kolejová doprava, a.s. Czech Republic Rail transportation 100.00%<br />
SD – Humatex, a.s. Czech Republic Sale of chemicals 100.00%<br />
Skládka Tušimice, a.s. Czech Republic Waste disposal 98.00%<br />
18. Reconciliation of Retained Earnings and Net Profit<br />
The accompanying financial statements are presented on the basis of International Financial Reporting Standards.<br />
Certain accounting principles generally accepted in the Czech Republic (CAS) do not conform to International<br />
Financial Reporting Standards used in preparing the accompanying financial statements. A description of the significant<br />
adjustments required to conform the Group’s statutory balances to financial statements prepared in accordance<br />
with International Financial Reporting Standards is set forth in the following tables.
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67<br />
The effect on retained earnings of differences in IFRS and CAS is as follows (in CZK million):<br />
<strong>2004</strong> 2003<br />
Consolidated retained earnings per statutory accounts at end of year 7,655 8,644<br />
Adjustments required by IFRS:<br />
Reclassification of items from retained earnings, net (228) (150)<br />
Repairs and maintenance accrual, net of deferred tax 1,349 1,314<br />
Provision for decommissioning, reclamation and mining damages, net of deferred tax (4,828) (3,938)<br />
Capitalized costs of provisions, net of deferred tax 1,753 1,755<br />
Interest income of available-for-sale investments (55) (56)<br />
IFRS retained earnings at end of year 5,646 7,569<br />
The effect on net profit of differences in IFRS and CAS is as follows (in CZK million):<br />
<strong>2004</strong> 2003<br />
Consolidated net profit per statutory accounts 1,194 1,390<br />
Adjustment required by IFRS:<br />
Reclassification of items from retained earnings, net (158) (92)<br />
Repairs and maintenance accrual, net of deferred tax 35 356<br />
Provision for decommissioning, reclamation and mining damages, net of deferred tax (890) (412)<br />
Depreciation of capitalized costs of provisions, net of deferred tax (2) 197<br />
Interest income of available-for-sale investments — (28)<br />
IFRS net profit 179 1,411
Post Balance Sheet Date Events<br />
January 2005 — routine operation of the new SAP information system kicks off<br />
— as of 1 January, the company applies International Accounting Standards in its accounting<br />
and in the preparation of financial statements<br />
— approval and launch of the programme ‘Optimization of the Maintenance and Number<br />
of Category D Workers’<br />
March 2005 — approval of the business plan for 2005<br />
— approval of the business plans of subsidiaries for 2005<br />
— General Meetings of subsidiaries held<br />
April 2005 — public contract for asset insurance granted to Kooperativa, pojišťovna, a.s.<br />
May 2005 — addendum to the long-term purchase agreement with ČEZ signed<br />
June 2005 — Annual General Meeting<br />
— approval of a dividend of CZK 240 per share<br />
— change in the composition of Company bodies
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Cash and In-kind Income<br />
Information about all pecuniary income and income in kind received in the accounting period by executives and<br />
members of the Supervisory Board from the issuer and from persons controlled by the issuer:<br />
Board of Directors<br />
In <strong>2004</strong>, members of the Board of Directors received CZK 3,240,000 in fees; bonuses from the distribution of the profit<br />
from 2003 amounted to CZK 6,715,000.<br />
Supervisory Board<br />
In <strong>2004</strong>, members of the Supervisory Board received CZK 1,530,000 in fees; bonuses from the distribution of the profit<br />
from 2003 amounted to CZK 2,079,000; income in kind amounted to CZK 118,000.<br />
Executives<br />
In <strong>2004</strong>, the company’s executives received base pay totalling CZK 17,354,000; bonuses tied to the company’s results<br />
came to CZK 21,119,000 and other pecuniary income and income in kind totalled CZK 910,000. Remuneration<br />
for positions in the bodies of controlled companies came to CZK 1,131,000; bonuses from the distribution of the 2003<br />
profit amounted to CZK 92,000.<br />
Principles of Remuneration<br />
The remuneration of members of the Board of Directors and Supervisory Board is governed by the principles approved<br />
by the company’s General Meeting on 28 June 2002.<br />
Members are due monthly remuneration in the scope approved by the Board of Directors. The company’s General<br />
Meeting may also award bonuses for the financial results achieved by the company.<br />
The total volume of resources available for fees and bonuses is subject to approval by the company’s General<br />
Meeting.<br />
The company may also provide resources and equipment, in accordance with approved principles, that are required<br />
for a particular position, i.e. use of an office, communication technology, a company car. The terms and conditions<br />
applicable to the use of such resources and equipment are governed by general regulations and by internal management<br />
documents.<br />
Members of the Board of Directors and Supervisory Board are insured to cover liability of the members of company<br />
bodies for damage caused.<br />
The remuneration of executives is governed by principles approved by the company’s Board of Directors.<br />
Under these principles, a base pay is set, plus the amount of quarterly and <strong>annual</strong> bonuses. Bonuses are tied<br />
to financial results (profit) and the fulfilment of other tasks connected with the holding of a position. Communication<br />
technology and company cars may be assigned for particular positions.<br />
Other matters are governed by the collective agreement.<br />
Information on Securities<br />
The number of shares issued by the company which are owned by members of statutory bodies, other executives<br />
of the issuer, and members of the Supervisory Board, including the next of kin of these persons, is immaterial<br />
and these persons did not engage in trading in such securities during <strong>2004</strong>. Options and similar agreements<br />
where the underlying assets are participating securities in favour of these persons have not been concluded.
Events Forecast in 2005<br />
— May 2005 – a meeting is planned by the Ústecko Region autonomous governing body to discuss territorial<br />
ecological limits (as part of the procedure to approve the region’s land-use plan and energy policy)<br />
— update of the long-term purchase agreement with ČEZ<br />
— ČEZ decision on the scope of reconstruction of CHP plants, including a schedule for the shutdown<br />
of the facilities to be reconstructed and renovated<br />
— implementation of further modules of the new SAP information system<br />
Doly Bílina<br />
— April to May 2005 – extensive reconstruction of the conveyor belt facilities of the fifth section, with<br />
a reduction in the level and the relaying of the belt conveyors<br />
— April to June 2005 – partial general overhaul and reconstruction of the electrics and electronics of the spreader<br />
ZPD 8000/Z98<br />
— July 2005 – completion of the general overhaul of the K 2000/K101 large-scale excavator<br />
— August 2005 – launch of the general overhaul of the KU 800/K99 large-scale excavator<br />
— December 2005 – completion of a significant ecological project: transfer of water discharge and treatment from<br />
the Ledvice pumping station to the main pumping station (termination of the discharge of water to Ledvice<br />
Stream)<br />
Doly Nástup Tušimice<br />
— completion of the assembly of the second ‘heavy’ SchRs 1320 excavator (August 2005), transfer to the point<br />
of use; launch of trial and then permanent operation in the final quarter of 2005<br />
— completion of the modernization of the mine water treatment plant in Březno<br />
— first stage of modernization and general overhaul of ÚDUT II<br />
— completion of the optimization of the organizational structure – the merger of operating sections<br />
at the overburden operation and quarry operation (abandonment of the Málkov and Zásada complex)<br />
— reduction in the excavation of overburden by reducing the shift system at the first overburden bench by one<br />
shift as of 1 July 2005 in accordance with the expected decline in coal mining due to the planned general<br />
overhaul of ETU II between 2007 and 2010<br />
— the advance of the overburden and coal sections and spoil bank will reach the area of the deep coal seam<br />
(the ‘Kralupy Fault’ area) and there is a risk that the overburden, coal, and spoil banks will slide even if<br />
adopted measures and subsequently adopted extraordinary measures are respected and implemented
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71<br />
Organizational Chart<br />
General Manager<br />
— CEO’s Office<br />
— Public Relations Division<br />
— Information Technology Division<br />
— Legal Division<br />
Financial Director Sales Director Technology Director Human Resources Director<br />
— Secretariat — Secretariat — Secretariat — Secretariat<br />
— Information System — Sales Division — Land Preparation and — HR Work Division<br />
— Division — Commercial Division — Reclamation Division — DNT HR Division<br />
— Planning and Controlling — Purchasing Division — Ecology Division — DB HR Division<br />
— Division — Innovation Division — Investment and — Asset Management and<br />
— Financing Division — Trade Economics — Technical Development — Realization Division<br />
— Taxation and Charges — Division — Division<br />
— Division — Mining Base<br />
— Internal Audit Division — Development Division<br />
— Strategic Development<br />
— Division<br />
Director – Doly Bílina Director – Doly Nástup Tušimice<br />
— Deputy Director for Production Technology — Deputy Director for Production Technology<br />
— Deputy Director for Economics — Deputy Director for Economics<br />
— OVERBURDEN UNIT — OVERBURDEN UNIT<br />
— OPENCAST PIT UNIT — OPENCAST PIT UNIT<br />
— LEDVICE COAL PREPARATION PLAN UNIT
Glossary<br />
ČEPS Czech Power Transmission System<br />
DB Doly Bílina<br />
DNT Doly Nástup Tušimice<br />
NAP National Allocation Plan<br />
NPF CR National Property Fund of the Czech Republic<br />
PSE Prague Stock Exchange<br />
humitanes humic acid salts used as fertilizers, pigments, in the healthcare industry, etc.<br />
lignite general generic term covering all types of brown coal, which vary in terms of pure coal<br />
oxyhumolite particular type of brown coal created mostly by climatic processes<br />
atvis automatic one-day bank deposit of an excess current account balance<br />
overnight one-day bank deposit<br />
P/E price-to-earnings ratio<br />
rating evaluation of credit standing (ability to pay future obligations) for issuers of debt securities
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73<br />
Shareholder Financial Calendar<br />
Strike date for attendance at Annual General Meeting: 17 June 2005<br />
Date of Annual General Meeting: 24 June 2005<br />
Strike date for dividend payout: 25 July 2005<br />
Date dividends will be paid: 26 September 2005<br />
Where dividends will be paid: Company Headquarters, Chomutov,<br />
Boženy Němcové 5359, Czech Republic<br />
How dividends will be paid:<br />
for private individuals who are citizens of the Czech Republic<br />
The Company will pay out dividends, at its own expense and risk, by means of the cheques of Poštovní spořitelna<br />
Československé obchodní banky, a.s., valid at all post offices for sixty days as of 22 August 2005. Cheques will be<br />
sent to the shareholder’s address as listed in the issuer’s register as at the strike date for dividend payment.<br />
for private individuals who are citizens of other countries<br />
The Company will pay out dividends, at its own expense and risk, by bank transfer forthwith on receipt of written<br />
notification containing the information necessary to make the transfer; shareholders are to send in this information<br />
after receiving written invitation to do so, sent by 2 August 2005 to the shareholder’s address as listed<br />
in the issuer’s register as at the strike date for dividend payment.<br />
for legal entities<br />
The Company will pay out dividends, at its own expense and risk, by bank transfer forthwith on receipt of written<br />
notification containing the information necessary to make the transfer and on receipt of the legal entity’s<br />
certificate of incorporation; shareholders are to send in this information after receiving written invitation to do so,<br />
sent by 2 August 2005 to the shareholder’s address as listed in the issuer’s register as at the strike date for dividend<br />
payment.<br />
The right to the payment of a dividend is time-barred once four years have elapsed as of the decisive date for the dividend<br />
payment.<br />
Annual <strong>report</strong> location and shareholder affairs contact:<br />
Zdeňka Montagová, Head of Financing, phone: +420/474/60 4270-1<br />
For further information please visit www.sdas.cz
Contact Addresses<br />
<strong>Severočeské</strong> <strong>doly</strong> a.s.<br />
Boženy Němcové 5359, 430 01 Chomutov<br />
PO Box 38<br />
Czech Republic<br />
Phone: +420/474/602 111, +420/474/652 265<br />
Telefax: +420/474/652 264<br />
E-mail: sdas@mail.sdas.cz<br />
http://www.sdas.cz<br />
<strong>Severočeské</strong> <strong>doly</strong> a.s.<br />
SALES SECTION<br />
5. května 213, 418 29 Bílina<br />
PO Box 19, 20<br />
Czech Republic<br />
Phone: +420/417/804 211, +420/417/804 265<br />
Telefax: +420/417/804 210, +420/417/804 260<br />
<strong>Severočeské</strong> <strong>doly</strong> a.s.<br />
DOLY BÍLINA<br />
5. května 213, 418 29 Bílina<br />
Czech Republic<br />
Phone: +420/417/804 111, +420/417/734 111<br />
Telefax: +420/417/829 080<br />
<strong>Severočeské</strong> <strong>doly</strong> a.s.<br />
DOLY NÁSTUP TUŠIMICE<br />
432 01 Kadaň<br />
Czech Republic<br />
Phone: +420/474/902 111, +420/474/333 139<br />
Telefax: +420/474/333 179
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75<br />
Persons Responsible for the Annual Report<br />
The financial statements for the years ending 31 December <strong>2004</strong>, 2003, and 2002, and the Annual Report were<br />
audited by:<br />
Ernst & Young ČR, s.r.o. Ladislav Langr<br />
Licence No 401 auditor<br />
Karlovo náměstí 10, Praha 2, 120 00 Certificate No 257<br />
Fees paid to auditors for <strong>2004</strong> amounted to CZK 2,550,000.<br />
Declaration of Honour<br />
I hereby declare on my honour that the information disclosed in the Annual Report is truthful and that no material<br />
circumstances which could affect an accurate, correct assessment of the issuer and securities have been omitted.<br />
I further declare that the financial statements for the past three accounting periods have been examined by<br />
an auditor and that the auditor’ s <strong>report</strong> contained in the Annual Report is truthful.<br />
Vratislav Vajnar Erich Grünbaum<br />
Chairman of the Board of Directors and Chief Executive Officer Vice-Chairman of the Board<br />
of Directors, Company Proxy<br />
and Financial Director
Notes
Consulting and production:<br />
© B.I.G. Prague, Hill & Knowlton Associate, 2005<br />
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