OJSC Magnitogorsk Iron and Steel Works ("MMK" or "the Company") (LSE: MMK) cut its energy costs by more than RUB 1 billion in 2015

As part of a programme aimed at reducing production and sales costs, which was approved by Pavel Shilyaev, CEO of MMK, the Company has carried out a number of initiatives to cut energy costs.

One of them is the wide-ranging involvement of staff in streamlining operations. In 2015, the Centre for Energy-saving Technologies at MMK received more than 700 energy saving ideas, launching 189 projects during the year, including some which are cost-free, and have an estimated annual saving of more that RUB 300 million.

Secondly, the implementation of low-cost, highly effective projects with a payback of no more than 2 years. At the end of 2015, more than 100 low-cost investment projects aimed at improving energy efficiency, were either in development or being implemented. During 2015, 16 projects were employed with an estimated annual economic benefit of RUB 117 million. A significant portion of projects are being carried out in the Head of Power Engineering’s management units. A number of projects also operate in the Chief Steel Works and Steel Rolling departments.

As part of MMK’s capital construction programme for 2016, investment in the implementation of such projects is forecasted at RUB 1 billion. The estimated annual benefit of introducing low-cost, highly effective projects will be approximately RUB 800 million.

The third means of improving energy efficiency is the signing of energy servicing contracts with LLC GPB – Energoeffect. Two similar projects are currently underway. The first one is modernising the lighting of rolling mills, costing more than RUB 250 million. The project is being implemented in two phases (in different steel rolling blocks) and will save more than half of the electricity consumption needed to light the mills. Actual savings from the realisation of this project in 2015 will amount to more than RUB 100 million.

Another energy-servicing project listed in the contract with LLC GPB – Energoeffect is the installation of a frequency controller in converters’ smoke exhausters, valued at almost RUB 400 million. Due to its implementation, a guaranteed saving of 35% of standard electricity consumption will be made, and the annual economic benefit will exceed RUB 100 million. The equipment is currently being installed and the commissioning is scheduled for April 2016.

The mill is also employing a programme to reduce the consumption of fuel and energy resources, 167 measures were fully implemented in 2015 and another 21 are in progress. Thanks to the implementation of these measures, MMK will save more than 16 million KW of electricity per hour, 3,500 tonnes of equivalent fuel, 6,200 Gcal of thermal energy, 4,700 thousand cu m of compressed air and air separation products, approximately 40 thousand cu m of drinking water and more than 2.5 million cu m of technical water on an annual basis. The economic benefit from saving fuel and energy resources will exceed RUB 70 million.
Communications Department