Annual report 2012

ŽELEZIARNE PODBREZOVÁ A.S. 16 Capital Investments and Care for Technological Equipment In 2012, we invested a total of EUR 5 711 thousand, of which 79% was directed into the development of the technological base. The most important investment was the introduction of alloyed mandrel rods in the production of hot-rolled tubes in the push bench and the associated new controlled lubrication and cooling. This modernisation will improve the quality of production and extend the useful life of mandrel rods, resulting in positive saving of costs of tube production. Important investments also include the renovation of rack and pinions of the push bench and partial renovation of track vehicles and a locomotive, as well as special wheeled vehicles and passenger cars. We alsomodernised the turbine at Jasenie water power plant for thegenerationof our ownelectricity. An important construction investment was the reconstruction of intracompany roads and the reconstruction and construction of new parking spaces at the old and the new plants. The year 2013 will be one of themost important milestones of the last two decades in terms of investments. The amount of planned investments for 2013 is EUR 24.2 million. Several very important investments for the long-term stability of the Companywill bemade. The most important investment is the reconstruction of the facility for the continuous casting of steel (FCC), which will be renovated after 31 years of operation. The quadruple-flow FCC will be modified to a triple-flow FCC using cutting-edge features, such as the extension of primary cooling (crystallisers), hydraulic and mechanical oscillation of crystallisers, electromagneticmixing of steel in the crystalliser, water and air secondary cooling of steel, three-point straightening of steel, precise division of casts, new run-out section and comprehensive reconstruction of cooling circuits. The reconstruction will improve the production quality while maintaining thedimensional product range. The second important investment is the reconstruction of dedusting of the electric arc and ladle furnace, one third of which will be co-financed by EU funds. The reconstruction will result in a 2.5-fold improvement in exhaust gas exhausting performance and their filtering in the filtration station – to 900 3 thousand m per hour, which will reduce air pollution significantly. In order to maintain our own power generation using waste heat, we will change the gas turbine and the combined cycle (cogeneration) control system. In the area of the non- destructive ultrasonic testingof tubes, wewill install a rotation testing machine ROT 65 VIS with evaluation software. In the production of seamless tubes, we will install the latest system of measuring different parameters of lenses before additional heating and reduction of tubes. The new 9-channel measurement system allowing continuous measurement of wall thickness, its eccentricity, diameter, temperature and length will optimise the reduction process and improve the quality of final tubes. The Board of Directors decided to make these important investments in 2013 with an emphasis on minimum downtimes of steel production. They are investments for the future to ensure the Company's competitiveness and long- termstability. Research andDevelopment In 2012, we spent EUR 299 thousand on research and development. Contractual research in cooperation with the subsidiary, ŽP VVC s.r.o., dealt with seven research tasks for EUR 207 thousand. The tasks were focused on research in waste treatment, boiler steel properties, tools and the modelling of technological processes. The solution of the research task “Research of properties of new-generation heat- resistant steel for application in superheater systems with ultrasupercritical parameters” included rolling of boiler quality P92 in2012. ENVIRONMENTAL POLICY One of the basic conditions of the management of Železiarne Podbrezová is increasing the quality of environment in line with the certified system of environmental management pursuant to the ISO14001 standard requirements. During 2012, the certification company SGS Slovakia, spol. s r.o. performed a recertification audit and confirmed the validity of defined environmental management processes and issued the fifth consecutive certificate valid for another three years for ŽeleziarnePodbrezová a.s. By meeting the environmental goals according to the approved Environmental Management System Programme, a total of 10 measures were performed totalling EUR 1 221 thousand in 2012. TheCompany secured new legal requirements in the area of the prevention and remedy of environmental damage by financial coverage of its responsibility for a potential environmental loss, including the anticipated costs of its elimination. Železiarne Podbrezová a.s. as a mandatory participant in the carbon dioxide allowances trading scheme, finished its second five-year trading period in 2012, in which emission allowances were allocated free of charge for the whole production of our Company, aswell as for all other industry sectors. From 2013, the EU starts to apply new stricter regulations in trading with emission allowances. The stricter rules will have a negative impact on themetallurgical industry. In the systemof international auctions, each participant will have to purchase the difference between the allocated allowances and the real productionof greenhousegases for thegiven year. ANNUAL REPORT 2 012 REPORT BY THE BOARD OF DIRECTORS ON THE BUSINESS ACTIVITIES, ASSETS, AND FINANCIAL PERFORMANCE IN 2012 AND INFORMATION ON THE BUSINESS PLAN