Strategy and Outlook for 2002

Brown coal market developments will be affected by the further progress of energy privatization and the subsequent change in the individual market players and their operations on the energy market. Given the fact that demand for brown coal is expected to decrease, Severočeské doly a.s. is assuming there will be a reduction in average revenues from industrial mixes intended primarily for thermal power plants. The estimated slump in revenues is put at approximately CZK 1 billion, which will require a different approach in terms of the quality of funding channelled into investments and operating costs.
The significant changes in market conditions have sparked a number of changes at the Company, including extensive restructuring measures. The Company's financial strength and stability cultivated in previous years forms a solid foundation for the upcoming difficult period. Even so, the Company is well aware of the need to cut costs, and therefore it has started implementing cost- cutting measures in all its areas of operation. The business plan for 2002 guarantees a rise in equity, which will improve the value of the Company for its current and future owners.
The Company will continue to shed employees. The average number of employees in 2002 should be 4,190, i.e. a year-on-year reduction of more than 1,300 employees. This action will give the Company room to increase wages by at least as much as inflation.

Strategy in Production and Sales

Despite the anticipated fall in brown coal sales, the Company is keen to maintain its leading market position. The basic pillar of the sales strategy is our long-term business alliance with ČEZ and several other large customers based in North Bohemia. The Czech market is our primary focus. Our sales policy also includes reliable fulfilment of all contractual obligations in terms of volume, product range, and commensurate pricing. Relations with consumers will be further improved through activities aimed at satisfying needs for making power sources more environmentally sound. In order to achieve this goal, the Company can draw on a highly modern technological base for coal extraction and preparation and on top-class quality management systems for output.

Financial Strategy

Severočeské doly a.s. puts its cash surpluses corresponding to its land cleanup and reclamation provisions to work by investing them in highly-liquid, top-rated financial instruments with adequate investment terms. To this end, we are reacting to new investment opportunities in the financial markets in keeping with our conservative risk profile, which lies in the diversification of financial activities among various types of investment instruments and among reputable financial institutions. The Company keeps track of the basic indicators of interest rate risk management, allowing it to avoid the undesirable effects of changes in interest rates. The Company makes use of standard financial market instruments for its interest rate and currency risk management.

Personnel Strategy

The aim of the personnel and social policy will remain the quality and stability of the workforce, with sufficient motivation for employees to overcome the difficult period of anticipated decline in coal sales, especially with regard to the efficient use of human and material resources. Strict compliance with labour-law obligations, and obligations under the Collective Agreement will continue to contribute to our high-quality corporate culture.

Communication Strategy

In its corporate communication strategy, Severočeské doly a.s. strives to be perceived by the public as a stable, successful, competitive, trustworthy company of great importance for the development of the sector and the region, a company that works to minimize the impact of its business on the environment. Great emphasis is placed on openness and honesty in our dealings with all business partners, the public, our employees and shareholders, as well as strengthening the corporate image and culture. The Company will continue to contribute to the development of employment, health care, education, sports and physical education, the arts, and other areas of public life.

The Environment

In realizing its strategy for protecting the environment, the Company pays very close attention to environmental needs and relationships in its area, especially with regard to the towns and cities located near its mines. Our systematic preparation and realization of cleanup and reclamation work on land affected by mining activity is a unique aspect of this relationship.

Capital Investment Programme

The anticipated decline in brown coal sales will necessitate certain cutbacks in capital investment. However, investment focused primarily on renewing and excavation technology will continue in order to ensure that mining can go on.