Although SDS Ugol is a large company with big production volumes, the bulk of its business is steam coal, which is unlikely to generate more than $150-200 mln of EBITDA in 2010, while its coking coal business (Prokopyevsk
Ugol) is quite weak, with no more than $100 mln EBITDA last year.
The new cities include Krasnodar, Ujno-Sakhalinsk, Kemerovo, Novotroitsk, Bratsk, Angarsk, Biysk, Rubtsovsk, Prokopyevsk
, Tolyatti, Novokuybyshevsk, Saratov, Dimitrovgrad, Astrakhan, Taganrog, Shakhty, Novocherkassk, Novomoskovsk, Rybinsk, Magnitogorsk, Orsk, and Kamensk Uralskiy.
In addition, NLMK has a negative track record of coal acquisitions (Prokopyevsk
Ugol) and knows very well that a strong professional management team is essential in coal mining (taking into account that Raspadskaya's key management will likely leave after the sale) and that it would bear significant execution and operational risks with Raspadskaya.