RESTRUCTURING OF THE POLISH HARD COAL INDUSTRY

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2. HARD COAL RESERVES in POLAND as on 31.12.2003 • Viable reserves 15 200 mln ton • Industrial reserves 6 800 mln ton • Operational reserves 4 800 mln ton • Easily accessible reserves 2 600 mln ton

3. COAL BASINS IN POLAND

4. STAGESIN RESTRUCTURINGOF POLISH HARD COAL INDUSTRY • I - stage covering 1989÷1993, • II - stage during 1994÷1995, • III - stage covering 1996÷1997, • IV - stage from 1998 till present.

5. Effectsof restructuringprocessesin 1990÷2002

6. Hard coal production Hard coal production in 2003 – 100,4 m tones

7. 140,0 120,0 100,0 80,0 60,0 40,0 20,0 0,0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 domestic sale domestic sale trend [ m tones ] 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 116.5 117.2 107.5 106.8 101.8 99.1 104.5 102.0 86.6 83.5 77.9 79.2 77.1 78.5 SITUATION ON THE DOMESTIC HARD COAL MARKET Domestic sale of hard coal in years 1990 – 2003 and domestic sale trend

8. Number of active mines of hard coal In 2003 – 40 mines

9. Employment in hard coal industry In 2003 – 136,5 [thousand pers.]

10. PRODUCTIVITY tones/person and year

11. THE POLISH HARD COAL INDUSTRYin 2003 and strategy of the sector for years 2004 - 2010

12. 20 kopalni czynnych Kompania Węglowa S.A. 5 kopalń czynnych 9 kopalń czynnych JSWSA KHW SA RADY ARP S.A., Węglokoks S.A., Węglozbyt S.A. otherstockcompanies kopalnie całkowicie i częściowo likwidowane SRKSA Minister of Economy WZA NADZORCZE 5 kopalni czynnych 5 spółek węglowych Independent mines Non-productive entities BSRK Sp. z o.o. liquidated mines As at21.09.2004 Totally: 39 operating mines ORGANISATIONAL SCHEME OFTHE HARD COAL MINING SECTOR

13. LOCALISATION OF THE COAL PRODUCTION COMPANIES

14. HARD COAL PRODUCTION VOLUMEPRODUCTION OF SIZE GRADES’ VOLUME Production volume [m tones] No. Details 2002 2003 1 0 2 3 102.1 100.4 1. Total production volume 86.2 84.3 2. Steam coal lump coal 7.8 7.5 incl.: fine coal 73.0 71.9 15.9 16.1 Coking coal 3. type 34 5.8 5.5 incl.: type 35 10.1 10.6

15. THE COAL SHARE IN ELECTRICITY AND HEAT PRODUCTION The coal share in production of: • electricity amounts to 92%, with the hard coal share of approx. 55%, • heat amounts to approx. 77%. Structure of the domestic consumption of hard coal: • utility power plants and CHPs 52% • heat only boilers, industry and other sectors 27% • coking plants 15% • industrial power generation 6%

16. STRUCTURE OF THE HARD COAL SALE Hard coal sale [m tones] Details No. 2002 2003 1 0 2 3 99.9 98.5 Total sale 1. Domestic market 77.0 78.5 2. 3. utility power generation 33.4 36.2 industrial 4. 0.1 0.8 power generation industrial and communal of which: 5. 2.4 2.0 heat only boilers 6. other industrial receivers - 2.1 7. coking plants 11.5 13.4 8. other domestic receivers 29.6 24.0 22.9 20.0 Export Eksport 9. 10. steam coal 19.0 17.3 of which: 11. coking coal 3.9 2.7

17. Employment in hard coal mining sector [pers.] Employment level as at: Details Balance 31.12.2002 31.12.2003 1 2 3 4 Totally 140 717 136 454 4 263 underground 108 046 105 127 2 919 including: on the surface 32 671 31 327 1 344 coal of which: 15 414 14 780 634 processing EMPLOYMENT RESTRUCTURING Employment as at the end of 2003 amounted to 136,454 persons. Decrease in employment in 2003 amounted to 4,263 persons.

18. Dynamics Unit No. Details 2002 2003 % 4:3 0 1 2 3 4 5 102.1 100.4 1 Total production volume m tones 98.4 99.9 98.5 Total sale m tones 98.6 76.9 78.5 2 incl.: domestic m tones 102.0 23.0 20.0 export m tones 87.1 2.4 2.9 3 Quantity of stock at the end of a period m tones 121.8 432.7 109.2 4 Result on sale m zł 25.2 Wages of basic coal employees 3,775.00 3,885.12 5 zł/person 102.9 according to GUS -656.8 9,239.1 6 Net result m zł - 2,531.9 2,456.6 7 Receivables m zł 97.0 22,846.9 8,641.2 8 Liabilities (long and short term) m zł 37.8 BASIC ECONOMIC AND FINANCIAL INDICATORS

19. 25 000.0 22 846.9 20 315.0 20 000.0 15 000.0 m zł 8 641.2 10 000.0 6 184.6 2 456.6 5 000.0 2 531.9 0.0 As on 30.12.2002 As on 30.12.2003 Total liabilities Receivables Surplus of (long and shortterm) liabilities over receivables AMOUNT OF LIABILITIES AND RECEIVABLES

20. ECONOMIC AND FINANCIAL RESULTS OF HARD COAL MINING SECTORwithin I – X 2004

21. BASIC ECONOMIC AND FINANCIAL INDICATORS FOR 10 MONTH OF 2004

22. STRATEGY OF THE SECTOR TO YEAR 2010

23. Groups of receivers 2004 2005 2006 2007 2008 2009 2010 Utility power generation 42.0 40.5 37.2 36.4 35.6 34.8 34.1 Industrial power generation 4.5 4.4 4.3 4.2 4.1 4.0 3.9 Other receivers 20.2 19.3 19.0 16.7 15.9 15.2 14.6 Total steam coal 66.7 64.2 60.5 57.3 55.6 54.0 52.6 Coking plants and steel plants 13.5 13.5 13.5 13.5 13.5 13.5 13.5 Total coking coal 13.5 13.5 13.5 13.5 13.5 13.5 13.5 TOTAL HARD COAL 80.2 77.7 74.0 70.8 69.1 67.5 66.1 POLAND’S HARD COAL DEMAND FORECAST Poland’s hard coal demand forecast until 2010 [ m tones ]

24. REDUCTION OF PRODUCTION CAPACITY IN YEARS 2004 - 2006 Under the continuous upward market trends with respect to power coal and compliance by companies of specific economic conditions, realisation may be extended in time. Scenarios of reduction of production capacity I scenario of production volume reduction by 14 m tones by the end of 2006 (the base case scenario) – target model II scenario of less drasticreduction of production volume by 7.8 m tones by the end of 2006 – alternative variant.

25. Redundancies Employ- Employ- Total New ment Social package Year ment other reduction recruits reduction miners’ re-training re-training level reduct. contract benefit scholarship 136.5 01.01.2004 12.0 4.5 3.0 7.5 27.0 1.5 25.5 111.0 31.12.2006 EMPLOYMENT RESTRUCTURING IN YEARS 2004 - 2006 Target model of employment changes until 2006 In the target model employment level will be reduced by25.5 thousand. Alternative variant of employment changes until 2006 Zwolnienia Employ- Employ- Total New ment pakiet socjalny Year ment other reduction recruits reduction miners’ re-training re-training level reduct. benefit scholarship contract 136.5 01.01.2004 8.0 2.5 1.5 9.5 21.5 2.0 19.5 117.0 31.12.2006 In the alternative variant employment level will be reduced by 19.5 thousand.

26. RESTRUCTURING IN YEARS 2004 – 2006 RESTRUCTURING IN YEARS 2004 – 2006Objectives and tasks • Maintenance of the energy security of the country and co-operation in improving the standard of energy security of the European Union; • Maintenance by mining enterprises of sustainable profitability, economic effectiveness and competitive advantage on the uniform market of the EU; • Securing satisfactory level of financial liquidity and creditworthiness in order to ensure sustained operation and development of mining enterprises; • Balancing of funds so as to enable current payment of liabilities, in particular those due to public sector creditors; • Adjustment of production capacity to the local market demand and economically viable exports to the uniform EU market and elsewhere; • Adjustment of employment to the actual production needs, along with ensuring a greater productivity and efficiency; • Actions towards a rational cost structure; • Privatisation of mining enterprises.

27. RESTRUCTURING IN YEARS 2004 – 2006 Aims will be achieved among others by: • cost reduction in all business areas, • conducting such a marketing policy that enables reduction of sale costs, • reduction of production capacity to approx. 88 m tones in 2006 (target model), • realisation of less drastic reduction of production capacity in the alternative variant, to the level not higher than 94.8 m tones by the end of 2006, provided the bullish market continues and mining enterprises retain sustainable profitability.

28. RESTRUCTURING IN YEARS 2004 – 2006Target status • Business entities will be economically effective; • Primary focus of mines and other entities of the industry will be able to meet the national demand for coal; • Exports by the industry entities will be economically effective; • Costs will match revenues; • Employment in the industry will match the production capacity, itself matching the market demand; • Entities of the sector will finance upgrade and capital expenditure projects with their own funds; • Mining entities will not benefit from any public assistance not allowed under international treaties; • Mining entities will comply with the environment protection and work safety standards.

29. Thank you

30. THE STRUCTURE OF PRIMARY ENERGY UTYLISATION Primary fuel2002 year • Hard coal 51.7% • Brown coal 12.7% • Oil 19.9 % • Natural gas 10.8 % • Renewable and waste energy 4.9 %