OJSC Magnitogorsk Iron and Steel Works ("MMK") has brought its energy saving and energy efficiency improvement initiatives to a new level. Expenditure on low-cost projects with timely returns (baby-capex) in this area grew four-fold in 2016 compared to 2015.

Baby-capex on energy efficiency improvements increased to RUB 1.2 bln in 2016 as compared to RUB 300 mln in 2015. Overall investment into projects planned for 2017 is estimated at RUB 1.5 bln.

Energy efficiency initiatives also include motivating employees to suggest ideas that drive innovations at the company, and concluding energy service contracts.

In 2016, MMK considered 390 ideas from employees on energy saving initiatives, which formed the basis for the implementation of 138 projects that delivered an annual economic effect of an estimated RUB 68 mln. In 2016, MMK adopted an electronic Energy Management platform which enables employees to submit their innovative ideas electronically. In April 2017, the platform was integrated into the Evolution mobile app, allowing ideas to be submitted via mobile devices.

MMK is the first industrial enterprise in Russia with a successful track-record in implementing energy service contracts. Currently, the company has completed phases I and II of workshop lighting modernization, which required almost no outlay from MMK. MMK has also implemented a major energy service project titled Frequency Regulation System for Exhauster Drives at Oxygen-Converter Plant. The economic effect of these projects amounted to around RUB 180 mln in 2016.

Also in 2016, MMK approved and adopted its Energy Policy. The document stipulates decreasing costs on energy resources as part of cash costs as a strategic goal in activities to save energy and improve energy efficiency. The key factors for achieving this goal include improving efficiency of personnel management, motivation and engagement, as well as adopting advanced technologies.

About MMK

MMK is one of the world's largest steel producers and a leading Russian metals company. The company's operations in Russia include a large steel-producing complex encompassing the entire production chain, from the preparation of iron ore to downstream processing of rolled steel. MMK turns out a broad range of steel products with a predominant share of high-value-added products. In 2016, the company produced 12.5 million tonnes of crude steel and 11.6 million tonnes of commercial steel products. MMK Group had sales in 2016 of USD 5,630 million and EBITDA of USD 1,956 million.

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