Company presentation. Leading private freight rail operator in Russia. 30 June 2008

Transcription

1 Company presentation Leading private freight rail operator in Russia 30 June 2008

2 Disclaimer Information contained in this presentation concerning Globaltrans Investment PLC, a company organised and existing under the laws of Cyprus (the Company ), is for general information purposes only. These materials have been prepared by the Company, solely for your information and may not be reproduced, transmitted or further distributed to any other person or published, in whole or in part for any purpose or under any circumstances, without prior written permission of the Company. The contents of this presentation are not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. The opinions presented herein are based on general information gathered at the time of writing and are subject to change without notice. The Company relies on information obtained from sources believed to be reliable but does not guarantee its accuracy or completeness. These materials may contain forward-looking statements regarding future events or the future financial performance of the Company. You can identify forward looking statements by terms such as expect, believe, estimate, anticipate, intend, will, could, may, or might, the negative of such terms or other similar expressions. These forward-looking statements include matters that are not historical facts and statements regarding the Company s intentions, beliefs or current expectations concerning, among other things, the Company s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that the Company s actual results of operations, financial condition, liquidity, prospects, growth, strategies and the development of the industry in which the Company operates may differ materially from those described in or suggested by the forwardlooking statements contained in these materials. In addition, even if the Company s results of operations, financial condition, liquidity, prospects, growth, strategies and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in these materials, those results or developments may not be indicative of results or developments in future periods. The Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in forward-looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, market change in the Russian freight rail market, as well as many other risks specifically related to the Company and its operations. No reliance may be placed for any purposes whatsoever on the information contained in this presentation or on its completeness, accuracy or fairness. The information in this presentation is subject to verification, completion and change. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its shareholders, directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in these materials. None of the Company nor any of its shareholders, directors, officers or any other person accepts any liability whatsoever for any loss howsoever arising from any use of the contents of this presentation or otherwise arising in connection therewith. These materials do not constitute an offer or an advertisement of any securities in any jurisdiction. By accepting these materials you agree to be bound by the foregoing terms regarding the information disclosed herein. 1

3 Globaltrans at a glance Globaltrans growth platform Globaltrans fleet under operations (as of 31-Dec-2007) The largest private freight rail operator in Russia with approx. 21,300 railcars as at 31-Dec-07 Wide operational coverage extending to every major industrial region in Russia Large industrial customer base 14,381 gondola cars 6,489 oil tank cars Strong improvement of adjusted EBITDA (b) in 2007 resulting from better utilization of logistic network Controlled by beneficial owners of TIHL, the largest private transportation company in Russia Key financial and operating statistics CAGR Transportation volumes (m tonnes) % Revenue (US$ m) % Adjusted revenue (a) (US$ m) % Adjusted EBITDA (b) (US$ m) % Profit for the year (US$ m) % Total assets (US$ m) % 440 hopper and other 19 locomotives Adjusted revenue (a) breakdown by cargo type (2007) Construction materials 2.9% Coal 3.0% Oil & oil products 38.3% Other 9.0% Ferrous metals, scrap metals & iron ore 46.8% ROCE (c) n/a 10.3% 18.8% n/a (a) (b) (c) Adjusted revenue defined as revenue from railway transportation operators services less infrastructure and locomotive tariff: loaded trips Adjusted EBITDA represents profit for the year before income tax expense, net finance costs, depreciation of property, plant and equipment, share of profit of joint ventures, gain from sale of joint ventures, gain from sale of subsidiaries, other gains, recognised deferred gains, net foreign exchange gains/(losses) on operating activities ROCE is defined as Adjusted EBITDA after depreciation of property, plant and equipment divided by average capital employed; average capital employed is defined as the sum of average balances between balance sheet dates of total equity, total borrowings and minority interest Source: Globaltrans IFRS accounts, management accounts (cannot be directly derived from IFRS accounts) Source: Globaltrans management accounts (cannot be directly derived from IFRS accounts) 2

4 Railway is a key transportation mode for Russia Key highlights Structure of freight transportation excluding pipelines (tonnes-km, 2006) (b) Second largest railway system in the world (c. 87,000 kilometres of track length) after US Third largest in the world by volume of rail freight turnover after US and China 93% market share in Russian freight transportation market (excluding pipeline traffic) in 2006 Railway infrastructure improvements national priority according to RZD strategic development plan 2,718 Rail cargo turnover (m tonnes-km, 2005) 93% 53% 49% 31% 27% 10% Russia India US Brazil China Europe Rail Road Water Other (a) As of 2005 (b) Including pipelines share in Russia s freight transportation turnover rail represents is 42% of total Source: Business Monitor International, DG Energy and Transport, Federal State Statistics Service Investments in railway transportation sector in Russia (c) (a) 1,934 1, (bn Rubles) Source: A.T. Kearney US China Russia India Brazil Germany Average (min) Average (max) (c) Denotes total investment by the State budget, RZD and private investors in the railway transportation market as a whole Source: RZD investment plan and investment program for , RZD strategy till

5 Key drivers of railway transportation market Rail freight transportation market Rail transportation of metallurgical cargo Volume (bn tonnes-km) 2,523 1,214 1,373 1,951 CAGR ( ): 6.0% (m tonnes) CAGR ( ): 6.0% Iron-ore Scrap Cast-iron Rolled Historical railway tariff growth Expected railway tariff growth Tariff (Rebased to 100) (Rebased to 100) CPI Railway tariff for internal and through sea ports transportation CPI forecast Railway tariff for internal and through Sea ports transportation Source: A.T. Kearney 4

6 Liberalisation of railway transportation market exciting opportunities for private operators Liberalisation Pre Future Ministry for Railway Transport - regulatory and business functions Regulated tariff setting based on Ministry for Railway Transport budget Ministry for Railway Transport regulatory functions only Business functions transferred to Russian Railways (RZD) Tariff established to promote private investment in rolling stock fleet Adoption of Federal Law On railway transportation in 2002 Federal Agency for Rail Transport - regulatory functions only RZD subsidiaries established to operate rolling stock RZD focusing on key functions infrastructure and locomotive services Evolution of market share of private operators RZD tariff decreasing as benchmark Federal Agency for Rail Transport regulatory functions only RZD infrastructure operator only Potential liberalisation of locomotive services Open-market pricing of non-infrastructure related services Non-discriminatory third party access to rail infrastructure guaranteed by law Source: A.T. Kearney, Globaltrans Globaltrans is the first real investment opportunity to participate in the liberalisation of the Russian freight rail transportation market 5

7 Key investment highlights Leading private freight rail operator in Russia with modern rolling stock fleet Focus on higher revenue generating cargoes Strong client relationships Advanced destination management and route optimisation Experienced management team High profitability and rapid growth 6

8 Leading private freight rail operator in Russia with modern rolling stock fleet Major rolling stock operators (000s railcars, 2007) Globaltrans Transgarant Eurosib SPB DVTG Metalloinvesttrans Transoil Freight One Other RZD (a) (b) (a) Freight One currently operates less than 20% of its fleet (the rest is operated by RZD), it is planned that fleet under operation will increase to thousand railcars by 2010 (b) RZD and its affiliates, excluding Freight One Source: A.T. Kearney Growth in Globaltrans owned (f) rolling stock Owned (c) rolling stock remaining life (years) (d) Gondola cars 19 3 Oil tank cars 29 5 Hopper cars 25 2 Locomotives 6 Globaltrans average 24 RZD average (c) Includes both rolling stock owned by Globaltrans directly and leased from third-parties under finance leases (d) Not including potential life extension options (e) Remaining life of Globaltrans locomotives since last capital repair Source: A.T. Kearney, Globaltrans management accounts (cannot be directly derived from IFRS accounts) Rolling stock fleet development (CAGR ) (e) (Railcars) 17,425 14,319 11, , ,853 2,653 8,650 10,349 11, % 11.5% 4.0% Gondola cars Oil tank cars Other (g) (f) Includes both rolling stock owned by Globaltrans directly and leased from third-parties under finance leases (g) Other includes locomotives and hopper cars Source: Globaltrans management accounts (cannot be directly derived from IFRS accounts) Globaltrans Total fleet of private operators Total Russian fleet Source: A.T. Kearney, Globaltrans management accounts (cannot be directly derived from IFRS accounts) 7

9 Focus on higher revenue generating cargoes Class 3 cargoes are the most profitable for private operators (a) Transportation by cargo class (2007) 60,000 50, % 41.0% Mark-up (000s RUR) 40,000 30,000 20, % 36.6% 78% 10, % 22.4% 0 0 1,000 2,000 3,000 4,000 5,000 6,000 Distance (k m) Class 1 Class 2 Class 3 Cargo turnover Class 1 Class 2 Class 3 Adjusted revenue (b) (a) Illustrative example: Mark-up defined as a difference between RZD tariff and infrastructure and locomotive charge for 3 5 wagons dispatch, loaded trip and the following cargo classes (Class 1 coal, Class 2 cast iron, Class 3 ferrous metals) (b) Adjusted revenue defined as revenue from railway transportation operators services less infrastructure and locomotive tariff: loaded trips Source: Tariff Source: Globaltrans management accounts (cannot be directly derived from IFRS accounts) 8

10 Focus on higher revenue generating cargoes (continued) 2007 Adjusted revenue (a) (US$m) Globaltrans market position (private operators) Expected market growth CAGR (c) ( ) Globaltrans positioning highlights Ferrous metals, scrap metals and iron ore #1 6.0% Strong logistics and dispatching capabilities Oil and oil products #4 2.5% Superior high-capacity oil tanks and sound client base Construction materials 10.3 #8 (b) 13.6% (b) Fast growing fleet of brand new rolling stock Coal 10.4 #5 6.3% Build on existing expertise after liberalisation of power sector is complete (a) Adjusted revenue defined as revenue from railway transportation operators services less infrastructure and locomotive tariff: loaded trips (b) For construction materials Globaltrans market position and expected market growth is presented for cement + crushed stone only (c) A.T. Kearney estimates Source: A.T. Kearney, Globaltrans management accounts (cannot be directly derived from IFRS accounts) 9

11 Strong client relationships Globaltrans client base Largest clients (by Adjusted revenue (a), 2007) Total number of clients exceeds 250 Quality client base concentrated on large Russian industrial groups Insignificant share of spot sales contracts Complex logistics solutions and ability to react quickly to clients needs Oil & oil products clients 28.8% 100.0% Metals and mining clients 4.9% 17.7% 8.5% 4.2% 12.2% 10.3% 13.5% Further development of relationship with medium size clients to support growth and achieve route optimisation Severstal MMK Evraz Ural Steel Rosneft RITEK Lukoil Other Total (a) Adjusted revenue defined as revenue from railway transportation operators services less infrastructure and locomotive tariff: loaded trips Source: Globaltrans management accounts (can not be directly derived from IFRS accounts) Revenue cargo mix # of destinations (b) Tailored service offering to key clients Revenue cargo mix # of destinations (b) Revenue cargo mix # of destinations (b) Revenue cargo mix 27% 194 9% % 15% 16% 2% 22 4% 4 21% 5 24% 8 17% 46% % 52% 56% 59% % # of destinations (b) Severstal MMK Evraz Ural Steel Ferrous metals Scrap metal Iron ore Other (b) Number of destinations for each customer in the respective segment, arrows indicate inbound/outbound transportation Source: Globaltrans management accounts (cannot be directly derived from IFRS accounts) 10

12 Advanced destination management and route optimisation Destination management Illustration of complex logistics requirements (e.g. Severstal) Critical to private operator efficiency as market price includes an assumed significant empty return journey (empty run) Empty run charge is passed on to the customer Raw materials Iron ore Coking coal Scrap metal Optimisation of the empty run ratio - major driver of Globaltrans profitability with strong logistics support Finished products Metal sales in Russia Metals export sales Byproducts sales in Russia Complex logistics solutions to key industrial clients to meet their high volume transportation needs Key to decision-making on technological and commercial expediency of transportation Supply and demand balance for transportation services Illustration of complex destinations and routes (e.g. Severstal) Cherepovets (Severstal) and advanced dispatching capabilities Round-the-clock monitoring of freight transportation services Interaction between Globaltrans logistics centre and customer s transportation subdivisions Management of empty railcars by assigning them to the next loading point Source: Globaltrans Principal routes Empty routes 11

13 Experienced management team Sergey Maltsev Valery Shpakov Irina Aleksandrova Ilya Dudinskiy Chief Executive Officer First Deputy CEO Deputy CEO, Business Deputy CEO, Operations 15 years of experience 34 years of experience development 7 years of experience 13 years of experience Alexander Shenets Roman Goncharov Boris Torbin Sergey Vaselenko Chief Financial Officer Head of Treasury Marketing Director Chief Information Officer 6 years of experience 10 years of experience 4 years of experience 4 years of experience 12

14 High profitability and rapid growth Adjusted revenue (a) development Adjusted EBITDA (b) development (US$m) 231 CAGR ( ): 24% (US$m) 80 CAGR ( ): 40% (a) Adjusted revenue defined as revenue from railway transportation operators services less infrastructure and locomotive tariff: loaded trips (b) Adjusted EBITDA represents profit for the year before income tax expense, net finance costs, depreciation of property, plant and equipment, share of profit of joint ventures, gain from sale of joint ventures, gain from sale of subsidiaries, other gains, recognised deferred gains, net foreign exchange gains/(losses) on operating activities Source: Globaltrans IFRS accounts Financing capacity Source: Globaltrans IFRS accounts ROCE development (d) % (US$ m) 4.5x 4.8x 2.7x 10.3% Net Debt (c) Net Debt / Adjusted EBITDA (c) Net debt is defined as sum of current and non-current borrowings less cash and cash equivalents Source: Globaltrans IFRS accounts n/a (d) ROCE is defined as Adjusted EBITDA after depreciation of property, plant and equipment divided by average capital employed; average capital employed is defined as the sum of average balances between balance sheet dates of total equity, total borrowings and minority interest Source: Globaltrans IFRS accounts 13

15 High profitability and rapid growth (continued) Adjusted EBITDA (a) bridge (US$m) Key EBITDA drivers (US$m) (13.9) (24.8) (4.7) (15.5) CAGR Adjusted revenue % Other sales (48)% Infrastructure and locomotive tariffs: loaded trips (6)% Revenue % Empty trips % Operating lease rentals rolling stock (10)% Repair and maintenance % Other cost of sales (28)% Adjusted cost of sales (CoS) (ex D&A) % Adjusted EBITDA 2005 (b) Adjusted revenue (c) Other sales/expenses (d) Adjusted CoS (ex D&A) (e) SG&A (ex D&A) Adjusted EBITDA 2006 Adjusted revenue Other sales/expenses Adjusted CoS (ex D&A) SG&A (ex D&A) Adjusted Adjusted EBITDA 2007 Infrastructure and locomotive tariffs: loaded trips (6)% Total cost of sales (ex D&A) (1)% SG&A (ex D&A) % Cost of wagons and locomotives sold in trading transactions (91)% Adjusted EBITDA % (a) Adjusted EBITDA represents profit for the year before income tax expense, net finance costs, depreciation of property, plant and equipment, share of profit of joint ventures, gain from sale of joint ventures, gain from sale of subsidiaries, other gains, recognised deferred gains, net foreign exchange gains/(losses) on operating activities (b) Adjusted revenue defined as revenue from railway transportation operators services less infrastructure and locomotive tariff: loaded trips (c) Other sales/expenses defined as sum of revenues from railway transportation freight forwarding, revenue from operating leasing of rolling stock (tankers and open wagons), revenue from operating leasing of locomotives and hoppers, revenue from sale of wagons and locomotives, other revenue less cost of wagons and locomotives sold in trading transactions (not part of property, plant and equipment) (d) Adjusted CoS defined as cost of sales less infrastructure and locomotive tariffs: loaded trips less cost of wagons and locomotives sold in trading transactions (not part of property, plant and equipment) (e) SG&A is defined as selling, marketing and administrative expenses Source: Globaltrans IFRS accounts, management accounts (cannot be directly derived from IFRS accounts) 14

16 Clear strategy to achieve superior growth and strong returns 1 Continue profit-focused growth 2 Leverage and Further Develop Operating Efficiencies 3 Explore Opportunities to Increase Services Offering 15

17 1 Continue profit-focused growth Strategic initiatives Key outcomes Significantly expand fleet of gondola cars Gain market share in key segments Capture leading position in fast growing cement transportation Leverage strong customer relationship and identify new customers Grow faster than the overall Russian freight rail transportation market Expand geography of operations Closely monitor potential acquisition opportunities Diversify client base and develop customer loyalty 16

18 2 leverage and further develop operating efficiencies Strategic initiatives Key outcomes Continue to decrease empty runs Continually improve earnings and returns Create loop routes via development of additional medium size client relationships Increase use of block trains on regular high-volume destinations Decrease delivery time and offer better client service Identify and reduce dwell time Minimise repair and maintenance costs Optimise maintenance and repair 17

19 3 explore opportunities to increase services offering Strategic initiatives Key outcomes Establish required internal infrastructure and gain experience while operating some locomotives on short routes of stable demand Begin locomotive service once market liberalises and opportunities for private carriers or operators emerge Profit from first mover advantage, gain significant market share and extract additional margins Increase current fleet of 18 owned locomotives 18

20 Conclusion Leading private freight rail operator in Russia with modern rolling stock fleet Focus on higher revenue generating cargoes Strong client relationships Advanced destination management and route optimisation Experienced management team High profitability and rapid growth 19

21 Appendix I Russian railway transportation market overview 30-Jun-08 09:27 8cld0271.ppt 20

22 Private operators are taking market share from RZD Railcar fleet structure in Russia (000s railcars) CAGR : 3% CAGR 10% Private operators Freight One CAGR 0% (a) RZD Privately operated rolling stock share in total transportation 74% 68% 66% 65% 62% 26% 32% 34% 35% 38% (a) Joint fleet of RZD and Freight One (200,200 railcars were transferred to Freight One in July 2007) Source: A.T. Kearney Market share of private operators (2007, by transportation volume) Private operators RZD Source: RZD, Presentation of the Head of Corporate Development and Reform Development, Mr. Veremeev Rolling stock purchases by Russian operators (by group, 000s railcars) Oil and oil products Iron ore 46% 67% 54% 33% Scrap metal Ferrous metals Coal 43% 36% 22% 57% 64% 78% F 2009F 2010F 2011F 2012F Source: A.T. Kearney Private operators RZD Source: A.T. Kearney RZD and affiliates Private operators 21

23 Impact of cargo class and distance on tariff rate for loaded trips Class 1 Class 2 (eg tariff for coal transportation) (eg tariff for cast iron transportation) Class 3 (eg tariff for metals transportation) (Rubles/railcar) 200, , ,000 50, c. 1.6 thousand km c. 1.7 thousand km c. 1.9 thousand km (Rubles/railcar) ,000 2,000 3,000 4,000 5,000 6, Transportation distance (k m) Transportation distance (k m) Transportation distance (km) RZD transportation tariff Infrastructure and locomotive charge (loaded trip) Average distance for Globaltrans loaded trip in 2007 (Rubles/railcar) Note: Example based on difference between tariff using RZD rolling stock for 3 5 wagons dispatch, loaded trip (approximately customer s price) and infrastructure and locomotive charge for illustrative purposes Examples of Class 1 cargo Examples of Class 2 cargo Examples of Class 3 cargo Energy coal, coking coal Iron ore Natural construction materials (crushed stones, sand, etc) Cement Wood Chemical raw materials for fertilizer production Crude oil, gasoline, kerosene, diesel fuel Heating oil Fertilizers Bricks Agricultural machinery and equipment Asphalt Agricultural products Cast iron Ferrous and non-ferrous metals and scrap Construction materials for industrial production Metal construction components Lubricants and oils Timber products Mineral wax and other dark oil products Machinery and equipment (except agricultural) Automobiles Rubber, plastics and paint materials Organic and non-organic chemicals Alcohol products Soft goods Source: A.T. Kearney, RZD, Tariff 10-01, Globaltrans management accounts (cannot be directly derived from IFRS accounts) 22

24 Impact of empty runs on tariff rate Overview of the empty run concept The standard railway transportation tariff (as set out by Tariff 10-01) incorporates a portion of the charge for the assumed empty return journey of the rolling stock 150,000 Illustrative transportation tariff, price and cost for Class 2 (a) Allowance for empty runs included in the tariff depends on many factors, including cargo class and type, opportunities for return load, distance, weight, etc. For general purpose rolling stock (gondola (open top) cars, flatcars, boxcar): on average 60% For specialised rolling stock (eg oil tank cars, hopper cars): on average 100% (Rubles/railcar) 100,000 50,000 To reduce empty runs private operators manage its cargo destinations and routes so as to match a customer order for rail shipment of cargo to a particular destination with another cargo shipment order from this or close to this destination Globaltrans managed to decrease the empty return ratio for general purpose rolling stock from 39% in 2005, 36% in 2006 and to 21% in 2007, as a result of expanded geographic coverage and better route optimisation Efficient destination management and the ability to create loop routes (optimal structure with no empty runs) is a major margin driver of private freight rail operators Source: Globaltrans 0 0 (a) Example for cast iron transportation in 3 5 wagon dispatch for illustrative purposes Source: RZD, Tariff ,000 2,000 3,000 4,000 5,000 6,000 Transportation distance (km) RZD transportation tariff (approximately Customer s price) Transportation cost in own railcars 60% empty return tariff Transportation cost in own railcars 30% empty return tariff Infrastructure and locomotive charge (loaded trip) 23

25 Appendix II Globaltrans background 30-Jun-08 09:27 8cld0271.ppt 24

26 Globaltrans is part of TIHL infrastructure group Ownership structure 50.10% TIHL Envesta 19.55% Free-float 30.35% TIHL background Transportation Investments Holding Limited (TIHL) is the largest privately-owned transportation group in Russia with strategic interests in rail transportation and port operations and carries on business under the name of NTrans Nikita Mishin, Konstantin Nikolaev and Andrey Filatov are the beneficial owners and co-founders of TIHL Envesta Investments Ltd. background Envesta Investments Ltd. (EIL) is controlled two individuals: Sergey Maltsev (51% stake), Chief Executive Officer, Globaltrans Alexander Eliseev (49% stake), Chairman of the Board of Directors, Globaltrans Source: Globaltrans 25

27 Transparent corporate governance Board of Directors Corporate governance Alexander Eliseev Non-executive director Chairman of the board Shareholder of Envesta Investments Ltd. Member of Remuneration Committee 14 years of management experience, mostly in railway industry Board of Directors Consists of 3 executive directors, 2 non-executive directors and 2 INEDs Non-executive Chairman Financial reporting Michael Zampelas Independent non-executive director Member of Audit Committee Member of Remuneration Committee Member of Nominations Committee Founder of Coopers & Lybrand, Cyprus Elia Nicolaou Non-executive director Member of Audit Committee More than four years of legal and management experience Mikhail Loganov Executive director Member of Nominations Committee More than seven years of financial experience Hans Durrer Independent non-executive director Member of Remuneration Committee Member of Nominations Committee Ex-CEO of Montafan AG and IMT Dienst AG Sergey Maltsev Executive director CEO Controlling shareholder of Envesta Investments Ltd. 15 years of experience in railway industry Konstantin Shirokov Executive director Financial Manager for Transportation Investments Holding Limited Head of Internal Audit The Company prepares IFRS financial statements since 2005 Audit is done by PricewaterhouseCoopers Chaired by INED Comprised of 2 directors, including 1 INED Chaired by INED Comprised of 3 members, including 2 INEDs Chaired by INED Comprised of 3 members, including 2 INEDs Audit Committee Remuneration Committee Nominations Committee Meets at least 4 times each year Meets at least 1 times each year Meets at least 1 times each year 26

28 Appendix III Illustrative Globaltrans transportation routes 30-Jun-08 09:27 8cld0271.ppt 27

29 Metallurgy industry illustrative transportation routes Baltic ports Kostomuksha Kovdor Severstal Vologda Ukraine Kursk Voronezh South ports NLMK Chusovoy Ekaterinburg Nizhny Tagil Chelyabinsk Mechel Magnitogorsk Urals steel Krasnoyarsk ZapSib Prokopievsk Leninsk-Kuznetskiy Novokuznetsk Ust-Ilimsk Severstal Evraz MMK Mechel Urals steel Far East ports NLMK Principal Globaltrans metallurgy industry transportation routes Source: Globaltrans 28

30 Oil and oil products illustrative transportation routes The Baltic States Kaliningrad St. Petersburg Kirishi Yaroslavl Belarus Ukraine Moscow N. Novgorod Ryazan Niznhnekamsk Saratov Perm Serov Surgut Komsomolsk Volgograd Samara Ufa Omsk Achinsk Khabarovsk Tuapse Budennovsk Grozny Orsk Angarsk Key oil provinces Oil refineries Principal Globaltrans oil and oil products transportation routes Source: Globaltrans 29

31 Construction materials illustrative transportation routes Deposits of crushed stone Kandalaksha Pyazieva Selga Helula Kaalamo St. Petersburg Belomorsk Arkhangelsk Moscow N. Novgorod Samara Kazan Surgut Nizhnevartovsk Deposits of Lime Rostov-na-Donu Volsk 'Stavropol Zolsky Khadzok Labinskaya Ufa Yekaterinburg Chelyabinsk Tyumen Magnitogorsk Omsk Novosibirsk Topki Krasnoyarsk Blagovechensk Spassk-Dalniy Source: Globaltrans Deposits of crushed stone City Russian cities with >1.0 m population Cement plants >1.5 m tonnes of capacity Principal Globaltrans cement and crushed stone transportation routes 30

32 Coal illustrative transportation routes Severstal Vorkuta Yakutugol Yakutsk NLMK Ukraine Gukovo Blockpost MMK Urals steel Nizhny Tagil Mechel Omsk ZapSib Kemerevo Novokuznetsk Krasnoyarsk Abakan Irkutsk Basin Irkutsk Chita Chegdomin Blagoveshensk Khabarovsk Novoshakhtinsk Severstal Evraz MMK Mechel Vladivostok Urals steel Source: Globaltrans Energy coal deposits Coking coal deposits Largest coal power plants Principal Globaltrans coal transportation routes NLMK 31

33 Appendix VI Recent Developments 30-Jun-08 09:27 8cld0271.ppt 32

34 Recent Developments Purchase of new railcars by Globaltrans Globaltrans has acquired 316 gondola cars and 260 cement hoppers during the first five months of 2008 We have contracted further 1214 gondola cars and 240 cement hoppers to be delivered by the end of September 2008 the latest. Year 2008 Tariffs regulation of RZD Tariff was increased on average by 11% since the beginning of The increase of Part II (internal and external transportation via ports) amounted to 14.8% and increase of Part III (external. amounted to 0% (external). Tariff was increased on average by 1% since April 1 st, The increase for part II (internal transportation and external via ports) amounted to 1.26% and increase for Part III (external) amounted to 0%. Federal Tariff Agency published order 120-T/1 of railway freight transportation tariffs increase amounting on average 8%, effective from 01 July 2008 Ministry of Economic Development and Trade (MEDT) presented a forecast of tariff increase for RZD in The expected average tariff increase is expected to range from 17,1% to 18,7% in 2009 and 9,7% -13,7% in 2010 and 10% -14% in Locomotive traction liberalization New draft of the key law regulating rail transportation Law on Rail Transportation was signed by the minister of transport and sent for review and suggestions by various ministries (new draft includes initial steps of liberalization of the locomotives traction). Several decrees were passed regulating locomotive traction Russian Federation Ministry of Transport Order dtd No.150 regulates the procedure and conditions of freight transportation by owned trains, Russian Federation Ministry of Transport Order dtd No.196 amends current acts regulating freight transportation document processing. Russian Federation Ministry of Transport Order dtd No.28 Introduction of amendments to order by the Ministry of Railways dtd. 18 June 2003 No.26) introduces certain procedures of locomotives traction and regulations of private locomotives access to rail tracks. Sale of non core assets of RZD Russian Railways announced sale of 22 repair and maintenance depots. Globaltrans is looking at the opportunity, no decisions have been made yet. 33