Annual Report 2007 - Severstal

Financial statements
OAO Severstal and subsidiaries
Notes to the consolidated financial statements
for the year ended December 31, 2007
(Amounts expressed in thousands of US dollars, except as otherwise stated)
30. Subsequent events
In January 2008, an explosion occurred on one of Severstal North America’s (“SNA”) furnaces, blast furnace “B”. As a result of the accident SNA has stopped
production at this facility. SNA is carrying out an internal investigation and estimation of losses. Blast furnace “B” is the smaller of SNA’s two furnaces and is
used to produce pig iron for subsequent conversion into steel. “B” furnace’s daily production was 1,800 tons. SNA’s primary blast furnace “C”, a newly rebuilt
facility, was not affected by the accident. At the date of these consolidated financial statements it is not possible to quantify any potential loss.
In January 2008, a fire occurred at blast furnace No 5 of Severstal’s steel plant in Cherepovets. A preliminary investigation showed that the fire might
had been the result of dispersal and subsequent ignition of the furnace’s roofing material caused by opening of the third Cowper stove in the upper part of
the furnace. On February 2, 2008 blast furnace No 5 resumed operations and restored its normal production capacity. At the date of these consolidated
financial statements it is not possible to quantify any potential loss.
In January 2008, the Group acquired assets of a Polish steel-pipe producer Technologia Buczek, which was declared bankrupt, for the total consideration
of PLN 54.1 million (US$ 21.8 million at the transaction date exchange rate). As a part of the above assets Severstal purchased a 100% stake in the freight
company SAMKOL and a 50.72% stake in the tube manufacturing company Buczek Automotive. These assets were bought by the Group’s Latvian unit,
Severstallatt, which plans to develop production and distribution of steel products in Poland.
In January 2008, the supplier of electricity with whom SNA had a long-term purchase contract decided to terminate the contract and pay a lump sum
penalty to compensate SNA for the differential between the contract price and the price of electricity SNA will have to pay another supplier for the duration
of the original contract. This penalty payment amounted to US$ 177 million which was paid in February 2008.
In January 2008, the Group acquired a 100% stake in Baracom Limited from its Majority Shareholder for US$ 84.4 million. Baracom owns 79.9% of the
voting stock of the holding structure, which controls 74.2% of SeverCorr. Accordingly, starting from January 2008 SeverCorr will be included in the Group’s
consolidated financial statements.
In January 2008, the Group acquired the remaining 13.7% stake in Celtic Resources Holdings Plc for US$ 44 million.
The acquirees’ profit since the acquisition dates is insignificant to the Group’s profit for the period.
In March 2008, the Board of Directors recommended the final dividend for 2007 of RUR 4.00 (US$ 0.17) per share and GDR.
104 Severstal Annual Report 2007