Bogatyr’s New Achievement
The company’s tenth anniversary sees a record coal output
Today around 70% of Kazakhstan’s power plants are coal-operated. Almost all of them use the coal from Ekibastuz, and more precisely Bogatyr, the world’s largest open-cast coalmine. The coalmine has been developed by Bogatyr Access Komyr (BAK) – a subsidiary of US-based Access Industries – since November 1996. Mr Dennis C. Price, general director of the company, answers questions about the enterprise that is pivotal to Kazakhstan’s energy sector.
Mr Price, your company has recently introduced the ISO 9001:2000 quality management system. Has this step helped to boost your production’s competitive edge?
This is very important for us – the introduction of ISO 9001:2000 will determine the company’s perspective on its development in the short and long-term. This will not just improve the quality of coal. This will help us control production, technology and management procedures. In a word, the work we did to receive the certificate gave us the chance to analyse and optimise everything that is going on in the company.
I would like to stress that in addition to this we were certified as meeting the ISO 14001 environmental management standards at enterprises in July this year. I believe this is an equally important thing, because this concerns ecology and the conditions the future generations of Ekibastuz residents will be living under. It is often said today that coal producers pollute, but coal production is simply impossible without a certain negative impact on the environment. The only thing we can do is use up-to-date technology and methods of production. Applying the ISO 14001 system helps us continuously improve environmental protection. And that is exactly what we want to achieve.
What socioeconomic indices do you expect from BAK by the end of 2006?
This year we expect the production and shipment of coal to surpass 40 million tonnes. This is a record for the entire decade of the company’s operation.
As for the social dimension, the salaries of all BAK employees were raised by 20% on 1 October. Currently we are considering further adjustments and raising the tariff rates and salaries for our staff.
Of course, people want to earn as much as possible. This is a natural desire. However, when solving this problem we need to remember that we are working under market conditions and need to sell coal at attractive prices. Our clients include Almaty Power Consolidated, Astana Energy, Karaganda-Zhylu and other power companies servicing Kazakh residents.
Have you overcome last year’s problems that were caused by a lower demand for Ekibastuz coal from Russian consumers?
So far we have solved this problem. In 2005, 48% of BAK’s total production went to Russia; today this figure is 52–53%. Now we are facing a transportation problem. Russia and Kazakhstan disagree on the issue of mutual provision of empty cars. The Russian side has vested this function on Kazakhstan, while Kazakhstan Temir Zholy is involving private transport companies to solve the problem. In fact, we do have coal and demand for coal, but the empty cars problem remains unsolved.
For instance, in November, our consumers placed the largest order in the history of BAK: 34 shipment routes per day. However Kazakhstan Temir Zholy finds it hard to secure even 32 routes. We are constantly looking for a way out of this situation with Bogatyr Trans, our sister company, but the issue remains unsolved.
As far as we know, Kazakhstan Temir Zholy (KTZ) contacted the antimonopoly agency for permission to raise coal transport tariffs from 1 January 2007. What impact might this measure have on your production’s competitiveness?
This might have been a very direct impact. Thank God the antimonopoly agency declined this request. On the one hand, I can understand KTZ – perhaps, they do have a reason for raising cargo transport tariffs. However, we need to take account of the fact that the transport costs – though differing depending on the remoteness of power plants – still make up around 50% of the price consumers pay for coal. That is, every extra tenge of any transport tariff will be reflected in the coal price and the price per kilowatt or gigacalorie the Kazakh people pay.
Although sometimes we have to solve these issues at a government level, our negotiations with KTZ are generally constructive. I have a lot of sympathy for Mr Atamkulov, the president of KTZ, who does everything possible for his company, yet always tries to understand the problems consigners are facing.
Could you tell us about the transition to the coal blending conveyor technology at Bogatyr?
This is a very dynamic process. In 2001-2004, the first phase of the transition, we reconstructed the existing blending and shipment rail-conveyor complex and boosted its production to 12 million tonnes of blended coal per year.
In 2005, we launched the second phase in the Severny coalmine and, in April 2006, the sixth area of Bogatyr shifted to the new technology. We are planning to finish the phase with the ninth area of the coalmine in 2007. The measures will include mastering new coal production technology utilising hydraulic excavators and power shovels, large-tonnage dump trucks, blending tanks and bucket-wheel excavators for shipping the coal into rail cars.
The result is already exceeding our expectations: we proved that the new technology mode will ensure a higher, more homogenous quality of the coal we supply to consumers. The fluctuations of ash content in shipped coal do not exceed 2% of the average value. When the second phase is over, by 2008 the share of blended coal shipment will reach around 90% of the total output, and coals of quality group II will not be supplied anymore. The third phase provides for the total transition to the cyclical-and-continuous method of production and blending of all coal produced. It will be completed by 2015.
Since 2001, around €50m have been invested in these programmes. Over the next seven years, the total investment will come to around €500m. And we enjoy the opportunity to choose from various sources of finance. Presently, major foreign banks are willing to lend money to us, which means we are moving in the right direction. In addition, Access Industries possesses its own considerable financial resources. We are also considering an IPO as one of the options, but no final decision has yet been taken.
Construction of a new heat power plant using Chinese investment is being considered today. What prospects and challenges will your company face should this project be realised?
This project will require that we produce an additional 20-22 million tonnes of coal per year. Boosting production will not be a problem for us. Should there be any relevant agreements, we would boost our output faster than the plant is constructed. However, nobody has yet contacted us with any proposals. As far as I know, no government agreements have yet been signed between Kazakhstan and China on this project.
Being an active participant in the Foreign Investors Council under the president of Kazakhstan, could you tell us about the most topical issues currently being considered by the organisation?
I will not list the entire range of issues, only that the next plenary session of FIC will focus on improving of the vocational education and developing of human capital in Kazakhstan. Foreign investors face the urgency of this issue every day. BAK is no exception: we have a deficit of staff with certain qualifications, even though our company considers the staff training problem carefully and cooperates with local educational institutions. I am planning to make a personal appeal to President Nazarbayev, proposing to create additional educational facilities in Ekibastuz. Of course, training highly skilled staff is to some extent the responsibility of the enterprises operating in the region. But I think we do need some help with this from the Ministry of Education.
Another important thing I want to emphasise is the recent statement by Aimak Deputy Group leader Dariga Nazarbayeva, who believes that FIC should be more proactive in raising salaries, ensuring security and preventing industrial accidents. We certainly must do whatever is possible to prevent tragedies like the recent one in Shakhtinsk from happening. As the director of FIC, I promise that the task force on current foreign investors’ activities will keep working in this direction. And we plan to closely cooperate with Aimak group.
A common opinion is that it is crucial that a structure similar to the Foreign Investors Council, but for domestic investors, is established. There have also been proposals to unite local and foreign investors within a single body under the president of the country. What do you think of these ideas?
I am totally supportive of the idea to set up a council or a task force of local investors under the president. However, my opinion is that it shouldn’t be merged with FIC, as the latter body deals with the activities of foreign investors. And foreign investors are facing different issues to domestic investors.
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