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UR 2007 CC pdf AJ

VIEWS: 8 PAGES: 129

									                                                         contents




Report of the Czech Coal Group
        Activities and Sustainable Development in 2006
                                 contents




w w w. c z e c h c o a l . c z
    In Accordance status of this Czech Coal Group's Report has been checked by the Global Reporting Initiative.




    This Report is based on the international reporting methodology of the Global Reporting Initiative (GRI). It was prepared using the Sustainability Reporting Guidelines GRI, 2002, and the GRI
    Mining and Metals Sector Supplement, 2005. In line with the principles of sustainable development, GRI promotes voluntary disclosure of environmental, economic and social information by
    organisations, especially by private businesses. The purpose of the GRI is to support the transparency and credibility of activities related to sustainable development. For more information about
    the GRI initiative, see www.globalreporting.org.


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               Report of the Czech Coal Group

Activities and Sustainable Development in 2006
    Contents:
       1. REPORT ON BUSINESS ACTIVITIES IN 2006
       1.1 Statement by the Chief Executive Officer of Mostecká uhelná a.s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14


                 1.2 Group Profile and its Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
                             Core Business Lines of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
                             Ownership Structure and Equity Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
                             Map No. 1 Companies and Major Facilities of the Group in the Ústí nad Labem Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
                             History of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
                             Governing and Supervisory Bodies of Mostecká uhelná a.s. and Czech Coal a.s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
                             Consolidated Key Financials for the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


                 1.3 Electricity Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
                             1.3.1 Czech Coal a.s. Trading in Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
                             1.3.2 Electricity Market in the Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
                                         The Position of the End Customer on the Liberalised Electricity Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
                                         Governmental Authorities’ Supervision over Electricity Trade and Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
                                         Electricity Pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
                                         Prices of Electricity from Conventional and Renewable Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
                                         Rules for Electricity Supplier Switching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
                                         Criteria for Selecting a Good Electricity Supplier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
                             1.3.3 Electricity Trading – Offer to Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
                             1.3.4 Electricity Trading Results in 2006 and Outlook for 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21


                 1.4 Brown Coal Trading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
                             1.4.1 Czech Coal a.s. and its Brown Coal Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
                                         Results of Brown Coal Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
                                         Brown Coal Product Range – Data for 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
                                         Market Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4
                        Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
                        Brown Coal Pricing and Changes in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
                        Average Quality Parameters of the Most Brown Coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
                        Customer Health and Safety, Information on the Environmental Impacts of Products . . . . . . . . . . . . . . . . . . . . . . . . . . 22
                        Customers of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23


1.5 Brown Coal Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
            1.5.1 Brown Coal Mining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
                        History of Brown Coal Mining of Most Region. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
                        Extent of MUS Brown Coal Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
                        Map No. 2 Brown Coal Reserves at the Main Sites of Mostecká uhelná a.s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
                        Brown Coal Reserves at the Main Sites as at December 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
                        Gross Extraction Rates of Coal and Overburden. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
            1.5.2 Clean-up and Reclamation of the Land Affected by MUS Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
            1.5.3 Monitoring Brown Coal Quality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
                        Automatic Ash Meters and Sulphur Meters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
                        Automatic Samplers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27      5
            1.5.4 Coal Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
            1.5.5 Outlooks for Brown Coal Production and Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27


1.6 Capital Expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
                        Investments in and Expenditure on Asset Replacement in the Group’s Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
                        Investments in MUS Asset Replacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28


1.7 Standards and Certificates in the Group’s Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29


1.8 Applied Research and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
                        Applied Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
                        Technical Innovation in the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
                        Laboratory Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
       1.9 Other Business Lines in the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
                              Deep Brown Coal Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
                              Mechanical Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
                              Construction and Earthworks, Transport and Building Machines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
                              Reclamation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
                              Operation of Water Treatment Plants and Pumps and Sale of Coal Mining By-products . . . . . . . . . . . . . . . . . . . . . . . . 33
                              Rubber-related Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
                              IT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
                              Support to Sports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
                              Housing Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
                              Development Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34




    2. SUSTAINABLE DEVELOPMENT IN 2006
       2.1 Our Concept of Sustainable Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
                  Statement by the Chief Executive Officer of Czech Coal a.s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38


       2.2 Sustainable Development Practice and Reporting in the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
                  2.2.1 Vision and Strategy of the Group in the Context of Sustainable Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
                  2.2.2 Environmental and Social Responsibility in the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
                              Targets of the Group’s Environmental and Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
                              Facts about the Transformation of Mostecká uhelná a.s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
                              Projects that Enhance Environmental and Social Responsibility in MUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
                              Implementation of Economic, Environmental and Social Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
                              Internal Codes of Ethics, Principles, Methodologies and Concepts for Economic, Environmental and Social Performance . . . . 41
                  2.2.3 Risks and Opportunities of the Group’s Sustainable Business Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
                              Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
                              Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6
          2.2.4 Relationships with Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
                     Principles of Relationships with Stakeholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
                     Types of Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
                     Communication with Stakeholder Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
                     The Group’s Membership of Local and International Organisations and Associations . . . . . . . . . . . . . . . . . . . . . . . . . . 44
          2.2.5 Reporting on the Activities and Sustainable Development of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
                     Sustainable Development on Company Level. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
                     Structure and Key Elements of the Report on Activities and Sustainable Development of the Group . . . . . . . . . . . . . . . 45
                     Selection of the Global Reporting Initiative Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
                     Major Changes that Affect Data Continuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
                     Method of Data Processing and Standardisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46


2.3 Sustainable Development and the Position of Brown Coal Power Generation in the Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . 47
          2.3.1 International Context of the Sustainable Development of Brown Coal Power Generation in the Czech Republic . . . . . . . 47
          2.3.2 Pollutant Emissions from Coal Combustion in the Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
          2.3.3 Importance of Brown Coal Power Generation in the Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
                     Brown Coal Reserves in the North Bohemian Coal Basin and the Mining Limits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48                                   7
                     Brown Coal Production in the Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
                     Proportion of Electricity Generated from Brown Coal in the Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
                      Current and Projected Use of Graded Coal in the Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
                      National Energy Concept, Mining Limits and Coal Production in the Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . 51


2.4 Economic Relationships with the Local Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
          2.4.1 Types of Statutory Levies on Brown Coal Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
          2.4.2 Financial Benefits from Brown Coal Extraction to Communities in the Most/Chomutov Area . . . . . . . . . . . . . . . . . . . . . . 52
          2.4.3 Management of Reserved Mineral Deposits and the Determination and Closure of Working Districts . . . . . . . . . . . . . . . . 53
          2.4.4 Method of Identification and Buyout of Land in Mining Districts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
    2.5 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
               2.5.1 Caring for the Environment in the Group Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
               2.5.2 Information on the Environmental Impact of the Group’s Production Companies in 2006 . . . . . . . . . . . . . . . . . . . . . . . . 56
               2.5.3 Environmental Protection in MUS Brown Coal Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
                           Total Emission and Waste Production in Coal Extraction and Preparation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
                           Use of Energy By-products from the Coal Combustion Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
                           Measuring Air Pollution and Noise Levels Caused by Surface Mine Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
                           System of Monitoring the Side Slopes of the ČSA Surface Mine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
                           Protection Zones. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
                           Air Quality Protection in Brown Coal Sorting and Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
                           Monitoring Brown Coal Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
                           Water Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
                           Waste Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
                           Management and Disposal of Equipment with Possible PCB Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
                           Inspections of Air Pollution Sources, Water Management Facilities and Waste Disposal Facilities. . . . . . . . . . . . . . . . . . 61


    2.6 Reclamation – Landscape and Environment Regeneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
               2.6.1 Reclamation of the Areas Affected by Brown Coal Extraction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
                           History of the Reclamation and a Brief Outline of the Development of the “Czech Reclamation School” . . . . . . . . . . . 62
                           Key Issues Addressed by Reclamation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
                           Difference in Reclamation after Deep and Surface Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
                           Reclamation Problems Brought about by the Approval of the Mining Limits in 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . 62
                           Reclamation Types from the Landscaping Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
                           Reclamation Project Approval Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
                           Relationships between Reclamation and Space Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
                           Caring for Biodiversity and Original Vegetation Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
                           Sources of Reclamation Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
                           Development of Knowledge for Reclamation Method Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64


8
            2.6.2 MUS Reclamation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
                         Maps No. 3 and 4 State of Reclamation in 2006 and the Location of Important Reclamation Sites. . . . . . . . . . . . . 65-66
                         MUS Reclamation: Basic Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
                         Reclamation Costs 1994 - 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
                         Reclamation Projects under Way and Completed by MUS in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
                         MUS Reclaimed Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
                         MUS Reclamation Projects Currently under Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
                         Energy Crop Growing in Reclaimed Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
                         Landmark Reclamation Projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
                         Presentation of Reclamation Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69


2.7 Employee Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
                         Map No. 5 The Importance of the Group as an Employer in the Ústí nad Labem Region in 2006
                         (% of Group employees out of the employed population of the municipalities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
            2.7.1 Shared Principles of Employee Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
                         Safety at Work Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
                         Overview of Social and Health Benefits in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
                         Safety at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
                                                                                                                                                                                                                             9
                         Operation of the Most Main Mine Rescue Station (HBZS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
                         Fire Brigade of Mostecká uhelná a.s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
                         Social and Health Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
            2.7.2 Personnel Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
                         Principles of Employment Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
                         Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
                         Overview of Employee Education in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
                         MUS Programme for Graduates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
                         Information System of the MUS Employee Centre. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
                         New Job Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
                         Employee Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
                         Labour Psychology and Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
                         Co-operation with Schools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
                 2.7.3 Employee Participation in Company Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
                             Importance of Collective Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
                             Collective Bargaining in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
                             Trade Union Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
                             Employee and Trade Union Representation on Company Governing Bodies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78


     2.8 Regional Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
                 2.8.1 Regional Policy of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
                 2.8.2 MUS Regional Co-operation Programme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
                             Partnership with Municipalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
                             Programme of Support for the Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
                             Year-round Sponsoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
                             Selected Results of Regional Co-operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
                 2.8.3 Support for Social Projects at the National Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
                 2.8.4 Support to Universities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
                 2.8.5 Opinion of the Inhabitants of the Ústí nad Labem Region on the Activities of MUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
                             Key Characteristics of MUS as Viewed by the Inhabitants of the Ústí nad Labem Region . . . . . . . . . . . . . . . . . . . . . . . 81
                             Views of the Inhabitants of the Ústí nad Labem Region on the Benefits of MUS for the Region . . . . . . . . . . . . . . . . . 81
                             Views of the Inhabitants of the Ústí nad Labem Region on the Adverse Impacts of MUS’s Activities. . . . . . . . . . . . . . . 81
                             Views of the Inhabitants of the Ústí nad Labem Region on the Desirable Focus of MUS’s Regional Policy. . . . . . . . . . . 82
                             Opinions of the Inhabitants of the Ústí nad Labem Region on the Extension of Mining beyond the Mining Limits . . . . 82
                 2.8.6 Programme of Monitoring Sustainable Development Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
                 2.8.7 Results of the Programme of Monitoring Sustainable Development Factors 2003-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . 83
                             Data as a Precondition for the Co-existence of Industry and Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
                             Impact of Coal Extraction on Population Migration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
                             Types of Households that Move to the Towns/Villages with Extraction Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
                             Opinions of the Business Owners and Cultural and Political Elites of the Communities Neighbouring on the Surface Mines . . . . . 85
                             Opinion of the Inhabitants of Jirkov and Litvínov on Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
                             Monitoring of Environmental Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
                             Seminar on the Co-existence of Industry and Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
                             Reporting of the Benefits and Impacts on Neighbouring Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10
              2.8.8 Project to Unlock Brown Coal Reserves for Future Generations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
                          The “Co-existence” Information and Contact Centre at Litvínov . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
                          Direct Negotiation between MUS and the Property Owners and Other Citizens of Horní Jiřetín and Černice . . . . . . . . . 92
                          Offer of Settlement for the Citizens of Horní Jiřetín in the Case of Resettlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92



3. FINANCIAL RESULTS OF MOSTECKÁ UHELNÁ A.S.
  AND CAPITAL EXPENDITURE IN 2006
   3.1 Financial Results of Mostecká uhelná a.s. in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
              3.1.1 The Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
              3.1.2 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
              3.1.3 Profit and Loss Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
              3.1.4 Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103


   3.2 Investments and Expenditure on Long-term Asset Replacement and Description of Maintenance in MUS in 2006 . . . . . . . . . . . . . 105
              3.2.1 Expenditures on Long-term Asset Replacement and Asset Development for 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
              3.2.2 Description of Maintenance in MUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
                                                                                                                                                                                                           11

4. ANNEXES
   4.1 List of the Reported Group Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
   4.2 Overview of Contents and Indicators in Accordance with the GRI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
   4.3 Auditor’s Opinion in Accordance with the GRI 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
   4.4 Report Evaluation - Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128


5. CD-ROM with Complete Contents of the Report
contents
                        contents




1. REPORT ON BUSINESS    13

   ACTIVITIES IN 2006
           1.1. Statement by the Chief Executive Officer                                                                                                                      of Mostecká uhelná a.s.


              Our Group’s business strengthened significantly in 2006. In spite of a slight decline in our sales, our productivity increased and a substantial growth was recorded in the
              value added and in the profit of the Group. The reserves of coal are shrinking within the existing mining limits, but we were able to compensate the decline in coal sales by
              the growing volumes of the related services provided and by the dynamic sales of electricity.


              The future is not a matter of only a couple of years. Our report, therefore, though primarily focusing on our activities in 2006, also addresses our Group’s development in
              the context of sustainable development. The possibility of mining beyond the mining limits is among the key issues for Mostecká uhelná a.s., its employees as well as for
              the region; indeed, we can say without exaggeration that in the very foreseeable future it will also be important for the nation’s energy security and self-sufficiency. The
              obligations imposed by the Mining Act on the mining companies are clear: ensure that the coal reserves in approved working district are accessible for future generations
              and that conflicts of interests among stakeholders are managed. We have prepared and proposed a project, worth billions of crowns, but the country’s political
              representatives have not yet made any decision for the long term.


              For many years Mostecká uhelná a.s. has been informing the public in the region very openly about its plans and about the steps it takes to mitigate the adverse impacts
              of brown coal mining, including the systematic regeneration of the landscape affected by extraction and a range of other measures. In addition to the numerous charges
              and mandatory payments to the public budgets, we provide various forms of compensation such as support for projects in the areas of public health, education, culture and
              sports and direct assistance to the communities that may be affected by the Company’s activities. It was in this context that the Czech Coal Group, of which Mostecká uhelná
              a.s. is an important member, issued its Sustainable Development Report for the first time two years ago.


              Last year we withstood the market pressures and therefore remained a good partner to our customers and suppliers and many municipalities in the region. This testifies to
              the stability of our Company as the largest employer in the region.


              We are prepared for an open discussion on all issues related to our business activities. And you will certainly find answers to many of your questions in this already third
              Report on Czech Coal Group Sustainable Development.




                                                                                                                                                       Luboš Měkota
                                                                                                                                             Chairman of the Board of Directors
      14                                                                                                                              and Chief Executive Officer of Mostecká uhelná a.s.



contents
1.2 Group Profile and its Results                                                                                                                                                                        contents




The core companies of the Czech Coal Group are Mostecká uhelná a.s., the second largest brown coal producer in the Czech Republic in terms of volumes produced, and Czech Coal a.s., trader in energy
commodities, especially brown coal, electricity and greenhouse gas emission allowances. In addition, the Group includes a number of service companies and has equity interests in heat & power plants.
The Group employs more than 6,000 people and in 2006 it reported consolidated sales of CZK 8.2 billion.

Core Business Lines of the Group
   - Mineral extraction
   - Reclamation and revitalisation of the landscape affected by mining
   - Brown coal trading
   - Electricity trading and provision of related services

                                                                          Czech Coal Group
                                                    Ownership structure and equity interests (as at 31 December 2006)




                      Indoverse Czech Coal Investments Limited                                                      Czech Coal N.V.
                                       40 %                                                                             60 %
                                                                                                                                                                                                          15

                                                                    Mostecká uhelná a.s. (MUS)




                                                                                          Důl Kohinoor a.s.                      Equity interests in heat & power plants:
                                    Czech Coal a.s.                                       DTS Vrbenský, a.s.                       Teplárna Otrokovice a.s. (34 %)
                                                                                          Krušnohorské strojírny Komořany a.s.     Energetika Malenovice, a.s. (34 %)
                                                                                          RENOGUM-NILOS a.s.                       Teplárna Strakonice, a.s. (13,47 %)
                                                                                          HUMECO, a.s.                             Vltavotýnská teplárenská, a.s. (5,2 %)
                                                                                          REKULTIVACE a.s.
                                                                                          HIPODROM MOST a.s.                     and equity interests in other companies
                                                                                          Infotea s.r.o.
                                      E-GATE a.s.                                         MUS-Uniservis, spol. s r.o.
           Czech Coal a.s. and E-GATE a.s. have their registered offices in Prague. Most of the remaining companies of the Group are based in the Ústí nad Labem Region.

                                                                    Map No. 1 Companies and major facilities of the Group in the Ústí nad Labem Region, 2006




      16




contents
                                                                                                                                                                                              contents


History of the Group                                                                                                  Management Team of the Company
– 1993, establishment of Mostecká uhelná společnost (MUS), the second largest brown coal mining                          Luboš Měkota, Chief Executive Officer
  company in the Czech Republic.                                                                                         Petr Kolman, Executive Director
– 1998 MUS privatised by the Appian Group.                                                                               Vladimír Rouček, Chief Operations Officer
– 2002 Appian Group a.s. obtained a licence as an energy commodity trader.                                               Jan Rančák, Chief Financial Officer
– March 2005 MUS managers Antonín Koláček, Luboš Měkota, Vasil Bobela and Petr Pudil bought                              František Svoboda, Chief Technical Officer
  energy assets in the Czech Republic, including MUS and Appian Group a.s. and others, from the Appian                   Ivan Ondřejka, Chief HR Officer
  Group through Severočeská uhelná a.s..                                                                                 Vladimír Fornůsek, Chief Restructuring Officer
– May 2005 Appian Group a.s. was renamed to Czech Coal a.s. The Group was restructured under                             Damir Dordevič, Maintenance Officer
   a new name, Czech Coal.                                                                                               Jan Pivko, Chief Information Officer
– May 2006 The Czech Coal Group and the E.ON Group established a joint venture in Teplárna Otrokovice a.s.               Vladimír Zemánek, Special Project Director
  and Energetika Malenovice, a.s. Forty percent of Czech Coal shares were bought by the Cypriot financial                Liběna Novotná, Spokesperson, head of the communication department
  investor, Indoverse Czech Coal Investments Limited, which thus entered into the Czech Coal Group.
                                                                                                                      Czech Coal a.s.
Governing and Supervisory Bodies of Mostecká uhelná a.s. and Czech Coal a.s. (as at 31 March 2007)                    Supervisory Board
                                                                                                                          Antonín Koláček, Chairman
Mostecká uhelná a.s. (MUS)                                                                                                Oldřich Klimecký, Vice-Chairman
Supervisory Board                                                                                                         Helena Veverková, Member
Under the Company’s Articles of Association, the Supervisory Board has six members, who are
elected and removed by the General Meeting of Shareholders.
     Antonín Koláček, Chairman
                                                                                                                      Board of Directors
                                                                                                                          Petr Pudil, Chairman
                                                                                                                                                                                               17
     Oldřich Klimecký, Vice-Chairman                                                                                      Vasil Bobela, Vice-Chairman**
     Helena Veverková, Member                                                                                             Luboš Měkota, Vice-Chairman
     Luboš Dubnička, Member                                                                                               Petr Kolman, Member
     Vlastimil Waic, Member *                                                                                             Jan Rančák, Member
     Jiří Cingr, Member*                                                                                                  Vladimír Šístek, Member
                                                                                                                          Tomáš Fohler, Member**
Board of Directors
    Luboš Měkota, Chairman                                                                                            Management Team of the Company
    Vasil Bobela, Vice-Chairman**                                                                                        Petr Pudil, Chief Executive Officer
    Petr Pudil, Vice-Chairman                                                                                            Vladimír Šístek, Chief Financial Officer
    Petr Kolman, Member                                                                                                  Alexandr Musil, Coal Trade Director
    Jan Rančák, Member                                                                                                   Zdeněk Fousek, Power Trade Director
    Vladimír Šístek, Member                                                                                              Zdeněk Neterda, HR and Facility Director
    Tomáš Fohler, Member**                                                                                               Radek Stavěl, Corporate Communication Manager
Notes: * Members of the Supervisory Board of Mostecká uhelná společnost representing the Company’s employees.
       ** Members of the Board of Directors not holding any executive positions in the organisation (29 % members).
           Consolidated key financials for the Group*



           Key financials for the Group, year-on-year comparison (CZK million)*                                    2005             2006
           Net sales (production + margin)                                                                         8,092            8,199
           Value added                                                                                             4,862            5,562
           Consolidated operating revenues                                                                         9,148            9,103
           EBITDA                                                                                                  2,460            2,247
           Operating profit/loss                                                                                   1,707            1,556
           Profit before tax                                                                                       1,772            2,313
           Profit after tax                                                                                        1,296            1,866
           Income tax on ordinary activities                                                                         476              447
           Number of employees                                                                                     6,926            6,398

           Additional financials for the Group (CZK ‘000)*                                                                      2006
           Costs of material purchases (consumption in operation)                                                            2,636,402
           Total payroll costs and benefits (personnel costs)                                                                2,525,511
           Total tax                                                                                                           576,127
           Subsidies received (not including government expense on reclamation)                                                 51,806
           Percentage of contracts where suppliers were paid in accordance with agreed conditions                                100 %



           The detailed financial results of the largest Group member company, Mostecká uhelná a.s., are contained
           in Chapter 3.1 Financial Results of Mostecká uhelná a.s. for 2006.

           * The consolidated group includes the following companies: Mostecká uhelná a.s., Czech Coal a.s., Důl Kohinoor a.s., Krušnohorské
             strojírny Komořany a.s., DTS Vrbenský, a.s., HUMECO, a.s., REKULTIVACE a.s., RENOGUM-NILOS a.s., MUS-UNISERVIS, spol. s r.o.,
             HIPODROM-MOST a.s., Infotea s.r.o., Servis Leasing, a.s., Porteuroinvest Anstalt Lichtenstein and Synergoinvest SA, CH-Fribourg.
             As against 2005, the 2006 data does not include information about Teplárna Otrokovice a.s. and Energetika Malenovice, a.s.




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1.3 Electricity Trading                                                                                                                                                                                                   contents


Czech Coal a.s. focuses primarily on the sale of the brown coal from Mostecká uhelná a.s., on               4) No power plant supplies electricity straight to the end customers. Electricity is always
the purchase and sale of electricity and greenhouse gas emission allowances, and on the                        supplied through traders. There is no need for an electricity supplier to own a power plant,
provision of related services.                                                                                 just as there is no need for a fuel filling station operator to own an oil well.
Czech Coal a.s. is one of the largest energy commodity traders in the Czech Republic.
                                                                                                            Governmental Authorities’ Supervision over Electricity Trade and Distribution
1.3.1 Czech Coal a.s. Trading in Electricity                                                                Electricity trade and distribution, including pricing, is strictly supervised by governmental
                                                                                                            authorities. These authorities protect the interests of end customers, create rules and supervise
Czech Coal a.s. began trading in electricity in the Czech Republic in 2002, as early as was                 compliance with those rules by all market players, particularly by distributors.
legally possible after the opening of the electricity market in the Czech Republic.
Czech Coal a.s., as a part of a major energy Group, possesses a very strong pool of knowledge               Governmental authorities overseeing the electricity market and their major activities from the
and capital to support its own electricity sales.                                                           viewpoint of the end customer:
At first, Czech Coal a.s. primarily focused on electricity wholesaling. Large volumes of electricity were
sold mainly on international markets during 2001-4. This was very important for gaining experience,         Energy Regulatory Office (ERÚ) - www.eru.cz:
because the foreign markets had been liberalised earlier than that in the Czech Republic.                       Sets regulated prices for electricity transmission and distribution and the related services
The Czech electricity market underwent unprecedented changes over the last five years.                          Sets other regulated prices and charges (e.g., for co-generation, renewable resources,
Changes in electricity trading constitute key information for many energy customers.                            reactive power, fee to the electricity market operator, etc.)
                                                                                                                Sets out and amends the rules governing the electricity market
1.3.2 Electricity Market in the Czech Republic                                                                  Provides for equal conditions for end customers irrespective of the part of the country
                                                                                                                where they are connected
The Position of the End Customer on the Liberalised Electricity Market
1) The end customer has the right to enter into an electricity supply contract with any supplier            State Energy Inspection (ČR – SEI) - www.cr-sei.cz:
                                                                                                                                                                                                                           19
   in the Czech Republic.                                                                                       Supervises compliance with laws and regulations in the electricity industry
2) Electricity distribution and transmission is a government-regulated activity. The transmission               Resolves disputes between distributors and customers
   and distribution price is regulated and is the same for all entities in the Czech Republic at                Imposes fines based on its own findings. The outcomes of ČR-SEI’s supervisory activities
   each voltage level. As required by law, electricity supply to the end customer is provided by                take the form of penalising measures taken against entities that breach laws and
   the distributor serving the respective area. The distributor is obliged to transport electricity             regulations. However, in the first place these outcomes enable governmental authorities
   to the customer from any supplier under the same conditions. By law, the distributor is not                  to analyse objectively the behaviour of all players in the areas of generation, distribution
   allowed to prefer or discriminate against any supplier or customer. In other words, the                      and energy consumption and, being agencies of the State, to take effective measures
   conditions of electricity transmission and distribution and the fees for these services must
   always be the same for the customer, regardless of who supplies the electricity to him.                  Electricity Market Operator - www.ote-cr.cz:
3) Traders purchase electricity either straight from the producer or through the electricity                    Identifies the actual values of electricity supply and consumption for the electricity market players
   exchange. Cross-border supply is another possible source of electricity. Only accredited                     Evaluates the differences (imbalances) between (on the one hand) the contracted electricity
   traders have access to the electricity exchange. The role of the exchange will strengthen in                 supplies by entities subject to clearing or by registered market participants and (on the other
   the future. Traders who are able to combine purchases of electricity from both domestic and                  hand) the actually metered electricity supplies and takes for the registered market participants
   foreign sources have a competitive advantage.                                                                Ensures the clearing and settlement of the imbalances between the entities that are subject to clearing
           Electricity Pricing                                                                                                           area served by each distributor in the Czech Republic. The regulated prices include in particular the following:
           Energy prices for the end customers are formed on the market. The price varies by supplier and the services                          The charge for distribution, i.e. the use of networks/the grid
           offered by him. The end customer can influence this part of the price by selecting a supplier offering good                          The charge for the booked capacity (monthly, annual)
           services and agreeing on supply conditions with the supplier.                                                                        The charge for system services
           Energy price varies during the year as well as during the day:                                                                       Premium on the price for electricity from renewable resources
           - During the year there are seasonal differences between winter and summer
           - During the day there are differences between the peak and off-peak periods                                                              Prices of Electricity from Conventional and Renewable Resources
           - Variations depending on the date of electricity purchase by the trader                                                     The prices of electricity generated from conventional resources are determined by the market
           - Variations depending on the date on which the end customer signs a supply agreement.                                       whereas the prices of electricity generated from renewable resources are regulated – they are fixed
                                                                                                                                        at a level at which the distributor must purchase electricity from the generators that use renewable
                      The main components of electricity price for the end customer
                                                              (illustration)                                                            resources. A comparison of these two types of price is given below:
                                                                                                                                            Market price of energy on the wholesale market in 2007:
                    The part of the price that                           The parts of the electricity price                                  Average coal/nuclear mix: CZK 1,320/MWh
                       can be influenced                                    that cannot be influenced                                       Price of electricity from renewable resources in 2007:
                      by the end customer                                 by negotiations are declared                                       Biomass firing: CZK 2,340 – 3,375/MWh, depending on biomass category
                                                                                 by the regulator                                            Wind power: CZK 2,460 – 3,200/MWh, depending on the date of putting into operation
                                                                          Regulated price                                                    Solar energy: CZK 6,410 – 13,460/MWh, depending on the date of putting into operation
                Price on the wholesale market                             for the use          Regulated price
                of the energy from generators                             of network           for reserved capacity                    The prices of energy from renewable resources are subsequently reflected in regulated prices. For
                                                                                               (monthly, annual)                        2007, this premium is CZK 34.13/MWh for each end customer. Renewable resources are expected
                                                                                                                                        to continue being supported even more and, consequently, this premium to be paid by the end
                                                                                                            Regulated
                                                                                                            price for                   customers will grow significantly in the future.
                                                                                                            system
                                                                                                            services                  Rules for Electricity Supplier Switching
                                                                                                                                      A customer wishing to switch to another electricity supplier must take the following five steps:
                                                                                    Regulated premium                                    1. Terminate the agreement with the current supplier.
                                                   The trader’s margin
                                                                                    for renewable sources
                                                                                                                                         Prior to switching suppliers the contract in place with the current electricity supplier must be
              Traders are not responsible for the growth of energy prices on the Czech market over the last five years.                  terminated. If your current contract is a fixed-term agreement (one year is the most frequent term of
              It is due to the rapidly growing generators’ prices on the wholesale market. For example, in 2003 the                      such contracts) it is enough not to extend the contract any more. You also have to terminate a fixed-
              price of the supply of energy, with constant power of 1MW throughout the year (the annual band) was                        term contract that contains provisions on automatic extension (for example, if not terminated three
              about CZK 735/MWh, whereas for 2007 the price is about CZK 1,200/MWh – an increase by more than                            month prior to the end of the term, the contract is automatically extended by one year). If you have in
              60%. There are a number of other factors also contributing to this growth, for example, the emission                       place a contract in perpetuity containing provisions on a notice of termination, it must be terminated
              allowances and the high regulated mandatory buyout prices of electricity from renewable resources. In                      in the way described in the contract.
              the following years the energy price will undoubtedly continue growing due to the introduction of excise                2. Enter into an agreement on supply point connection with a new distributor.
              duties on the raw materials used for energy generation and the planned “carbon tax”.                                       In the case of the first supplier change, an agreement on supply point connection must be executed.
              Regulated electricity prices, declared by the independent authority (Energy Regulatory Office) for a particular year,      The customer enters into such agreement with the distributor that serves the respective area. The
              cannot be changed by negotiations during the year.The regulated prices are applicable for the entire year in the           connection agreement defines the delivery point between the customer and the distributor in technical
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                                                                                                                                                                                                             contents

   terms, it is free of charge, and no financial obligations arise from it. It is entered into for the   without changing the number. Czech Coal focuses on the corporate clientele.
   first time only, and in perpetuity. The agreement can be executed at any time during a year.          Within the range of its value-added services, Czech Coal offers the following:
   The request for the preparation of this agreement must be submitted at least thirty days                  Cost optimisation
   before the planned supplier change.                                                                       Detailed information – each of our customers knows for what he is paying: data from each
3. Obtain the Registered Market Participant Number from the electricity market operator                      bill is first reconciled between the customer and Czech Coal a.s. before the bill is sent
   (Operátor trhu s elektřinou, a.s., OTE)                                                                   A strong pool of resources and extensive experience on both domestic and international
   For the first supplier change, a Registered Market Participant (RÚT) number must be obtained.             markets
   The electronic registration form is filled in on OTE’s website. Once the electronic form is sent          Customer-focused culture of selling and service provision – a trader rather than a call
   and a registration fee of CZK 500 is paid, the customer obtains his RÚT Number within 14 days.            centre is in contact with each end customer throughout the year
4. The customer obtains the right to select his supplier upon entering into an agreement on                  Evaluation of the customer’s load profile
   supply point connection with his respective distributor and obtaining a RÚT Number from                   We will propose the optimum tariff structure and assistance in optimising the booked
   the electricity market operator.                                                                          capacity
5. Enter into an electricity supply agreement and a distribution agreement with the new supplier.            Assistance in finding an appropriate time of electricity purchase for the customer
   An agreement on bundled electricity supply services is executed as a rule, in which the               We are able to help new customers, if they are interested, with the administration of supplier
   complete energy supply is bundled with the provision of distribution services (i.e.                   switching. We can assist in the entering into the agreement on supply point connection and
   performance of points 2 and 3 above).                                                                 in obtaining the Registered Market Participant Number.

Criteria for Selecting a Good Electricity Supplier                                                       1.3.4 Electricity Trading Results in 2006 and Outlook for 2007
    It has a licence for electricity trading (licences are issued by the Energy Regulatoty Office
    to applicants if the statutory conditions are met)                                                   In electricity trading, Czech Coal a.s. has so far focused on wholesale customers. In 2006 the
    It is able to help and guide you through the process of supplier switching
    It is able to buy electricity on both the domestic and international electricity exchanges.
                                                                                                         Company broadened its focus and strongly entered the market for supplies to end customers.
                                                                                                         The strategic focus on small and medium-sized industrial enterprises, a highly motivated sales
                                                                                                                                                                                                              21
    The exchange is a competitive environment where only financially strong companies can                force, and an aggressive marketing campaign have strengthened the customer portfolio,
    survive                                                                                              adding to it more than thirty Czech industrial companies.
    It is able to diversify its electricity sources (importing electricity from abroad, trading on            Czech Coal a.s. sold 1.5 TWh of electricity (financially, this represents an annual turnover
    the exchange, running a foreign subsidiary) to optimise the purchases and supplies of                     of about CZK 2 billion) and ranked among the first five players on the market, next to the
    electricity for end customers                                                                             owners of distribution networks
    It is strong financially – able to buy and offer large electricity volumes, and so guarantee              Under its Central Europe expansion programme, Czech Coal a.s. established a subsidiary
    electricity supply to a large number of customers                                                         named Czech Coal SK s.r.o., in Bratislava, Slovakia
    It has a reliable legal form: a public limited company (a.s.), which generally enjoy better          In 2007, Czech Coal a.s. will continue to strengthen its customer-focused sales team for both
    credibility, rather than a private limited company (s.r.o.)                                          new and existing clients. We expect our electricity sales to grow dynamically by 15 – 20%
                                                                                                         annually. We rely on our competitive advantages, professional customer care, and flexible
1.3.3 Electricity Trading – Offer to Customers                                                           servicing to save our clients’ time and funds.

Czech Coal a.s. wishes to be a good partner to customers, rather than being just an electricity
supplier. Electricity supplier switching is as easy as switching to another mobile operator
           1.4 Brown Coal Trading
           1.4.1 Czech Coal a.s. and its Brown Coal Trade                            2. The quantity of powder coal (rough powder) sold to heat & power                    The key objective of Czech Coal a.s. in the coal trade area in 2007 is
                                                                                         plants was 1.4 million tonnes, which was more than 9% of the                      to keep the Most coal sales volumes at the levels of the previous
           Mostecká uhelná a.s. is one of the major suppliers of brown coal              Company’s total output.                                                           years and to maintain the current market share of brown coal supply
           products to both the Czech energy sector and retail customers and         3. The Company also normally sells untreated (run-of-mine) coal,                      to electricity and heat generators as well as the market share of
           ranks second in the Czech Republic in terms of the volume of brown            representing 2% of the total output.                                              graded coal for households and small boiler plants.
           coal extracted. The Company’s coal business was gradually                 4. Graded coal (1.2 million tonnes, almost 8% of total sales) is
           reorganised and its brown coal sales activities were transferred to its       supplied to households and small boiler plants.                                   Brown Coal Pricing and Changes in 2006
           subsidiary, Czech Coal a.s., which sells the Most brown coal to power     Production of additive-treated rough powders provides                                 Mostecká uhelná a.s. holds a brown coal market share of 32.4%. The
           and heat industries and, in addition, provides sales representation for   environmental benefits. The Komořany preparation plant produces                       market determines the price of coal. The final price of brown coal
           Mostecká uhelná a.s. for the sale of graded coal to households and        rough powders mixed with limestone (limestone absorbs sulphur                         consists of the price of the fuel itself, the costs of transport and, in
           small boiler plants.                                                      oxides, thus providing for the desulphurisation of the coal). This fuel               the case of retail sale, the margins of the distributors and sellers. In
                                                                                     is intended for environmentally friendly burning in small boiler plants.              addition, excise tax is to be imposed on coal from 1 January 2008.
           Coal trade activities were primarily focused on four areas in 2006:       As much as 26,000 tonnes of additive-treated fuel was produced in                     Czech Coal a.s. practices the policy of equal conditions in relation to
           • Brown coal sale to end customers                                        2006. The processes of burning other types of steam coal and brown                    all customers, the price only depending on how, and how much, coal
           • Coal transport                                                          coal for industry in generating units are desulphurised by other                      is bought by the customer. Each medium-term contract has
           • Coal sales agency operations                                            methods.                                                                              a provision on future development of the price: this provision is
           • Agency service for the purchase and sale of energy by-products                                                                                                agreed separately with each customer, depending on the conditions
                                                                                     Market Segments                                                                       of supply and purchase. The decision on the guaranteed coal supply
           Results of Brown Coal Trade                                               The Group sells coal through the Sales Unit of Czech Coal a.s. In                     volumes and delivery dates depends on the customer’s business
           In 2006 the Group sold 15.7 million tonnes of the Most brown coal         2006, the Most coal was sold in three major market segments:                          considerations. Customers who did not enter into a contract with the
           on the market. Within the Group, it achieved revenues of CZK              Large power plants...................................................… 69.94%         Company buy coal on the open market, where the price is determined
           6,459,907,000 from coal sales.                                                                                      (11 million tonnes of brown coal)           by demand and supply. The contracts are signed in Czech Coal a.s. for
           The domestic market is the key territory where the Most coal is sold.     Heat and power plants and industrial power plants ….. 23.31%                          periods ending in 2015 at the latest. This is so because of the
           As much as 15.5 million tonnes of Most coal, i.e. almost 99% of the                                                                      (3.7 million tonnes)   uncertainty as to the mining limits, i.e. the future of extraction at the
           annual output, was sold on the domestic market. Slovakia                  Households and small boiler plants………...……….… 6.75%                                   ČSA site.
           predominates among the export territories: the Company sold there                                                                        (1.1 million tonnes)
           130,000 tonnes of the Most brown coal out of its total coal exports                                                                                             Average Quality Parameters of the Most Brown Coal
           of 191,000 tonnes.                                                        Business Strategy                                                                     Detailed data is available in the Most Coal Catalogue on the
                                                                                     The Company’s business strategy is based on medium- and long-term                     website: www.czechcoal.cz/en/profil/mus/produkty/catalogue.html
           Brown Coal Product Range – data for 2006                                  agreements that respect the mutually advantageous business
           1. The production and sale of the heating and industrial mixes for the    conditions and create a platform for the use of brown coal as                         Customer Health and Safety, Information on the Environmental
              electricity and heat supply industries predominates. The Company       a reasonably priced locally available energy commodity on a long-                     Impacts of Products
              sold 12.8 million tonnes of these products, representing more than     term basis.                                                                           The issues of customer health and safety in handling and using the
              81% of the Company’s total coal output.                                                                                                                      coal products are addressed in accordance with the applicable
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                                                                                                                                                                                                                                     contents


regulations, general safety regulations, ČSN and ČSN/ISO standards, customers’                                                  The Group does not have any information on the specific environmental impacts of its
methodologies and safety rules, operating rules, technological processes of coal product                                        products as used at its customers – it has no overview of emissions and the content of
handling, and combustion processes.                                                                                             pollutants in the ash and in the flue gases generated by the plants to which it supplies coal;
                                                                                                                                however, it is does provide information about the quality parameters of the Most coal.
                                                                                                                                Supported by analyses performed by accredited laboratories, this information includes the
                                                                                                                                results of the chemical analyses of the ash, elementary analysis of pure coal substance,
                                                                                                                                radioactivity, contents of chlorine and fluorine, the forms of sulphur, the emission factor of the
                                                                                                                                individual types of fuel, and the basic fire safety characteristics of the fuel. The Most Coal
                                                                                                                                Catalogue is a detailed source of information on the options for using the products and the
                                                                                                                                potential risks involved in coal product handling.
   Sales of coal from Most by product type, 1994-2006 (million tonnes)
                                                                                                                                The purchase agreements concluded between Czech Coal a.s. as a trading company and each
    25                                                                                                                          customer include provisions on the quality of the coal to be supplied, on quality testing and
              .7




                                  7
                                 7
                                .4
            22




                               .2
                        .8



                              22
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                                                                                                                                on the claims procedure in the case of coal delivery faults; these provisions are contained
                      21




                                                  4
                                                .7




    20                                                                                                                          either in the body of the contract or in an appendix thereto. Quality certificates containing the
                                                                         9
                                            18




                                                                 9




                                                                                          6
                                                                       .0
                                                               .3




                                                                                       .9
                                                                                 .6




                                                                                                1

                                                                                                         .4

                                                                                                                 3
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                                                                                               .2
                                                             17




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                                                                                                                .7
                                                                                                                                basic technological quality analysis, delivery weight and dispatch date are issued for specific




                                                                                                      16
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                                                                                                              15
                                                        3
                                                      .2




    15                                                                                                                          daily deliveries if the customer so requests.
                                                    13




                                                                                                                                Upon customers’ requirements, data on the quality of the supplied coal is sent electronically
    10                                                                                                                          to the customers on a regular basis after the daily delivery and after evaluation of sample
                                                                                                                                analyses in Mostecká uhelná’s laboratories. Quality data on the supplied fuel is provided to all
        5                                                                                                                       customers together with the invoices for the deliveries. To obtain information from MUS, the
                                                                                                                                customers may use the free telephone line 800 111 311.
                                                                                                                                                                                                                                      23
        0
             94

                    95

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                                                                                                                                Customers of the Group
            19

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             graded               powder                    heating and industrial mixes              run-of-mine               Czech Coal a.s.’s most important customers buying coal and related services are listed on the
                                                                                                                                website: www.czechcoal.cz/en/profil/skupina/reference/index.html

                                           Most coal sales by product type 1994-2006 (including colliery consumption) (in ‘000 tonnes)

                                           1994             1995            1996              1997            1998      1999        2000          2001          2002         2003          2004         2005           2006
graded                                     5,188            4,096            4,308            3,823            2,293    1,257        1,109        1,152         1,139        1,149         1,039         1,075         1,204
powder                                     4,686            3,653            3,691            3,368            2,713    2,520        2,474        2,451         2,243        2,105         1,914         1,901         1,434
heating & industrial mixes             12,825              14,024          14,155          15,132             13,624    9,211      13,635        13,260        12,994       13,424        12,967       12,821        12,785
run-of-mine                                     8                30            115             149              111      244           176          231           227          282           293           310           309
total                                  22,707            21,803            22,269          22,472          18,741      13,232     17,394        17,094        16,603       16,960        16,213        16,107        15,732
           1.5 Brown Coal Production
                                                                                                              Map No. 2 Brown coal reserves at the main sites of Mostecká uhelná a.s., December 2006
           1.5.1 Brown Coal Mining

           History of brown Coal Mining of Most Region
           Brown coal mining and preparation is the core business line of Mostecká uhelná a.s. (MUS).
           The Company continues in the half-millennium tradition of brown coal mining in North-
           western Bohemia. In the area around Most, the beginnings of the use of coal date back to
           1594. In 1871 the Vienna Exchange Bank established in Vienna the Most Company for Coal
           Mining as the first brown coal public limited company in the Austrian-Hungarian Empire. The
           state-owned company Severočeské hnědouhelné doly n.p. (SHD) in Most, was established at
           the end of 1945 and this name was then used until 1992. Then SHD disintegrated and, on 1
           November 1993, the National Property Fund established Mostecká uhelná společnost a.s.,
           which was incorporated in the Companies Register. The Company was founded by a merger of
           former state-owned enterprises Doly a úpravny Komořany [surface mines and preparation
           plants], Doly Ležáky and Doly Hlubina. Within the context of industry transformation, certain
           operations were scaled down and then closed, for example, the Herkules coal preparation
           plant, the Most surface mine, Alexander deep mine and Kohinoor deep mine.
           The demand for products from the Most brown coal has stabilised and therefore the Company
           did not have to reduce its production and processing capacities any longer in 2006. Consistent
           restructuring efforts including, in particular, reduction of the Company’s costs and the
           increasing productivity, made it possible to achieve growing profits in spite of the decrease in
           the volumes produced.

           Extent of MUS Brown Coal Mining
           Mostecká uhelná a.s. is currently exploiting an area of more than 9,300 hectares. Coal is being
           extracted in surface mines at the Československá armáda (ČSA) and Vršany sites, where the
           annual amount of coal sold was 15,274,000 tonnes in 2006. At Vršany, coal is mined within
           the approved working districts of Holešice and Vršany. At the ČSA site, coal extraction will
           continue within the mining limits. For 2006 the coal production volume declined by 367,000
           tonnes (2%), compared with 2005. The last deep brown coal mine still working in the Czech
           Republic, the Centrum Mine, is operated by a subsidiary, Důl Kohinoor a.s.: its output exceeded
           470,000 tonnes of coal in 2006. On the whole, coal output in the Group amounted to
           15,744,600 tonnes.



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         Brown Coal Reserves at the Main Sites as at December 2006 (Source: MUS)                                                           Production and delivery of MUS coal products
                                                                                                                                  Total products                    Of which by type of delivery
MUS coal reserves within the range of the existing mining limits
Surface mine          Tonnes of coal Calorific value         Heat contained                 Life of                                                     direct delivery           on rail           trucks
                                                             in the reserves               the mine                                2005     2006        2005       2006       2005     2006       2005     2006
                       million tonnes        Qir (MJ/kg)             PJ
ČSA, Stage I           52.921               17.96                      950.5                 to 2017               Komořany
                                                                                                                                   8,610    8,377      2,827       2,359      5,112    5,321      671        698
Vršany                329.141               10.94                    3,600.8                 to 2058               plant
                                                                                                                   Hrabák
                                                                                                                                   7,187    7,046      6,162       6,059      1,025         987
                                                                                                                   plant
MUS coal reserves beyond the mining limits
                                                                                                                   Deliveries –
ČSA, Stage II   285.624       16.96                                  4,838.41             until 2065
                                                                                          (with smooth             run-of-mine       310      309        310        309
                                                                                      progress from Stage I)       coal
Prospective MUS sites
ČSA, Stages III & IV 470                     15.5                    7,285               after 2065

                                                                                                                   Coal products are made and loaded at the Hrabák processing site and at the Komořany coal
                        Gross extraction rates of coal and overburden                                              preparation plant.
Site                          Coal (in tonnes)                 Overburden (in cubic metres)                        Heating mixes of a lower calorific value, intended primarily for the Počerady, Chvaletice and
                           2005                 2006                2005                  2006                     Mělník power plants, are processed at the Hrabák site. The graded coal, powder coal and single-
ČSA                     5,166,076            5,075,450          18,664,056            22,493,191                   purpose products are made in the Komořany coal preparation plant, from where they go mainly
                                                                                                                   to households and heat and power plants.
                                                                                                                                                                                                                      25
Vršany                 10,474,491           10,198,550          13,066,355          *13,321,986
MUS total              15,640,567           15,274,000          31,730,411            35,815,177
Důl Kohinoor a.s.         468,669               470,620
Group total           16,109,236            15,744,620         31,730,411            35,815,177
                                                                                                               3
                                                                            * including topsoil – 48,409 m


                                        Extraction rates of overburden and coal in the MUS surface mines (not including the Centrum deep mine)
                              1994             1995        1996           1997          1998              1999     2000           2001         2002       2003             2004       2005         2006
Overburden removal          85,966            74,546       63,976         62,628        54,974            49,543   43,327         36,608      35,983      29,641       33,389         31,730      35,815
(‘000 cubic metres)

Coal output                 23,401            22,308       22,302         22,515        18,766            13,234   17,066         16,850      16,269      16,498       15,768         15,641      15,274
(‘000 tonnes)
           1.5.2 Clean-up and Reclamation of the Land Affected by MUS Mining                                            1.5.3 Monitoring Brown Coal Quality

           On a long-term basis, MUS applies reclamation processes to restore the landscape affected by mining. Act     To maintain good quality on a consistent basis over the entire breadth of the fuel product range, the Company
           No. 44/1988 on the Protection and Utilisation of Mineral Resources requires mining organisations to          implemented an information system that monitors, in real time, a wide range of information and provides an
           ensure clean-up and reclamation of the affected land.                                                        objective view of the operation of the equipment. The system consists of a network of sensors: high-quality
                                                                                                                        platform balances, conveyer scales, automatic samplers, sulphur meters and ash meters. Computer processing
           Current area affected by MUS mining activities                      9,335.86 hectares                        of the data from these instruments makes it possible to stabilise the quality parameters of the produced types
           Reclamation work completed as at 31 December 2006                   6,012.52 hectares                        of brown coal. The continuously monitored parameters include the calorific value and the content of ash,
           Reclamation work under way                                          1,792.64 hectares                        sulphur, water, etc. This system helps to maintain the quality parameters indicated in the Most Coal Catalogue
                                                                                                                        without any greater variations. In the case of any customer’s complaint, the date, shift and loading site,
           The actual costs of clean-up and reclamation amounted to CZK 71,738,000 in 2006. Of this, MUS spent          including the time and the employee who supervised the loading, can be traced in the archives.
           CZK 62,388,000 on the clean-up and reclamation work. The remaining CZK 9,350,000 was provided from           Penalty was only paid on 26,606.5 tonnes out of the total quantity of 15,732,000 tonnes of coal sold in
           other sources (government costs).                                                                            2006, which is 0.17 % of the total MUS deliveries.
           Since 1995 the mining waste has only been deposited in the depleted mines (inner dumps). The extensive
           reclamation process in the outer dumps was in its final stage in 2006. The total area affected by mining     Great attention is always paid by MUS to the quality of brown coal deliveries. Ash meters and samplers
           continues shrinking.                                                                                         therefore play an important role in the quality monitoring system, which is being improved on a systematic
                                                                                                                        and continuous basis.

                         Total area affected by MUS mining (including reclamation) (in hectares)                        Automatic Ash Meters and Sulphur Meters
              1999        2000         2001        2002        2003         2004        2005       2006                 Production is managed in MUS on the basis of the data obtained from the installed ash meters (GE 2000,
                                                                                                                        by which the previous meters, GE 1100 S, are being replaced). In five-minute intervals, the ash meters
             14,889      13,960       11,598      11,074      10,801        9,863       9,741      9,336                measure coal density and, thereby, ash content. MUS has 39 ash meters at present. They are installed on
                                                                                                                        the large-scale excavators (so that even the driver of the excavator can influence coal quality), at the belt
                                                                                                                        conveyers and at the homogenising plant of the ČSA surface mine, at the Komořany coal preparation
                                                                                                                        plant, on the excavators of the Vršany surface mine, and at the belt conveyers and loading bin at the
           For MUS, reclamation is not just a statutory obligation: it is also a business opportunity that supports     Hrabák site. Three automatic sulphur meters are installed at the ČSA site.
           regional development and the use of renewable resources (biomass). HIPODROM MOST a.s., a subsidiary          Ash meters serve to control the quality of steam coal as well as the quality of coal for small customers
           of MUS, manages a reclamation park, built on the former Velebudice Dump, with an internationally             (small boiler plants and households).
           recognised horse racing track. It organises numerous sport and social activities for the region there. One   Further treatment and commercial use of coal depends on ash content. Where the ash content is up to
           of the reclamation projects is focused on the testing of promising energy crops that could be included in    12%, no treatment is needed and the coal is only sorted by size. Coal containing 12% to 35% ash may
           the biotechnological process of reclamation. Another MUS subsidiary, REKULTIVACE a.s., conducted pilot       be treated by a separation process using a heavy suspension (coal washing: the coal goes to a bath where
           trials with the cultivation of energy sorrel. An area of 6 hectares was sown with this crop during 2004-5    the coal containing dirt falls to the bottom faster and the good-quality coal that remains on the surface
           at the Slatinice site and another 60 ha at the Slatinice/Střimice site. (For more information, see Section   undergoes further treatment). The separation (washing) process takes 10 seconds at the maximum. The
           2.6.2 Reclamation MUS: Energy Crop Growing in Reclaimed Areas).                                              brown coal that contains up to 12% ash is used for the production of graded coal, which is supplied as
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nut, cube and stone coal to households and to small boiler plants. Coal with more ash than           1.5.4 Coal Delivery
12% is supplied to industry, to heat and power plants and to the power generators (rough
powders, industrial and heating mixes).                                                              MUS products are delivered to customers in three ways: on rail, by road trucks and directly by
Parameters of the run-of-mine coal vary with the mining sites within the surface mine. The           a belt conveyer.
results of the analyses of samples from the automatic samplers serve for setting the ash meters.
                                                                                                         MUS Rail Transport
Automatic Samplers                                                                                       MUS’s own railway system is used to transport overburden material and coal from the
Quality inspection consists in the collection of samples for the determination of water, ash and         excavators to the destinations, including the dumps, the preparation plant, crushing plants
sulphur contents and of the calorific value, and the granulometric analysis (coal grade control).        and storage sites, and also to remove combustion residues from power plants and from
To ensure absolute objectivity in sample collection and to eliminate any impact of the human             heat and power plants.
factor, installation and certification of automatic samplers has been under way since 1996 on            MUS’s own railway system also serves to deliver a part of the produced coal to customers.
all belt conveyers that carry the coal just before it is loaded on trucks or railway cars. An            In addition, services of Czech Railways (ČD) are used. The coal is treated to meet
automatic sampler was put into operation in September 2006 on belt No. C70 for the loading               customers’ needs and then, after loading the railway cars and making up the trains, ČD
of Nut 2 coal on lorries. The entire quantity of coal produced by Mostecká uhelná is currently           carries the coal to MUS customers.
subject to sampling by automatic samplers.
A 24-hour sample is made from every coal delivery and the results of its analysis are made               The loading of products onto trucks takes place at Komořany. Almost 100 trucks are
available to the customer as information for invoicing. Every such sample is stored for one              loaded every day, on average. Coal freighters can monitor the density of traffic on the
month. In addition, daily samples poured together for a period of about ten days, are subjected          parking site and the loading on the website www.czechcoal.cz thanks to a camera system.
to a complete analysis. For the selected types of coal produced, an accredited laboratory
prepares detailed fire-safety and technical characteristics of the product, which can be provided
                                                                                                                                                                                                        27
in a complete (unabridged) version upon request to the customer. A simple table of the basic         1.5.5 Outlooks for Brown Coal Production and Preparation
fire-safety and technical data on the fuel is prepared on the basis of the individual parameters.
To make the data available to all customers, this table is included in the Most Coal Catalogue.      Production plans for 2007 envisage about the same output as in 2006 and similarly, no
In 2006 the Company finished the complete testing of the automatic coal samplers’ fitness in         substantial changes in the annual output are expected over the medium term. Taking this into
terms of both design and function. The validity of the certificates for all samplers that are used   account, MUS will continue using its existing coal mining and preparation technologies as in
for the sampling of MUS final products (including the products for the energy sector as well         2006.
as those for households) was extended. The testing of the samplers was completed in order
that the laboratory could be accredited (under ČSN ISO 17025:2005). The accreditation
process was successfully finished at the end of 2006. All the automatic samplers meet the
basic design and functional requirements for Parts 3 of the ČSN 44 1304, ČSN ISO 5069-1,2,
ČSN ISO 13909-2,4 and ČSN ISO 9411-1 standards. The entire process relates to Act No.
695/2004 on Greenhouse Gas Emission Allowances Trading, and Regulation 696/2004, which
require that the data used for calculating the quantity of emissions released into the air must
come from an accredited laboratory.
           1.6 Capital Expenditure
           Investments in and Expenditure on Asset Replacement in the Group’s Production Companies                    Construction of belt lifts for coal was another major capital investment project, commenced in 2002. It
           The Group’s production companies focus on investments that guarantee stable business conditions and        was completed in 2006.
           a good-quality product and service range for our business partners over the long-term.
                                                                                                                      Detailed information on capital expenditure and maintenance at MUS is provided in Section 3.2
                                                                                                                      Investments in and Expenditure on Long-term Asset Replacement and the Description of Maintenance in
            Investments in and expenditure on asset replacement in the Group’s companies                              MUS in 2006.
                                                                                   Investments in and
           Company                                                                expenditure on asset
                                                                                  replacement in 2006
                                                                                        CZK ‘000
           Mostecká uhelná a.s.                                                          741,681
           Důl Kohinoor a.s.                                                                  305
           DTS Vrbenský, a.s.                                                              93,875
           Krušnohorské strojírny Komořany a.s.                                            19,033
           RENOGUM-NILOS a.s.                                                               2,896
           HUMECO, a.s.                                                                  103,519
           REKULTIVACE a.s.                                                                 2,259
           Infotea s.r.o.                                                                   2,804


           Investments in MUS Asset Replacement
           Expenditure on long-term asset renovation is understood to be the aggregated expenses on complete
           overhauls, medium-size repairs and improvements, refurbishments, modernisations and new asset
           purchases.
           A series of complete overhauls of nine giant machines, planned for 2004-2006, is an important part of
           the long-term asset renovation programme. In addition to complete overhauls, the Company also carries
           out refurbishment and modernisation of mining equipment, including, in particular, overall modernisation
           of the machines’ electrical/electronic systems. The driving units of the digging mechanisms are
           refurbished and the obsolete control systems are replaced by new microprocessor systems. This improves
           the safety of the machine. Such complete overhauls and refurbishments add at least 15 years to the
           lifecycle of the asset.
           Besides the overhauls of the mining equipment, the long-term asset renovation programme also includes
           expenditure on the purchases and complete overhauls of rolling stock (three electrical and five Diesel
           locomotives were overhauled in 2006) and complete overhauls of power equipment.
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1.7 Standards and Certificates in the Group’s Companies
Enhancement of product and service management and quality and safety at work improvements are among the key targets pursued by the Company.


                                        Quality management standards and certificates in the Group companies in 2006
                                                                           Name of the standard                                             Date of obtaining the certificate                 Auditor

                                 ČSN 44 1304, ČSN ISO 5069-1,2, ČSN ISO 13909-2,4 a ČSN ISO 9411-1 (automatic coal samplers)                     2006 (certificates extended)                   TEKO
Mostecká uhelná a.s.
                                                       ČSN EN ISO/IEC 17025:2005 (Testing Laboratory No. 1493)                                             2006                 Český institut pro akreditaci o.p.s.


RENOGUM-NILOS a.s.                                                             ISO 9001:2001                                                               2002                    STAVCERT Praha, spol. s.r.o.
                                                                                                                                                    (2005 re-certification)


                                                                               ISO 9001:2000                                                               2005                         Det Norske Veritas

DTS Vrbenský, a.s.                                                            ISO 14001:2004                                                               2005                         Det Norske Veritas

                                                                               OHSAS 18001                                                                 2006                         Det Norske Veritas


                                                                               ISO 9001:2001                                                               2005                                 BVQI

REKULTIVACE a.s.                                                              ISO 14001:2004                                                               2005                                 BVQI                     29
                                                                            OHSAS 18001:1999                                                               2006                                 BVQI


                                                               ČSN EN ISO 9001:2001 and ČSN EN 3834-2                                                      2005                 VÚPS-Certifikační společnost, s.r.o.

                                                                          ČSN EN ISO 14001:2005                                                            2006                 VÚPS-Certifikační společnost, s.r.o.

                                                                            OHSAS 18001:1999                                                               2006                 VÚPS-Certifikační společnost, s.r.o.

Krušnohorské strojírny           Steel Structure Manufacture and Assembly – ČD a.s. Large Certificate of Competence; ČSN 732601-Z2,Article 200              2004                 VÚPS-Certifikační společnost, s.r.o.

Komořany a.s.                                    Steel Structure Manufacture and Assembly ČSN 732601-Z2, Article 203                                       2003                 VÚPS-Certifikační společnost, s.r.o.

                                           Welding - Large Certificate of Competence, DIN 18800-7, Art. 6.2 and DIN 15018                                  2003                          SLV Halle GmbH

                                           Calibration Laboratory – Certificate of Accreditation, ČSN EN ISO/IEC 17025:2005                                2006                 Český institut pro akreditaci o.p.s.
           1.8 Applied Research and Services
           Applied Research                                                            mechanical properties of the material for further use of the parts. This    “Coal and Biofuel Co-firing.”This project was adopted and implemented
           The Group pays systematic attention to research and development.            provides significant savings for MUS.                                       to support the sales of the Most coal in 2005 and 2006 and is directly
           A plan of technical innovation and technical support is prepared every                                                                                  related to the need to tackle the issue of environmentally friendly
           year. This plan is a part of the capital expenditure plan, because it       EDIS Košice (R&D Co-operative for Electronic Digital Systems                combustion of the Most coal in boiler installations from 200 kW to 50 MW.
           generates new tangible or intangible fixed assets. The Asset Acquisition    in Slovakia) and ZAT a.s. Příbram.
           and Renovation Department is responsible also for the implementation        Over the period from 2000 to May 2006, MUS and EDIS Košice, working         Checking the characteristics of biomass, finding a solution and testing
           of projects of this type. These projects are most frequently implemented    together, developed and implemented a technical solution for the            the co-firing of coal and biomass in traditional and fluidised-bed boilers
           by the Brown Coal Research Institute in Most (VÚHU).                        monitoring of the condition of conveyer belt joints and for the             having different capacities (MUS)
                                                                                       transmission of the data to the control centre of the technological unit.   To meet the emission limits, the possibilities of improving the quality
           An Overview of Research Co-operation                                                                                                                    parameters must be addressed, in particular the quantity of sulphur
           Výzkumný ústav pro hnědé uhlí a.s.                                          Technical Innovation in the Group                                           released into the atmosphere during the combustion process.
           [Brown Coal Research Institute](VÚHU)                                       The most important innovations were achieved in the area of MUS mining
           MUS cooperates with the Brown Coal Research Institute under the             equipment (e.g. improved safety of the large-scale excavators and           Developing a new spectrometer (MUS)
           Framework Agreement on Tasks in the Area of Technical Innovation,           modernisation of the sulphur analyser), in the development of MUS           The purpose of the development of the new spectrometer is to modernise the
           Technical Support and Contracts. Examples of research projects addressed    heating mixes, which also include biomass, and in the development of        sulphur analyser (for a higher reliability, accuracy and stability for another 10-
           under the Framework Agreement include projects to ensure the stability      boilers by Krušnohorské strojírny Komořany a.s.                             15 years of its operation). Sulphur analysers serve for continuous operating
           of slopes and drainage of the mines, analyses of the coal combustion                                                                                    analysis of the coal transported on the belt conveyer in the ČSA surface mine.
           products, analyses of waters and wastes, and special tasks related to the   Overview of the most important innovations                                  MUS has three sulphur analysers, which include spectrometers.
           preparation and use of Most coal for clean coal technologies.               Development of boilers (Krušnohorské strojírny Komořany a.s.)
           However, co-operation with the VÚHU covers not only R&D projects: it        Development focused on boilers and on fluidised bed combustion              Improving the reliability of end limit switches in the KU800/92 large-
           also focuses on the current needs of MUS departments and units, and this    technologies. Among other co-operation schemes, the Company                 scale excavator (MUS)
           work has the nature of technical assistance and/or technical innovation.    completed a joint programme with the Research Institute of Agricultural     The Company co-operated with the Electrical Engineering Faculty of the
                                                                                       Machinery (VÚZT Praha) under government project QD1209 –                    Czech Technical University (ČVUT FEL) in Prague to improve the
           Research Institute of Applied Mechanics, Brno                               Technological Systems to Use Bio Fuels from Energy Crops.                   reliability of the end limit switches of the large-scale excavator under
           In co-operation with the Research Institute of Applied Mechanics (ÚAM)                                                                                  worsened weather conditions and replace the current system of capacity
           in Brno and with the VÚHU, Mostecká uhelná a.s. addresses the issues of     Improving the utility characteristics of heating mixes (MUS)                measurement by a more reliable system, using the SICK-LMS221 laser
           the life of the steel structures of large-scale excavators.                 The Company co-operated with VÚHU on a project focused on checking          converter. The end limit switches serve to improve safety and prevent
                                                                                       the possibility of using heating and industrial mixes for making a new      accidents at the coal excavators.
           Škoda výzkum a.s.                                                           product, in which coal would be combined with high-carbon wastes for
           Škoda výzkum a.s. applies in MUS its special coating on the shafts of the   a higher calorific value of the coal.                                       Residual life of the large-scale excavators (MUS)
           bucket wheels in the giant machines.                                                                                                                    In 2006 the Company started co-operating with VÚHU to develop a new
                                                                                       Biomass availability (MUS)                                                  methodology for the evaluation of the steel structures of large-scale
           VÍTKOVICE – Výzkum a vývoj, spol. s r.o.                                    In co-operation with VÚHU and VÚPEK-ECONOMY, spol. s r.o. Praha, the        excavators.The reliability and safety of the machine depends on the stability
           The Material Engineering Institute takes micro-samples to determine the     MUS worked in 2006 on a project closely associated with its plans:          and strength of the steel frames. The co-operation continues in 2007.
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Bucket wheel drive (Krušnohorské strojírny Komořany a.s.)                                                     accredited employees possessing a certificate of Technical Diagnostician. The Laboratory aims at
Krušnohorské strojírny cooperated with Liebezeit hydraulik s.r.o., Krušnohorská elektromontážní               becoming one of the pilot stations of the Association of Technical Diagnosticians.
společnost s r.o., ZAT a.s. Příbram and EDIS, vvd Košice on the project of “Hydraulic Bucket                 Vibration Diagnostics (MUS, Komořany Coal Preparation Plant)
Wheel Drive of the KU800 large-scale Excavators and Automation of Bucket Cleaning”.                           This laboratory identifies the causes of damage to machines and provides the following
A prototype of the equipment will be built during the first quarter of 2007.                                  services: analysis of machines, machine balancing, machine alignment, straightness
                                                                                                              measurement, endoscope measurements, measurement of antifriction bearings, professional
Laboratory Services                                                                                           advising. The diagnoses are performed in a non-invasive manner. The employees hold valid
   Accredited laboratory for coal product analyses, Komořany and Hrabák stations (MUS)                        certificates of Technical Diagnostician, issued by the ATD ČR certification authority.
   Oil Laboratory (MUS)                                                                                      Gas Laboratory – at the MUS Main Mine Rescue Station at Most (MUS)
   Vibration Diagnostics (MUS, Komořany Coal Preparation Plant)                                               Based on Ministry of the Environment Decision Ref. No. 3034/40/05, the laboratory is
   Gas Laboratory – located at the site of the Main Mine Rescue Station in Most (MUS)                         authorised to measure pollution levels in the mines’ air. Based on Decision Ref. No.
   Accredited Testing Laboratory for Water Analyses (HUMECO, a.s.)                                            3209/40/05 of the Czech Mining Office at Prague, the laboratory is authorised to analyse
   Accredited Calibration Laboratory (Krušnohorské strojírny Komořany a.s.)                                   samples of mines’ air and other mine gases. The laboratory measures pollutants and
   Rubber Service Laboratory (RENOGUM-NILOS a.s.).                                                            accompanying substances exclusively for the organisations and other units that carry out
                                                                                                              mining activities or other activities using mining methods. The measured substances include
Detailed overview of laboratory services:                                                                     CO, NOx, O2, CH4, CO2, and H2.
       Coal Product Laboratory, Komořany and Hrabák Stations (MUS)                                           Testing Laboratory for Water Analyses (HUMECO, a.s.)
    Since 1 January 2007 MUS has been offering its customers a new service of accredited coal                 The Laboratory is accredited as a Testing Laboratory for Water Analyses. Good Practice
    analyses. The laboratory makes analyses of coal products sampled at MUS operations. It
    also analyses sludge, mine waters and weighting materials. All types of analyses are
                                                                                                              Certificate No. 289 was issued to it by ASLAB in 2004. The laboratory offers analyses of
                                                                                                              wastewater and surface waters, with determinations, including sampling.
                                                                                                                                                                                                                       31
    provided for both MUS (to ensure product quality) and external customers (determination                  Calibration Laboratory (Krušnohorské strojírny Komořany a.s.)
    of Mn, Fe, Cu, Ca, Mg, Al, Ti, sulphur, water, metals, arsenic, ash, gross calorific value,               Calibration Laboratory No. 2234 of Krušnohorské strojírny Komořany a.s. is accredited (ČSN EN
    granulometry, etc.). In 2006 the Coal Laboratory, Komořany and Hrabák Stations,                           ISO/IEC17025:2005) for the calibration of measuring devices, instruments and equipment for:
    underwent a process of accreditation by Český institut pro akreditaci, o.p.s., and received               length, pressure, force, plane angle, electrical variables and time.The following additional services
    Accreditation Certificate No. 545/2006, dated 11 December 2006, which will remain in                      are offered: purchase and sale of measuring devices, and technical assistance in metrology.
    effect until 31 December 2009.                                                                            The testing stations offer defectoscopy tests and non-invasive diagnostics of the equipment,
   Oil Laboratory (MUS)                                                                                       including, for example, seating of rotating machines using laser optic instruments.
    The laboratory makes analyses of, in particular, motor, gear, hydraulic and transformer oils. It can     Rubber Service Laboratory (RENOGUM-NILOS a.s.)
    analyse any oil as the customer may wish.The chemical and physical characteristics of the oils can        RENOGUM-NILOS a.s. has a non-accredited laboratory offering the following services:
    be analysed in the laboratory, including viscosity, acidity, electrical strength, density, and surface    measurement of granulate moisture, determination of abrasion resistance, determination
    tension. The laboratory measures the content of mechanical impurities in the oils and provides            of the course of the vulcanisation process, measurement of absorbing capacity,
    special services, such as atomic spectrometry (content of Fe, Cu, Pb, Al, Si, Cr in oil sample) and       granulometry, determination of specific weight and volume weight, adhesion between the
    infrared spectrometry – lubricant degradation. It issues a report on the overall assessment of the        plies and covering layers, cord/rubber adhesion, tension characteristics of rubber, pressure
    oil with recommendation as to further use, replacement or filtering.The laboratory is operated by         characteristics of granulate, complete testing of mixes.
           1.9 Other Business Lines in the Group
           Deep Brown Coal Mining                                                  Mechanical Engineering                                                           The company possesses a number of certificates, including: Steel
           The Centrum Mine is the last deep brown coal mine in the Czech          Krušnohorské strojírny Komořany a.s. (KSK): its core business is the             Structure Manufacture and Assembly – ČD a.s. Large Certificate of
           Republic, which is still active. It is operated by Důl Kohinoor a.s.,   production and repairing of the mining machines and surface mining               Competence – ČSN 732601-Z2 Article 200; Steel Structure
           a subsidiary of Mostecká uhelná a.s. Its extractable reserves will be   systems, manufacture of steel structures, parts and components,                  Manufacture and Assembly, ČSN 732601-Z2 Article 203; Welding
           exhausted in spring 2008 and the mine will be closed.                   manufacture to the customer’s specifications, production of                      – Large Certificate of Competence, DIN 18800-7 Article 6.2 and
           The mine started its operations in 1888. The Humboldt I Mine was        Varimatik automatic boilers and provision of related services                    DIN 15018. The Company also has certificates for the SMJ (Quality
           affiliated to it in 1904, Humboldt II Mine in 1932 and Kolumbus         (calibration laboratory, testing rooms, material blasting). In 2007 the          Management System), EMS (Environmental Management System)
           Mine in 1965. Over the entire time of its existence (until 2006) more   proportions of the business segments to which the company’s                      and SM BOZP (Safety and Health at Work Management System)
           than 57 million tonnes of coal was extracted. There is a flat seam 32   products are supplied are expected to be as follows: mining 63%,                 and is a winner of the “GOLDEN CERTIFICATE”.
           metres thick at a depth of about 170 metres in the working district     engineering industry and services 37% (Varimatik boilers account
           of the Centrum Mine. This working district extends into the cadastral   for about 10% of the latter). Most of KSK products and services are              Construction and Earthwork, Transport and Building Machines
           districts of Dolní Jiřetín, Čtrnáct Dvorců, Horní Jiřetín, Černice      provided to Czech customers (85%) and the rest goes to EU member                 The key activities of DTS Vrbenský, a.s. include: earthwork, clean-
           u Horního Jiřetína, Albrechtice u Mostu and Záluží u Litvínova.         countries (in particular, Germany and Austria) and Switzerland.                  up, reclamation, removal of environmental burdens, handling of
           The Centrum Mine produced high-quality brown coal with                       The production of the VARIMATIK boilers is a promising                      hazardous waste, construction, reconstruction and removal of
           a calorific value of about 18 MJ/kg and with a sulphur content of            business line. The boilers are intended for households and for              buildings, including environmental structures and dumps, water
           less than 0.5%.                                                              small boiler plants for heating in industrial premises,                     management structures, goods transport, motor vehicle and
           The technical plan of closedown of the mine will be completed                workshops, greenhouses, hotels, schools etc. The supply of                  building machine leasing and servicing. The proportion of the
           during 2007. The sequence of the stages of the closedown of the              automatically controlled boilers to retail customers increased by           company’s sales outside the Czech Coal Group is 27%. The
           underground part of the mine have been planned as follows:                   almost 60% in 2006. A new multi-fuel boiler, VARIKOT VK 25,                 company’s customers include, in particular, mining companies and
           closing down the mine workings, ecological clearing, and                     was launched to complement the existing series of VARIMATIK                 their servicing organisations (75%), construction companies (8%),
           closedown of the initial mine workings. The equipment located                boilers. The company plans to export this boiler to EU countries.           transport companies (4%) and state administration and self-
           both underground and aboveground will be ecologically removed                The automatic control system of the boiler permits optimised                government authorities (9%).
           and the operations will be closed. The pits will be filled with              fuel feed. The boilers do not need much attendance and their                Development in this area is primarily focused on meeting the
           a compact backfill material in accordance with Czech Mining                  performance is high in terms of efficiency and emission                     needs of Mostecká uhelná a.s., with orientation towards
           Office Regulation No. 52/1997. The counter dams downstream                   production. They are designed for the burning of brown coal as              optimising technological capacities. Sales outside the Group keep
           from the pits will be completed. Mine ventilation and mine water             well as pelleted fuels from renewable resources. All the boilers            increasing as the company intensifies its co-operation with
           pumping will be switched off. The reclamation and clean-up will              have an emergency thermostat to prevent overheating.                        construction companies in the implementation of large-scale
           continue until about 2010-2011.                                              The customers buying the products of this company include, in               projects, including, in particular, industrial zones, new
           During the process of termination of the operation of the mine and           particular, larger and medium-sized enterprises, both in the Czech          technological units and shopping centres. The company’s activities
           its closedown the Company will negotiate with the stakeholders,              Republic and abroad. The major local customers include Mostecká             outside the Group include removal of environmental damage from
           particularly the affected municipalities. All the 380 (or so) job            uhelná a.s., SD - 1. strojírenská, a.s., EGAR s.r.o., KOCH-CZECH, s.r.o.,   previous mining activities in North-western Bohemia and co-
           positions will be successively abolished and, therefore, the                 ŽĎAS, a.s., CONSIST spol. s r.o., Sokolovská uhelná, a.s., SHD – KOMES      operation with major construction companies such as Metrostav
           Company will consult the employment agencies in the region.                  a.s. and Severočeské doly a.s. (the Bílina Mines and the Nástup Mines       a.s., Subterra a.s., Tarmac CZ a.s., Klement, a.s. and Strabag.
                                                                                        in Tušimice). The most important foreign customer is Concast AG.
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Reclamation                                                                                         Castle Exhibition in 2000. The company has the ČSN EN 1177 Certificate for impact-damping
REKULTIVACE a.s. is responsible for biological (farm and forest) reclamation, cultivation work      playground surface. Sales increased significantly in 2006, especially the sales of the anti-
and forestry, landscaping, preparatory work for construction, and greenery maintenance.             vibration slabs (used mainly on the “C” line of the Prague Underground), rail base pads and
Reclamation marks the end of mining activities, the affected area being returned to use again.      rubber paving for children’s playgrounds. The company’s major customers include Metalcom
In addition, the company grows energy crops (See the paragraph 2.6.2. Reclamation MUS:              a.s., České dráhy a.s. and Metros s.r.o.
Energy Crop Growing in Reclaimed Areas).
                                                                                                    IT
Operation of Water Treatment Plants and Pumps and Sale of Coal Mining By-products                   Infotea s.r.o. was established to provide IT services to medium-sized and large companies to
HUMECO, a.s. provides services (93% of turnover in 2006), including drainage, pumping and           meet all their IT needs. It has qualified specialists in a wide scope of IT services, ranging from all-
treatment of mine waters and treatment of waste waters at the sites of the parent company,          round user support to consulting services to the management of information systems and the
Mostecká uhelná a.s. Its other activities include the sale of products from recycled non-ferrous    related technologies. These services also include the delivery of bespoke hardware and software.
metals and the sale of goods and materials, including the accompanying raw materials, such          The company, established in 2004, uses the experience of the IT team that has been providing
as sand and secondary raw materials.                                                                IT services to Mostecká uhelná a.s. since its establishment in 1993.

Rubber-related Services                                                                             Support to Sports
RENOGUM – NILOS a.s. was established in 1995. It provides a broad range of rubber-related           HIPODROM MOST a.s., established in 1996, manages the Velebudice reclamation park, built
services. Its core business includes conveyer belt installation and servicing. Conveyer belt        under a top-level project of the Czech reclamation school. The Velebudice dump is one of the
renovation and rubber waste processing are activities of increasing importance, rubber waste        largest spoil banks in the former North Bohemian Brown Coal District, having a total area of 790
being converted to rubber granulate and other rubber products (the Rubber Programme). Sales
outside the Group represented 27% of total sales in 2006. The Company has customers on
                                                                                                    hectares. The company’s mission is to restore the area to its previous societal importance. All types
                                                                                                    of racing contests can take place on the race course of the Most hippodrome, including gallop
                                                                                                                                                                                                               33
the Czech market and also in Romania, France and Germany.                                           races, flat races, hurdle races, and steeplechase. The main racetrack is 1,800 metres long, the
Conveyer belt servicing includes the purchase of new belts and activities related to their          length of the straight section of the track is 1,200 m and its width is 30 m. The first horse race
installation, and maintenance and repairs of the equipment. The company’s servicing activities      took place in the hippodrome in 1997. Currently the Most hippodrome ranks among the four
were primarily focused on Mostecká uhelná a.s. in the past but in recent years the company          Category A horse racing stadiums in the Czech Republic (Velká Chuchle in Prague, Pardubice,
has been expanding: at present it provides services, on a contractual basis, to the Čertovy         Karlovy Vary, Most). The hippodrome has a judges’ tower, facilities for the riders with the weighing
schody lime works near Beroun and also to ČEZ a.s., International Power Opatovice a.s.,             room, and summer and winter stables. A sheltered parcours hall is currently being built.
TARMAC a.c., Lomy Mořina a.s. and other customers.                                                  The company provides all-round maintenance of the racetrack and training track, the parcours
REGONUM – NILOS a.s. also rehabilitates used conveyer belts, produces abrasion rubber and           area, dressage yard and the adjacent slopes. Development efforts are currently focused on
special rubber mats.                                                                                finding advertising partners for the above-mentioned sports. The company’s core business
The Rubber Programme includes the production (recycling) of granulate from used tyres. The          includes, in particular, the provision of organisational and technical conditions for the sports,
granulate is either sold straight away or used as material for other rubber products (e.g. rubber   including the organisation of flat race days (eight in 2006) and parcours days (eleven in 2006),
paving, anti-vibration rubber slabs, rail base pads, discs for underbelt rollers etc.). Rubber      rider tests, recreational riding for the public, learning courses for primary schools and
Programme products are sold, for the most part, outside the Czech Coal Group (95%). The             a number of other sport, racing, social, cultural and family events.
rubber paving products won the “Best Product of the Exhibition” award at the My House My            2006 was the third year in a row in which the total number of visitors exceeded 100,000.
           Housing Management
           MUS-Uniservis, spol. s r.o. is a regional company focusing its activities on
           housing management. It has a strong maintenance base in the Most and
           Chomutov districts. It is responsible for housing management and
           maintenance in respect of almost 3,000 flats in the towns of Chomutov,
           Jirkov, Most, Litvínov, Teplice, Bílina and Osek. The company provides
           a complete portfolio of services, including the operation and maintenance of
           exchanger stations and heat distribution systems.
           Its customers include tenants, housing co-operatives, and condominiums. The
           flats are used primarily by employees of Mostecká uhelná a.s. (427 flats) and
           Doly a úpravny Komořany, s.p. (2,160 flats) and condominiums (601 flats).

           Development Activities
           E–GATE a.s. was established to build shopping and office building in
           Evropská Street, Prague 6.
           The E-GATE (www.e-gate.cz) project has passed through the necessary
           approval stages, including tests for the environmental impacts of the
           building. E-GATE a.s. paid special attention to drawing up studies on
           pollution dispersion, noise, automobile traffic intensity, and greenery.
           Construction work started in November 2005. SKANSKA CZ a.s., the main
           contractor, meets all requirements in terms of quality management and
           environmental impacts. So far neither public administration bodies nor any
           citizens and other participants of the building permit procedure have raised
           any complaints as to the impact of the construction on the environment or
           the adjacent residential area. E-Gate is designed as an eight-floor stand-
           alone building with an atrium. The three interconnected wings with
           a standard depth of about 15-20 m surround an open atrium. The internal
           layout reflects the function of the premises (primarily an office building). The
           space that can be leased (on the ground floor next to the reception room)
           can be used for retail and service purposes. A typical floor offers a lettable
           area of more than 3,000 square metres. The last two receding floors with an
           area of 2,500 square metres are also intended for administrative purposes.
           The approval procedure was commenced in April 2007. The local
           investigation did not reveal any faults or defects that would prevent the use
           of the building.


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2. SUSTAINABLE DEVELOPMENT
   IN 2006
                             37
           2.1 Our Concept of Sustainable Development
           Statement by the Chief Executive Officer of Czech Coal a.s.



           “This report has been prepared in accordance with the 2002 GRI Guidelines. It represents a balanced and reasonable presentation of our organisation’s economic, environmental, and social performance.”


           This summary yearly report on sustainable development – an already third report of this kind issued by our Group – provides a sufficient time series of information on how the Czech Coal Group’s performance develops in

           the economic, social and environmental areas. This year’s report primarily focuses on how, and how far, we meet our Group’s mission, objectives and targets and, thereby, respond to the expectations of our stakeholders.



           Any business involves risks and opportunities. We address our business risks and opportunities in detail in this report, aiming to convey information on our business to you, our readers, who are now leafing through this report.

           There is a strong call for regulation on energy markets, motivated by protection of the population’s health and climate protection policies, and, on the other hand, by efforts to assert economic policy interests. Yet the energy

           sector – an industry that involves more diverse and conflicting interests and more areas of human activities than any other industries – always has a number of new business opportunities to offer.



           Aware of both of these reasons, we believe that exchange of information is a key precondition for success in the energy business and energy policy alike. However, the information being exchanged must be of sufficient quality:

           it must be to the point and relevant for those for whom it is intended. Our reporting on sustainable development performance, based on the principles of the Global Reporting Initiative, is in our opinion one of the tools for

           such exchange of information and, at the same time, a basis for manifesting our long-term commitment to our corporate social and environmental responsibility.




                                                                                                                                                                                             Petr Pudil
                                                                                                                                                         Chairman of the Board of Directors and Chief Executive Officer of Czech Coal a.s.
                                                                                                                                                              and Vice-Chairman of the Board of Directors of Mostecká uhelná a.s.




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                                                                                                      Edited by Foxit PDF Editor
                                                                                                      Copyright (c) by Foxit Software Company, 2004
                                                                                                      For Evaluation Only.

2.2 Sustainable Development Practice                                                                                                                                                                         contents




    and Reporting in the Group
2.2.1 Vision and Strategy of the Group in the Context of Sustainable                             2.2.2 Environmental and Social Responsibility in the Group
      Development
                                                                                                 Targets of the Group’s Environmental and Social Responsibility:
“We can only grow as far as our stakeholders allow us”.                                             Minimise the business risks for customers and suppliers, resulting from the uncertainty of
                                                                                                    the further possible development of environmental and energy legislation and the
                                                                                                    potentially adverse social changes in the region around Most;
Mission                                                                                             In general, achieve business results that generate sufficient funds to support regional
                                                                                                    development, both as part of financial support under regional co-operation programmes
Our mission is to be a preferred partner to our customers for the supply of fuels and energy        and, in particular, support to the social revitalisation of the reclaimed areas;
and provision of the related services.                                                              Develop the monitoring of environmental impacts and create the preconditions for further
                                                                                                    reductions in air and water pollution and waste generation; develop the use and storage
                                                                                                    of the products of brown coal combustion;
Vision                                                                                              Create the preconditions in the Group’s companies for further improvements in safety at
                                                                                                    work and for developing employees’ skills and qualifications.
Our Group’s vision is to remain:
    The strongest independent trader on the brown coal and electricity markets;
    The strongest independent brown coal producer.
We define our independence in relation to the national dominant electricity producer and the
regional electricity distributors.                                                                               Facts about the transformation of Mostecká uhelná a.s.
                                                                                                 YEAR                                                           1994                                 2006
Strategy                                                                                         Coal output (millions of tonnes)                                                22.7                 15.7
    In energy commodity trading, we are a flexible and reliable partner to our customers. In
    addition to our competitive products, we also offer value-added services and consulting.
                                                                                                 Total quantity of emissions released (tonnes)
                                                                                                 Reclaimed area returned to use (hectares)
                                                                                                                                                                               379.8
                                                                                                                                                                             2,917
                                                                                                                                                                                                      36.9
                                                                                                                                                                                                    6,013
                                                                                                                                                                                                             39
    In brown coal production we focus on:                                                        Total area affected by coal extraction (hectares)                         14,889                   9,336
     - High-level coal quality management and customer services to ensure that our products
                                                                                                 No. of employees                                                          16,265*                  4,216
       meet the highest requirements on environmental protection and customer’s health and                                                   *(in November 1993 when the Company was established)
       safety;
     - Compliance with all statutory restrictions on coal mining, including the noise and dust
       limits;                                                                                   YEAR                                                                            2000                2006
     - Environmental revitalisation beyond the statutory reclamation obligations after coal      Frequency of accidents (% of the total number of employees)                       1.64               0.85
       extraction.                                                                               Absence for sickness (% of total time worked)                                     6.7                4.8
           Projects that Enhance Environmental and Social Responsibility in MUS                                                            Implementation of Economic, Environmental and Social Projects
                                                                                                                                           The Company’s management is responsible for checking, implementing and auditing the
                                                                                                                                           economic, environmental and social concepts and the results thereof. Shareholders submit
                    2001               2002                  2003                 2004                   2005                2006          recommendations to the Board of Directors through the Supervisory Board or directly to the
                                                                                                                                           Board of Directors.
            Reduction of pollutant content in the air, reduction of waste production, measurement of noise and dust around surface mines   With its professional structure, the Company’s management team is able to cover the entire
                                                                                                                                           strategic orientation of the Company, including issues related to environmental and social
                                                                                                                                           risks and opportunities.
                       Automation of coal quality monitoring (sulphur meters, ash meters, automatic samplers)                              The addressing of economic, environmental and social risks and opportunities is reviewed
                                                                                                                                           at the level of the Board of Directors of the Group’s companies, to which the results are
                                                                                                                                           transmitted. The managers’ remuneration depends on the Company’s financial and non-
                                                The Coal Academy education programme
                                                                                                                                           financial (environmental and social) performance.
                                                                                                                                           The performance of the Group companies is monitored through financial and non-financial
                                                                                                                                           reporting by the individual organisational units. These reports provide a source of
                                                                     Programme of regional co-operation
                                                                                                                                           information for the individual companies’ annual reports and for reporting in accordance
                                                                                                                                           with the GRI sustainability reporting guidelines (the Group’s Sustainable Development
                                                                                                                                           Report). The reports are subject to internal and external audit.
                                                                                           Health programme                                The Group companies develop a system supporting ethical conduct, in particular toward the
                                                                                                                                           employees, customers and local communities.

                                                                       The Monitoring Sustainable Development
                                                                       Factors programme



                                                                                                  Sustainable development reporting
                                                                                                  using the GRI methodology


                                                                                                          CSA surface mine slope
                                                                                                          automatic monitoring


                                                                                                         The “Co-existence”
                                                                                                         Information and Contact Centre




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Internal Codes of Ethics, Principles, Methodologies and Concepts for Economic, Environmental and Social Performance

Documents (internal directives, standards, provisions of Collective Agreements, organisational rules and working rules, standards etc.) in which the following is specified in greater detail than in the applicable
laws, orders and other regulations of the Czech Republic and its state administration authorities:


    GRI 2002 indicator          Col. Agt.        LA4            LA13               LA6            HR4,LA10         SO1           SO1 SO1 SO1                   SO1            SO2            PR1           PR2           PR3           MM5          MM12
                                                                Employee                                      Management of impacts and effects on communities
                                                             representation    Health, safety
                                                               on the top         and other      Prevention of Monitoring       Method of     Gifts to     Procedures for
                                               Method of                                                                                                                                                                               Product
                                Existence of                    company          committees       any form of     systems; communication communities       submission of                   Customer
                                               bargaining                                                                                                                                               Provision of   Customer     characteristics Preparation
                                                                                                 discrimination method of          with      and other     complaints by Anti-corruption   health and
                                a collective                governing bodies      involving                                                                                                             information     privacy      with respect for emergency
                                                  with                                           (age, gender, controlling the stakeholder groups within    communities       focus          safety
                                 agreement                    (Supervisory      management                                                                                                              on products    protection   to sustainable situations
                                               employees                                              racial,    impact on       groups;      the civil          or                        protection
                                                             Board member      and employee                                                                                                                                          development
                                                                                                    religious)  communities co-operation       society     municipalities
                                                                elected by     representatives                                 programmes
                                                               employees)


    Mostecká uhelná a.s.           yes            yes            yes                yes              yes           yes           yes           yes              yes            yes            yes          yes           yes            yes           yes


       Czech Coal a.s.             yes            yes            yes                yes              yes                         yes           yes                             yes                         yes                                        yes


      Důl Kohinoor a.s.            yes            yes            yes                yes              yes           yes                                                                                                                                yes

   Krušnohorské strojírny
                                   yes            yes            yes                yes              yes           yes                         yes                             yes            yes                        yes                          yes
        Komořany a.s.

   RENOGUM-NILOS a.s.              yes            yes            yes                yes              yes                                                                       yes                                                                    yes


      DTS Vrbenský, a.s.           yes            yes            yes                yes              yes                                       yes                             yes            yes          yes           yes                          yes


        HUMECO, a.s.               yes            yes            yes                yes              yes                                                                                                                                                          41
      REKULTIVACE a.s.                                                              yes                                                                                        yes


  MUS-Uniservis, spol. s r.o.                                                       yes


   HIPODROM MOST a.s.                                                               yes


         Infotea s.r.o.
           2.2.3 Risks and Opportunities of the Group’s                                    policy, which does not allow any mining beyond the limits – not even in the           The following organisations also contribute to the formulation of
                 Sustainable Business Development                                          case that all conflicts of interest related to continued extraction are resolved.     these policies:
                                                                                           Taxes and charges on brown coal, its extraction and sale; and on                          Research organisations and consultancies
           Change, rather than response to change, is the basis of                         electricity and its generation and sale                                                   Non-profit organisations
           innovation.                                                                   – Currently there are four types of statutory charges on brown coal                         Professional associations
                                                                                           extraction* and two types of outlays on emissions (emission
           We wish to develop active relationships with our key stakeholders,              allowances and emission fees). In addition, there are of course general             2. Risk of Significant Excess of Demand over Supply of Brown Coal
           including not only our trading partners and employees but also the              taxes (VAT and direct taxes), statutory levies and insurance (the social                   Considering the development of the brown coal market in the
           inhabitants of the regions where we are active and with the                     policy) and, on top of all this, an excise duty shall have to be paid from                 Czech Republic and the still unresolved issue of mining limits,
           authorities and institutions that create the legal environment of our           2008 on solid fuels and electricity. According to the government’s                         the medium to long-term risks also include the inability to
           business. We ourselves come up with initiatives and solutions, both             concept of the Environmental Tax reform (ETR), the rates of these taxes                    meet all customers’ requirements for brown coal supply.
           in business as such as well as in the social and environmental areas.           are to increase in two waves by 2015, but it is unclear how this is to
           It is our ambition – in the interest of our stakeholders – to anticipate        be achieved. Policy makers are also considering imposing another tax                Key stakeholders to co-operate with in addressing this risk:
           risks and use opportunities to ensure long-term sustainable growth              (called the carbon tax) on fuels and/or appliances that consume fuels.                     Czech Coal’s customers
           of the Group while improving the environment, which we share with               Future requirements of the government for brown coal quality                               Energy and environmental policy makers (see above).
           our stakeholders and the general public.                                      – A range of parameters are regulated in the production of brown coal,
                                                                                            including, in particular, ashes and sulphur content. To control them, the          3. Risk of Significant Excess of Demand over Supply of Electricity
           Risks to the Group’s Sustainable Business Development                            Company therefore invests in coal preparation technologies and in                    The Czech Republic’s energy policy has so far been conducive to
                                                                                            equipment of coal-fired heat and power plants. Certain characteristics such          a limitation of the offer on the electricity generation market through the
           1. Barrier between the Environmental Policy and Energy                           as sulphur content are inherent to coal as a result of natural processes and         phasing out or stagnation of traditional energy generating capacities
              Policy of the State                                                           cannot be removed by any available technology from coal as such. Thus                (brown and hard coal, nuclear energy), combined with an inadequate
           Investors that invest in the extractive and energy sectors need                  there is a risk that the government will tighten the requirements for such           development of renewable resources. Given the high, above-average
           a transparent and predictable environment. For regulation, this                  parameters without consulting the producers of the fuels and without                 economic growth, it will be impossible – even despite energy savings –
           involves the following major issues:                                             granting an adequate run-in period for producers and their market.                   to stop the growth of electrical energy consumption. It is assumed in
             Method of regulation of emissions from energy generating plants                                                                                                     various analyses that the Czech Republic will become a net electrical
           – In the short and medium term (up to 10 years), there is, above all,         Key stakeholders to co-operate with in addressing this risk:                            energy importer between 2010 and 2015. The inadequate capacity of
             uncertainty as to the volume of CO2 emission allowances to be                 The key institutions responsible for energy and environmental policies are:           cross-border interconnections and possibly also insufficient generating
             obtained under the National Allocation Plan.                                       Government of the Czech Republic                                                 capacity in EU countries may even lead to consumption regulation and,
           – In the long-term (up to 40 years), there is a risk of wrong and                    The Ústí nad Labem Region                                                        in extreme cases, to electricity supply outages.
             irreversible emission regulation policy measures: investments in                   Ministry of the Environment
             new energy generating plants would thus lose their value.                          Ministry of Industry and Trade                                                 Key stakeholders to co-operate with in addressing this risk:
             Further government action in addressing the issue of brown coal                    Czech Mining Office                                                                   Czech Coal’s customers
             reserves beyond the mining limits                                                  Energy Regulatory Office                                                              Electricity producers and transmission system operators in the Czech
           – There is a conflict between, on the one hand, energy companies’ interest           Other regulatory and supervisory authorities and institutions                         Republic (ČEPS. a.s.) and in other EU member states, particularly in
             and the government’s energy concept, wishing to exploit the coal reserves          of the Czech Republic                                                                 the neighbouring countries (Germany, Poland,Austria and Slovakia)
             beyond the limits and, on the other hand, the government’s environmental           European Commission and other EU institutions                                         Energy and environmental policy makers (see above).
      42                                                                                                                                                                                                * See Section 2.4.1 Types of Levies on Brown Coal Mining




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4. Risks in the Social and Employment Area                                                                             Electricity producers
There is a paradoxical situation in northern Bohemia compared with the overall development in the                      Producers of CCT and CCS technologies
Czech Republic: a combination of structural unemployment, increased demand for products and –
at the same time – brown coal mining limits. There is a growing demand for coal, engineering                   2. Reclamation and Revitalisation after Coal Extraction
products and new advanced technologies related to mining and the energy sector. Many companies                   High-quality reclamation and revitalisation projects implemented in agreement with the
would like to hire new employees but there is a shortage of, in particular, skilled workers and                  municipalities in whose territory or vicinity such projects take place make the region more
technical professionals on the labour market in northern Bohemia. Within a short-term horizon (3                 attractive. Empirically documented inflow of economically active population, particularly
to 5 years), Mostecká uhelná must prepare a restructuring plan, including the identification of                  families with children, into towns and villages in or near the mining and reclaimed areas
redundant job positions and lay-offs in the case that mining limits remain in effect.                            enhances the labour market situation and improves a number of additional social and
                                                                                                                 environmental parameters, which helps to improve business conditions in the region,
Key stakeholders to co-operate with in addressing this risk:                                                     including the conditions for the Group’s business.**
       The Group’s employees and trade union organisations                                                       Some of the reclaimed farming areas can be used to grow energy crops. Energy biomass
       Employment agencies, particularly those at Litvínov and Most                                              was produced on 66 hectares in 2006 on a test basis.***
       The Ústí nad Labem Region
       Government agencies responsible for social policy, particularly the Ministry of Labour                  Key stakeholders to co-operate with in this business opportunity:
       and Social Affairs                                                                                             The Group’s employees in the Most and Litvínov areas
       Energy and environmental policy makers (see above).                                                            Municipalities neighbouring on the coal extraction areas
                                                                                                                      Energy and environmental policy makers (see above), in particular those with regional
The Group’s Opportunities in Sustainable Business Development                                                         responsibility, e.g. the Ústí nad Labem Region

1. Clean Coal Technology (CCT)                                                                                 3. Full Liberalisation of the Electricity Market
  More efficient technologies of fossil fuel combustion provide two types of opportunity to                      In electricity trade it is highly probable that the market share of the dominant producer,
  coal-fired capacities:                                                                                         distributor and seller of electricity to end customers will continue shrinking. The European
   Lower fuel consumption with an unchanged output is an economical solution for the ever-                       Commission is trying to ensure electricity generation, transmission and distribution
   diminishing reserves of brown coal in the Czech Republic (mining capacity will continue to                    unbundling, thus expanding the scope of opportunities for flexible, customer-focused
   be reduced irrespective of whether the mining limits are maintained or removed)*.                             suppliers having highly qualified and experienced experts in electricity trading. There is
   Lower pollutant emissions correspond to the lower fuel consumption with an unchanged output.
  While maintaining a high profitability of brown coal as the primary resource for large power
                                                                                                                 sufficient room for growth mainly in the segment of organisations and firms (including small
                                                                                                                 and medium-sized enterprises) that seek energy cost savings.
                                                                                                                                                                                                                                   43
  stations and heat & power plants, CCT may therefore substantially contribute to meeting
  the national and European emission-reduction obligations.                                                    Key stakeholders to co-operate with in this business opportunity:
  Zero emission power stations with CO2 Capture and Storage Technology (CCS), offer an                                Czech Coal’s customers
  opportunity over the long haul. It is expected in the EU that the CCS technologies will be                          Energy policy makers and institutions responsible for the energy policy and market,
  used commercially after 2020.                                                                                       including, but not limited to, the Czech Government, Ministry of Industry and Trade,
                                                                                                                      Energy Regulatory Office, European Commission and DG TREN, and the anti-monopoly
Key stakeholders to co-operate with in this business opportunity:                                                     authorities (both in the Czech Republic and on the EU level).
       Energy and environmental policy makers (see above)
* See Section 2.3.3 Importance of Brown Coal Industry in the Czech Republic: National Energy Concept, Mining   **   See Section 2.8.7 Results of the Monitoring Sustainable Development Factors programme in 2003-2005: Types of
  Limits and Coal Production in the Czech Republic                                                                  households moving to towns/villages with coal extraction
                                                                                                               *** See Section 2.6.2 Reclamation MUS: Energy Crops Growing in Reclaimed Areas
           2.2.4 Relationships with Stakeholders                                      trade departments of the individual companies within the Group.          Labem Region (HSR ÚK) and the Most Economic and Social Council
                                                                                      Other specialised departments maintain contacts with the respective      (HSRM), the Regional Chamber of Commerce (KHR ÚK) and the Most
           Principles of Relationships with Stakeholders                              governmental supervisory agencies, including, but not limited to,        District Chamber of Commerce (OHK Most). The Most District
           Management of the relationships with all of the Group’s stakeholders       those in the areas of safety at work, environmental protection, and      Economic and Social Council closely cooperates with the Economic
           is subject to the following principles:                                    research. Regular consultations are held with representatives of self-   and Social Council of the Ústí nad Labem Region, which is
                Statutory obligations are strictly respected in promoting relations   government authorities, mainly under the MUS regional co-operation       responsible for the co-ordination of efforts and dealing with the
                with all stakeholders                                                 programme. Trade union, professional and regional organisations          Czech Government, Ministries, central administration authorities, Ústí
                The sustainable development principle is reflected in the Group’s     constitute another important source of information and opportunities     nad Labem regional authorities and the self-government authorities
                relationships to all stakeholders                                     for consultations with a broad group of stakeholders.                    in the district of Most, concerning the issues of the economic and
                Relationships between the Group and individual stakeholders are       The Group understands that the different groups of stakeholders          social development of the region. The Council’s objective is to ensure
                based on mutual information, awareness and transparency in all        have specific information needs. The companies, particularly             a well-balanced economic and social development in the Most
                actions and conduct                                                   Mostecká uhelná a.s. and Czech Coal a.s., therefore have                 district and the Ústí nad Labem Region. The Group is also strongly
                                                                                      Communication Departments to meet such needs. The largest                represented on the OHK Most, which is the strongest District
           Types of Stakeholders                                                      company, Mostecká uhelná a.s., operates the “Co-existence”               Chamber of Commerce in the Ústí nad Labem Region and indeed one
           The following major stakeholder groups, each having specific               Information and Contact Centre at Litvínov (www.spoluziti.cz) and        of the strongest Chambers of Commerce in the Czech Republic.
           requirements and needs, are distinguished in the social responsibility     a toll-free line (800 800 499).                                          As to the professional organisations, the Group is a member of the
           area:                                                                                                                                               Association for District Heating of the Czech Republic, which in 2006
                  Customers                                                                                                                                    worked, among other things, on the Rules for Implementing the
                  Employees and their organisations                                   The Group’s Membership of Local and International                        Cogeneration Directive, and member of the Association of Energy
                  Local communities                                                   Organisations and Associations                                           Managers, which provides valuable independent information about
                  Self-government authorities                                                                                                                  the electricity market and is a respected institution that provides
                  State administration institutions                                   The Czech Coal Group is a member of 41 organisations and                 comments on the newly drafted energy legislation and the Energy
                  Employer organisations                                              associations, of which 35 are national and six are international.        Regulatory Office’s price assessments. Membership of the Club of
                  Non-profit and professional organisations                                                                                                    Personnel Managers of the Czech Republic, Czech Association of
                  Partners in the area of education and research                      Czech Organisations                                                      Information Technology Managers (CACIO), Association of
                  Suppliers and other trading partners                                Examples of membership of important Czech economic and business          Mechanical Engineers, or the Czech Treasury Association, providing
                                                                                      associations and unions include, in particular, membership of the        important information in the area of financial management, is also
           The specific stakeholder groups are referred to in the sections of this    Confederation of Industry of the Czech Republic (SPCR) and the           beneficial to the Group.
           Report where the individual activities of the Company are described.       Mining and Oil Industry Employer Union (ZSDNP), which associate
                                                                                      employers and businesses in the Czech Republic in the areas of           International Organisations
           Communication with Stakeholder Groups                                      industry and transport. Their objective is to assert business and        Membership of the European Association for Coal and Lignite,
           Stakeholder groups can obtain information from the publications of         employer interests. The Czech Coal Group is represented on the           EURACOAL, which provides an umbrella over the European coal
           the Group’s companies (annual reports, product catalogues, Report          Board of Directors of both these organisations.                          industry, is important for the Group. Its mission is to promote the
           on the Group’s Activities and Sustainable Development etc.) or from        The Group is also a member of the Economic and Social Councils and       interests of the coal industry in the European energy policy and to
           the website at www.czechcoal.cz.                                           of Chambers of Commerce. In the Ústí nad Labem Region, the Group         contribute actively to creating a non-discriminatory Community
           Customers and suppliers obtain most of the information from the            is represented on the Economic and Social Council of the Ústí nad        framework for the coal industry. Currently the Association has 23
      44




contents
                                                                                                                                                                                                      contents

members – associations in the coal and energy industries of 15 countries. The Group is actively     development. The report offers a detailed description of the Group’s business and sustainable
involved in EURACOAL’s work. It is represented on the Executive Committee, the strategic            development and provides feedback to the Czech Coal Group and its stakeholders in terms of
General Proposals Committee, and Environment Committee. In 2006 the Group took part in              the data being produced. We believe that only where data is made public are stakeholders
organising the meeting of the Executive Committee and the plenary meeting of EURACOAL in            able to identify preferences that can be shared across all stakeholder groups.
Prague. The CEO of Czech Coal a.s. was elected the Vice-President of EURACOAL in 2007.
Within the EU, the Group is represented on the European Economic and Social Committee’s             Structure and Key Elements of the Report on Activities and Sustainable Development
Consultative Commission on Industrial Change (CCMI) and on the Coal Working Group of the            of the Group
Berlin Fossil Fuel Forum under the Energy and Transport Directorate General of the European         The first Report on the Activities and Sustainable Development of the Group was issued in July
Commission. The Working Group’s activities focused in 2006 on issues related to the position        2005 under the programme of Monitoring the Internal and External Factors of Sustainable
of fossil fuels in the EU energy policy, which is currently being prepared, and the position of     Development of the Group, which was commenced in 2003. The purpose was to provide
coal in electricity generation from fossil fuels. The Group is also represented on a working        a report on the activities of the companies within the Group, with a particular focus on
group of the Integrated Pollution Prevention and Control System (IPPC) for the mining               Mostecká uhelná a.s., using the Group’s internal data and, in particular, in the context of the
industry, and is a member of the European Commission’s Working Group on Standardisation,            relevant data characterising the development of the region.
CEN/TC292, which is preparing standards for the disposal of mining industry waste under the         Developing relevant information by retrieving data from public sources and from the results of
EU Mining Waste Directive.                                                                          the Group’s own surveys was costly and laborious and involved discussions with numerous
                                                                                                    stakeholder groups, including, in particular, governmental institutions, local authorities,
                                                                                                    research organisations and universities. Brown coal mining has a significant long-lasting
2.2.5 Reporting on the Activities and Sustainable Development                                       impact on the landscape and settlement structure and this was the main reason why selected
      of the Group                                                                                  settlements in the close vicinity of mining operations were subjected to research into the
                                                                                                    development of their socio-economic situation. Discussions with representatives of the
Sustainable Development on Company Level                                                            stakeholder groups indicated that the Report would also have to contain many texts that
Sustainable development is “development that meets the needs of the present without                 explain the history and legislative conditions of the industrial activities and the approval
compromising the ability of future generations to meet their own needs.” This is how the UN         processes for the key decisions (mainly including plans for mining and reclamation), and also
World Commission on Environment and Development defined sustainable development as                  the numerical series documenting the developments at the end of the 20th and the beginning
early as 1987. In compliance with this definition, the Group’s interest in the brown coal mining    of the 21st centuries, which was revolutionary in many respects.
area is not focused on rapidly extracting the coal reserves – this would in fact be impossible,
both technically and economically. The Group’s intention is to make the coal reserves available
to the generations of our children who themselves will decide how to use those mineral riches
                                                                                                    Selection of the Global Reporting Initiative Methodology
                                                                                                    At the end of 2004 and the beginning of 2005 it was decided to select a standardised
                                                                                                                                                                                                      45
in this century, and perhaps also in the next.                                                      methodology. The Group was the first in the Czech Republic to apply the methodology of
Sustainable development combines three dimensions of the society’s life, economic, social and       Global Reporting Initiative (GRI) - Sustainability Reporting Guidelines GRI, 2002, and
environmental, and addresses the conditions of how these three dimensions co-exist and how          thereafter also the GRI Mining and Metals Sector Supplement, 2005, to corporate reporting.
they are interconnected. Technology is one such interconnecting feature. The world of               In compliance with the principles of sustainable development, the Global Reporting Initiative
technology, as well as the world of nature, is where we all have been living since our childhood.   (for more information see www.globalreporting.org) promotes voluntary disclosure of
If we approach these two realms with due respect and with a view to meeting people’s needs          environmental, economic and social indicators by organisations, including particularly
on a long-term basis, there can never be any antagonism between technology and nature.              privately-held businesses. The objective behind the GRI is to support the transparency and
The Group publishes, on a regular basis, its yearly report on its activities and sustainable        credibility of the activities related to sustainable development.
           The Global Reporting Initiative methodology is an effective and           Method of Data Processing and Standardisation                                     More details can be obtained from the Communication Department
           inspiring standardised tool for the monitoring the sustainable            The reporting relies on the consolidated figures from annual reports of the       of each Group company concerned. Of course, confidential
           development at the company level. It defines specific indicators of the   Group companies, and some other data is taken from the yearly reports of          information (trade secret) and personal information cannot be
           three dimensions of sustainable development. The main reason why          the individual organisational units of MUS and the subsidiaries; only a small     provided.
           this methodology was chosen was the equal reporting of both               portion of the data is prepared specifically for this report.The annual reports
           financial and non-financial data and both internal and external           are audited by KPMG Česká republika, s.r.o. KPGM also audits the structure
           effects. The selected methodology makes it possible to prepare            and methodology in the GRI Report of the Czech Coal Group.
           a more rational and more balanced interpretation of the company’s         The criteria and definitions used in the determination of the economic,
           impact on the environment and on stakeholders, compared with the          environmental and social costs and benefits are the standard criteria
           purely protectionist views focusing only on the adverse impacts of        required by the Czech regulations on annual reports and on
           man and technology on the world of nature.                                maintaining records in the personnel (employee) area.
           The ability to prepare reports that meet the requirements of this         Certain information, especially social data reporting, and a number of
           international methodology is being systematically developed and           case studies (quality management, reclamation etc.) are prepared
           enhanced in the Group.                                                    separately with regard to the requirements of the GRI methodology
                                                                                     and stakeholders’ needs.
           Major Changes that Affect Data Continuity                                 Data is selected upon consultation with specialists from the
           A significant change in the ownership of the Group was made               individual Group companies. In deciding on the final form and
           between 2005 and 2006: the sale of 66% ownership interests in             appearance of the texts and data overviews, the management of the
           Teplárna Otrokovice a.s. and Energetika Malenovice, a.s. These two        Group relies on the opinions of those specialists. Data collection, the
           companies are no more covered by the Group’s reporting for 2006.          consultation of data selection, and data editing in 2006 were
           In 2005 and partly also at the beginning of 2006 Czech Coal a.s. was      performed in co-operation with external specialists in sustainable
           undergoing a transformation, during which it changed its focus            development factor reporting. The final touches were made by the
           towards trading activities and substantially reduced its workforce.       MUS and Czech Coal a.s. communication departments.
           A restructuring programme is also under way in Mostecká uhelná a.s.       With the exception of the financial data (which is presented for the
           The Group itself carries out all the activities concerning its main       Group as a whole), the methodology of preparing the Report prefers
           products – coal production and electricity trade. As to the               detailed information (in the social and environmental area) from the
           subsidiaries, their primary focus is on services and special products     individual companies within the Group; as to the information on the
           for MUS, and a part of their output also goes outside the Group. The      region, the data as well as the maps refer to the individual
           level of outsourcing is insignificant. The current reporting covers the   communities. This level of detail goes beyond what is required by the
           entire output of the Group as well as the environmental and social        GRI methodology and provides a transparent description of the
           impacts. One of the exceptions is that the Group has most of its          Group’s industrial activities for all stakeholders in the region,
           wastes processed or dumped by external companies – the charges for        especially in the districts of Most and Chomutov.
           wastes are therefore not related to the overall output of the Group.      At present the range of available information is being extended and
                                                                                     a new Group website is being developed and regularly updated. The
                                                                                     readers of this report can contribute to the development of the reporting
                                                                                     by taking part in a poll that provides the Group with feedback.
      46




contents
2.3 Sustainable Development and the Position of Brown                                                                                                                                                                                                  contents




    Coal Power Generation in the Czech Republic
2.3.1 International Context of the Sustainable Development of Brown                                                                        2.3.2 Pollutant Emissions from Coal Combustion in the Czech Republic
      Coal Power Generation in the Czech Republic
                                                                                                                                           Larger sources of SO2 are regulated by emission ceilings and, according to available
There are a number of international obligations that affect coal-based power generation in the Czech                                       information, SO2 emissions remain stable or drop. Emission statistics clearly indicate that the
Republic. CO2 production by fossil fuel-fired generating plants is regulated by trade in emission                                          most impressive improvements are being achieved in SO2 emissions. The planned renovation
allowances due to the Kyoto Protocol, while the production of SO2, the most dangerous pollutant                                            and modernisation of coal-fired power plants promises a further significant improvement in
originating specifically from brown coal combustion, is regulated by national emission ceilings. The                                       the sulphur oxide emission situation.
levels of the national emission ceilings are defined with reference to the Göteborg Protocol to the UN                                         Emissions of selected main pollutants between 1985 and 2005
ECE Convention on Long-range Transboundary Air Pollution (CLRTAP) and to Directive No 2001/81/EC                                                              (thousands of tonnes per year) *
(National Emission Ceilings Directive), implemented in Czech legislation by Act No. 86/2002.
                                                                                                                                              Year     Solid Pollutants SO2                NOx              CO              VOC              NH3
According to the Ministry of the Environment, the national emission ceilings were reached as early
as 2001. During the 1990s sulphur dioxide emissions decreased by almost 90% in Czech Republic                                                 1985          1,015        2,161             795             889
– a fall unparalleled in the world. As indicated by the statistics of the Ministry of the Environment,                                        1990            565        1,850             551            1275              441             156
the SO2 limit for the Czech Republic under the Göteborg Protocol and under Directive No.                                                      1991            525        1,749             527           1,197              394             134
2001/81/EC was met during the period of 2001-2004. Desulphurisation of coal-fired power plants                                                1992            425        1,495             499           1,141              366             115
in northern Bohemia contributed most significantly to this result.                                                                            1993            367        1,366             459           1,055              346               99
                                                                                                                                              1994            258        1,205             378           1,036              310               91
                           Sulphur dioxide emissions in the Czech Republic, 1990-2004*
                                                                                                                                              1995            211        1,103             370           1,044              292               86
                                                                                                                                              1996            178          944             366           1,012              293               81
                      2,000
                                                                                                                                              1997            127          697             349             944              277               81
                      1,800
                      1,600
                                                                                                                                              1998             84          438             321             765              242               80
 '000 tonnes/year




                                                                                                                                              1999             66          268             313             716              234               75
                      1,400
                      1,200                                                                                                                   2000             75          264             321             648              227               74
                                                                                                                                                                                                                                                       47
                      1,000                                                                                                                   2001             70          251             332             649              220               77
                          800                                                                                                                 2002             74          234             285             547              202               84
                          600                                                                                                                 2003             76          229             286             564              200               82
                          400                                                                                                                 2004             74          227             286             547              191               70
                          200                                                                                                                 2005             77          227             288             549              187               68
                            0
                                1990

                                       1991

                                              1992

                                                     1993

                                                            1994

                                                                   1995

                                                                          1996

                                                                                 1997

                                                                                        1998

                                                                                               1999

                                                                                                      2000

                                                                                                             2001

                                                                                                                    2002

                                                                                                                           2003

                                                                                                                                  2004




                                                                                                                                                                          * Report on the Environment in the Czech Republic in 2005, (Table III.1.4)

                    SO emissions         Limit for 2010 under the Göteborg Protocol            Limit for 2010 under Directive 2001/81/EC

                      *    See http://indikatory.env.cz/index.php, 12 March 2007 on the Ministry of the Environment website
           It is often said that brown coal use for household heating is on the rise and that poorer households are returning to                                   Brown Coal Reserves in the North Bohemian Coal Basin and the Mining Limits
           coal heating and that, generally, that this is a return to the situation of the early 1990s. However, no available data                                 Brown coal is the only indigenous primary energy resource in which the Czech Republic is entirely self-
           indicates that coal consumption in households has increased significantly, i.e. such views cannot be documented.                                        sufficient.
           Between 1994 and 2005 the production of graded coal decreased from 7,348,000 tonnes to 3,269,000                                                        In the Czech Republic, brown coal deposits are located in four basins. The North Bohemian Coal Basin is
           tonnes and the quantity of graded coal sold has remained practically unchanged (with minor variations)                                                  the largest of them. It is situated at the foot of the Krušné hory Mountains and spreads from Chabařovice
           since 1999 (between 3.2 and 3.5 million tonnes).                                                                                                        to Kadaň and Žatec. The Sokolovská Basin is another basin that is being exploited, and brown coal also
           Ambient air pollution measurements reflect the above changes. According to the data contained in the                                                    occurs in the Cheb and Žitava Basins.
           2005 reports of the State Health Institute*: "The average long-term exposure to sulphur dioxide is low –                                                The total brown coal reserves are currently estimated at 9.87 billion tonnes, including 2.39 billion tonnes
           about twice the natural background level as the maximum. In 2005 it did not exceed 15 μg/cu m for 99%                                                   in the exploited deposits. The coal reserves that can actually be extracted within the mining limits are
           of the population in the residential areas surveyed. It can be said that since 1999, exposure to sulphur                                                estimated at 1.20 billion tonnes.
           dioxide in the towns under review has been stable at the natural background level.”
           Increases in the measured levels of solid pollutants, especially the PM10 particulates, are usually attributed
           to coal burning in households. Taking into account the stagnation in the quantity of coal distributed over                                                                        Useful life of the surface mines in the North Bohemian
                                                                                                                                                                                                                 Brown Coal Basin
           the period between 1999 and 2006, a local worsening of air quality (PM10) due to brown coal is only
           thinkable in the case of a substantial change in the local distribution of coal (coal burning reduced in some
           areas and increased in others). The increases in the levels of solid pollutants are probably due to firing                                                                  Within the existing mining limits                         Beyond the existing mining limits

           other solid fuels (wood or waste) or to road traffic; unlike local furnaces, motor vehicles can be expected                                                         MUS (Mostecká uhelná a.s.)
           to increase the production of solid pollutants significantly in the future.                                                                                         SD (Severočeské doly a.s.)
                                                                                                                                                                                                                                                                                     ČSA
           Investigations of ambient air pollution in small rural settlements** draw attention to the underestimation
           of the situation in this “little monitored part of Czech territory”, but the measurements have so far been                                                                                                   Vršany
           brief and lack continuity.                                                                                                                                                                       Libouš                                                     Vršany        2100
                                                                                                                                                                                                Bílina                                                     Libouš
                                                                                                                                                                                    ČSA                                                         Bílina
           2.3.3 Importance of Brown Coal Power Generation in the Czech Republic***

           Before 1989 Czechoslovakia had an extensive economy with a large proportion of heavy industries.
           Industry, including mineral extraction and the energy sector, therefore did not work effectively and caused
           an excessive burden on the environment. Extensive transformation has been under way in coal mining and                                                                   2017        2034         2037        2058                   2043        2049        2058        2061
           coal-fired power generation since 1990. The transformation was initially regulated by the government.                                                                                                                                             SD           MUS
                                                                                                                                                                                    MUS           SD          SD         MUS                    SD                                   MUS
           When the first private investors appeared in the mid-1990s this transformation was also motivated by the
           need for long-term competitiveness and for social acceptability by stakeholders.                                                                                                                                                                                  (Source: VÚHU)

           Surface coal mining and coal-fired power generation are not inheritance from the previous socialist regime.                                             The extractable reserves that are under control by MUS but beyond the mining limits are estimated at 280
           They have long been effectively practiced in countries that had started to adopt the sustainable                                                        million tonnes. In the next stages of the expansion of the ČSA surface mine (the surface mine with the
           development and corporate social responsibility concepts decades before we did. In Germany, Greece, Spain                                               largest reserves of brown coal in the Czech Republic) this reserve may be increased by another 470 million
           and other countries, coal as a resource for power generation is planned to continue playing an important                                                tonnes. If spread over a longer period of time, mining may continue to 2061, or even beyond 2100
           role for decades or even centuries as a sustainable technology in transition to new energy resources.                                                   provided that further stages of expansion are carried out.
      48     * System of monitoring the population’s health related to environmental factors. Subsystem I. Health implications and risks of air pollution. Technical Report for 2005. State Health Institute, Prague, July 2006, pp 44, 48
            ** See Kotlík, Kazmarová, Kvasničková, Kelder: Air Quality in Czech Villages – situation in 2003. In: Air Pollution 2/2006 - seminar organised by the Ministry of the Environment, pp 11-16.
           *** Information on electricity generation from coal is drawn from the statistics of the Energy Regulatory Office and from the press conference of the ČEZ electricity generator on its consolidated results for 2006. The remaining data is taken from Czech Coal’s own statistics.



contents
                                                                                                                                                                                             contents

While the volumes of brown coal produced by Mostecká uhelná a.s. continue to fall, demand for brown
coal is increasing. This imbalance may worsen in the coming years due to the existing mining limits.
If the brown coal reserves beyond the mining limits remain unavailable at the ČSA site, where the
largest Czech coal reserves are located, the output of Mostecká uhelná a.s. will fall to less than one-
half of the current level within the next ten years. This will have the following consequences:
   Uncertainty of mining beyond the current mining limits does not allow Czech Coal a.s. to enter into
   long-term coal supply contracts beyond 2015.
   After 2017 the Company would only exploit the Vršany site, producing 6 to 7 million tonnes of coal
   annually. Just for the sake of comparison, in 2006 the total volume of the Most coal sold was 15.7
   million tonnes.
   The loss of 280 million tonnes of brown coal in ČSA Mine Stage II will burden the nation’s external
   payment balance, because 628.3 TWh of electricity will have to be imported (the estimated cost is
   about CZK 700 billion); revenues to the national budget will fall and, as unemployment problems
   will have to be addressed, national budget expenditure will grow.
   About 4,000 jobs will be lost directly and another almost 9,500 jobs will be at risk. This will
   significantly increase unemployment in the area of Most and in neighbouring areas.
   In addition, heat supplies to Prague, Chomutov, Most, Litvínov, Hradec Králové, Pardubice,
   Strakonice, Příbram, Zlín and Otrokovice (for about 750,500 inhabitants) might also be at risk of
   termination, plus another 160,000 households that use the graded Most coal (out of a total number
   of about half a million Czech households heated with brown coal).
   The unavailability of the reserves beyond the mining limits also makes it difficult for investors to
   decide on the construction of new and efficient coal-fired power plants with much better
   environmental parameters than the existing power plants.

Brown Coal Production in the Czech Republic                                                                                    Brown coal companies’ contributions
Compared with 2005, the annual saleable output of coal in 2006 was 48.5 million tonnes, i.e.                                 to overall brown coal production in 2006
an increase by some 330,000 tonnes, or 0.7%.
                                                                                                          Severočeské doly a.s.
                                                                                                                                                                   Sokolovská uhelná, a.s.
                                                                                                                                                                     10.3 million tonnes
                                                                                                                                                                                             49
         Brown-coal companies’ output in millions of tonnes in 1998 to 2006                                22.5 million tonnes                                            21.3 %
                                                                                                                46.3 %
                         1998     1999     2000     2001    2002     2003     2004     2005     2006
Mostecká uhelná a.s.      18.7 13.2        17.4    17.1      16.6    17.0     16.2      16.1    15.7
Severočeské doly a.s.     21.5 21.3        21.1    22.6      21.4    22.7     21.8      21.8    22.5
Sokolovská uhelná, a.s. 10.4      9.9      10.3    10.8      10.4    10.1     10.1      10.3    10.3
Total brown coal          50.7 44.4        49.8    50.4     48.4     49.8     48.1     48.2     48.5
                                                                                                                                                                Mostecká uhelná a.s.
                                                                                                                                                                15.7 million tonnes
                                                                                                                                                                      32.4 %
           Proportion of Electricity Generated from Brown Coal in the Czech Republic                                                                                      Electricity production and consumption (gross) in the Czech Republic
           Electricity generation in the Czech Republic was at its historical maximum of 84.3 TWh in 2004 and 2006 alike, some                                                          and the export balance in TWh (1998-2006)
           1.7 TWh (2.1%) up on 2005.                                                                                                                                    100
           Coal-fired power plants contributed 62.1% to the total electricity output in 2006 and nuclear power plants 30.9%.
                                                                                                                                                                                                                                                                83.2            84.3            82.6            84.3
           Demand on the Czech electricity market increased 2.9% year on year.                                                                                           80                                                     74.6            76.4
                                                                                                                                                                                                                 73.5                                                                                                  71.7
           Most of the brown coal produced is used in the electricity industry, particularly the ČEZ Group.                                                                      65.1            64.4                                  65.1            65
                                                                                                                                                                                                                                                                       67              68.6            69.9
                                                                                                                                                                                        62.7                            63.4
                                                                                                                                                                                                        61.1
                                                                                                                                                                         60

                     Brown coal production and consumption in the Czech Republic in 1995 to 2006




                                                                                                                                                                   TWh
                                                                                                                                                                         40
                                                                           (millions of tonnes)
             70
                                                                                                                                                                         20
                                 .9
                      .1


                               58



                                          .8
                    57




                                        56




             60
                                                       .7




                                                                                            .4
                                                                                .8




                                                                                                                     .8
                                                     50




                                                                                          50




                                                                                                                                                         .5
                                                                                                         .4




                                                                                                                                           .2
                                                                                                                                  .1
                                                                              49




                                                                                                                  49
                                                                                                                                                                          0




                                                                                                                                                       48
                                                                                                       48




                                                                                                                                          48
                                                                                                                             48
             50
                                                                  .4

                                                                                                                                                                                          -2.5            -3.3
                                                                44



                                                                                                                                                                                                                          -10            -9.5           -11.4                                           -12.6           -12.6
                                                                                                                                                                                                                                                                        -16.2           -15.7
             40                                                                                                                                                          -20
                                                                                                                                                                                  1998            1999            2000           2001            2002            2003            2004            2005            2006
                                              .2




                                                                                                                       .0
                                                                                     .0


                                                                                              .9
                                                          .0




                                                                                                                                                              .1
                                   .8




                                                                                                                                   .8
                                             30




                                                                                                                                                .3
                                                                                                            .2


                                                                                                                     30
                                                                                 30


                                                                                            29
                         .3




                                                        29




                                                                                                                                                         29
                                 28




                                                                                                                                  28


                                                                                                                                               28
                                                                                                          28
                       27




                                                                      .9




             30
                                                                    24




             20                                                                                                                                                               import/export balance                 domestic consumption of electricity (gross)                    total electricity production (gross)


             10
                                                                                                                                                                   Current and Projected Use of Graded Coal in the Czech Republic
               0                                                                                                                                                   The volume of graded brown coal supplied to the market in the Czech Republic in 2006 was 3.4
                       1995      1996        1997      1998         1999         2000       2001          2002       2003         2004         2005      2006
                                                                                                                                                                   million tonnes, some 200,000 tonnes up on 2005. According to forecasts, the volume of graded
                                      Brown coal total (without lignite)                          of which, ČEZ and the Mělník 1 power plant                       brown coal supplied from the Bílina, ČSA and Jiří sites is to be about 3 million tonnes annually
           Total gross electricity production in the Czech Republic, electricity exports and net electricity consumption in the Czech                              until 2015. After 2015, graded coal is only expected to be produced at the Bílina site, its annual
           Republic (in TWh):                                                                                                                                      output being about 1.7 million tonnes until the end of its life. Households will remain the key
                                        Electricity in the Czech Republic, 1995 to 2006 (TWh)
                                                                                                                                                                   customer group on the graded coal market.
                                  1998            1999         2000          2001          2002            2003            2004        2005           2006         However, the future development of graded brown coal and brown-coal briquette production and
              Electricity
                                   62.7             61.1       63.4          65.1          65.0            67.0           68.6         69.9           71.7         consumption will to a considerable extent depend on the balance maintained between the
              consumption (gross)
              Electricity                                                                                                                                          demand for brown coal for electricity generation (and possibly also for district heating) and the
              production (gross)      65.1          64.4       73.5          74.6          76.4            83.2           84.3         82.6           84.3         availability of powder coal. In a critical situation, the structure of brown coal production may be
              Electricity                                                                                                                                          adjusted to meet primarily the needs of power and heat generating plants to the detriment of the
              output (gross)          47.9          45.7       50.8          52.2          53.7            60.9           61.6         59.5           62.0         production of graded coal.
              ČEZ a.s.
              Electricity
              import/export           -2.5          -3.3      -10             -9.5        -11.4           -16.2           -15.7        -12.6          -12.6
              balance
      50




contents
                                                                                                                                                                                                          contents

National Energy Concept, Mining Limits and Coal Production in the Czech Republic
The Czech Republic is self-sufficient in electricity supply at present, but without further capital expenditure this will change after 2015. The current National Energy Concept (Government Resolution
No. 211/2004) envisages the use of the brown coal beyond the mining limits (the mining limits were set by the earlier Government Resolution No. 444/1991 in 1991). Nevertheless, even this scenario
involves further scale-downs in brown coal extraction and electricity generation from brown coal, still the most important part of the Czech energy mix.




                                               National Energy Concept in the Czech Republic
                                                 - Governement Resolution No. 211/2004*                                                   National Energy Concept of Czech Republic
                                 100                                                                                                                  2000 2005     2010 2015 2020 2025 2030
                                  90                                                                                       Electricity, total (TWh)   73.73 78.2     82.37 80.85 84.95 87.49 89.17
                                  80                                                                                       of which:
                                                                                                                           Contribution of brown
 electricity generation in TWh




                                  70
                                                                                                                           coal to electricity        58.4   48.9   45.3   40.5   37.3   33     31.9
                                  60
                                                                                                                           generation (%)
                                  50
                                                                                                                           Brown coal                 43.06 38.27   37.3 32.76    31.72 28.86   28.46
                                  40                                                                                       Hard coal                   8.94 5.18     5.58 5.26     7.79 6.36     4.34
                                  30                                                                                       Other solid fuels           0.14 0.06     0.1   0.1     0.07 0.06     0.06
                                  20                                                                                       Gaseous fuels               4.69 3.66     4.56 6.25     7.27 7.37     6.46
                                  10                                                                                       Liquid fuels                1.59 0.84     0.62 0.6      0.48 0.41     0.34
                                    0                                                                                      Nuclear fuels              13.59 26.04   26.04 26.04   26.04 30.24   34.44
                                              2000    2005           2010      2015      2020        2025    2030          Renewable resources         1.71 4.16     8.17 9.84    11.58 14.2    15.06
                                 Brown coal              Renewable resources          Liquid fuels          Nuclear fuel

                                 Gaseous fuels           Hard coal

 * According to the calculations in the National Energy Concept (NEC), energy (heat and electricity) was planned
  to be generated from the following sources in 2005: brown coal 38.3%, nuclear 26%, hard coal 5.2%, natural
  gas 3.7%, and renewable resources 4.2%. By 2030, the contribution of nuclear fuel to energy production is to
  increase to 34.4%, that of brown coal will fall to 28.5% and that of renewable resources is to increase significantly
  to 15%.                                                                                                                                                                                                 51
           2.4 Economic Relationships with the Local Communities
           2.4.1 Types of Statutory Levies on Brown Coal Mining                                                                 2.4.2 Financial Benefits from Brown Coal Extraction to Communities in the
                                                                                                                                      Most/Chomutov Area
           Over the last several decades coal mining has been perceived by the public as a source of adverse impacts on
           the landscape and environment. Phrases like “liquidation of traditional historical landscape” or “adverse            Owing to the tax revenue assignation to municipalities, mineral extraction is an important direct source of
           impact on local communities” are not uncommon, and so are the terms dust levels, noise pollution and others.         funding for their budgets, depending on the extent of the mining company’s activities in the respective
           On the other hand, facts such as the provision of jobs (almost 9% of all jobs in the Most district) or the           community’s territory.
           financial benefits from brown coal mining are disregarded.
           The two key laws that cover mining (Act No. 44/1988 and Act No. 62/1988) lay down the obligation to                   Payments made by Mostecká uhelná a.s. and Důl Kohinoor a.s. in 2005 and 2006 (in CZK)
           pay for permission, prospecting for and surveying of reserved mineral deposits, to pay for the working
                                                                                                                                                              Payment on                   Payments on the mineral                     Payments for
           district and to pay an annual levy on the average market price of the mineral extracted:
                                                                                                                                                         the working districts               extracted – coal and                  exclusion of the land
              1. Levy on the mineral extracted (Section 32a, Subsection 2 of Act No. 44/1988, as amended by Act No. 541/1991)                               (100 % goes to                    stone (75% goes to                     from farming use
              2. Payment on the working district (Section 32a, Subsection 1 of Act No. 541/1991)                                Community                  the communities                  communities, 25 % to
              3. Payment under Act No. 334/1992, on the Protection of the Agricultural Land Fund.                                                              affected)*                    the national budget)
              4. Financial provisions for compensation for the damage caused by mining, including clean-up and                                               2005            2006               2005               2006               2005               2006
                 reclamation (Sections 36, 37 and 37a of Act No. 44/1988)
           The funds provided voluntarily by the Group under the Regional Co-operation Programme constitute                     Most                       301,094         283,653          19,921,261         15,877,287           193,348            193,348
           another form of economic support.                                                                                    Vrskmaň                     73,270           70,318

           Funds generated by MUS from brown coal                      Total amount                Of which, amount             Strupčice                   74,825           69,152          5, 582,307         5,888,975           210,974            210,974
           extraction intended for landscape                            1994-2006                  for communities
           regeneration, support to local                              (CZK million)                 in the region              Horní Jiřetín              254,580         245,973            6,059,952        14,544,719                    0
           communities and improvement                                                                1994-2006
                                                                                                                                Malé Březno                116,690         111,032          14,102 911         15,253,047           444,327            444,328
           of the quality of life (rounded)                                                          (CZK million)
                                                                                                                                Litvínov                   150,600         149,217              107,912             45,002          109,997
           Payment on the mineral extracted – coal                          992                             598
           Payment on the working districts                                  32                              32                 Lom u Mostu                 47,355           41,656
           Payments for exclusion of the land                                                                                   Vysoká Pec                  43,206           42,251
                                                                            602
           from farming use in the period of 1994-2006
           MUS funds spent on reclamation                                                                                       Mariánské Radčice           23,238           21,776
                                                                          3,154
           in the period of 1994-2006
                                                                                                                                Louka u Litvínova                300             263
           Funds provided voluntarily under the MUS
           Regional Co-operation Programme                                  333                             333                 Other communities          140,342         136,409
           since 1998 (CZK million)
                                                                                                                                Communities total 1,225,500 1,171,700                       45,774,343         51,609,030           958,646            848,650

                                                                                                                                National budget                                             15,258,114         17,203,008 34,268,897** 32,371,347**

      52                                                                                                                        * Payments on the working districts (WDs) are made on those WDs that are under the organisation’s control as at 1 January of the
                                                                                                                                   respective year, irrespective of how the WD area is used – whether it is used for mining or is being reclaimed or left untouched.
                                                                                                                                ** State Environmental Fund



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                                                                                                                                                                                                                                                             contents




Taking the payments on extracted mineral alone, the municipalities in the vicinity of                                                                           Reserves in a reserved deposit are classified as follows:
 the ČSA and Vršany surface mines and the Centrum deep mine have received the                                                                                      By the degree of exploration: reserves prospected and investigated
   following amounts (in CZK ‘000) since the entry of private capital into MUS*:                                                                                   By the conditions of use:
Community                   1999         2000         2001          2002        2003          2004         2005** 2006                  Total                   - Workable reserves – usable at present
                                                                                                                                                                - Unworkable reserves – not usable at present
Most                       18,603 16,664 27,411 28,558 23,433 19,869 19,921 15,877                                                    170,336
                                                                                                                                                                   By the admissibility of extraction:
Vrskmaň                      2,386        2,966        1,499        1,692           174               0            0            0        8,717                  - Free reserves
Strupčice                    4,537        4,700        9,387 12,509              7,591         4,514         5,582 5,889               54,709                   - Fixed reserves (e.g. in protective pillars)

Horní Jiřetín                  643        2,271        3,955        4,111 10,434               4,112         6,060 15,545              47,131
                                                                                                                                                                Write-off of a reserved mineral deposit means:
Malé Březno                  8,973        7,456 10,069              7,939        6,558 18,225 14,103 15,253                            88,576                   - Exclusion from the records of reserves
Litvínov                           9          78            61             5            0             0         108           45            306                 - Transfer from workable to unworkable reserves
                                                                                                                                                                Unworkable reserves in a reserved mineral deposit can be written off if such reserves
Mariánské Radčice 1,283                     189               0            0            0             0                                  1,472
                                                                                                                                                                are not currently used and are not expected to be used in the future.
* Data on the payments for each of the years applies to MUS alone, except 2005, where it also includes payments for the subsidiary, Důl Kohinoor a.s.
**Note: The amount paid in 2005 relates to both coal and quarried stone.

                                                                                                                                                        A protected mineral estate (CHLÚ) is declared to protect a reserved mineral deposit against
2.4.3 Management of Reserved Mineral Deposits and the Determination                                                                                     rendering its extraction difficult or impossible. A protected mineral estate is declared in the
      and Closure of Working Districts                                                                                                                  prospecting or investigation period after the Reserved Deposit Certificate is issued and is
                                                                                                                                                        declared by the Ministry of the Environment together with the Ministry of Industry and Trade
Knowledge of the key rules of brown coal deposit protection and use is essential for                                                                    and the District Mining Office.
understanding mining companies’ approaches. However, the public does not have much                                                                      The definition of the working district is based on the results of the investigation of the deposit
experience with the use of these rules, which is probably due to the rapid development of the                                                           and it must ensure that the deposit can be economically extracted. Working district definition
relevant legislation.                                                                                                                                   is based on the declared CHLÚ, taking into account the extraction of the adjacent deposits and

Under the Mining Act, minerals are divided into:
                                                                                                                                                        the impact of extraction. (The boundaries of a surface mine are not necessarily identical with
                                                                                                                                                        the boundary of the working district, and therefore it cannot be claimed that the mine must
                                                                                                                                                                                                                                                             53
   Reserved minerals                                                                                                                                    reach as far as the working district or the protected mineral estate.)
   Unreserved minerals                                                                                                                                  For extraction from a a reserved deposit in a working district, the organisation needs, among
Reserved minerals, directly listed in the Act, include crude oil, gas, coal, ores and others.                                                           other documents, a Mining Permit from the District Mining Office.
Generally it can be said that the State is the owner of reserved minerals, whereas unreserved                                                           A Development and Working Face Advance Plan must be prepared and submitted for the issue
minerals belong to the owner of the land.                                                                                                               of the Mining Permit. The Development and Working Face Advance Plan must contain all the
If it is found (e.g. as a result of geological surveying) that reserved minerals occur in a                                                             details defined by the relevant Regulation of the Czech Mining Office.
concentrated quantity at a site, the Ministry of Industry and Trade issues a Reserved Deposit
Certificate.
           List of abolished and transferred working districts (since the establishment of MUS)
           26/1/1994         Havraň working district, abolished
           5/10/1995         Loučná working district, abolished
           9/10/1995         Hamr I u Litvínova working district, abolished
           9/10/1995         Hamr II u Litvínova working district, abolished
           12/12/1995        Souš I working district, abolished
           4/1/2000          Háj working district, abolished
           2/2/2000          Lom II working district, transferred to Důl Kohinoor a.s.
           5/2/2001          Louka u Litvínova working district, abolished
           20/7/2001         Proboštov working district, abolished
           21/8/2001         Most working district, transferred to Důl Kohinoor a.s.
           27/12/2001        Chomutov working district, abolished
           8/3/2002          Pohradice working district, abolished
           31/7/2002         Dolní Jiřetín working district, transferred to Důl Kohinoor a.s.
           8/10/2002         Jeníkov working district, abolished




           2.4.4 Method of Identification and Buyout of Land in Mining Districts

           Changes in the perception of private property occurred after 1989 and were influenced, among other
           factors, by the amended Economic Code (1990) and the amended Civil Code (1991). However, the most
           important changes in the legislation covering this area arrived with the adoption of the “Cadastral Act”
           and the related regulations in 1992, in effect since 1 January 1993.
           Under the new legislation, mining companies had to thoroughly examine and clear up the ownership titles
           to the properties in the areas affected by mining. The properties for which these titles were cleared up and
           settled were privatised in November 1993 and are now owned by MUS. The ownership titles that are still
           unclear have been left to be addressed by the state-owned enterprise, Doly a úpravny, s.p. Komořany.
           The existing rules and laws guarantee that the ownership issues are appropriately resolved. The procedure
           also applies to the titles to properties in the extractive sector. The issues faced during the process are not
           inherent in the procedure itself but are due to the method of property registration and the general
           approach to ownership as such before 1989.
           Where the parties are unable to reach an agreement, the complaints, disputes and disagreements regarding the process
           of clearing and settling ownership titles are considered by courts upon a petition filed by any of the parties involved.
      54




contents
                                                                                                                                                                                                                 contents

2.5 Environmental Protection
2.5.1 Caring for the Environment in the Group Companies

The care for the environment in Mostecká uhelná a.s. and its subsidiaries is primarily focused on the prevention of the adverse impacts of mining and the related activities. Environmental protection
enjoys maximum attention in the Czech Coal Group, particularly when it comes to emission reduction, waste disposal, water and air quality protection and control, and the treatment of hazardous
chemicals and other substances. In 2006 the Group operated 67 air pollution sources, including 43 medium-sized and 24 small sources.
The applicable legal regulations, including the execution regulations relating to laws, are strictly respected in all of the above areas. In the water protection area, all the waste, mine and surface waters
discharged to public water courses meet the requirements contained in the relevant decisions issued by the water management authorities. All of this helps to minimise the adverse environmental
impacts caused by the Czech Coal Group: no environmental fine was levied on any of the Group’s companies and no accident occurred in 2006.




                                                                                                                                                                                                                 55
           2.5.2 Information on the Environmental Impact of the Group’s Production Companies in 2006

                                                                                                        Data on the Environmental Impact of the Group’s Production Companies


                                                                                                          Air                                                                                 Waste                                                            Water
                                                                        Medium-sized air                              Small air                                  Waste collected                          Waste utilised in                     Waste water treatment plants (WWTP)
                                                                        pollution sources*                       pollution sources**                             for further use                     the company’s own facilities               Mine water treatment plant (MWTP)
                                                                                                                                                                                                                                                     Fuel filling stations (FS)

                                                                   8 operating units of the coal                  3 coal storage sites,                      Waste oils, tyres,                           Sludge from mine water
                                                                   preparation plant, 2 sites with                1 loading and unloading                    scrap iron, batteries,                       treatment plant,
              Mostecká uhelná a.s.                                 possible occurrence of fire                    installation for agglomerate,              separated municipal                          construction and                             The waters are delivered to
                                                                   and ignition in the surface
                                                                                                                  1 paint spraying shop,                     waste, construction                          demolition waste,                            HUMECO, a.s. for treatment
                                                                   mines, 6 fuel filling stations,
                                                                   1 stone quarry, 2 combustion                   6 combustion plants                        and demolition waste                         energy by-products after
                                                                   plants and 202 grinders                                                                                                                coal combustion

              Důl Kohinoor a.s.                                                                                                                              Waste oil, scrap iron,                                                                    1 FS, 1 MWTP
                                                                                                                                                             separated municipal
                                                                                                                                                             waste, batteries


                                                                                                                                                             Waste oils, tyres, scrap                                                                  1 WWTP in Třebušice,
              DTS Vrbenský, a.s.                                   Medium-sized air pollution                                                                iron, batteries,                                                                          1 treatment plant for
                                                                                                                  1 paint spraying shop
                                                                   sources: 7 fuel filling stations                                                          separated municipal                                                                       oil-contaminated water
                                                                                                                                                             waste


                                                                   Medium-sized air pollution sources:            1 paint spraying cabin,                    Scrap iron, tyres,
              Krušnohorské strojírny Komořany a.s.                 5 Četrans boilers, forge,                                                                                                                                                           1 WWTP, 1 FS
                                                                                                                  1 furnace for waste wood                   separated municipal
                                                                   waste water treatment plant,
                                                                   blast machine, grinders                          firing                                   waste, batteries, oils

                                                                   4 conveyer belt renovation                                                                Scrap iron,                                                                               The waters are delivered to
                                                                                                                                                                                                          Waste rubber (tyres)
              RENOGUM-NILOS a.s.                                   lines                                                                                     separated municipal waste                                                                 HUMECO, a.s. for treatment

                                                                                                                                                                                                          Cables and non-ferrous
              HUMECO, a.s.                                         2 waste water treatment                        1 boiler house,                            Plastics, paper,                             metals, electrical                           6 WWTPs, 2 MWTPs, 63 FSs
                                                                   plants (Hrabák, ČSA)                           1 recycling line separator                 scrap iron                                   equipment

              MUS-Uniservis, spol. s r.o.                          1 boiler plant                                 8 boiler houses

            * Medium-sized air pollution sources include combustion facilities with a rated thermal output of 0.2 MW to 5 MW, coal preparation facilities, fuel filling stations, the stone quarry, mine ignition, mine fire and certain technological operations and grinders.
      56    ** Small air pollution sources include combustion plants with a rated thermal output lower than 0.2 MW, the paint spraying shop and the dumps of inert waste and coal products, boiler plants, and certain technological operations




contents
                                                   T h e s u m m a r i s e d e n v i ro n m e n t a l i n d i c a t o rs f o r t h e G ro u p ’s p ro d u c t i o n c o m p a n i e s, 2 0 0 6                                                                             contents
                                                                          Unit      Mostecká           Důl           Krušnohorské            RENOGUM               DTS                HUMECO, a.s.         REKULTIVACE a.s.             MUS            HIPODROM
                                                                                    uhelná a.s.    Kohinoor a.s.       strojírny             -NILOS a.s.       Vrbenský, a.s.                                                        -Uniservis,       MOST a.s.
                                                                                                                     Komořany a.s.                                                                                                    spol. s r.o.
Environmental subsidies received*                                        CZK ’000    9,350.00          1, 000
Direct energy consumption by primary resources
Electrical energy                                                         MWh       268,526.00        6,459.00          3,882.19              1,131.00            1,282.79              6,068.84                  94.00                 163.00             175.31
Thermal energy                                                             GJ       234,919.00       54,947.00         30,837.00              6,593.66            16,122.00             2,207.00                  858.00               3,990.00
Water consumption (D - drinking, S – service, or both D+S)                cu m      436,008.00    D-25,252 S-24,000 D-14,665 S-14,613         2,580.00           22, 767.00             3,982.00                 1,832.00              7,194.00          43,625.00
Total land owned or used for production                                  hectares    9,335.86          779.67            355.84                  2.93                82.2                 3.25                    66.00                                    790.00
Re-utilisation (proportion of final products which can be re-utilised)      %                                                                   100.00
Percentage of production from secondary materials                           %                                                                   100.00
Greenhouse gas emissions, TOTAL                                            t CO2                                                                              Data not available.**
NOx, SOx and other important air emissions, TOTAL                           t         36.91                                9.90                                      0.16                                                               0.0814
Total production of NOx emissions                                           t          0.12                                1.29                                                                                                         0.0591
Total production of SO2 emissions                                           t          0.01                                7.30                                                                                                         0.0005
Total production of solid pollutant emissions                               t         36.62                                0.46                                                                                                         0.0010
Total production of other emissions                                         t          0.16                                0.85                  9.34                0.16                                                               0.0208
Total production of other emissions                                       cu m        11.59
(mine fire and mine ignition in surface mines – weighted average)
Emission charges                                                         CZK ’000     83.10                               10.20                  8.40                                     5.20
Number of sampled pieces of                                                          1,246.00          15.00               0.00
equipment with possible PCB content                                       pieces
Quantities of wastes by type and location, TOTAL                            t        11,083.7          426.48           2,060.94                905.51            1,486.39               438.80                   218.30                12.00
Of which:
- Production of waste categorised as “other wastes”                         t       10,139.60          423.18           1,976.39                899.86            1,169.01               437.67                   218.30                12.00
- Production of hazardous waste                                             t         944.10            3.30              84.55                  5.65               317.38                1.13
Of which:
- Total output of construction and demolition waste                         t        9,692.70          18.64               0.00                 33.66             1,122.16               148.10
- Total quantity of waste delivered to be disposed of                       t        2,318.50          344.81            614.64                 868.05            1,163.89               269.61
- Total quantity of waste to be utilised                                    t        8,765.20          81.67            1,446.30                37.46               322.50               149.10                                                                            57
Waste charges                                                            CZK ’000      4.86                                                                                              16.101
Quantity of waters released                                        thousand cu m     7,718.33                             14.70
to public watercourses, TOTAL                                         per year
Of which:
- Total quantity of discharged water not requiring thousand cu m                     4,507.1
  treatment before discharging to watercourse
- Total sewage water purified before discharge thousand cu m                          237.00                              14.70
- Total treated mine waters before
                                                                   thousand cu m     2,974.23
  discharge to watercourse
Water pollution charges                                                  CZK ‘000       0
     * (e.g. subsidies from the National Property Fund for reclamation, removal of the consequences of extraction, clean-up etc.)
     ** Obligations under Section 35 of the Czech Clean Air Act (Act No. 86/2002) do not apply to the Group. The Group does not operate any particularly large or large stationary sources of air pollution. The sources are too small to be accounted for as greenhouse
          gas generating sources.
           2.5.3 Environmental Protection in MUS Brown Coal Production

           The Company’s environmental efforts include:                                                                                                              Emissions and wastes produced in coal extraction and preparation
               Clean-up and reclamation of the areas affected by the consequences of mining (see the                                                                                       in MUS (1994 - 2006)
               Reclamation section)                                                                                                                                                                                                                                                                                           24




                                                                                                                     Quantity of pollutant emissions (tonnes/year)
                                                                                                                                                                     800
               Ongoing measurement of solid pollutants in the air and measurement of noise levels at




                                                                                                                        Quantity of waste (‘000 tonnes/year)




                                                                                                                                                                                                                                                                                                                                   Coal sales (million tonnes/year)
                                                                                                                                                                     700




                                                                                                                                                                             2.8
                                                                                                                                                                                                                                                                                                                              20




                                                                                                                                                                            71



                                                                                                                                                                                         7
                                                                                                                                                                                        6.
               the boundaries of the sanitary protection zone around the surface mines




                                                                                                                                                                                       62
                                                                                                                                                                     600
               Air quality protection during brown coal sorting and preparation                                                                                                                                                                                                                                               16
               Brown coal quality monitoring on a continuous basis                                                                                                   500




                                                                                                                                                                                   8
               Compliance with the statutory emission limits for air pollution sources, ongoing                                                                      400                                                                                                                                                      12




                                                                                                                                                                               9.
                                                                                                                                                                             37
               measurements                                                                                                                                          300
                                                                                                                                                                                                                                                                                                                              8
               Compliance with the operating rules for water management facilities, increasing the




                                                                                                                                                                                               4
                                                                                                                                                                                            5.
                                                                                                                                                                     200




                                                                                                                                                                                         19


                                                                                                                                                                                                       6
                                                                                                                                                                                                    9.

                                                                                                                                                                                                           1
                                                                                                                                                                                                   14
               efficiency of effluent treatment plants, e.g. through their refurbishment, and compliance




                                                                                                                                                                                                           3.
                                                                                                                                                                                                                                                                                                                              4




                                                                                                                                                                                                        12
                                                                                                                                                                     100




                                                                                                                                                                                                                 .6
                                                                                                                                                                                                                72



                                                                                                                                                                                                                             .0
                                                                                                                                                                                                                       .1
               with the quality requirements for discharged mine and waste waters




                                                                                                                                                                                                                                                   .9


                                                                                                                                                                                                                                                               .6
                                                                                                                                                                                                                            54



                                                                                                                                                                                                                                       9. .4
                                                                                                                                                                                                                     51




                                                                                                                                                                                                                                                48




                                                                                                                                                                                                                                                                                                                          9
                                                                                                                                                                                                                                                             49
                                                                                                                                                                                                                                  .5




                                                                                                                                                                                                                                                                                                                      .
                                                                                                                                                                                                                                                                                      .1
                                                                                                                                                                                                                                           37




                                                                                                                                                                                                                                                                                             .6




                                                                                                                                                                                                                                                                                                                    36
                                                                                                                                                                                                                                                                            .2




                                                                                                                                                                                                                                                                                                             .0
                                                                                                                                                                                                                                                                                                    .3

                                                                                                                                                                                                                                                                                                           .8
                                                                                                                                                                                                                              22




                                                                                                                                                                                                                                                                                    28
                                                                                                                                                                                                                                                        .0




                                                                                                                                                                                                                                                                                                                   .1
                                                                                                                                                                                                                                                                                            26
                                                                                                                                                                                                                                         7




                                                                                                                                                                                                                                                                        21
                                                                                                                                                                                                                                                                   5




                                                                                                                                                                                                                                                                                                          19
                                                                                                                                                                                                                                                                                    9


                                                                                                                                                                                                                                                                                                 14
                                                                                                                                                                                                                                                                          8




                                                                                                                                                                                                                                                                                                         12
                                                                                                                                                                                                                                                   11




                                                                                                                                                                                                                                                                                                                  11
                                                                                                                                                                                                                                                                9.
                                                                                                                                                                                                                                                                                                                              0




                                                                                                                                                                                                                                                                                 9.
                                                                                                                                                                                                                                                                       7.
               Compliance with the operating rules for the facilities for waste disposal and utilisation,                                                             0     1994        1995        1996        1997        1998        1999     2000         2001      2002      2003       2004        2005      2006


               collection of wastes suitable for further use and preferential use of wastes, and facilities
                                                                                                                                                               Quantity of pollutant emissions (tonnes/year)                                                                             Coal sales (million tonnes/year)
               for waste recycling
               Recording and controlled handling of any equipment that may contain PCBs or any other                                                             of which, pollutants - emissions from the stone quarry (tonnes/year)*                                                   Quantity of waste (‘000 tonnes/year)
               hazardous substances                                                                                                                                  *The increase in emissions starting in 2004 is due to the operation of the “Kočičí vrch – Ležáky” stone quarry,
                                                                                                                                                                      taken over from Důl Kohinoor a.s. in 2004. For example, in 2006 the emissions of solid pollutants (TZL) amounted
               Utilisation of the solid residuals from Most coal combustion and the desulphurisation                                                                  to 27.99 tonnes, which was 76% of the total volume of emissions from MUS’s air pollution sources.
               products
               Monitoring the condition of the side slopes of the ČSA surface mine.

           Total Emission and Waste Production in Coal Extraction and Preparation



                                                                        Emissions and wastes produced in coal extraction and preparation in MUS

                                     Years                                           1994 1995      1996      1997              1998                                      1999         2000                2001             2002 2003                         2004             2005 2006

                                     Quantity of waste (‘000 tonnes/year)            712.8 626.7 149.6        72.6                       54.0                              37.4          48.9                49.6            21.2               28.1           26.6              12.8          11.1

                                     Fees for emissions (CZK ‘000/year)              624.2 719.2 375.2 377.8 172.8 114.5                                                                 50.9                42.3            34.0               32.6           39.8              51.5          83.1

                                     Quantity of pollutant emissions (tonnes/year)   379.8 195.4 123.1        51.1                       22.5                               9.7          11.0                   9.5               7.8            9.9           14.3              19.1          36.9

                                     Coal sales (million tonnes/year)                22.7   21.8     22.3     22.5                       18.7                              13.2          17.4                17.1            16.6               17.0           16.2              16.1          15.7


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Use of Energy By-products from the Coal Combustion Process                           Dust emission and noise levels in brown coal extraction at the Vršany and ČSA surface mines
The Group helps the customers to whom it delivers the Most brown coal to          The data is the results of measurements performed by the authorised department of the Brown Coal Research Institute
                                                                                  (The measuring sites are shown in map No. 1.)
dispose of and use the energy by-products, including the products of brown
coal combustion and products of flue gas desulphurisation, in an
                                                                                                                                                            Measuring sites near the towns/villages
environmentally friendly manner.
                                                                                                                                                          Vršany surface mine                  ČSA surface mine
In 2006, like in 2002 – 2005, certified products of the Most brown coal
                                                                                                                                                          Strupčice Vrskmaň                      Horní Jiřetín
combustion were deposited at MUS sites. On the whole, as much as                                                                                                                                  (Černice quarter)
2,375,800 tonnes of certified energy by-products were delivered from the          Suspended particles PM10 levels                                2004       38.7 / 45           31 / 48               18.7 / 29
above suppliers and deposited at Mostecká uhelná a.s. in 2006 (0.2 million        average 24-hour concentrations /            μ g per cu m       2005       28.5 / 43        39.8 / 47                24.6 / 40
tonnes more than in 2005).
                                                                                  maximum levels measured                                        2006         17 / 21        43.9 / 49.6              26.6 / 39
Certified granulates and additive-treated granulates, i.e. products as per
Government Resolution No. 163/2002, laying down the technical                     The average                                                    2004          36.9        37.2 a 39.1*             35.9 a 42.5*
requirements for selected construction products, are accepted in a treated
                                                                                  equivalent ambient                              dB (A)         2005          39.2        36.4 a 37.6*             42.0 a 38.6*
condition. The wastes that may be delivered in an untreated condition are only
those specified in accordance with Ministry of the Environment Regulation         noise level LAeq                                               2006          36.2        37.5 a 39.4*             39.8 a 36.9*
No. 381/2001 – Catalogue of Wastes in Group 10, which are included in             * Note: At Vrskmaň, noise is measured at two sites (the Local Authority house and House No. 47), and the same applies to Černice
                                                                                    (Houses No. 107 and No. 101).
category “O” (Other Wastes) and which meet the conditions formulated in
Regulation No. 294/2005 on the Conditions of Waste Disposal by Dumping
and the Use Thereof on Ground Surface.                                            Regular nighttime noise measurements are taken under Planning Authorities’ decisions on the establishment
These energy by-products were mostly used in mixed filling material for inner     of the sanitary protection zones, while respecting the conditions specified in the binding official opinions of
dumps to improve the geomechanical properties of the filling earth and            the Regional Public Health Authority. The equivalent noise level recorded near the residential areas next to the
increase the stability of the dump layers. A smaller part was used for building   surface mines meets the legal regulations in force. Preventive measures aimed at reducing noise levels have
temporary roads in mining operations and for laying the foundation layer of       long been taken. However, the equivalent level of noise may increase at certain sites for a certain time, owing
long-distance conveyer line routes.                                               to the signalisation used when the machines are being started up.

Measuring Air Pollution and Noise Levels Caused by Surface Mine                   System of Monitoring the Side Slopes of the ČSA Surface Mine
Operation
Noise levels and concentration of particulates in the environment of the local
                                                                                  Under the Mining Act and the related regulations, mining companies are obliged to ensure the stability of the
                                                                                  slopes of surface mines. Stability calculations are performed for this purpose (for MUS, these calculations are
                                                                                                                                                                                                                      59
communities may be affected by the operation of surface mines. For this           made by the Brown Coal Research Institute). They are incorporated in the Development and Working Face
reason, sanitary protection zones were established to protect the villages        Advance Plan (DWAP) and are detailed for the individual technological units (excavators) in the specific parts
Strupčice, Vrskmaň and Černice (part of Horní Jiřetín). The prescribed range of   of the surface mine. The stability of the slopes is also checked by field measurements.
dust measurements is taken on a regular basis. The results indicate that the      It was concluded from the results of monitoring the side slopes of the ČSA surface mine in previous years that
highest admissible dust concentration on the boundaries of those villages’        the crystalline complex of the Krušné hory Mountains is stable but problems could occur due to sediments.
sanitary protection zones is not exceeded.                                        MUS therefore focused on monitoring the sediments on the slopes in the vicinity of the ČSA surface mine.
                                                                                  With regard to the properties of the earths on the side slopes of the ČSA surface mine, the slope areas of
                                                                                  overlaying sediments are monitored on a long-term basis. The new automatic measuring system, which has
           been in operation since 2005, makes measurements in preset               Other measurements performed:                                              Vrskmaň
           intervals, using a system of fixed measuring points located on the       GPS campaign – once in 5 years (by an external firm)                            Decision on the sanitary protection zone of the Jan Šverma (now
           side slopes of the ČSA surface mine. The system uses an automated        Height measurements in the Jezeří gallery – twice a year                        Vršany) surface mine for Vrskmaň was issued by the Jirkov
           Leica TCA 2003 Total Station, located in an area where the stability     Attaching height measurements in the Jezeří gallery – twice a year              Municipality on 4 September 2000 under Ref. No. H/00/019336.
           is assumed to be high, to monitor the positional changes of the fixed    Levelling line Červený Hrádek – Albrechtice – once in 5 years                   The District Municipality/District Public Health Officer in
           points. The results are evaluated. For the local monitoring of the       (performed by the Czech Technical University)                                   Chomutov extended the validity of the binding opinion on the
           stability conditions, the so-called operating measuring points have      Ground water level measurement (performed by the Brown Coal                     sanitary protection zone of the Jan Šverma (now Vršany) surface
           been used since 2006, allowing to promptly expand the monitoring         Research Institute)                                                             mine for Vrskmaň on 29 August 2000 under Ref. No. 2267-
           system. The effectiveness of this system was proved on 19 June 2005      Accurate inclinometry measurements (performed by the Brown Coal                 215/00-Ko.
           when the system provided an early warning of a frontal landslide in      Research Institute)                                                        Frequency of noise level measurement: February, May, August,
           the north-western part of the side slope. Currently (April 2007) there                                                                              November (Vrskmaň – house no. 47 and the Local Authority house;
           are 54 monitoring points.                                                Protection Zones                                                           Strupčice – house no. 100) and fly dust measurement: twice annually
                                                                                    The sanitary protection zones were declared in the past by the above       (in and outside the heating season) at Strupčice and once monthly at
           A monitoring point                                                       authorities for the following sites:                                       Vrskmaň.
                                                                                    Horní Jiřetín
                                                                                         Planning Decision on the ČSA surface mine sanitary protective         Air Quality Protection in Brown Coal Sorting and Preparation
                                                                                         zone for Horní Jiřetín, Černice quarter, was issued by the Planning   According to Annex No. 1 to Government Order No. 353/2002, coal
                                                                                         Authority in Litvínov on 12 May 1993 under Ref. No. SÚ/273-           sorting and preparation belongs in the category of listed pollution
                                                                                         PHO/1025-At/93. The Litvínov Municipality’s Planning Authority        sources (medium contributors to air pollution). In 2005 six one-off
                                                                                         confirmed the protection zone on 30 November 1998 under Ref.          measurements were taken within the statutory time limit on the
                                                                                         No. SÚ/2611-SD/Hf/98.                                                 operating premises of the coal preparation plants – washery and the
                                                                                         Opinion of the District Public Health Officer in Most on the          loading bin – where wet surface separators are installed. It follows
                                                                                         proposed sanitary protection zone for Černice with regard to the      from the measurements that the maximum measured solid pollutant
                                                                                         operation of the ČSA surface mine was issued on 16 March 1993         emission level amounts to 2.3% of the emission limit (the emission
                                                                                         under Ref. No. 689-241D/93.                                           limit is 100 mg/cu m). No measurements were taken in 2006. The
                                                                                    Frequency of noise and dust measurement: January-February, June-           nearest measurement date within the statutory time limit for
                                                                                    July, and September-October.                                               emission measurements at a medium air pollution source is in 2008.

                                                                                    Strupčice                                                                  Monitoring Brown Coal Quality
                                                                                        Decision on the Vršany surface mine sanitary protection zone for       (For more information, see paragraph 1.5.3 Monitoring Brown Coal
                                                                                        Strupčice was issued by the Jirkov Municipality on 4 September         Quality.)
                                                                                        2000 under Ref. No. H/00/021004.                                       In the catalogues where the quality of brown coal is specified, in
                                                                                        The District Authority/District Public Health Officer in Chomutov      commercial quotations and in the delivery documentation
                                                                                        issued a binding opinion on the Vršany surface mine sanitary           accompanying every shipment of coal to households, the producer
                                                                                        protection zone for Strupčice on 29 August 2000 under Ref. No.         indicates the maximum content of total sulphur in anhydrous state,
                                                                                        2484-215/00-Ko.                                                        the average content of ash in anhydrous state, and the average
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content of total water in its initial condition, the chemical analysis of ash, radioactivity, content   limits by authorised laboratories. Together with reviewing compliance with the operating rules
of chlorine and fluorine and the minimum calorific value in the initial condition. Compliance           physical checks of the equipment are made. The operating rules are amended if necessary.
with the sulphur limit (maximum specific sulphur content) is also stated.                               The facilities are also inspected by state administration authorities.
                                                                                                        On 5 and 6 January 2006 the District Mining Office at Most performed an inspection focused
Water Protection                                                                                        on drainage in the ČSA surface mine. The faults identified during the inspection were repaired
MUS continues in its intensive efforts to build a system of water management facilities,                within the agreed periods.
including, in particular, the drainage of the side slopes beneath the Jezeří ensemble of heritage       On 5 and 6 October 2006 the District Mining Office at Most performed an inspection focused
buildings, commissioning of the refurbished effluent treatment plant at the Obránců míru site,          on drainage in the Hrabák surface mine. No faults were found.
commencement of the construction of a pumping station at the ČSA site (including discharge              Compliance with the obligations of MUS as an operator of air pollution sources was inspected
piping and sedimentation pools) and the construction of other pumping stations at the ČSA               by the Ústí nad Labem Regional Inspectorate of the Czech Environmental Inspectorate on 3
and Vršany sites.                                                                                       August 2006, 19 September 2006 and 2 November 2006. The inspections confirmed that
In the water protection area, all the waste, mine and surface waters discharged to public water         MUS operated its air pollution sources in compliance with the legal regulations in force.
courses meet the requirements contained in the decisions issued by the water management                 On 16 January 2006 the Most Office of the Ústí nad Labem Regional Public Health Service
authorities.                                                                                            inspected all the MUS facilities serving for waste use and disposal.
                                                                                                        On 22 February 2006 the Ústí nad Labem Regional Inspectorate of the Czech Environmental
Waste Management                                                                                        Inspectorate inspected MUS’s inert waste dump. No faults were identified.
The total annual production of wastes decreased slightly in 2006: the total volume was
11,083.7 tonnes, including 944 tonnes of waste of the hazardous waste category.
MUS facilities serving for the use and disposal of wastes worked as usual during 2006. About
360 tonnes of waste (sludge from the mine water treatment plant) was spread over the land
surface. Another 16.2 tonnes of waste was deposited on the dump operated by MUS. Most of
the wastes were delivered to customers outside the Group.

Management and Disposal of Equipment with Possible PCB Content
Mostecká uhelná a.s. maintains central records of the equipment that may contain PCB. As
required by law, any owner or operator of such suspect equipment must be able to prove (by
the end of 2010) that it has no equipment containing PCBs. The total number of pieces of
equipment identified as possibly containing PCB in MUS was 2,885 and, as at 30 December
                                                                                                                                                                                                         61
2006, 1,246 of them were sampled for PCB content, of which 127 did contain PCBs. 125
pieces of this PCB-containing equipment were delivered for safe disposal.

Inspections of Air Pollution Sources, Water Management Facilities and Waste Disposal
Facilities
The conditions of the operation of the individual air pollution sources, water management
facilities and waste disposal facilities are inspected on a regular basis in accordance with the
operating rules of the facilities. The measurements are performed within the statutory time
           2.6 Reclamation – Landscape and Environment
               Regeneration
           2.6.1 Reclamation of the Areas Affected by Brown                            Supporting Production Unit of the SHD Báňské stavby Most National                  the site changes.Reclamation of the subsidence troughs or depressions in the
                 Coal Extraction                                                       Enterprise in Teplice. A series of organisational changes followed.                affected areas is aimed at restoring the disrupted ecosystem in accordance
                                                                                       The beginnings of the “Czech Reclamation School” date back to the post-            with natural principles and the requirements of public administration.
           Reclamation of areas affected by brown coal extraction is a long            war period (1952) when the reclamation started developing on a systematic          Surface mining is an extensive intervention in the composition of the
           process, characterised by a high technical and biological complexity.       basis and when the first Reclamation Master Plan was developed (in 1958 –          earth crust in the surface mine itself and includes the moving of large
           Reclamation in northern Bohemia will have the 100th anniversary             1960). This plan was fairly advanced for its time, and was systematically          masses of earth in the extraction area and the formation of large
           next year. A reclaimed landscape is the outcome of specific efforts         updated to reflect the latest findings. It has remained a conceptual policy        dumps inside and outside the surface mine. A new configuration of
           and, in particular, legislative conditions, application of know-how         document for reclamation work to this day. It is the world’s unique strategy       the terrain develops and the nature of the bedrock environment
           and, last but not least, sufficient funding. The development of             document of its time.                                                              changes. The purpose of reclamation in such areas is to restore the
           reclamation, the basic legislative conditions, stakeholder                  For the current European concept of the remediation of the consequences of         area to its productive use through a combination of clean-up and
           participation and the technical and biological processes: knowledge         mining operations, the Czech approach was a guidebook for landscape                reclamation work of both technical and biological nature.
           of all these factors is essential for the assessment of the impacts of      regeneration in the early 1990s. In many countries with coal and other
           extraction.                                                                 mineral extraction, the results and experience of Czech specialists served as      Reclamation Problems Brought about by the Approval
                                                                                       a basis for the formulation of landscape regeneration principles and               of Mining Limits in 1991
           History of Reclamation and a Brief Outline of the Development               preparation of reclamation projects.                                               Due to the adoption of the mining limits (Government Resolution No.
           of the “Czech Reclamation School”                                                                                                                              444/1991), the approach to the final landscaping solution in the area
           The Austro-Hungarian Mining Law of 1852 contained provisions                Key Issues Addressed by Reclamation                                                affected by mining was constrained by the change in the overall extent
           imposing on mining companies the obligation to ensure that the land         Mining affects all landscape features and all basic constituents of the            of the initially envisaged plans. Compromises must be sought for the
           affected by their mining operations could be returned to its initial use.   landscape within the lithosphere, hydrosphere, troposphere, pedosphere             reclamation of the area. The formation of the landscape configuration
           The methods of repairing the mining damage were also defined. In            and biosphere, and all constituents of the social environment, with                requires more complex solutions, often using costlier clean-up, technical
           northern Bohemia, the first organised project of regeneration of the        limitations on residential and industrial construction and technical               and biological reclamation technologies. There is a deficit of material
           land affected by coal extraction was carried out in 1908 under the          infrastructure. Reclamation of the areas affected by mining operations             caused by the limitations on mining.The problems of the demanding co-
           supervision of the Reclamation Agency of the Czech Land Council for         restores the landscape to its function. The key task for reclamation is to         ordination of the landscaping and technical solutions involved in the
           Agriculture. The area of land recorded as reclaimed was 448 hectares.       renew or restore farmland and cultures to grow farm crops and establish            reclamation of the ČSA surface mine are an example.
           Planned development of reclamation activities in the North                  forest stands, and also to renew and create water areas and watercourses
           Bohemian Brown Coal District took place at the beginning of the             and prepare areas suitable for recreation and commercial use.                      Reclamation Types from the Landscaping Perspective
           second half of the 20th century. At the end of 1951 SHD (North                                                                                                 Regeneration of an area after mining with a suitable arrangement of the
           Bohemian Brown Coal Mines) set up a Reclamation Department                  Differences in Reclamation after Deep and Surface Mining                           landscape features, using different types of reclamation, is based on the
           within its agricultural establishment in Teplice. The organisation was      Deep mining causes subsidence or local depressions of the existing surface         landscaping solutions in the summary clean-up and reclamation plan. The
           partially reshaped in 1957 and the SDH established a Farming and            of the earth, i.e. a partial deformation of the landscape relief. The surface of   approach to work of technical and biological nature within the reclamation
           Reclamation Unit in Teplice, which was transferred in 1958 to the           a part of the terrain sinks under the groundwater table and the altitude of        process depends on the basic types of reclamation. These are as follows:
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1. Agricultural reclamation – the use of this type of reclamation is based on the Act on Protection of the         their entirety, applying to the area as a whole as well as the individual features and structures,
   Agricultural Land Fund and on the obligation to strip and store the cultivated surface layers of the soil.      including the basic economic aspects. The SCRP is the basic conceptual material for removing the
   The technological process of agricultural reclamation depends on the desired outcome: whether there             consequences of mining with projection until the end of the useful life of the surface mine.
   is to be an arable area or grassland (meadow or pasture) or any other type of agricultural reclamation.         Having been considered by the public administration bodies (Space Planning Departments,
   The reclamation crop rotation practices are applied for a period of 2 to 6 years.                               Environmental Departments, Ministry of the Environment, etc.), by the local self-government
2. Afforestation – this type of reclamation is a priority where the many specific protective                       authorities and by the Czech Mining Office, the SCRP is included, for the respective period of
    functions of forests are desired. Its implementation has two major stages: the preparation                     time, in the Development and Working Face Advance Plan (DWAP).
    stage, including planting (1 to 3 years), and the cultivation stage (6 to 8 years). The                     2. Clean-up and Reclamation Plan – its general part, based on the SCRP, is attached to the
    trees/shrubs that are used for reclamation include an approved mix of endemic species and                      application for exclusion of the land from agricultural use and for exclusion from the land
    also species suitable for the slopes in the area being reclaimed.                                              intended to fulfil the functions of forest, and is discussed with the respective agencies of the
3. Hydrological reclamation – this involves the formation of a new water regime in the reclaimed                   Ministry of the Environment and other authorities concerned.
   landscape, based on construction and technical measures. Smaller-scale hydrological reclamation              3. Clean-up and Reclamation Plan (DWAP, Section 1.6) for the validity period of the individual
   projects include, for example, trenches, various types of drains, retention reservoirs that regulate water      sites’ DWAP plans. It is approved by the Mining Office once approved by the Ministry of the
   runoff and intercept the erosion sediment.The local water-filled depressions are respected as stabilising       Environment, municipalities, and the public administration bodies concerned. Approval of the
   environmental features in the landscape. Larger water bodies are created in the flooded residual pits or        DWAP also depends, among other things, on environmental impact assessment under Act No.
   large depressions and serve for the purposes of suburban recreation and other functional uses.                  100/2001. An approved DWAP is an essential precondition for any mining operation as such.
4. Other reclamation – functional and recreational greenery. Unlike conventional agricultural reclamation       The above documentation must be prepared and deliberated before the commencement of mining as
   or afforestation, this approach uses scattered greenery, which is one of important landscaping features.     such. Further details of the reclamation process are determined during the course of mining:
   The purpose is to develop parks, engineered landscapes or suburban greenery, to include recreational         4. The Specific Reclamation Plan (reclamation master plan) specifies the details of clean-up and
   and sports grounds in the landscape, to cultivate the areas surrounding industrial premises, dumps etc.         reclamation for a five-year period in more detail. It is based on the SCRP, serves as a source
   Riparian greenery along water streams and in the littoral zones around the lakes in the flooded residual        of information for project documentation, and contains an overview of the reclamation
   pits is an important landscape feature. Landscaping projects in reclaimed areas also include tree lines         projects that are being commenced, those that are under way and those that are being
   along roads, field woods and game refuges, brushwood on dump slopes exposed to erosion, etc. It is              finished. Once it is agreed with the environmental public administration and space planning
   also useful to combine areas that have reached different degrees of succession.                                 bodies, it is obligatory for the mining company.

Reclamation Project Approval Process
                                                                                                                5. Clean-up and reclamation project documentation (execution designs) for the
                                                                                                                    implementation period – documentation required by the Building Act for the planning
                                                                                                                                                                                                                           63
Reclamation is the final stage of mining activities under the provisions of Act No. 44/1988 on the                  procedure, building permit procedure, and water management procedure in accordance
Protection and Utilisation of Mineral Resources.The clean-up and reclamation projects are considered                with the regulations in force – agreed with the landowners and public administration
in several stages, which follow one after the other. The key documents must be approved before the                  authorities (the Planning Authority) and self-government authorities concerned.
extraction work is commenced. The Development and Working Face Advance Plan (DWAP) must be
approved first. Natural and juristic persons involved, and state administration authorities take part in        Relationship between Reclamation and Space Planning
the approval process where their interests are affected by the utilisation of a reserved deposit – the          As part of the DWAP documentation, the Summary Clean-up and Reclamation Plans for the area
final reclamation stage. The documents that must be approved are as follows:                                    affected by the extraction of a reserved deposit are strategic documents.They reflect the space planning
1. Summary Clean-up and Reclamation Plan (SCRP). This plan addresses the landscaping efforts in                 documentation. Their compliance with the latter and the affirmative opinions of the respective state
           administration authorities, municipalities, regional environmental              Conventional reclamation process – an all-round technological solution to     agricultural land in the depressions left after deep mining. Then the focus
           departments and space planning departments are binding preconditions for        the mining and environmental technical stages, including work such as         was gradually shifted to reclamation through the cultivation of mine
           permitting the mining operations. There must be ongoing interactions            ground shaping, stabilisation measures, basic soil improvement measures,      dumps – they were afforested, using primarily the pioneer wood species,
           between the Summary Clean-up and Reclamation Plans as well as the               hydrotechnical measures and decisions on the biotechnical type of             including alder, poplar, black locust and some others.
           reclamation plans (including reclamation documentation) and the space           reclamation (agricultural reclamation, afforestation, hydrologic              The year 1956 was a landmark year. The topsoil from the areas in front of
           planning documentation.                                                         reclamation, and others) with the selection of a suitable bio-cycle of        the mine face began to be stored.The saved soil was then spread over the
                                                                                           cultivation. Most of the areas affected in the past by the surface mining     closed mine dumps where fertile fields and fruit orchards developed, and
           Caring for Biodiversity and Original Vegetation Cover                           activities of MUS as well as its predecessors can be mentioned as examples.   later also vineyards. The target wood species began to be included in the
           Biodiversity remains a part of the integrated solution of the issues under                                                                                    afforestation programmes, including maple, ash and others. However, the
           the SCRP until the consequences of mining operations in the affected            Sources of Reclamation Funding                                                reclamation concept was still matter of random selection at that time. Later
           area are remedied. The SCRP provides a conceptual framework for the             (financial provisions, direct costs, other resources – subsidies etc.)        on, at the end of the 1950s when surface mining affected larger areas, the
           formation and protection of the constituent systems of the environmental        Act No. 44/1988, on the Protection and Utilisation of Mineral Resources,      Reclamation Master Plan was prepared.
           stability (SES) of the area.The SCRP provides a local solution derived from     as amended, imposes on mining organisations to ensure that all the land       During the 1990s Mostecká uhelná a.s. adopted the aim of the
           the SES master plans that apply to the surrounding areas and from the           affected by mining is cleaned up and reclaimed. Clean-up means the            reclamation process as a means of enriching the area by new landforms
           SES-related technical documents concerning the area at and above the            removal of landscape damage through an all-round restoration of the area      with changed contours and with a different formation of landscape
           regional level in the Czech Republic. The formation of local ecological         and all the structures in it. Mining organisations must maintain financial    constituents, while allowing new relationships in both the environmental
           corridors and centres, including the biodiversity of the area, constitutes      provisions for clean-up and reclamation. The use of funds from these          and social areas to develop. The reclamation strategy is based on well-
           a part of the SCRP and subsequent projects.                                     provisions is governed by Section 37a Subsection 2 of Act No. 168/93.         proven experience, and research concerning new, different approaches to
           Temporary reclamation – system of technical and biotechnical work               Part of the work is financed from other funding resources, including the      the technology of the biological work. Model processes of reclamation
           not providing a permanent solution to the formation of the                      government’s funds for the removal of the damage of the past, as set out      work are determined using methods developed for practical application
           landscape: its purpose is to bridge the period until the area is                in Government Resolution No. 242/2002. The projects that meet the             by a research institute, which used the assessment of the results of its
           affected by mining operations again (extraction, transfer of material,          conditions of the Inter-ministerial Commission’s request for proposals for    observations as the basis. Much attention is paid to soil research and to
           etc.). Temporary reclamation mitigates the adverse impacts of mining            the removal of past damage are financed, upon approval, by government         the technology of erosion control and soil improvement measures.
           by applying simplified reclamation solutions. Reclamation of a part of          funds. A supervisor overseeing the reclamation projects represents the        Afforestation, which is a priority because of the specific protective
           the Slatinice dump, reclamation of the Kopisty dump, Albrechtice                government’s interests.                                                       functions of forest in the system of maintaining a natural balance,
           dump and other such projects can be mentioned as examples.                      Direct costs are incurred by mining organisations in the clean-up and         focuses on the planting of endemic species with stronger growth
           Controlled succession – former mining areas where natural succession            reclamation projects to remove the damage caused to the landscape             vigour, including English oak, durmast oak, small-leaf linden, sycamore
           has continued for a longer period of time may develop into important            affected by the extraction of unreserved minerals.                            maple, Norway maple and others.
           landscape features in some cases. If the valuable vegetation cover                                                                                            The methods of agricultural biological reclamation, i.e. the crop
           (herbs, shrubs and trees) is respected as the core feature and if the           Development of Knowledge for Reclamation Method Selection                     rotation systems, were modified to meet the priority requirement: soil
           specific site conditions are supported, then it is possible, using a suitable   The development of reclamation approaches reflects the gradually gained       formation. The extent to which agricultural reclamation is practised
           additional reclamation process, to maintain the natural vegetation,             experience and the results of research into the possibilities of varying      reflects the statutory obligation to protect the agricultural land fund,
           including the new features, and to create the preconditions for their           technical and biotechnical work in the reclamation process. There was no      using the stripped and stored topsoil.
           expansion. Examples include the areas identified in certain parts of the        experience in this area when the reclamation efforts commenced (after         The societal demand for the future utilisation of the affected areas is of
           slopes of the Ryzel Hill and the western edge of the Slatinice dump, the        1951) and this affected the outcomes of the first reclamation projects. At    key importance at present, particularly in the reclamation work
           Pařidla lobe of the former Ležáky surface mine and other similar sites.         the beginning, reclamation was only focused on the restoration of             performed under specific projects.
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2.6.2 Reclamation by MUS
                           Map No. 3 State of Reclamation in 2006 and the location of important reclamation sites




                                                                                                                    65
           Maps No. 4 State of Reclamation in 2006 and the location of important reclamation sites




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MUS Reclamation: Basic Information
Reclamation is closely related to the environmental aspects of sustainable development.
Mostecká uhelná a.s. and its subsidiary, REKULTIVACE a.s., use a reclamation process that                 Reclamation projects under way and completed by MUS in 2006
creates a new landscape, including farmland, crop stands, forests, water bodies and                                              (% of total area)
watercourses, as well as recreational and sports areas. New landscape features are created,
including lakes and undulating tracts, formed by high dumps, which offer new opportunities for                                                      Agricultural
landscape use where they are in contact with towns and villages.                                              Other                                                              Forest
                                                                                                                                                     8%
The total area affected by MUS’s brown coal extraction keeps decreasing: in 1999 it was 14,900
hectares and currently MUS a.s. covers an area of more than 9,300 hectares. This area mainly
                                                                                                                        51 %                                           39 %
includes two surface mines and one deep mine (Důl Kohinoor a.s., a subsidiary of MUS a.s.).
At the end of 2006 reclamation work was under way on 19% of the area (9,300 hectares)
where MUS operated. By 31 December 2006 reclamation had been completed on a total area                                                             2%
of 6,012.52 hectares from the beginning of the reclamation efforts. Reclamation is under way
on an area of 1,792.64 hectares. The total area that has been fully reclaimed (to complete
remediation) is 4,777 hectares at the Vršany site and 2,843 at the ČSA site (Stage I).
                                                                                                                                                      Water




Reclamation Costs in 1994-2006
Reclamation costs have been falling since 1998 as the reclamation of the external dumps was finished and extensive areas (the Ležáky surface mine and the Kohinoor deep mine site) were
transferred to Palivový kombinát Ústí nad Labem, státní podnik (the Ústí nad Labem Fuel Complex, a state-owned enterprise) as from 1 January 2004. Over the period of its existence MUS has
spent more than CZK 3.15 billion on reclamation.


                                             1994    1995    1996     1997       1998      1999    2000      2001      2002     2003      2004      2005       2006                Total
                                                                                                                                                                                              67
Costs paid by MUS (CZK million)              232     295     467       512       429        255    256       203       127      105        103       108        62                3,154
Costs paid by the government (CZK million)     0       4      30        10          0        13      2         2         0         3        14        11        10                   99
Total (CZK million)                          232     299     497       522       429        268    258       205       127      108        117       119        72                3,253
Hectares returned to MUS for use               0      93     132       377       497        297    323       259       325        54         8       317       413                3,095
Total hectares reclaimed
                                         2,917      3,010   3,142    3,519     4,016      4,313   4,636     4,895     5,220    5,274     5,282     5,599      6,013               6,013
back to beneficial use
                                                                             MUS reclaimed areas (under way and completed in the year) in hectares
               Reclaimed area, hectares           1994        1995          1996        1997        1998          1999       2000         2001        2002           2003        2004       2005        2006
               Agricultural                          355        453          330         309         174            238        188            151       141           125          193       144          145
               Forest                            1,252        1,780        1,986        2,253      1,825          1,836      1,634        1,283         992           860          929       928          693
               Water                                   78       114          131         140           27            81         70             77        45            46          47          47          39
               Other                                 496        525          870         676       1,280          1,284      1,323        1,467       1,094           939          966       983          915
               Total hectares (per year)         2,181       2,872         3,317        3,378      3,307          3,440     3,215         2,979      2,272        1,970        2,134       2,102       1,793


           MUS Reclamation Projects Currently under Way
           The reclamation projects now under way are the implementation projects under the reclamation master plan, which contains an overview of reclamation projects that are being commenced, continued and
           completed over the medium term. The master plan respects the summarised plan of clean-up and reclamation for the MUS sites that are being exploited. The summarised plan of clean-up and reclamation is part
           of the current Development and Working Face Advance Plan (DWFAP).
           In 2006 reclamation work continued in compliance with the mining plans at the following sites:
           ČSA surface mine – side slopes, internal dump, Obránců míru dump, Růžodol dump
           Vršany surface mine – internal dump, Malé Březno dump, Slatinice dump, Velebudice dump, Vrbenský site

                                                                                         MUS reclamation work (2005 and 2006)
               Site name and specification                                                                            Type of reclamation, in hectares
                                                                      Agricultural                      Forest                        Water            Other, including parks                   Total hectares
                                                                  2005         2006               2005           2006         2005            2006            2005          2006              2005          2006
               ČSA surface mine                                  106.56        106.56            697.32      506.44           40.87       36.02            377.91       356.74              1,222.66     1,005.76
               Vršany surface mine                                 37.17        38.22            231.16      187.03            5.78           3.38         605.50       558.25                879.61       786.88
               MUS – total area of reclamation under way 143.73               144.78            928.48       693.47          46.65        39.4             983.41       914.99             2,102.27      1,792.64



                   Reclamation cost draw down in 2005 and 2006 from MUS’s funds (CZK ‘000)
                                                                                                 2005            2006
                Total volumes of work and supplies                                              118,862          71,738
                  of which, MUS financial provisions                                            107,842          62,144
                  MUS direct costs                                                                  230            244
                  Other sources                                                                  10,790           9,350


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Energy Crop Growing in the Reclaimed Areas                           the conditions of testing for the suitability of growing were          The landscaping solution to the reclamation of the dumps near
Agricultural reclamation took place in large areas under the         defined with regard to the results of the soil formation process,      the town of Most took the form of recreational greenery with
reclamation projects. Unfortunately, due to the difficult general    development of the crops being grown and assessment of the             a basic system of roads and paths, the necessary water areas
situation in agriculture attempts to use the reclaimed land for      crops’ impact on the surrounding vegetation. The assessments           and a water management system. At present the reclaimed
primary agricultural production or to allocate it to interested      of the suitability of energy crop growing will continue for five       external dumps cover extensive areas, which are as valuable as
parties have not been very successful. However, it appears to be     years.                                                                 the original areas.
a realistic approach to grow energy crops there.
The Chomutov Station of the Research Institute of Crop               Landmark Reclamation Projects                                          Presentation of Reclamation Efforts
Production (RICP) has studied a number of energy crops and the       The Velebudice dump (800 hectares) – the issue of the complete         In places accessible to the public at the Vršany and ČSA surface
most promising dry matter yields per hectare have been               utilisation of the area through the reclamation process was            mines information boards show photos and descriptions of the
achieved with the Uteusha cultivar of energy (feed) sorrel.          addressed as an architectural whole – suburban recreational area       mine and the reclamation projects. A Reclamation Summer
Energy sorrel growing requires processing or packing into giant      for the town of Most. The horse-racing stadium (hippodrome) is         School is organised for university students every year.
bales to be sold to incineration plants and power plants, or         the dominant part of the area. It has a turf surface, hedge hurdles,   Excursions to the reclaimed areas are organised on a regular
further processing into briquettes or pellets.                       grass-covered tribunes etc. and is managed by a MUS subsidiary,        basis. The content of the excursion can be focused on
In 2004 REKULTIVACE a.s. started pilot operation in an area of       HIPODROM MOST, a.s. There are also golf links and areas                reclamation issues and on learning the fundamentals of surface
six hectares at Slatinice. In 2005 the area under energy sorrel      regenerated by agricultural and forest reclamation methods.            coal mining and mine operation, the mine’s economic and land-
was extended to 60 hectares at Slatinice and Střimice. The           The Autodrom car racing circuit and the 40-hectare Matylda             forming effects and benefits for the region, reclamation
purpose was to test the growth vigour and yield potential of         water reservoir were built in the area of the former Vrbenský          methods and practices, methods and results of energy crop
energy sorrel and to see if it is suitable for further processing.   surface mine. The reclaimed area is 500 hectares in size and           growing, or it can take the form of a geographical excursion or
The responsible authorities approved the growing of this crop.       includes a group of reclamation structures for short-term              a show of selected equipment and machinery, etc.
The first harvest in July 2006 yielded about 350 tonnes of sorrel    recreation, including a circuit for automobile races, which have       In 2006 MUS organised 38 technical excursions, including 15
biomass, which was pressed into giant bales 2 x 1 x 0.8 metres       a long-established tradition in the Most region. The circuit,          excursions for primary and secondary schools, 8 for foreign
in size. The total yield ranged between 5.2 and 8.7 tonnes per       which was put to use in 1992, is 4,148 metres long and 12              universities and 7 for Czech university students, and 3 for
hectare. An area of about six hectares was harvested for seed        metres wide. The Matylda lake, also built in 1992, has a beach         governmental agencies.
and sold to a seed company. The experiment will continue             and a park and offers opportunities for swimming and water             The telephone number for those interested in an excursion is
because higher yields are expected in the following growing          sports.                                                                +420 476 203 356.
seasons and the capital expenditure on the crop will be much
lower than the costs of establishing the crop stand. The
                                                                     Important reclamation projects also include the reclamation of
                                                                     large external dumps. Since 1995 mine waste from the MUS
                                                                                                                                                                                                               69
company also plans trials to test other energy crops.                mining sites has only been dumped in the depleted shafts
Investigation of promising energy crops that could be included       (internal dumps). The extensive reclamation of the external
in the biotechnical process of reclamation is one of both current    dumps was in its final stage of completion in 2006.
and future tasks of reclamation. MUS established test plots,         Afforestation predominates in the reclamation projects that
12.9 hectares in total to grow herbaceous energy crops (the          have been completed on a total area of more than 4,000
Uteusha sorrel cultivar) on the internal dump of the Vršany          hectares of the external dumps. The total area reclaimed by
surface mine. This is neither a conventional reclamation process     agricultural methods reflects the availability of the stripped
nor a process of cultivation solely for energy use and, therefore,   topsoil at the sites accessible for future agro-technical use.
           2.7 Employee Policy
           The Group’s companies that are based in northern Bohemia – Mostecká uhelná                              Map No. 5 The importance of the Group as an employer in the Ústí nad Labem Region in 2006
           a.s. and most of its subsidiaries – rank among the most important employers in                                    (% of Group employees of the employed population of the municipalities)
           the Ústí nad Labem Region. They provide jobs for almost 6,240 employees, i.e.
           8.7% of all the employed population in the former district of Most and 2.6%
                                                                                                                                                                                                              Český Jiřetín
           in the former district of Chomutov. Another company, Czech Coal a.s., is based
           in Prague.
           In 2006 the average monthly wage (excluding contractual wages) in MUS,
                                                                                                                                                            Brandov                                  Klíny
           which is the largest company of the Group, amounted to CZK 20,040 the                                                                             (20.9)                                             Meziboří
                                                                                                                                                                                                     (20.0)
           average gross monthly wage in the region being CZK 18,094.                                                                                                                                            (18.9)
                                                                                                                                                                Hora Svaté
                                                                                                                                                                 Kateřiny           Nová Ves                             Lom u Mostu
                                                                                                                                                                                    v Horách
                                                                                                                                                                  (26.9)             (15.8)                                  (23.5)
                                                                                                                                        Kalek                                                            Litvínov
                                                                                                                                                                                                          (21.5)       Louka
                                                                                                                                                                                                                     u Litvínova
                                                                                                                                                                                         Horní Jiřetín                 (28.2)
                                                                                                                                                             Boleboř                       (20.0)
                                                                                                                                                              (14.8)                                                          Mariánské
                                                                                                                                                                                                                               Radčice
                                                                                                               Hora Svatého                                                Vysoká                                               (25.5)
                                                                                                                Šebestiána                    Blatno                         Pec         ČSA
                                                                                           y                      (23.9)                      (11.0)                        (9.8)   surface mine                       Brňany
                                                                                                                                                                  Jirkov                                                (22.3)
                                                                                                                               Křimov                             (16.3)                              Most                   Želenice
                                                                                                            Výsluní                                                       Vrskmaň Vršany             (18.5)                    (24.8)
                                                                                                                                                                            (19.4)                                   Obrnice
                                                                                                                                                                Otvice            surface mine                        (36.6)
                                                                                                                                                                (12.7)        Strupčice                                Patokryje
                                                                                                                        Místo                       Chomutov                              Malé
                                                                                                                                      Černovice                       Pesvice (13.7)     Březno                          (21.3) Lužice
                                                                                                                        (9.0)                         (13.6)
                                                                                               Domašín                                  (11.2)                        (19.7)             (15.9)                        Korozluky (14.5)
                                                                                                                              Málkov           Spořice                    Všestudy                                       (19.0)
                                                                                                                                                                 Údlice (14.4)                   Lišnice                           Skršín
                                                                                                                               (9.8)            (14.3)
                                                                                                                                      Spořice                    (10.8)                          (15.7)        Bečov u Mostu (15.5)
                                                                                                                                       (14.3)         Droužkovice                         Havraň
                                                                                            Klášterec                                                    (13.5)                                         Polerady (36.1)          Bělušice
                                                                                                                                                                   Nezabylice Bílence     (30.3)          (8.2)
                                                                                            nad Ohří                                                                                                                              (20.2)
                                                                                              (8.9)                      Kadaň                              Všehrdy (6.1)                                     Volevčice
                                                                                                                                                                                                                (7.1)
                                                                                                                                                   Březno              Hrušovany

                                                                                                                            Rokle                                                                             0.2 - 1.0 %                 6.1 - 7.0 %
                                                                             The colour scale indicates the numbers of employees of Mostecká uhelná a.s. and its
                                                                                                                             Chbany                                                                           1.1 - 2.0 %                 7.2 - 8.4 %
                                                                             subsidiaries*, expressed as % of the employed population (as at February 2006)
                                                                                                              Vilémov
                                                                                                                                 Pětipsy                                                                      2.1 - 2.5 %                 9.8 - 10.7 %
                                                                                                       the municipality’s(16.3) Libědice the relative unemployment
                                                                             Figures in brackets under Radonice           name indicate                                                                       3.9 - 4.5 %                 13.3 - 15.2 %
                                                                             rate in December 2006.                          Račetice
                                                                                                                                                                                                              5.0 - 5.9 %                 18.9 - 20.5 %
                                                                             * The calculations (as at April 2006) cover the employees of the key companies, including Mostecká uhelná a.s., Czech Coal a.s., Důl Kohinoor a.s., RENOGUM-NILOS a.s., HUMECO, a.s.,
                                                                               REKULTIVACE a.s., DTS Vrbenský, a.s., Krušnohorské strojírny Komořany a.s., MUS Uniservis, spol. s r.o., HIPODROM MOST a.s., and Infotea, spol. s r.o.
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2.7.1 Shared Principles of Employee Policy

Care for employees in the social area is considered to be an important factor of sustainable development in the Group. The shared principles of employee policy are perceived as investment in the
human and social capital of the employees. Emphasis is placed on safety at work, generous social and health benefits, high-quality personnel policy, and employee participation in company management,
i.e. collective bargaining.

                                                                   Accident rate and incapacity for work in Group companies, 2006
                                       Number               Number                 Accident        Average number       Incapacity for work         Absence due             Occupational diseases % of employee
                                    of employees    of registered accidents          rate          of calendar days   (total for the company        to sick leave            (people newly fallen   turnover
                                  (monthly average) (in absolute terms)                              per accident         – calendar days)     (% of total time worked)          ill in 2005)

Mostecká uhelná a.s.                     4,216                     36                0.854                 58               73,168                       4.76                         0                10.68

Důl Kohinoor a.s.                        389.3                     22                 5.60                66.3                 1,459                     8.25                         1                 0.09

Czech Coal a.s.                             46                      0                     0                 0                   208                       1.2                         0                  39

DTS Vrbenský, a.s.                        755                       5                 0.66                33.8              11,283                       4.37                         0                11.26

Krušnohorské strojírny Komořany a.s.      425                      25                 5.88                 27                  6,026                     4.79                         0                17.65

RENOGUM-NILOS a.s.                       222.8                     13                 5.86               42.50                 5,391                    11.15                         0                18.03

HUMECO, a.s.                              129                       1                 0.75               20.00                 1,895                     3.28                         0                 4.03

REKULTIVACE a.s.                          114                    7.00                 5.80               23.42                 1,990                     4.78                         0               114.91

HIPODROM MOST a.s.                          21                      0                     0                 0                     0                      0.00                         0                   0

MUS-Uniservis, spol. s r.o.               23.8                      0                     0                 0                   434                       6.2                         0                 2.45

Infotea s.r.o.                            33.5                      0                     0                 0                    36                      0.33                         0                 2.99



                                                                        Accident rate and incapacity for work in MUS (2000-2006)                                                                                  71
Year                                                                                                     2000          2001            2002          2003                 2004         2005          2006
Number of employees (monthly average)                                                                    6,480         5,944           5,471         4,641                4,668        4,477         4,216
Number of registered accidents resulting in incapacity for work longer than 3 days (in absolute terms)    106            85             73            48                   48           48             36
Accident rate (% of the number of employees)                                                             1.636          1.43           1.334         1.034                1.028        1.072         0.854
Average calendar days of incapacity for work per accident                                                  84            73              58            51                  68           58             58
Absence due to sick leave (% of total time worked)                                                        6.7           6.4            6.15           5.7                 4.58         5.13           4.76
           Safety at Work Awards
           The Gold Permon Prize for safety at work in the mining industry is one of the awards for the effectiveness of the safety at work policy. Mostecká uhelná a.s. won it for the third time in a row: in 2004, 2005 and now for 2006.
           The prize is awarded by the Czech Mining Office, the Trade Union of Employees in Mining, Geology and Oil Industry, and the Kooperativa insurance company.
           In Category II – Surface Coal Mine (Brown Coal), the MUS surface mines ranked among the first three:
              1. MUS a.s., Vršany surface mine
              2. Sokolovská uhelná a.s., Družba Division
              3. MUS a.s., ČSA surface mine
              4. Sokolovská uhelná a.s., Jiří Division
              5. Severočeské Doly a.s., Nástup Tušimice Mines
                                                                                Overview of social and health benefits for the employees of the Group companies in 2006

                                                              Mostecká        Důl         Czech          DTS         Krušnohorské    RENOGUM       HUMECO, a.s.       REKULTIVACE a.s.      HIPODROM            MUS             Infotea
                                                             uhelná a.s. Kohinoor a.s.   Coal a.s   Vrbenský, a.s.     strojírny     -NILOS a.s.                                            MOST a.s.        -Uniservis,          s.r.o
                                                                                                                     Komořany a.s.                                                                           spol. s r.o.
            Number of employees (monthly average)                 4,216      389.3         46            755             425           222.8            129                  114                21              23.8              33.5
            Collective Agreement:
            End of the year bonuses (“13th and 14th pay”)
            Holiday leave one week longer than
            the statutory leave entitlement.
            Benefit provided to single parents
            taking care of minor children or a person
            requiring special care: paid day off four
            times a year.
            Contribution to health service (not mandatory)
            Contribution to pension fund schemes
            Contribution to works catering
            Services related to works catering
            Contracted bus transport
            Health protection drinks and vitamin supplements
            Contribution to children’s recreation
            Contribution to family recreation
            Work with the seniors
            Anniversary rewards
            Reconditioning stays for managerial staff
            Tuition fees for employees studying at universities
            Contribution to cultural and sport activities
             Insurance for managers, bonuses and gifts, etc.
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                                 Social costs in the Group in 2006 (CZK)                                                 Station’s mission and tasks are based on Czech Mining Office’s Regulation No. 447/2001 on
                                                                                                                         Mine Rescue Service. HZBS is authorised to carry out rescue tasks in surface mining areas
                                                                                                                         throughout the Czech Republic and, in addition, those required by the Regulation in
Total social costs                                                                               100,638,979             underground mining operations of the Centrum, Kohinoor, Marie, Richard (in Litoměřice) and
---- of which, non-tax-deductible costs                                                           33,289,290             Bratrství and Svornost (in Jáchymov) deep mines. The rescue service teams have 233 members,
Average social costs per employee per year, in CZK                                                    15,786             including the Mine Rescue Station of the Centrum Mine. Under an agreement with the Fire
Average tax-non-deductible social costs per employee per year, in CZK                                  5,222             Service (HZS) of the Ústí nad Labem Region, the HBZS is a member of the Integrated Rescue
Average monthly number of employees in 2006                                                            6,375             System of the Czech Republic. In 2006 HBZS took 58 emergency actions, 155 non-emergency
                                                                                                                         actions, 15 planned and 164 commercial actions. Providing its mine rescue services to its
* Employees of the following major companies were included in the calculations: Mostecká uhelná a.s,, Czech Coal a.s.,   contracting partners, the HZBS carries out particularly the following work:
  Důl Kohinoor a.s., RENOGUM-NILOS a.s., HUMECO, a.s., REKULTIVACE a.s., DTS Vrbenský, a.s., Krušnohorské strojírny
  Komořany a.s, MUS–Uniservis, spol. s r.o., HIPODROM MOST a.s., and Infotea, spol. s.r.o.                               - Work in irrespirable atmosphere or deleterious environment and work under extreme conditions
                                                                                                                         - Emergency actions and clean-up work
                                                                                                                         - Work at heights over open depth
Safety at Work                                                                                                           - Work in the fire safety area
The safety at work area is carefully monitored, and it is evaluated every month and the findings are                     - Instruction and training
published in Úrazový a informační zpravodaj [Accidents and Information Bulletin]. This bulletin                          - Pressure cylinder testing, including filling
contains the accident figures and descriptions of certain selected accidents for employees to learn                      - Testing of respirators and resuscitation devices
from and, in addition, it offers information on new legislation in the areas of labour law, safety at                    - Gas laboratory work
work, fire safety and environmental protection and planning. A report concerning accidents, fire                         - Testing of exploders, ohmmeters and indication apparatus
safety, environmental protection and planning, work of the MUS’ Main Mine Rescue Station (HBZS)                          The proportion of commercial activities in the overall activities of the HBZS continues
and Fire Brigade (HZS) is prepared on a half-yearly basis and discussed by the company’s                                 increasing. These commercial activities also include work done for parties outside regular
management team and subsequently in the Board of Directors. To keep the number of accidents as                           contractual relationships. For example, HBZS carries out specific tasks for the Ministry of the
low as possible the Company organises regular training courses, carries out regular inspections, and                     Environment related to the remediation of environmental pollution in abandoned mining
emphasises the need to respect all applicable regulations.                                                               operations and other mining-related activities. The planned work for MUS is also an important
In 2006 MUS registered the lowest number of accidents over the time of the company’s existence.                          part of HBZS’s activities, including the maintenance and operation of the “Jezeří” and “Jiřetín”
Co-operation between the subsidiaries and the parent company is one of the key principles                                inspection galleries and inspection and maintenance of the stable extinguishing system on
underlying MUS’s efforts in the safety at work. Many of the parent company’s safety
regulations, company standards or mine manager’s measures are also applied in the
                                                                                                                         giant machines of MUS a.s. and SD a.s.
                                                                                                                                                                                                                            73
subsidiaries. The uniform conditions and operating documentation make it easier to co-                                   Fire Brigade of Mostecká uhelná a.s.
operate in the area of safety at work.                                                                                   The Fire Brigade of Mostecká uhelná a.s. (“HZS MUS”) was established under Section 67(1)
Emphasis is also placed on co-operation with firms outside the Group: for example, safety at                             of Czech National Council Act No. 133/1985 on Fire Safety, as amended (“FS Act”) to carry
work requirements are included in the conditions of tendering processes for MUS’s suppliers.                             out the tasks specified in Section 70 of the FS Act.
                                                                                                                         HZS MUS is based at the central fire station at the ČSA-OM site and the branch station at
Operation of the Most Main Mine Rescue Station (HBZS) (www.hbzs.cz)                                                      Vršany-Hrabák. The service is organised in a continuous four-shift system with 12-hour shifts.
The HBZS provides continuous emergency service. The mine rescuers and their equipment are                                As at 31 December 2006 it had 65 employees. The HZS MUS unit operates within the entire
kept ready to take action at any time. Mostecká uhelná a.s. is the founder of the HBZS. The                              MUS, including the subsidiaries. In addition, it intervenes upon a request from the Regional
           Operating Centre of the Ústí nad Labem Region as a basic unit of the Integrated Rescue System, e.g., in          Czech Coal a.s. issues the so-called Flexipasses for their employees to use certain cultural, sport, health
           cases of natural disasters and other extraordinary events.                                                       and recreational services.
           The HZS MUS unit also performs commercial activities, including inspections of the hydrant networks,             Care of employees’ children is emphasised in some of the Group companies. This includes contributions
           assistance service during automobile races at the Most Autodrom car racing circuit, disposal of dust             to recreation and certain allowances and benefits.
           products, road washing, etc.                                                                                     Most of the Group companies contribute – in compliance with the applicable legislation – to their
                                                                                                                            employees’ insurance accounts with a selected pension fund. The amount of this contribution is stipulated
           Social and Health Benefits                                                                                       in the collective agreement in companies where a collective agreement exists.
           Most of the Group companies do not only pay statutory contributions (contributions to pension fund               Contracted transport for employees has been one of the very costly contributions under the social
           schemes, medical checks, drinks and vitamins) but also contribute to other employee services, e.g.               programme. In 2005 the costs of this service amounted to CZK 6,338,000. The contracted transport
           catering, transport and activities for a healthy lifestyle (the “Health” or “Relax” programmes). Some of         capacity was optimised in 2006 and the costs were reduced to CZK 3,047,000. There are ten bus lines at
           the companies even contribute to welfare assistance.                                                             present, three of which being operated by the Transport Company of the Towns of Chomutov and Jirkov
           Each of the production and trading companies provides a number of other services under its social                and seven by the KAVKA Company. The main lines provide transport to and from Most, Chomutov, Jirkov
           programme. The funding of these services is included in the companies’ costs, often beyond what is               and Litvínov. Krušnohorské strojírny Komořany a.s. and Důl Kohinoor a.s. contribute to the operation of
           required by law. Some of these outlays are tax non-deductible capital expenditure (often forming the             transport lines from Teplice.
           social fund). These outlays are subject to collective bargaining every year. The Group also very thoroughly
           monitors compliance with any obligations resulting from changes in general legislation.
           Implementation of the preventive health measures is also one of the factors that are reflected in the
           relatively stable recent figures on incapacity for work.
           The employees themselves may choose, based on their own personal preferences, the type and volume of
           benefits to use (within the specified financial limits per employee) – this is one of the tools to achieve the
           best effects in terms of cost adequacy.
           The Health programme plays a key role in the health and prevention activities of MUS. It was launched in
           2003, and in subsequent years extended in two stages in terms of the services offered and in terms of the
           even distribution of those services over the areas where the employees live. In 2006 each employee’s
           benefit fund was increased by CZK 300 to CZK 2,000. Employees can choose from 46 types of activities,
           on which the company agreed with 35 service providers. For this, employees received 9,132 vouchers in
           2006, and the amount spent from the Social Fund was CZK 4,044,000. This is a participation scheme and
           the employees themselves therefore paid CZK 1,613,000. The vouchers can be used for various sport and
           rehabilitation activities (fitness clubs and aquaparks), treatments not covered from public funds as well as
           the purchase of various health aids.
           In DTS Vrbenský, a.s., the Health programme supports sport activities (fitness clubs, spas, Aquadromes)
           and medical rehabilitation and prevention activities, mainly vaccination and the purchase of health aids.
           Employees of RENOGUM-NILOS a.s. use their RELAX programme, enjoying services of the Most
           Aquadrome and the Chomutov Municipal Baths, including: swimming, sauna, conditioning baths and
           massages. Employees of Krušnohorské strojírny Komořany a.s. can visit swimming pools, stay in salt caves
           and enjoy other services under the company’s AKTIV programme.
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2.7.2 Personnel Policy

Principles of Employment Management
The most important rules include inside staffing, i.e. filling vacancies primarily from the internal job market of the Czech Coal Group companies, the outside labour market being only used when appropriate
people are not found inside. The purpose is to make the maximum use of the Group’s internal resources, with support for voluntary active staff mobility. There are increasing numbers of new employees with
secondary education and university degrees. The proportion of people with basic-level education keeps falling and the proportion of those with secondary education is increasing. For example, MUS has hired
174 people from the outside labour market and 29 fresh school leavers, including 18 from secondary schools and universities and 11 from vocational schools.
                                                                                Qualification structure of Czech Coal Group employees in 2006
Education of the employees                        Mostecká          Důl          Czech         DTS        Krušnohorské    RENOGUM       HUMECO, a.s.   REKULTIVACE a.s.* HIPODROM       MUS             Infotea
(% by qualification categories)                   uhelná a.s.   Kohinoor a.s.   Coal a.s   Vrbenský, a.s.   strojírny     -NILOS a.s.                                    MOST a.s.   -Uniservis,          s.r.o
                                                                                                          Komořany a.s.                                                               spol. s r.o.
 No. of employees                                   4,216          389.3           46          755            425           222.8           129              114            21          23.8              33.5
 (monthly average) in 2006
 % University graduates
                                                      5.1            2.6           59           2.2            8.5            3              8                5             6.7           2               28.7
 – bachelors, masters, doctors
 % of secondary school leavers                       17.4           15.9           39          11.1           19.9            14            33               15             6             10                61
 % of vocational school leavers                       6.2                                       2.6            9              2,0                                           6.7
 with school-leaving examination
 % of vocational school leavers                      55.3           66.1           2           65.8           58.1            60            65               61             20            10                9
 without school-leaving examination
 % Basic-level education                              16            15.4                       18.5            4.5            21            19               19             6.7           1                1.4

Restructuring
Between 1999 and 2006 the organisational changes involved thousands of employees within the Group. In MUS alone, the number of employees fell from 7,754 in 1999 to 4,110 at the end of 2006 (in 1993,
when MUS was established, it had 16,265 employees). The number of employees who left MUS due to organisational changes in 2006 was 141. The greatest staff reductions occurred in the administrative and
maintenance management areas. Transformation of Czech Coal a.s. into a trading company was completed in 2006 and the current number of its employees is 46.
                                                                       Employee turnover in the Group companies in 2006
                                                  Mostecká          Důl          Czech         DTS        Krušnohorské    RENOGUM       HUMECO, a.s.   REKULTIVACE a.s.* HIPODROM       MUS             Infotea
                                                  uhelná a.s.   Kohinoor a.s.   Coal a.s   Vrbenský, a.s.   strojírny     -NILOS a.s.                                    MOST a.s.   -Uniservis,          s.r.o

Total number of employees who left
                                                                                                          Komořany a.s.                                                               spol. s r.o.                     75
the respective company (incl. retirement,
maternity leave, contract termination                450             35            12           85             75             40            26               131            0             7                 1
at the employee’s request, etc. plus dismissals
for redundancy due to organisational change)
of which: number of employees dismissed for          141             0             7            1              3              0              9                              0             4                 0
redundancy due to organisational change
of which: number of those who went                    0              0             1            0                             0                                             0                               0
to other Group companies
Total number of newly hired employees                192             23            6            52             72             51            16               136            0             1                11
of which: number of those who came                    7              3             1            4              2              3                                             0                              11
from other Group companies
Total number of employees:                          4,110           383            46          742            422            226            125              106            15           23                36
absolute number as at 31 December 2006
Overall employee turnover (%)                       10.68           0.09           39         11.26          17.65          18.03           4.03            114.91          0           2.45              2.99
                                                                                                                                                                                        * Including seasonal workers
                                                                                                            Overview of employee education in 2006
           Study and training courses                         Mostecká        Důl           Czech            DTS          Krušnohorské     RENOGUM        HUMECO, a.s.       REKULTIVACE a.s.        HIPODROM            MUS               Infotea
                                                              uhelná a.s. Kohinoor a.s.    Coal a.s      Vrbenský, a.s.     strojírny      -NILOS a.s.                                               MOST a.s.        -Uniservis,            s.r.o
                                                                                                                          Komořany a.s.                                                                                spol. s r.o.

            Average monthly number of employees                   4,216       389.3           46              755              425            222.8             129                  114                 21               23.8               33.5
            in 2006

            Number of employees studying at universities and        11                         1               2                1                                1                    0
            receiving contributions to tuition fees

            Average number of hours of all types                    27         2.4        Not recorded       16.4              11               25               5                    5.2
            of training courses per employee per year

              of which, management                                  53                                        29               79                               26                    6.3                                                     24

              of which, specialists, engineers, administrative staff 45       29.8                           16.3              20               14               4                    3.2                                  10                 16

              of which, manual professions                          23         2.5                           16.4               6               27               4                    5.3                                  8                  4
              (production, maintenance)

            Average costs of training/education                   1,452        223          28,217           1,123            1,108           1,307            1,360                 392                                 1,000              5,830
            per employee (in CZK)

            Number of employees – mandatory                       5,885        167            46              603              136             156                                    52                 21                                   33
            training courses (safety at work etc.)

            No. of employees – “voluntary” skill
            improvement courses paid by the company                305          1             40              58               24               2                                     0                                                       2
            (English language and other courses)
           MUS Programme for Graduates (AP):                                                                                          addressed. At the sites where employees order their catering, an employee portal has been created, through
           Secondary and tertiary school graduates’ interest in participating in the selection procedure for the AP                   which employees can have their requests attended to. Each request is processed and sent to the employee’s
           programme was very high in the past (2004/2005 - 170 graduates, most of them from the districts of Most                    chosen destination (either the workplace or home). The Employee Centre’s drop boxes, located at MUS sites,
           and Chomutov) but at present the interest is lower (2006/2007 – 33 graduates). This may be due to the fact                 are another frequently used form of communication. About 2,300 documents were delivered through the drop
           that the AP programme currently covers less lucrative professions. An annual employment contract under the                 boxes by the employees to the Employee Centre in 2006. Information leaflets issued by the Chief HR Officer’s
           programme has so far been signed with 31 persons (15 graduates in 2004/2005; ten graduates in                              Department are a new form of communication from the employer to the employees. Nineteen leaflets were
           2005/2006; and six in 2006/2007). In 2006 a standard employment contract was signed with five                              used in 2006, telling the employees where and how to address their employment-related situations. The
           programme participants and the programme was extended for two of the participants. The total costs of the                  leaflets are updated on an ongoing basis and are available at the info-points located at selected places at
           programme for graduates amounted to CZK 1,012,000 in 2006, including subsidies from the job centre. The                    MUS sites. All types of leaflets are also placed on the screens of the company’s PCs.
           job centre’s subsidy funds have been significantly reduced and it may well happen that the AP programmes
           will henceforth be run without subsidies, and the costs will therefore increase considerably.                              New Job Creation
                                                                                                                                      Although the Most area is among the Czech regions that are most severely affected by unemployment, the Group
           Information System of the MUS Employee Centre                                                                              companies experience problems with recruiting qualified people for many positions. The structural unemployment
           The MUS Employee Centre was established towards the end of 2005 to centralise most of the personnel                        issues apply to the entire Ústí nad Labem Region, where the heavy industries are being restructured. In addition,
           services in a suitable building located at a place offering better accessibility to its clients. Besides personal          there is also an age problem: in many professions there are many people in pre-retirement age. The Group
           communication, there are a number of other flexible processes by which employees’ requests can be                          companies are therefore preparing to co-operate with schools to address this situation, although they provide
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a substantial part of the required education themselves.                                                     assessment of mental fitness for exacting jobs and for professions where such an assessment is
Mostecká uhelná a.s. seeks engine drivers, workshop fitters (locksmiths), specialised electricians           mandatory; selective and managerial psychological diagnostics; psychological consultancy;
and people for other manual jobs needed in mining operations. To address these issues, the Group             Assessment Centre for Foremen and Overseers; and outdoor activities for selected teams.
supports voluntary internal employee mobility – employees are given opportunities to change or               Psychological services are provided to all employees of the company and its subsidiaries, and
raise their qualifications and fill such vacancies. Two training courses for engine drivers and several      partly also to external clients. The number of persons who underwent psychological examination
courses for giant machine operators were organised in 2006.                                                  in 2006 was 749, including 172 external clients. The income from the services provided to
Mining specialists are a very specific group in which a gradual generation change is under way.              external clients increased by 76% compared with 2005.
Krušnohorské strojírny Komořany a.s. is trying to fill vacancies in the key manual positions, particularly
in its machining shops and also needs qualified welders authorised under the ČSN EN 287-1 Standard.          Co-operation with Schools
However, job centres are unable to provide a sufficient number of qualified workforce. Because of the        Co-operation with schools is primarily focused on study visits and on-the-job training at MUS. Our
generous welfare benefits, the registered job seekers are not interested in retraining to new professions    specialists’ participation in students’ diploma theses is also an interesting activity. MUS co-operates
and their inadequate work discipline compels employers to hiring them on a fixed-term basis.                 on a long-term basis with the Integrated Technical Secondary School – Professional Training Centre
DTS Vrbenský, a.s. is concerned about the future threat of qualified workforce shortages,                    at Velebudice: on-the-job training in MUS operations is provided to apprentices, especially the future
particularly in the area of the operation of auxiliary machinery.                                            fitters and electricians, with the intention to retain the students as future MUS employees.
RENOGUM-NILOS a.s. feels a lack of qualified job seekers because of the narrow specialisation                MUS co-operates with the Teachers’ Secondary School, Business Academy and Social Law
of vulcanisation (curing) workers.                                                                           College in Most in supporting contests among students’ fictitious firms: MUS employees are
                                                                                                             represented on the juries and the company provides prizes.
Employee Education
In MUS as the largest company in the Czech Coal Group, educational and training efforts were                                         Study visits and on-the-job training at MUS, 2006
focused in 2006 on the professional and development activities for the employees of MUS itself                                                                        Institute of Finance and Administration
                                                                                                             Study visits of university students              6
and its subsidiaries, as well as external customers. On the whole 929 education courses and                                                                           (VŠFS) in Most; University of Jan Evangelista
events are registered in the company, and 8,288 participants completed them.                                                                                          Purkyně (UJEP) in Ústí nad Labem; University of
Within the systematic long-term educational effort, the most important activities include the                                                                         West Bohemia (ZČU) in Plzeň
“Coal Academy” for line managers, the “Management Skills Development” course for medium-                     On-the-job training for secondary school                 Secondary Industrial School in Most;
                                                                                                                                                             42
and higher-level managerial staff, education courses for secretaries, the “outdoor training”                 students under long-term contracts                       Secondary Industrial School in Chomutov;
development courses for the teams of technical department managers, and continuation                                                                                  Integrated Technical Secondary School in
                                                                                                                                                                      Most-Velebudice (ISŠT); Teachers’ Secondary
education courses for those who completed their training in systematic education projects.
Important activities in the workers’ education area included mandatory periodic retesting of employees as
                                                                                                                                                                      School, Business Academy and Social Law           77
                                                                                                                                                                      College in Most
required by applicable legislation, training courses for drivers of electric and Diesel locomotives and      On-the-job training for students
a training course for giant machine operators, which was completed by 31 participants.                                                                       25
                                                                                                             of other secondary schools
In 2006 forty employees used external study schemes to study (while employed) at the Institute
of Finance and Administration (VŠFS) in Prague and Technical University (VŠB TU) in Ostrava.
The direct costs of education for the period under review are CZK 4,340,280.                                 Krušnohorské strojírny Komořany a.s. co-operates with UJEP in Ústí n. Labem (study visits and
                                                                                                             students’ diploma theses) and with ISŠT Most-Velebudice, the Trowel Trades Secondary
Labour Psychology and Organisation                                                                           Apprentice School at Meziboří and the Technical Secondary Apprentice School in Chomutov (on-
MUS services in labour psychology focus on the entry screening of new hires; entry and periodical            the-job-training for machine tool operators and fitters).
           2.7.3 Employee Participation in Company                                  within MUS, including the Association of MUS Trade Union
                 Management                                                         Organisations (SOO MUS, the largest of them), the North Bohemian
                                                                                    Association of Trade Union Organisations, the Railway Trade Union
           Importance of Collective Agreements                                      and the Energy Workers Trade Union.
           In addition to what is provided for in Czech legislation, particularly
           the Labour Code and safety regulations, a large part of labour           Trade Union Membership
           conditions in the Czech Coal Group are defined in collective             Trade union membership in the Czech Coal Group companies is
           agreements. Collective agreements and amendments thereto                 declining year by year. Trade union organisations are active, and
           stipulate a number of extra benefits for the employees, primarily in     collective agreements are signed, in most of the Group companies.
           the social, personnel and payroll areas (end of the year bonuses –       Czech Coal a.s., REKULTIVACE a.s. MUS – Uniservis, spol. s r.o. and
           “13th and 14th pay”, wage increases that reflect the annual              Infotea s.r.o. are exceptions – they have no active trade union
           inflation rate, severance pay etc.). Collective agreements also          organisations and no collective agreements, and their
           specify the procedures that cover information, consultation and          employee/employer relations are governed by the Labour Code and
           bargaining with employees about organisational changes and               internal regulations.
           restructuring plans, principles of equal opportunities, and the Group
           companies’ social costs in the area of safety and health at work.        Employee and Trade Union Representation on Company
           These obligations, combined with the generally applicable                Governing Bodies
           regulations for the individual areas, are reflected in the detailed      Representation of employees and trade union organisations on
           rules (internal standards) according to which joint commissions and      company governing bodies varies among the Czech Coal Group
           committees where employees are represented are established, or in        companies, depending on their size, presence or absence of trade
           the procedures of accident reporting, professional disease reporting     union organisations and the different legal forms of each company.
           etc., and in the forms and rules for various types of complaints and     In MUS, the largest of the Group companies, two employee
           notifications. The rules specified in collective agreements and their    representatives are elected to the Supervisory Board. The trade
           amendments apply to all employees of the companies.                      union organisations have technical bodies of their own, for
                                                                                    example, a safety and health at work commission, to which they
           Collective Bargaining in 2006                                            invite representatives of company management. On the other hand,
           The 2006 collective bargaining in the Group took place at the end        they are represented on the commissions established by the
           of 2006 and at the beginning of 2007. Because of the above               employer, including mainly indemnification commissions,
           context, the bargaining parties agreed to change the bargaining          emergency commissions, catering commission, interviewing
           mechanisms in order to ensure that the extensive negotiations are        commissions (in the lay-off process within organisational changes),
           as effective as possible. The bargaining had to be very intensive        and in safety commissions during safety screening.
           because of the pressure of time. The relationships newly defined in
           the collective agreements had to comply with the newly defined
           legislative environment (from 1 January 2007).
           The bargaining was conducted by representatives of the employer
           and representatives of the four trade union organisations active
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          2.8 Regional Policy
          2.8.1 The Group’s Regional Policy

          It is important and essential, in the Group’s opinion, to take part in addressing the issues of                        In the Group’s opinion, knowledge of how the region’s residents perceive its activities is an
          the region in which almost all of its production operations are located and most of its                                essential prerequisite for deciding on the directions of its future development, including
          employees live. The Group’s regional policy is therefore focused on the Ústí nad Labem Region,                         regional co-operation. The people, businesses and institutions communicate their views and
          especially the districts of Chomutov and Most. The Group companies, in particular the largest                          comments directly to MUS’s Communication Department or, since May 2006, to the “Co-
          of them, Mostecká uhelná a.s., are systematically involved in the efforts to resolve the regional                      existence” Information and Contact Centre at Litvínov. MUS also conducts opinion polls
          issues. The most pressing issues include the social situation (20% people unemployed in the                            amongst the region’s residents on a regular basis, usually once in two years.
          Most district) and the small number of university graduates among the population (half the                             Since 1998 MUS has spent almost CZK 333 million on the Regional Co-operation Programme.
          national average).                                                                                                     In 2006 MUS donated CZK 32,868,700 for these purposes. MUS subsidiaries supported
          The relationship of Mostecká uhelná a.s. and its subsidiaries to the region is determined by a                         development in different parts of the region by another CZK 4,586,000. On the whole, the
          number of separate programmes, all of which focus on efforts to develop the best possible                              entire Czech Coal Group supported more than 150 projects in northern Bohemia in 2006.
          working environment and high-quality care for employees, to revitalise the areas affected by
          extraction and to minimise the environmental impacts and, in particular, to develop good
          relationships with the neighbouring communities.



                Funds spent on the programme of regional co-operation                                                                                             Support for projects, 2006
                    of MUS and its subsidiaries for the development
              of the North-Bohemian region, 2006 (Total CZK 35.9 million)                                                        Company                          Financial support in            Total Support for projects
                                                                                                                                                              the Ústí nad Labem Region           all over the Czech Rep
                                                                                                                                                                        CZK ‘000                          CZK ‘000
                                                     Other              Support to cultural
                   Social revitalisation   (conferences, professional events and amateur                                          Mostecká uhelná a.s.                  32,868.7                           52,868.7
                  of the reclaimed areas   ogranisations, prizes, etc.)    ensembles        Support to cultural institutions,     Czech Coal a.s.                        2,500                             22,427
                       (Hippodrome)                      5%                                    publications, restoration
                                                                              6%                                                  DTS Vrbenský, a.s.                       213.2                              313.2
                           30 %                                                                 of heritage properties
                                                                                                         7%                       Krušnohorské strojírny Komořany a.s.     339                              1,863                79
                                                                                                                                  RENOGUM-NILOS a.s.                        34                                234
                                                                                                                                  MUS-Uniservis, spol. s r.o.               10                                240
                                                                                                                                  Infotea, s.r.o.                                                             250
                                                                                                                                  HUMECO, a.s.                                                                 87
České Švýcarsko                                                                                        Support to professional
                                                                                                                                  TOTAL                                35,899                             61,776
 National Park                                                                                                 sports
     4%         Enviromental                                                                                    20 %
                  projects                                                   Support to sports,
                             Support in the social Support to schools      particularly for children
                    2%         and health area      and extramural               and youth
                                    13 %             education for                   6%
                                                       the young
                                                          7%
           2.8.2 MUS Regional Co-operation Programme                                       Programme of Support for the Region                                            MUS supports the use of reclaimed areas as social and sport
                                                                                           In 2006 funds intended for the support of educational, social and health       venues. This includes support for HIPODROM MOST, a.s., a company
           Donorship and sponsorship have been part of MUS’s non-production                projects were allocated to applicants from the districts of Chomutov,          that manages a race course, which is not only the most modern
           activities since the establishment of the company in 1993. In 2002 the          Most and Teplice.The programme includes the granting of both financial         centre of horse racing in the Czech Republic at present but also the
           Company launched an extensive project, called Regional Policy, through          and in-kind support available to dozens of natural and juristic persons        venue of many traditional municipal events. The Most hippodrome
           which it now supports dozens of cultural, sports and other social activities,   in the region for their longer-term projects. MUS primarily supports the       is an example of successful regeneration – social revitalisation – of
           including schemes in the social area, in health care and in education.          projects that bring about benefits that are not limited by time. This          the reclaimed area on the former Velebudice dump.
           The Regional Co-operation Programme constitutes a programme of                  includes, for example, the purchase of medical instruments, special aids       The Landscape for the Future project, launched by MUS in 2004, is
           the company’s clearly defined voluntary activities aimed at improving           for social care institutions, computers for schools, equipment for             focused on presenting the results of the company’s reclamation
           the quality of life of the region’s inhabitants. MUS considers it to be         protected workshops, construction of playgrounds etc.                          efforts and on environmental education of children, the young, and
           very important to use its economic power for improving the                      The MUS management team approves of the selection of applications              the general public. Children and their parents are shown round the
           conditions of life of the people in north-western Bohemia, particularly         for support. On the whole, an amount of CZK 3 million was provided             project by the little characters of Barborka and Prokůpek, patrons of
           the areas of Most and, in recent years, also Chomutov. The extent of            under this programme in 2006.                                                  events for children. The project also includes excursions centred on
           regional co-operation depends, naturally, on the company’s economic             In 2007 the Programme of Support for the Region will only focus on             reclamation issues, and environmentally oriented contests, e.g. waste
           success and also on the effectiveness of co-operation with employee             applicants from the district of Most and the range of supported areas will     recycling and nature conservation. The project is being implemented
           representatives, municipalities and regional organisations.                     be narrowed down to health, education and environmental protection.            in co-operation with the Most pro Krušnohoří Environmental Centre.
                                                                                                                                                                          The Czech Coal Group, the Administration of the České Švýcarsko
           The Regional Co-operation Programme is being implemented in the                 Year-round Sponsoring                                                          (Czech Switzerland) National Park and the České Švýcarsko charity
           following areas:                                                                Applications for support for activities, including specific, even short-       signed a partnership agreement for the period of 2004-6. The
                                                                                           term events, primarily in culture and sports, are received for the             purpose was to support the professionalisation of the České
           Partnership with Municipalities                                                 whole year in quarterly approval cycles. Events that attract a large           Švýcarsko non-profit organisation. Since then, the partnership has
           Community engagement is based on co-operation agreements                        number of people are preferred. This support is not intended for               helped the charity to prepare and start schemes of international
           between MUS and municipalities in the Most and Chomutov areas.                  individuals: it is always provided to sports organisations, teams,             importance with a focus on the development of sustainable
           Such agreements were signed with Most, Litvínov, Jirkov, Meziboří,              children’s and youth organisations and facilities, and institutions for        tourism, protection of natural and cultural values, and on
           Lom, Louka u Litvínova, Strupčice, Mariánské Radčice, Vrskmaň and               handicapped persons.                                                           education. The Czech and Saxon Switzerland complex is
           Vysoká Pec. (Horní Jiřetín rejected participation in 2006.)                     The selection of supported application for sponsorship is approved at          a representative example of sandstone block area, which has no
           The range of supported areas is updated on an annual basis to reflect           MUS management meetings on a quarterly basis.                                  match in Europe in terms of size. This region has therefore ambitions
           the needs of the partner towns and villages. They mainly include                                                                                               to be listed in the UNESCO World Natural Heritage.
           events and projects that would not be viable if they depended just on           On the whole, MUS donated almost CZK 24 million for all forms of
           the municipalities’ budgets. Thus, for example, through its                     support for the region in 2006.                                              2.8.3 Support for Social Projects at the National Level
           agreements with municipalities MUS contributed to the organisation
           of cultural and sports events, to new equipment for educational and             Selected Results of Regional Co-operation                                    Companies in the Czech Coal Group also provide support to
           cultural facilities, and to assistance provided to social care institutions       MUS contributed to the “Football for Children’s Homes” charitable          a number of other social and charitable projects both in northern
           and hospitals. Since the beginning of the project MUS provided                    project in the Ústí nad Labem Region.                                      Bohemia and elsewhere in the Czech Republic. For this purpose they
           almost CZK 30 million to municipalities under its regional policy,                Support was provided for the construction of exhibition grounds as         entrust their funds to the Czech Mining Foundation and to the Most
           including 2006 when the municipalities obtained CZK 6,210,000.                    part of the restoration of the Sacred Park in Litvínov.                    naděje (Bridge of Hope) Foundation.
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2.8.4 Support to Universities                                                                                                    The 2003/2005 comparisons show significant changes in the people’s positive perception of MUS:
                                                                                                                                   Trustworthiness of the firm: increased from the initial 35% to 64%
The Group systematically supports universities. A low number of university graduates (half the                                     Stability of the firm: increased from the initial 49% to 72%
Czech average) is one of the most pressing problems of the Ústí nad Labem Region. The                                              Prospects of the firm: increased from the initial 46% to 67%
financial support to Vysoká škola finanční a správní, o.p.s. (Institute of Finance and                                             Important sponsor: increased from the initial 52% to 71%
Administration), which has a branch in the Ústí nad Labem Region, amounted to CZK 4.5 million                                      The firm’s innovation: increased from the initial 38% to 50%
in 2006. Another CZK 100,000 was spent on other educational activities.                                                            Proud employees: increased from the initial 28% to 36%
                                                                                                                                   Employer: increased from the initial 78% to 84%.
2.8.5 Opinion of the Inhabitants of the Ústí nad Labem Region
      on the MUS Activities (opinion poll amongst the inhabitants of                                                             Views of the Inhabitants of the Ústí nad Labem Region on the Benefits of MUS for the
      the Ústí nad Labem Region from 2003 to 2005)                                                                               Region
                                                                                                                                 In 2005 three-quarters of the respondents (76%) believed that, generally, MUS’s activities are
Key Characteristics of MUS as viewed by the Inhabitants of the Ústí nad Labem Region                                             beneficial to the region and only 17% claimed the opposite. The inhabitants of the region saw
The following findings were obtained in September 2005 from comparisons of the parameters                                        the greatest benefits in the provision of jobs (36%) and in the supply of coal (12%), in
(relative frequencies monitored on a long-term basis) showing how respondents in the Ústí nad                                    sponsoring (8%), reclamation (5%) and electricity and heat supply (3%).
Labem Region evaluated Mostecká uhelná a.s.*:                                                                                    MUS support programmes (regional co-operation, sponsoring) were considered as sufficient
                                                                                                                                 by 70% of the respondents and as insufficient by only 14%, others did not know.
                                                                                                                                 As to MUS’s reclamation work, 62% of the respondents considered it to be good, 28% to be
                                                                                                                                 neither good nor bad, and 9% did not know.

                                                                                                                                 Views of the Inhabitants of the Ústí nad Labem Region on the Adverse Impacts of
                                                                                                                                 MUS’s Activities
                                                                                                                                 Unfortunately, the opinions of the inhabitants of the region as to the adverse impacts of MUS’s
                                                                                                                                 activities are not clearly related to the actual status of reclamation and emissions (See the
                                                                                                                                 Environmental Area).
                                                                                                                                 Landscape devastation was indicated by only 4% in 2002 and almost one-third (31%) in 2005
                                                                                                                                 Air pollution was indicated by 22% in 2002 and 22% again in 2005
                                                                                                                                 Pollution of nature was mentioned among the adverse impacts of MUS’s activities on the
                                                                                                                                                                                                                                   81
                                                                                                                                 region by about the same numbers of respondents in 2002 and 2005 (21% and 17%,
                                                                                                                                 respectively).




* About 300 respondents from the Ústí nad Labem Region. Telephone polling performed by GFK Praha, spol. s r.o., September 2005
                  Views of the inhabitants of the Ústí nad Labem Region regarding                                                                                    Opinions of the Inhabitants of the Ústí nad Labem Region on the Extension of Mining beyond
                             the desirable focus of MUS’ regional policy                                                                                             the Mining Limits in 2005
                                                                                                                                                                     2005 Opinion Poll Among the Inhabitants of the Ústí nad Labem Region on the Extension of Mining Beyond
           70 %                                                                                                                                                      the Mining Limits
                         65 % 64 %
                                     63 %      62 %
                                                                                                                                                                     Question: 1. Do you agree with the extension of mining beyond the current mining limits? Additional
           60 %   56 %
                                        58 %
                                                                                                                                                                     question: 2. If the mining company agrees with the inhabitants of the affected areas, will you then agree with
           50 %                                                     47 %                                                                                             the extension of mining beyond the current mining limits? (289 respondents in the Ústí nad Labem Region,
                                                      46 %
                                                             44 %
                                                                                                                                                                     September 2005. Inquiry performed by GFK Praha, spol. s r.o.)
           40 %                                                                                                                                                      Only one-third (34%) of the respondents agreed with the extension of mining beyond the mining limits;
                                                                           32 %
           30 %                                                                   29 %     29 %                                                                      59% were against it. On condition that the mining company is able to agree on the matter with the
                                                                                      26 %
                                                                                                  25 %                                                               inhabitants of the affected areas, 56% of the respondents (34% + another 22%) would agree with further
                                                                                                         22 %
           20 %                                                                                                 19 % 19 % 18 %
                                                                                                                                                                     extension of extraction. Summarised results (answers to both questions) are shown in the diagram below:
                                                                                                                                                12 %
           10 %
                                                                                                                                 3%
                                                                                                                                      5%               4% 5%
                                                                                                                                           1%
           0%                                                                                                                                                                     Opinions of the inhabitants of the Ústí nad Labem Region (in 2005)
                  health and environment schools and                          sports         culture               leisure       other          I don’t know                         regarding the extension of mining beyond the mining limits
                  social area             education
                                                                                                                                                               On agreement with inhabitants:
                                                                                                                                                                  definitely yes + rather yes                                                           On agreement with inhabitants:
                          2002 (n=263)                                      2003 (n=296)                                     2005 (n=289)                                                                                                                 definitely not + rather not
                                                                                                                                                                                                22 %
                                                                                                                                                                                                                                            33 %


                                                                                                                                                                                                                                                   3%
                                                                                                                                                                                                   34 %                                  8%



                                                                                                                                                                                                                                                           On agreement with inhabitants:
                                                                                                                                                                    Agree immediately:                                                                       do not know + no answer
                                                                                                                                                                 definitely yes + rather yes                                     Do not know + no answer




                                                                                                                                                                     2.8.6 Programme of Monitoring Sustainable Development Factors

                                                                                                                                                                     The Programme of Monitoring Sustainable Development Factors (“Monitoring Programme”) was pursued
                                                                                                                                                                     by the company on a voluntary basis. Specific actions were initiated under the Monitoring Programme in
                                                                                                                                                                     relation to the stakeholders, including state administration, self-governments and residents of
                                                                                                                                                                     municipalities, neighbouring communities, and scientific and research institutions.
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It is essential for an industrial company to find a method of how to evaluate the benefits of         involves the following steps:
regional co-operation within the context of the other impacts and benefits of its business. The       1. Acknowledging responsibility for the impacts of business activities on the society and environment.
impacts of MUS’s operations on the social and economic situation in the communities                   2. Developing valuable long-term relationships with all key stakeholders (“the Company’s
neighbouring on the extraction areas were therefore mapped and the methodologies for the                  neighbours”) affected by the Company’s activities.
monitoring of the key factors necessary for the description of the impacts of surface mining          However, availability of a detailed description of the benefits and impacts of industrial
were tested. The publicly available environmental, economic and social data concerning the            activities from the communities’ point of view is essential for these steps to be taken. The need
area affected by brown coal extraction was analysed under the Monitoring Programme during             for knowing the situation in the communities led the Czech Coal Group to implement its
2003-2005. The participating higher education institutions (Institute of Finance and                  programme of Monitoring, Analysing and Reporting Sustainable Development Factors in
Administration, Institute of Chemical Technology in Prague, University of West Bohemia in             2003-2005. This programme was implemented by the Group on an absolutely voluntary basis
Plzeň) and the Brown Coal Research Institute processed the generally available data of the            and involved co-operation with local communities, state administration authorities and
1991 and 2001 censuses, information from the lexicon of municipalities and data from job              universities. It required costs of almost CZK 3 million.
centres, municipalities’ social work departments, the Automated Ambient Air Pollution                 Under the monitoring scheme, publicly available environmental, economic and social data was
Monitoring System and the Czech Hydrometeorological Institute, as well as data directly               collected from the area affected by the industrial activities of MUS and other companies of the
collected from the households in the local communities. Perhaps the most interesting results          Czech Coal Group or, alternatively, funds were provided to universities for their field surveys.
relate to the social area and the research into emissions in small communities.                       The purpose of monitoring within the communities affected by the industrial activities was,
Partnerships with self-government authorities and state administration and the use of the             first, to identify – on the basis of the parameters (data series) that were complementary to
authorities’ indication potential constitute the key elements of the Monitoring Programme. Data       those of public administration authorities – how important the impact of the industrial
collection and handling complies with both the legislation on free access to information on the one   activities was and how MUS contributed to the development of the communities; and to
hand, and the personal data protection act on the other hand. The opinion polls were conducted        distinguish the impact of MUS’s industrial activities from other factors and provide feedback
in close co-operation with the representatives of self-government authorities and subject to their    for the assessment of MUS’s activities from the viewpoint of the different stakeholders.
consent.
                                                                                                      Results of Studies under the Sustainable Development Factors Monitoring Programme
2.8.7 Results of the Programme of Monitoring Sustainable Development                                  The impact of MUS’s activities on the social and economic situation in the areas next to the
      Factors 2003-2005                                                                               mining sites was mapped. Methods of monitoring the key factors were tested as a basis for
                                                                                                      describing the impact of mining activities. Particularly interesting results were obtained from
Data as a Precondition for the Co-existence of Industry and Communities                               surveys in the social area and research into emissions in small villages.
It is essential for an industrial company to find a method for evaluating the benefits of regional
co-operation in context of the other impacts and benefits of the company’s own business.              Impact of Coal Mining on Population Migration*
                                                                                                                                                                                                                              83
However, competitive advantage or benchmarking with other companies are not of primary                  Unlike what was expected, data for the communities under review, neighbouring with the
concern: what is sought is the feedback. One of the main questions asked by the Czech Coal              mines, do not suggest any trends of outward migration from the region: rather than that,
Group in relation to the region is: What knowledge needs to be shared to ensure that the                there are migration currents from cities to smaller communities, which seems to be related
Company’s extensive investments in the social and environmental areas pay off on a long-                to the construction of new houses (the villages of Malé Březno, Vysoká Pec, Strupčice,
term basis, i.e. that they are accepted and used by the people?                                         Mariánské Radčice, Lom, Louka u Litvínova, and Boleboř)
Social investments should not be confused with promotion through the media of “happy
distribution of gifts”. The rule for achieving commercial success is a method of support that            The migration trends at Jirkov and Litvínov are relatively weak. Currently there is a positive
applies ethical values and respects people, communities and the natural environment. This                migration balance. About one-fifth of the respondents think they will perhaps move away
                                                                                                      * Prepared by Institute of Finance and Administration in co-operation with the J.A. Purkyně University in Ústí nad
                                                                                                        Labem, January 2005. Source of data: Czech Statistical Office. Data also drawn from Annual Census of Municipalities
                                                                                                        1991 to 2003, Czech Statistical Office. Prepared by West Bohemian University in Plzeň, June 2005
                        Percent growth of population in municipalities                                                                                                      Socio-economic indicators in municipalities, 2001
                                                                                                                                            Communities up to 2,000 Inhabitants in the (former) districts of Chomutov, Louny, Most, Teplice and Ústí nad Labem
                                 up to 2 thousand inhabitants                                                                                                                                                   16.2
                     in the districts of Most, Louny, Chomutov, Teplice, Ústí n/L, 1991 - 2005 (1991 = 100%)                                                                                                      14.7
                                                                                                                                                                % of unemployed population
                                                                                                                                                                                                                  18.2
           24                                                                                                                                                                                                        22.9
                                                                                                                                                                % of one-parent families with                          22.4
           20                                                                                                                                                              at least one child                         23.1
                                                                                                                                                                                                                16.4
                                                                                                                                                          % of children up to (and including)                    16.6
           16
                                                                                                                                                                             14 years of age                     17.7
           12                                                                                                                                                                                                    17.9
                                                                                                                                                         % of population older than 59 years                     16.2
                                                                                                                                                                                                                16.1
           8                                                                                                                                                                                                                   36.0
                                                                                                                                                                         % of population born                                     33.7
           4                                                                                                                                                                   where they live                                    40.5
                                                                                                                                                                                                                     21.2
           0                                                                                                                                                       % of people with complete                         20.2
                                                                                                                                                                         secondary education                        18.4
           -4                                                                                                                                                                                                                                                    76.7
                1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005                                                                % of economically active population                                                                    75.8
                     average for communities with coal mining (10)                                                                             (out of those between 15 and 59 years of age)                                                                    74.4
                                                                                                                                                                                                                                                                             90.3
                     average for communities with reclaimed areas (10)                           (Source: Czech Statistical Office)                            % of flats of categories I and II                                                                               93.6
                     average for communities with no impact of mining (128)                                                                                  (out of the total number of flats)                                                                              90.8
                                                                                                                                                                                                            9.8
            The graph represents the following municipalities with major mining activities or reclamation, and with after-effects of                   % flats built between 1991 and 2001                   12.1
            reclamation carried out at the end of the 20th century:Extraction: Březno, Spořice, Vysoká Pec, Strupčice, Málkov, Černovice,                   (out of the total number of flats)              9.9
            Vrskmaň, Horní Jiřetín, Malé Březno and Ledvice (with coal preparation plant).                                                                                                                                      37.4
            Reclamation: Bečov, Braňany, Louka u Litvínova, Mariánské Radčice, Háj u Duchcova, Světec, Kostomlaty, Hrobčice, Jeníkov,                          % of inhabitants connected to                                                             66.7
            Modlany.                                                                                                                                               the public sewage system                                            46.6
            Note: Owing to the statistical processing, some of the very small communities or those that changed their territory had to be
            excluded from the statistical sets. This is reflected in the different numbers of communities in the graphs.                                                                                                               Source: Census 2001, Czech Statistical Office

                                                                                                                                                                       Average for the communities with no impact of extraction (138 communities)

                                                                                                                                                                       Average for the communities with brown coal extraction (10 communities)

                                                                                                                                                                       Average for the communities with reclamation or after-effects of reclamation (10 communities)

                                                                                                                                                          The graphs cover the following municipalities with significant brown coal extraction operations or with reclamation
                                                                                                                                                          activities and reclamation after-effects at the end of the 20th century:
                                                                                                                                                          Extraction: Březno, Spořice, Vysoká Pec, Strupčice, Málkov, Černovice, Vrskmaň, Horní Jiřetín, Malé Březno and Ledvice
                                                                                                                                                          (with coal preparation plant)
                                                                                                                                                          Reclamation: Bečov, Braňany, Louka u Litvínova, Mariánské Radčice, Háj u Duchcova, Světec, Kostomlaty, Hrobčice,
                                                                                                                                                          Jeníkov, Modlany.
                                                                                                                                                          Note: Owing to the statistical processing, some of the very small communities or those that changed their territory had to
                                                                                                                                                          be excluded from the statistical sets. This is reflected in the different numbers of communities in the graphs.




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  (the proportion of younger people is slightly higher in this group) and most of those who                                       Opinions of Business Owners and Cultural and Political Elites of the Municipalities in
  would like to leave would prefer moving outside the region, mainly to Prague. Their                                             the Vicinity of MUS Mines**
  migration plans are related to the opportunities to find interesting jobs.
                                                                                                                                  The opinions of the cultural and political elites (27 inhabitants): About one-half of these people
  Development of the population: It follows from the data contained in the Annual Census of                                       think that what MUS does is generally positive. They appreciate MUS’s contribution to job
  Municipalities issued by the Czech Statistical Office that the development of the total                                         opportunities, provision of financial support to the municipalities and the fact that MUS is
  population of all the communities taken together depended primarily on how many                                                 increasingly interested in the development of the entire Most area. However, it must be noted
  inhabitants each community had, but a certain impact of mining was also felt. In                                                that most of them at the same time point out certain adverse environmental impacts of
  communities with a pop. of up to 2,000, affected by mining or reclamation, the population                                       extraction. Outright disapproval or milder disapproval was heard exceptionally (only three
  increase over the period 1991-2005 was (relatively) higher than in communities of the same                                      respondents).
  size not affected by mining. A positive impact is produced not only by the advancing                                            Opinions of the business owners (78 inhabitants): Most of them say that coal extraction has no
  reclamation but probably also by the subsidies to municipal budgets received by virtue of                                       impact on local businesses (42%). 19% of the respondents evaluated coal extraction and other
  mining, which enabled municipalities to spend more funds on building local infrastructures.                                     operations positively. It is surprising that the positive evaluation of the mining companies’ impact
                                                                                                                                  is related to the place of the business rather than the particular business line. It is also remarkable
Types of Households that Move to Villages with Mining Operations within their Limits*                                             that most of the business owners have moved to the community from the outside (65%).
The people who moved to the communities in the neighbourhood of extraction came primarily
(76%) from the nearby towns at the foot of the Krušné hory Mountains. This process can be                                         Opinion of the Inhabitants of Jirkov and Litvínov on Industry (a sample of over 1,000
characterised as “natives coming home” and as suburbanisation.                                                                    households)***
What attracted the migrants to living in a small community was not a better job but better
conditions of living there. As many as 79% of the families in those municipalities wish to                                        In the opinion of the inhabitants of both these towns, the industries that provide the largest
remain where they are, although 14% of the members of those families have experienced                                             number of jobs are the most important. Question: Which industries do you consider to be
resettlement because of the extension of coal extraction.                                                                         promising for your town and the area around it?
It is interesting from the environmental point of view and in respect of the impact of extraction                                 Promising industry / town                              Litvínov                Jirkov
that 60% of the households cultivate a garden and produce a part of their foodstuffs                                              Coal mining and processing                                9.6                   16.4
themselves.                                                                                                                       Chemical industry                                        55.1                    1.8
The municipalities with the largest number of new families and new houses, e.g., Strupčice                                        Mechanical engineering                                    1.1                    3.8
and Černovice, are located in the immediate proximity to intensive coal extraction. In the
interviews with the people living next the mining sites coal extraction was referred to as a less
                                                                                                                                  Light industries, electrical industry
                                                                                                                                  Other industries
                                                                                                                                                                                            1.1
                                                                                                                                                                                            7.5
                                                                                                                                                                                                                   2.2
                                                                                                                                                                                                                  13.5
                                                                                                                                                                                                                                            85
serious problem than living next to a motorway or an industrial operation.                                                        None indicated / do not know                             25.6                   62.3
The newcomer households are younger, have more children and, on average, are economically
more successful. Thanks to migration the social structure of the population in these small                                        The high percentage of those who “do not know” seems to correspond to the feeling of
communities in the vicinity of coal extraction is improving. Many of the newcomers returned                                       uncertainty in looking to the future. The complexity of the situation is illustrated by the fact that
to their parents’ property or to their native village.                                                                            the industries that provide the largest number of jobs are at the same time perceived as the most
                                                                                                                                  harmful to the environment. In spite of the proclamations as to the introduction of new industries
                                                                                                                                  (especially in the context of the downscaling of coal extraction after 1991), the presence of any
                                                                                                                                  other industry in the region is not perceived as significant after 15 years of development.
* Data from the field questionnaire survey amongst the households in Modlany, Hrobčice, Mariánské Radčice, Strupčice and Černovice u Chomutova. Sample of 700 households, prepared by West Bohemian University in Plzeň, October 2003
** The questionnaire survey amongst the business community and cultural elites was carried out at Malé Březno, Vrskmaň, Vysoká Pec, Strupčice, and Mariánské Radčice. Prepared by: Institute of Finance and Administration, January 2005.
*** The field questionnaire survey was carried out amongst the households of Jirkov (about 650 households) and Litvínov (about 550 households). Prepared by: Institute of Finance and Administration, September 2005
           Evaluation of the environmental impacts of major companies.                                     Monitoring the Environmental Factors                                                             Environment. The detailed results were handed over to the
           Question: Please indicate – if you know about companies in/around                               Air quality monitoring is extremely important for the environmental                              municipalities and Proceedings were produced.*
           your town that damage environment – which of them are the most                                  characteristics of north-western Bohemia, because air quality responds                           Considering the benefits of the Seminar, it should be mentioned that
           harmful?                                                                                        most dynamically to the changes in pollution sources and because                                 the Seminar contributed substantially to the detailed knowledge of
           Companies / town                         Litvínov      Jirkov                                   80% of the total quantity of pollutants is transported by air. Emissions                         the environment in individual communities and, in particular,
           MUS, Severočeské doly                      10.7          18.3                                   from small and local furnaces, gas- or coal-fired, represent a serious                           encouraged the sharing of issues with the region, including
           Chemopetrol                                52.2          10.4                                   problem and there is not sufficient evidence to address this problem.                            a methodical description thereof. The results of the programme of
           ČEZ power plants                            0.7           4.8                                   Emissions in small municipalities were the subject of a case study by                            Monitoring Sustainable Development Factors also provided
                                                                                                           the Institute of Chemical Technology. The study included field surveys                           inspiration for preparing the Ústí nad Labem Regional Strategy of
           Opinion of Jirkov and Litvínov inhabitants on the possibility to move                           and data on emission levels, using experimentally identified emission                            Sustainable Development, which was completed at the end of 2005
           away: In Litvínov, there is a larger proportion of respondents who                              factors for the respective types of fuel burning appliances (firing gas,                         and the beginning of 2006. The Jirkov municipality co-operated on
           consider the industries in their town to be promising (74.4%), and so                           coal and wood) in five separate municipalities located near MUS                                  the project and this co-operation resulted in drawing up an original
           stronger migration trends would be expected in Jirkov where this                                surface mines in the districts of Chomutov and Most. It follows from                             methodology for a detailed description of the processes of
           proportion was smaller (37.7%). Nevertheless, the situation is about                            the findings that the calculated annual pollutant mass flows in those                            segregation within communities. This methodology was successfully
           the same in both towns, as indicated by answers to the question “Do                             five municipalities (2,535 houses) are many times greater than                                   tested and presented to the Czech Ministry for Regional
           you consider moving away?”                                                                      expected for the production of pollutants from local furnaces                                    Development.
           Considering mowing away / town               Litvínov       Jirkov                              (particularly CO and NOx) according to the Register of Emissions and
           yes                                            25.8          21.6                               Air Pollution Sources, REZZO3. Most of the people think that large
           no                                             72.5          77.5                               sources such as coal-fired power plants, or the transport of dust
           no answer                                       1.7            0.9                              particles from coal extraction, are by far the largest air polluters, but the
                                                                                                           results of this research indicate that today, the people are much more
           The frequency of thinking about moving away is related to the town                              exposed to pollutants from “their own oversized furnaces”.
           quarters where the respondents live and is statistically significant in
           the socially stigmatised areas (Litvínov-Janov, Jirkov-Nové Ervěnice).                          Seminar on the Co-existence of Industry and Communities
           Such considerations are probably not related to any industrial                                  The Seminar on the Co-existence of Industry and Communities, held
           activities: rather than that, they are related to the social status and                         under the auspices of the Regional Governor of the Ústí nad Labem
           feeling of security in the quarter of the town.                                                 Region, was the highlight of the programme of Monitoring
           It can be inferred from the above that the people consider social                               Sustainable Development Factors. It was organised by the Brown
           problems (unemployment, social stigmatisation) to be much more                                  Coal Research Institute and Mostecká uhelná in September 2005. Its
           important than environmental concerns. On the basis of the available                            purpose was to deliver the results to the municipalities and to discuss
           information and analyses it is possible to entirely refute the very                             the results with specialists from the Czech Coal Group, the
           widespread and frequently published hypothesis that brown coal                                  participating universities (Institute of Chemical Technology, The
           mining leads to population outflow from the adjacent communities.                               University of West Bohemia in Plzeň, and Institute of Finance and
           Migration of families from towns to suburbs is a different issue, not                           Administration), mayors and the representatives of the Regional
           related to mining: it is socially motivated.                                                    Authority, as well as representatives of state administration (job
                                                                                                           centres, departments of social affairs) and the Ministry of the
      86   * Bořecký, K. - Kužel, S. - Titl, F. (eds.): Proceedings of Seminar on Coexistence of Industry and Communities. Published by VÚHU a.s. and Mostecká uhelná a.s., September 2005, 226 pages, ISBN 80-239-6101-2




contents
                                                                                                                                                                                                              contents

Reporting the Benefits and Impacts on Neighbouring Communities (2005)

Mutually agreed form of reporting the benefits and impacts of the company within the sustainable development context is one of the outcomes of the Co-existence Seminar and the subsequent working
meeting of local communities’ officials and MUS. The purpose of the reporting is to enable assessment of the benefits and impacts of the Czech Coal Group’s business in respect of the situation in the
individual municipalities and to enhance their own exchanges of information as well as provision of information to the general public. The outputs are illustrated by the results of the questionnaire
survey, shown below, and also by the table to which the municipalities contribute certain data.

In the questionnaire survey by Mostecká uhelná, local deputies answered the following three questions:
    1.What is the main problem for the inhabitants in your municipality?
    2. What benefits and impacts of industrial companies can you identify in your municipality?
    3. How did you use in 2005 the funds from MUS payments for the mineral extracted, payments for the mine space, and contributions under the Regional Co-operation Programme?



    Town Litvínov                 1. Unemployment
                                  2. They are the main employers for the citizens of the town
                                  3. The funds from the payments for the extracted mineral are part of the town’s budget – they primarily occur on the expenditure side of the operating budget. The
                                     money from the Regional Co-operation Programme went to the equipment of a multimedia classroom, construction work and earthwork on the Mortuary project,
                                     repair of the roof on the Radniční sklípek House, support for cultural events (St Michael Festival, Valdštejn Festival, Christmas in the Krušné hory Mountains, Krušné
                                     hory Mountains Marathon, cycling path opening ceremony, Jazz Festival)



    Town Jirkov                   1. Increasing crime rate and vandalism, high unemployment
                                  2. No impacts from industry. Transport contributes to pollution.
                                  3. Purchase of medical technical aids for the Municipal Social Service Institute in Jirkov



    Town Most                     1. Environment, housing, unemployment
                                  2. Wages above Czech average, co-operation in town development programmes based on co-operation agreements, unemployment
                                                                                                                                                                                                              87
                                  3. The funds are included in all parts (titles) of the town’s budget. Funds from the MUS Regional Co-operation Programme are used in accordance with agreements.



    Town Meziboří                 1. Citizens see the main problem in the slow regeneration and revitalisation of the town
                                  2. What causes the greatest problems is the use and, possibly, refurbishment of the 17 shabby buildings that formerly served as schools for prospective coal mine
                                     employees. The town is not eligible for support from the CZK 15 billion intended for the regeneration of the Ústí nad Labem Region and does not have sufficient
                                     funds to co-finance any subsidised projects. What we appreciate is the excellent co-operation with Mostecká uhelná in preparing sports and cultural opportunities
                                     mainly for the young generation
                                  3. Under a donation agreement: support to sports clubs, Czech Freedom Fighters’ Union at Meziboří, the Libuše Civic Association and the Union of the Handicapped,
                                     the construction of a playground in the kindergarten, fence around guesthouses
           Town Lom                     1. Forty-year ban on construction – as a result, the town has obsolete housing stock and infrastructure, and poor leisure facilities for the citizens
                                        2. Benefits – our own industrial zone and opportunities to use government grants. Impacts – environmental problems
                                        3. Based on agreed conditions – support for amateur sports, rehabilitation of heritage properties, leisure opportunities for children and the young



           Village Strupčice            1. Poor employment opportunities in the village
                                        2. Benefits: industry always provides employment to the people. Impacts: for example, increased truck traffic in the village
                                        3. All went to the refurbishment of the primary school and repair of roads at Strupčice



           Village Vysoká Pec           1. Infrastructure not yet completed: we are building the infrastructure, and so we have no funds left for sports, culture, the youth
                                        2. Benefit: lower unemployment in the village, as most of the citizens are employed with MUS. Impact: dust and noise from the nearby mines
                                        3. The CZK 43,000 payment for mine space was included in the municipal budget. The gift of CZK 50,000 was used for equipping the library



           Village Louka u Litvínova 1. High unemployment (about 30% on a long-term basis - since 2000)
                                     2. Impacts: poor environment, high dust levels, damaged landscape. Benefits: employment for the people, dump reclamation, sport grounds build on the dumps (car racing, hippodrome,
                                        Polygon, water reservoirs…)
                                     3. Drying out wet walls in the SKNH club room, drainage of the sports field, furniture for the after-school centre, building a new playground for children in compliance with EU standards



           Village Mariánské Radčice 1. High unemployment, problems with transport services related to the fact that the Kohinoor premises are unused.
                                     2. Mining has killed farming, but reclamation is making the situation better. Land held by the Czech Land Fund and the Railway Track Administration, including Kohinoor premises, is
                                        deteriorating and remains unused
                                     3. Sponsorship gift of CZK 250,000 was used for the after-school and sports activities of children and youth



           Village Horní Jiřetín        1. Existence of coal extraction near the village
                                        2. No benefit, adverse impacts, particularly on the health of the inhabitants
                                        3.Payments for the mineral extracted and mining space were included in the municipal budget, other funds were used as agreed. Funds given to the National Heritage Institute
                                          for the Jezeří Castle and funds given to the Sokol sports organisation did not serve the village, because the Institute and the sports club are separate entities




      88




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Village Vrskmaň       1. Ageing population, transport, services, shops, unemployment
                      2. Pecuniary gifts, higher employment. Impacts: dust and noise
                      3. School, culture, the sports club, greenery



Village Malé Březno   1. Unemployment, poor transport services (the village subsidises public transport)
                      2. Dust from coal extraction and the Hrabák preparation plant. Benefits: employment and payments for the mineral extracted
                      3. Investments in the village: infrastructure, refurbishment of flats, repair of roads, children’s playground, improved greenery, refurbished lighting system




                                                                                                                                                                                      89
           In the questionnaire survey MUS provided municipalities with data on its statutory payments and on a part of the funds from the Regional Co-operation Programme (green). (2005)

                                                                                                      MUS Total Contribution                                        Town Litvínov                    Town Jirkov                      Town Most                     Town Meziboří

                                                                                                   % from municipal budget                        %                               0.32                             0.33                              1.96                          1.19

                                                                                                  Payments for extracted mineral              CZK '000                           107.91                                                          19,921.26

           Municipal budget
                                                 Total municipal budget                              Payments for mining areas                CZK '000        694,048.00         151.87       306,734.00                       1,890,839           295.59       69,176.00
              incomes

                                                                                                 Paym. for exclusion from farm use            CZK '000                           110.00                                                            193.35

                                                                                               Total contribution from MUS Regional
                                                                                                                                              CZK '000                          1,881.50                          1,015.00                       16,717.84                        823.23
                                                                                                        Co-op Programme*

                                                              Part of municipal budget - tax yield                                            CZK '000                301,077.00                      155,800.00                       601,088.00                       29,112.00

                                 Municipal funds for environment (excl.cycle paths) from       Contribution from MUS Regional Co-
                                                                                                                                              CZK '000                                            5,000                                          10,100.00        25.00
                                   corporate gifts and sponsorships and from grants                      op Programme*
             Environment
                                           Sports grounds, parks and leisure areas (estimate) within the village/town                          hectares                                                   13.75                           189.82                          16.00

                               Municip.lifestyle funds (sport, playgrounds, parks etc.) from Contribution from MUS Regional Co-
                                                                                                                                              CZK '000           15.00           421.50                           180.00        3,654.00           631.52        705.00           138.23
                                   corporate gifts and sponsorships and from grants                    op Programme*
                Health
                               Funds in municipal budget for health - from corporate gifts Contribution from MUS Regional Co-
                                                                                                                                              CZK '000                           300.00                                          700.00            270.00          5.00           45.00
                                          and sponsorships and from grants                           op Programme*
                              Municip.funds for schools and out-of-school education and training Contribution from MUS Regional Co-
                                                                                                                                              CZK '000          940.00           115.00          460.00           465.00       275,902.00        1,194.00         73.00           550.00
                                  - from corporate gifts and sponsorships and from grants                  op Programme*
            Education and     Municip.funds for cultural events and other cultural activities - Contribution from MUS Regional Co-
                                                                                                                                              CZK '000          220.00           310.00          195.00           100.00        2,216.00         1,130.00         66.00           40.00
               culture           from corporate gifts and sponsorships and from grants                    op Programme*

                                                          No. of children (6-18) going to local schools                                    No.of children                                                 2,880                            6,560                           906

                                                                                                  % citizens employed in MUS and
                                     Relative unemployment rate (December 2005)                  subsidiaries - out of total employed
                                                                                                                                                  %              23.00             4.6            19.3             11.00           20.5              11.6          23.1             6.2

                                        No.of locally based organisations actively working with children and the young                                                     17                               3                               33                               6
            Social cohesion
                                        No.of active locally based clubs, civic associations and non-profit organisations                                                  24                               1                               41                               7

                              Funds in municipal budget for social projects - from corporate         Contribution from MUS
                                                                                                                                              CZK '000                            80.00                           270.00        2,720.00           430.31         45.00           50.00
                                        gifts and sponsorships and from grants                     Regional Co-op Programme*

              Population                  No.of inhabitants in the community (as at 1 Jan 2006, Czech Statist. Office)                      No.of citizens               27,056                           21,093                          67,805                          4,898

                            Other funds from MUS under Regional Co-op. Programme for areas other than below
                                                                                                                                              CZK '000                   655.00                            0.00                           2,962.01                         0.00
                                 (heritage conservation, support to Police, Football Club SIAD Most, other)*
      90                                                                                                                                * The item Contributions under the MUS Regional Co-operation Programme includes all gifts to the municipal budgets and to the organisations based in
                                                                                                                                          the town/village, as well as the funds contributed to the events held in the community. (Agreements with municipalities, programme of support to the
                                                                                                                                          region, year-round sponsoring)


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                       Councillors provided data on their municipalities (pink) (2005)                                                                                                                                                               contents

          Town Lom                     village Strupčice               village Vysoká Pec            village Louka u Litvínova village Mariánské Radčice          village Horní Jiřetín        village Vrskmaň           village Malé Březno

                       0.59                            24.17                             0.27                                2.32                        3.13                      26.668                       4.20                       53.22

                                                      5,582.31                                                                                                                    6,059.95                                               41,102.91

    55,700.00          47.36        26,886.00           74.83        35,000.00           43.21           10,801.00           0.30    8,000.00                   26,810.32**        254.12    7,700.00           73.27   27,553.00          116.69

                                                       210.97                                                                                                                                                                              444.33

                       280.00                          630.00                            50.00                              250.00                     250.00                      840.00                      250.00

           25,700.00                         5,020.00                         6,500.00                            5,734.00                    5,000.00                                               3,400.00                    7,116.00


                                                                      1,000.00                                                       200.00                                        200.00


              111.00                           4.00                             2.00                               19.00                        5.00                                                    5.00                        1.00


      125.00           125.00         100.00                            85.00                             324.00            200.00   200.00            150.00                      40.00                       170.00




                                     7,730.00            630           410.00                             28.00              50.00   100.00            100.00                                                   80.00

      45.00            90.00                                            13.00            50.00             9.00                       50.00                                                   2.00

               248                              119                              14                                  45                         50                                                      33                          32


       25.8             5.4             14.6            13.8            10.30            14.5             28.77              6.8      26.4               6.7       22.5             13.3      21.4              7.5       19.3              19.7
                                                                                                                                                                                                                                                     91
                5                                2                                3                                   2                          2                                                                                   2

                7                                2                                2                                   1                          4

      30.00


              3,756                             635                              836                                 778                        419                       2,015                         225                         219


              65.00                            0.00                             0.00                                 0.00                       0.00                      600.00                        0.00                        0.00


** budget data according to http://wwwinfo.mfcr.cz/cgi-bin/aris/iarisusc/charakteristika.pl?ico=265942
           2.8.8 Project to Unlock Brown Coal Reserves for
                                                                                                        In spite of these opinions of the Horní Jiřetín and Litvínov Municipal                         is about two thousand and about 950 of them are property owners.
                 Future Generations                                                                     Assemblies, people from Horní Jiřetín personally contacted Mostecká                                75% of the property owners expressed their interest in continuing
                                                                                                        uhelná a.s. in both 2005 and 2006, asking about the company’s                                      discussions with MUS on the potential resettlement,
           There is a discrepancy in current Czech legislation, and this causes                         specific offer in the case of resettlement. Mostecká uhelná carefully                              acknowledging that the actual conditions could only be agreed on
           a very complicated situation for the citizens of Horní Jiřetín, Mostecká                     prepared its Project to Unlock Brown Coal Reserves for Future                                      the basis of an expert opinion.
           uhelná a.s. (MUS) and the entire region. First, there is Government                          Generations. This project also includes a specific offer for the people                            As for the selection of the options of resettlement and the
           Resolution No. 211/2004 on the National Energy Concept, dated                                living at Horní Jiřetín.                                                                           provision of new homes, about 60% preferred financial
           March 2004, which envisages continued brown coal extraction. And                                                                                                                                compensation and 40% preferred the construction of new homes.
           this resolution contradicts the earlier Government Resolution No.                            The “Coexistence” Information and Contact Centre at Litvínov                                       The results indicate that a large proportion of the people prefer
           444/1991 stipulating the mining limits.                                                      In September 2005 Mostecká uhelná set up its Co-existence website                                  financial compensation and reject resettlement to one place only.
           Mostecká uhelná a.s. is obliged to respect the Mining Act. The                               (www.spoluziti.cz) and a toll-free telephone line, 800 800 500.                                The first period of the fact finding phase at Horní Jiřetín indicates that
           Government’s resolution on mining limits is a piece of delegated                             Aware of the need for meeting with citizens in person and at easily                            it is possible, under certain conditions, to meet the requirement of the
           legislation [statutory instrument]. The Mining Act requires the                              accessible places, MUS decided to open (on 18 May 2006) its Co-                                Mining Act that conflicts of interest must be settled. Mostecká uhelná
           company to extract the mineral demanded on a long-term basis by                              existence Information and Contact Centre with the toll-free                                    a.s. highly appreciates the accommodating approach of Horní Jiřetín
           companies operating power stations and heat and power plants, and                            telephone line 800 800 499 in Litvínov.** The Centre’s mission is to                           and Černice citizens and believes that the pragmatic and constructive
           to do so as economically and environmentally sensitively as possible.                        provide those who are interested with exhaustive information about                             approach experienced during its talks with the citizens can also be
           The Mining Act also requires that conflicts of interest should be                            the steps related to the mining limits, the possibilities to continue                          transferred to talks with the municipality. The validity of the published
           settled. Hence, if conflicts of interests are successfully settled brown                     brown coal extraction, the relationships between the company and                               offer of settlement for the inhabitants and property owners at Horní
           coal extraction at the ČSA surface mine can continue: this stage II                          the communities near the mines and, in particular, about issues                                Jiřetín will expire on 30 June 2007.
           would include the relocation of the town Horní Jiřetín.                                      directly related to the future of Horní Jiřetín.
                                                                                                        From the opening of the information centre in May 2006 to the end                              Offer of Settlement for the Citizens of Horní Jiřetín in the
           The situation at the ČSA surface mine near Horní Jiřetín is not just                         of the year under review, the centre was visited by about 580 citizens.                        Case of Resettlement
           a local issue of northern Bohemia: if mining does not continue                                                                                                                              If the zone in front of the face of the ČSA surface mine is released for
           beyond the mining limits the approved variant of the National Energy                         Direct Negotiations between MUS and Property Owners and                                        brown coal extraction (Stage II) Stage II will comprise a number of
           Concept cannot be implemented. If the mining limits are not                                  Other Citizens of Horní Jiřetín and Černice                                                    sub-stages, including: settlement of property issues; planning and
           reconsidered, the level of coal mining after 2016, as required by the                        In June 2006 the citizens and property owners at Horní Jiřetín and                             construction of new homes; relays of water streams, utility networks
           National Energy Concept, will not be achieved, the result being that                         Černice received an offer for settlement in the case of their                                  and roads; and preparation of the area for mining at the new site.
           electricity output from indigenous sources will fall, electricity will                       resettlement to clear the area for continued brown coal extraction.                            This will altogether cost billions of crowns, including various other
           have to be imported and its price will grow*.                                                A fact finding phase took place in the summer and autumn 2006. The                             outlays in addition to the construction of new homes.
                                                                                                        citizens and property owners at Horní Jiřetín and Černice could
           Mostecká uhelná a.s. respects the results of the February 2005                               discuss with representatives of Mostecká uhelná their comments and                             In June 2006 Mostecká uhelná a.s. prepared a settlement offer for
           referendum, in which Horní Jiřetín citizens decided that the local                           suggestions regarding the offer they had received from the company.                            the inhabitants of Horní Jiřetín (almost 2,000 people). Under the
           Municipal Assembly should not negotiate with MUS on the relocation                           MUS representatives contacted almost all the people residing in                                offer people will be able to select their own option: joint construction
           of the town. MUS also acknowledges the Litvínov Municipal Assembly’s                         Horní Jiřetín and Černice. More than three-quarters of them were                               together with MUS, or financial compensation they will use for their
           position on the results of a referendum that took place at Litvínov on                       willing to discuss the MUS offer, i.e. the conditions of potential                             own individual construction, or a different approach to their housing
           1 December 2005, although the result is not legally binding.                                 resettlement and compensation. The total population of Horní Jiřetín                           situation. The approach will be personalised, but MUS will respect the
      92      * See Section 2.3.3 Importance of Brown Coal Power Generation in the Czech Republic
              ** Cheminvest Building, Gorkého 1613, Litvínov VI, opening hours Mondays and Wednesdays: 14:00-18:00, Saturdays: 13:00-17:00. Telephone 476 700 357 plus the toll-free telephone line 800 800 499. All information, including answers to telephone or e-mail questions, is
                 published at www.spoluziti.cz.



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                                                                                                                                                                                                          contents

principles of the uniform general offer to each specific group of the people to be resettled        Individual construction
(owners of houses, flats and land, tenants, businesses, associations and societies) with the        Individual construction of new housing outside the MUS joint construction sites. This solution
maximum transparency of each step.                                                                  will lack the economies of scale that can be achieved in mass-scale construction and will
Mostecká uhelná a.s. is learning from the experience of, for example, the Rhineland brown           therefore be more expensive. The calculation of the probable level of compensation will
coal district in Germany, where about fifty communities have been resettled over the last fifty     therefore be more advantageous for those interested in financial compensation. Cash is the
years: about 30,000 people have changed their homes and further resettlements are now               gain, and the recipient can use it as he likes. For example, if the now inhabited property is worth
under way.                                                                                          CZK 1.1 million the individual home builder will obtain 1.4 times the valuation price, plus CZK 1.5
In the fact finding phase MUS presented to Horní Jiřetín residents several options for              million and reimbursement of the costs of moving and household furnishings; the amount may
compensation and several options and types of sites for a new village. Of course, people may        increase up to CZK 3.2 million.
also decide to build their new homes on their own elsewhere. The offer applies to the
community as it was on 26 June 2006 and will remain in effect for a year. The company has           Buyout of land and garages
singled out several sites for the construction of up to 2,200 houses. The method of                 The valuation price, based on an expert opinion, is used as a basis, which is then increased by
compensation is primarily based on the restitution principle under the Mining Act. The detailed     an agreed coefficient. MUS will also provide free of charge, if so requested, the complete range
model formula for calculating the costs of acquiring new adequate housing is contained in the       of services related to the sale.
information materials offered by the Co-existence Information and Contact Centre (more
information is also available at www.spoluziti.cz). The specific amount of compensation will        An individual solution will be offered to:
always be agreed during individual negotiations, taking into account additional information.        - Businesses (e.g., compensation for the property, compensation for the provable profit for
Under the scheme of community resettlement and construction of new homes, MUS offers four             a period of three years ahead, support in seeking a new business opportunity, technical
settlement options:                                                                                   assistance in acquiring new operating premises)
   1. Construction with Mostecká uhelná a.s.– joint construction in the region                      - Members of the community who do not own any real property (tenants)
   2. Individual construction                                                                       - Associations, societies, special-interest organisations (for example, financial compensation,
   3. Buyout of land and garages                                                                      possibility to build new premises, to acquire new land …)
   4. Individual solution in specific cases (businesses, tenants, associations etc.)                - People with handicaps – in the form of social assistance.

Construction with Mostecká uhelná – joint construction in the region
MUS is prepared to start joint construction of family houses at one of the sites singled out in
the region. A new house will be offered for an abandoned house. For example, if the now
inhabited house is worth CZK 1.1 million, the house newly built by MUS for a three-member
                                                                                                                                                                                                          93
family will be worth CZK 2.7 million. The new house having this value rather than cash will be
the gain for the resettled homeowner.
MUS’s offer for joint construction also includes: legal advising, technical advice, architect’s
services, assistance in borrowing, engineering services during the joint construction, support
to the socially less privileged persons and, if there is interest, also support for employment in
MUS operations and support to those who study and would like to become MUS employees.
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3. Financial Results
   of Mostecká uhelná a.s.
   in 2006
                              95
           3.1 Financial Results of Mostecká uhelná a.s. in 2006
           3.1.1 The Result

           Mostecká uhelná, January to December 2006
                                                Result for 2006

            Costs - class 5                                       6,673,088

                of which, taxes (Income Statement, Line 49)         352.063

            Income, class 6                                       7,804,310

            Profit                                                1,131,222

            Profit before tax                                     1,483,285




      96




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                                                                                                                                                     contents

3.1.2 Balance Sheet

Mostecká uhelná a.s., 1-12/2006
                                                                           Balance Sheet - Asset
Identif.                                ASSETS                      Line                           Current period                   Prior period
                                                                                  Gross                  Adjustment        Net               Net
a                                               b                    c              1                          2            3                 4
               TOTAL ASSETS (Lines 02+03+31+63)                     001         22,815,060               -11,160,738   11,654,322       10,797,729
A.             Receivables for subscribed registered capital        002
B.             Fixed assets (Lines 04+13+23)                        003        18,934,710               -10,589,035    8,345,675       8,513,969
  B.I.         Intangible fixed assets (Lines 05 to 12)             004            262,647                  -232,993      29,654          34,047
   B.I.1.      Incorporation expenses                               005
        2.     Research and development                             006
        3.     Software                                             007             212,173                -200,635       11,538           20,644
        4.     Royalties                                            008                 200                     -20          180              200
        5.     Goodwill                                             009
        6.     Other intangible fixed assets                        010              46,195                 -32,338       13,857            9,463
        7.     Intangible fixed assets under construction           011               4,079                                4,079            3,606
        8.     Advance payments for intangible fixed assets         012                                                                       134
  B.II.        Tangible fixed assets (Lines 14 to 22)               013         12,153,981                -9,461,158    2,692,823       2,779,077
   B.II.1.     Land                                                 014            242,015                                242,015         166,004
         2.    Buildings                                            015          4,059,184                -2,456,309    1,602,875       1,829,221
         3.    Property, plant and equipment                        016          7,760,729                -7,004,849      755,880         676,394
         4.    Cultivated areas                                     017
         5.    Livestock                                            018
         6.    Other tangible fixed assets                          019               1,866                                1,866            2,195
         7.    Tangible fixed assets under construction             020              89,907                               89,907           99,123
         8.    Advance payments for tangible fixed assets           021                 280                                  280            6,140
         9.    Adjustments to acquirerd fixed assets                022
  B.III.       Long-term investments (Lines 24 to 30)               023           6,518,082                -894,884     5,623,198       5,700,845
   B.III.1.    Investments in group undertakings                    024           5,947,358                -845,659     5,101,699       5,560,625
          2.   Investments in associated companies                  025             438,324                 -10,959       427,365          26,845
          3.
          4.
               Other long-term securities and ownership interests
               Loans - group undertakings, associated companies
                                                                    026
                                                                    027
                                                                                     95,200                  -3,666        91,534         110,675
                                                                                                                                            2,700
                                                                                                                                                      97
          5.   Other long-term investments                          028              37,200                 -34,600        2,600
          6.   Long-term investments (provisional value)            029
          7.   Advance payments for long-term investments           030
           Identif.                                ASSETS                              Line                Current period                   Prior period
                                                                                                Gross            Adjustment        Net               Net
           a                                              b                             c         1                    2            3                 4
           C.             Current assets (Lines 32+39+48+58)                           031    3,866,025            -571,703    3,294,322        2,279,312
             C.I.         Inventories (Lines 33 to 38)                                 032      262,794              -10,000     252,794           239,158
              C.I.1.      Raw materials                                                033       238,291             -10,000      228,291          218,450
                   2.     Work in progress and semi-finished products                  034        21,079                           21,079           16,672
                   3.     Finished goods                                               035         2,888                            2,888            1,539
                   4.     Livestock                                                    036
                   5.     Goods for resale                                             037          536                              536              659
                   6.     Advance payments for inventories                             038                                                          1,838
             C.II.        Long-term receivables (Lines 40 to 47)                       039      267,529                          267,529          144,918
              C.II.1.     Trade receivables                                            040       40,000                           40,000           40,000
                    2.    Receivables - group undertakings                             041
                    3.    Receivables - associated companies                           042
                    4.    Receivables from shareholders/owners and alliance partners   043
                    5.    Long-term advances paid                                      044          400                              400              400
                    6.    Estimated receivables                                        045
                    7.    Other receivables                                            046       11,841                           11,841
                    8.    Deferred tax asset                                           047      215,288                          215,288          104,518
             C.III.       Short-term receivables (Lines 49 to 57)                      048    1,809,648            -561,703    1,247,945        1,088,468
              C.III.1.    Trade receivables                                            049    1,454,003            -550,571      903,432          781,145
                     2.   Receivables - group undertakings                             050      166,500                          166,500          289,500
                     3.   Receivables - associated companies                           051
                     4.   Receivables from shareholders/owners and alliance partners   052
                     5.   Social security and health insurance                         053
                     6.   Tax receivables                                              054
                     7.   Short-term advances paid                                     055       13,954                -500       13,454           11,843
                     8.   Estimated receivables                                        056                                                             94
                     9.   Other receivables                                            057      175,191             -10,632      164,559            5,886
             C.IV.        Short-term financial assets (Lines 59 to 62)                 058    1,526,054                        1,526,054          806,768
              C.IV.1.     Cash                                                         059        1,984                            1,984            1,924
                     2.   Bank accounts                                                060      717,720                          717,720          578,577
                     3.   Short-term securities and ownership interests                061      806,350                          806,350          226,267
                     4.   Short-term investments (provisional value)                   062
           D.I.           Deferrals (Lines 64+65+66)                                   063       14,325                           14,325            4,448
              D.I.1.      Prepaid expenses                                             064        4,341                            4,341            3,156
                   2.     Complex prepaid expenses                                     065                                                            246
      98           3.     Accrued revenues                                             066        9,984                            9,984            1,046



contents
                                                                                       Balance Sheet - Liabilities                                   contents

Identif.                               LIABILITIES                                             Line                  Current period   Prior period
 a                                                b                                              c                          5               6
               TOTAL LIABILITIES AND EQUITY (Lines 68+85+118)                                   067                   11,654,322      10,797,729
A.             Equity (Lines 69+73+78+81+84)                                                    068                    1,092,631          462,042
  A.I.         Registered capital (Lines 70+71+72)                                              069                          2,000           2,000
   A.I.1.      Registered capital                                                               070                          2,000           2,000
        2.     Own shares and ownership interests (-)                                           071
        3.     Changes in registered capital                                                    072
  A.II.        Capital contributions (Lines 74 to 77)                                           073                    -2,710,964      -2,534,942
   A.II.1.     Share premium                                                                    074
         2.    Other capital contributions                                                      075                    -1,995,451      -1,995,451
         3.    Revaluation of assets and liabilities                                            076                      -715,513        -539,491
         4.    Revaluation reserve on transformations                                           077
  A.III.       Reserve funds, undistributable fund and other funds from profit (Lines 79+80)    078                       483,377         482,288
   A.III.1.    Statutory reserve fund / Undistributable fund                                    079                       443,010         443,010
          2.   Statutory and other funds                                                        080                        40,367          39,278
  A.IV.        Retained earnings (Lines 82+83)                                                  081                     2,186,996       1,297,994
   A.IV.1.     Retained profits                                                                 082                     2,187,021       1,311,746
          2.   Accumulated losses                                                               083                           -25         -13,752
  A.V.         Profit (loss) for the current period (+/-)                                       084                     1,131,222       1,214,702
B.             Liabilities (Lines 86+91+102+114)                                                085                   10,554,979      10,330,379
  B.I.         Provisions (Lines 87 to 90)                                                      086                    6,438,370       6,160,122
   B.I.1.      Tax-deductible provisions                                                        087                     6,320,394       5,997,004
        2.     Provisions for pensions and other similar payables                               088
        3.     Income tax provision                                                             089                        93,175         115,131
        4.     Other provisions                                                                 090                        24,801          47,987
  B.II.        Long-term liabilities (Lines 92 to 101)                                          091
   B.II.1.     Trade payables                                                                   092
         2.    Liabilities - group undertakings                                                 093
         3.    Liabilities - associated companies                                               094
         4.    Liabilities to shareholders/owners and alliance partners                         095
         5.    Long-term advances received                                                      096
         6.    Debentures and bonds issued                                                      097                                                   99
         7.    Long-term bills of exchange payable                                              098
         8.    Estimated payables                                                               099
         9.    Other long-term payables                                                         100
         10.   Deferred tax liability                                                           101
            Identif.                                 LIABILITIES                     Line   Current period   Prior period
             a                                                b                        c           5               6
              B.III.       Short-term liabilities (Lines 103 to 113)                  102      816,609          820,257
               B.III.1.    Trade payables                                             103      500,395          528,262
                     2.    Liabilities - group undertakings                           104
                     3.    Liabilities - associated companies                         105
                     4.    Liabilities to sharehoders/owners and alliance partners    106
                     5.    Payables to employees                                      107       68,584          67,438
                     6.    Payables to social security and health insurance           108       38,305          39,546
                     7.    Tax liabilities and subsidies                              109       92,531          69,277
                     8.    Short-term advances received                               110       31,627          18,256
                     9.    Debentures and bonds issued                                111
                     10.   Estimated payables                                         112       49,130          53,582
                     11.   Other payables                                             113       36,037          43,896
              B.IV.        Bank loans and overdrafts (Lines 115+116+117)              114    3,300,000       3,350,000
               B.IV.1.     Long-term bank loans                                       115    3,000,000       2,675,000
                     2.    Short-term bank loans                                      116      300,000         675,000
                     3.    Short-term financial liabilities                           117
              C.I.         Accruals (Lines 119+120)                                   118        6,712           5,308
               C.I.1.      Accrued expenses                                           119        6,484           4,954
                    2.     Deferred revenues                                          120          228             354




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3.1.3 Profit and Loss Statement

Mostecká uhelná a.s.                                                            Profit and Loss Statement as at 31 December 2006 (in CZK '000)

Identif.                                  TEXT                                                                        Line No.                                 Accounting period
                                                                                                                                                     current                    prior
 a                                           b                                                                             c                            1                         2
     I.      Revenues from goods                                                                                          01                        177,953                    139,719
A.           Costs of goods sold                                                                                          02                        163,429                    130,020
     +       Gross profit (Lines 01-02)                                                                                   03                         14,524                      9,699
     II.     Revenues from production (Lines 05+06+07)                                                                    04                      6,666,504                  4,457,943
     II.1.   Revenues from own products and services                                                                      05                      6,576,858                  4,397,363
     II.2.   Change in inventory of own production                                                                        06                          5,756                     -3,150
     II.3.   Own work capitalised                                                                                         07                         83,890                     63,730
B.           Cost of sales (Lines 09+10)                                                                                  08                      2,580,687                  2,244,020
B.1.         Materials and consumables                                                                                    09                      1,017,393                        723
B.2.         Services                                                                                                     10                      1,563,294                  1,520,654
   +         Added value (Lines 03+04-08)                                                                                 11                     4,100,341                  2,223,622
C.           Personnel expenses (Lines 13 to 16)                                                                          12                      1,694,441                  1,313,295
C.1.         Wages and salaries                                                                                           13                      1,159,790                    924,299
C.2.         Remuneration of board members                                                                                14                         21,100                     15,170
C.3.         Social security and health insurance expenses                                                                15                        400,740                    304,446
C.4.         Social expenses                                                                                              16                        112,811                     69,380
D.           Taxes and charges                                                                                            17                        114,734                     78,733
E.           Depreciation of intangible and tangible fixed assets                                                         18                        384,779                    269,788
   III.      Proceeds from disposals of fixed assets and raw material (Lines 20+21)                                       19                        282,677                    194,489
   III.1     Proceeds from disposals of fixed assets                                                                      20                         75,883                     36,437
   III.2     Proceeds from disposals of raw material                                                                      21                        206,794                    158,052
F.           Net book value of fixed assets and raw materials sold (Lines 23+24)                                          22                        309,757                    187,835
F.1.         Net book value of fixed assets sold                                                                          23                        116,015                     27,016
F.2.         Raw materials sold                                                                                           24                        193,742                    160,819
G.           Change in provisions and adjustments relating to operating activity and change in complex prepaid expenses   25                        511,876                   -604,438
   IV.       Other operating revenues                                                                                     26                         51,934                     49,772
H.           Other operating expenses                                                                                     27                        144,291                    206,377   101
   V.        Transfer of operating revenues                                                                               28
I.           Transfer of operating expenses                                                                               29                        -40,000
   *         Operating profit (loss) (Lines 11-12-17-18+19-22-25+26-27+28-29)                                             30                     1,315,074                  1,016,293
            Identif.                              TEXT                                                            Line No.                Accounting period
                                                                                                                                current                    prior
             a                                             b                                                           c           1                         2
                 VI.      Proceeds from sale of securities and ownership interests                                    31       265,230                  2,060,352
            J.            Securities and ownership interests sold                                                     32       174,526                  2,060,573
                 VII.     Revenues from long-term investments (Lines 34+35+36)                                        33       323,400                    564,935
                 VII.1.   Revenues from investments in group undertakings and associated companies                    34       302,485                    538,496
                 VII.2.   Revenues from other long-term securities and ownership interests                            35        20,134                     25,892
                 VII.3.   Revenues from other long-term investments                                                   36           781                        547
                 VIII.    Revenues from short-term financial investments                                              37        12,451                      8,926
            K.            Financial assets expenses                                                                   38
               IX.        Revenues from revaluation of securities and derivatives                                     39         5,031
            L.            Expenses for revaluation of securities and derivatives                                      40         3,250
            M.            Change in provisions and adjustments relating to financial activity                         41       128,940                    -38,413
               X.         Interest income                                                                             42        12,393                     11,024
            N.            Interest expense                                                                            43        89,331                    100,415
               XI.        Other financial revenues                                                                    44         6,737                      1,116
            O.            Other financial expenses                                                                    45        60,984                     27,188
               XII.       Transfer of financial revenues                                                              46
            P.            Transfer of financial expenses                                                              47
               *          Profit (loss) from financial operations (Lines 31-32+33+37-38+39-40-41+42-43+44-45+46-47)   48       168,211                   496,590
               Q.         Income tax on ordinary profit (loss) (lines 50+51)                                          49        352,063                  298,181
            Q.1.            current                                                                                   50        382,502                  266,373
            Q.2.            deferred                                                                                  51        -30,439                   31,808
               **         Profit (loss) on ordinary activities after tax (lines 30+48-49)                             52     1,121,222                 1,214,702
               XIII.      Extraordinary revenues                                                                      53
            R.            Extraordinary expenses                                                                      54
            S.            Income tax on extraordinary profit (loss) (Lines 56+57)                                     55
            S.1.            current                                                                                   56
            S.2.            deferred                                                                                  57
               *          Extraordinary profit (loss) (Lines 53-54-55)                                                58
            T.            Transfer of profit or loss to partners                                                      59
               ***        Net profit (loss) for the accounting period (Lines 52+58-59)                                60      1,131,222                 1,214,702
               ****       Profit (loss) before tax (Lines 30+48+53-54)                                                61     1,483,285                 1,512,883



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3.1.4 Cash Flow Statement

Mostecká uhelná a.s. Cash Flow Statement as at 31 December 2006

                                                                                             Current period   Prior period
P. Cash and cash equivalents, beginning of year                                               806,768          2,788,918
Net operating cash flow
Z: Accounting profit (loss) from ordinary activities                                         1,483,285         1,512,883
A.1.Non-cash transactions                                                                      334,207          -738,861
 A.1.1. Depreciation of fixed assets                                                           384,779           269,788
 A.1.2. Change in:                                                                             640,570          -643,532
   A.1.2.1. goodwill and adjustments to acquired assets
   A.1.2.2. provisions and other adjustments                                                    640,570         -643,532
 A.1.3. Profit(-) Loss(+) on sale of fixed assets                                                40,132           -9,421
 A.1.4.Profit(-) Loss(+) on sale of securities                                                  -90,704              221
 A.1.5.Revenue from dividends and profit distribution                                          -322,619         -566,482
 A.1.6. Interest expense and income accounted for                                                63,706           82,011
 A.1.7. Other non-cash transactions                                                              52,109          128,554
A*. Net operating cash flow before tax, changes in working capital and extraordinary items   2,251,259          774,022
A.2. Change in working capital                                                                 -350,270          267,867
 A.2.1.Change in receivables from operating activities and deferrals                           -330,095          110,704
 A.2.2. Change in short-term liabilities from operating activities and accruals                  -3,531          152,676
 A.2.3. Change in inventories                                                                   -16,644            4,487
 A.2.4. Change in short-term financial assets other than cash and cash equivalents                    0
A.** Net operating cash flow before financial balances, tax and extraordinary items          1,900,989        1,041,889
A.3. Interest paid, excluding amounts capitalised                                               -88,044          -95,512
A.4. Interest received                                                                           24,706           18,404
A.5. Income tax paid on ordinary income and income tax relating to prior periods               -404,458         -375,068
A.6. Receipts and disbursement from extraordinary items
A.7. Dividends received and profit shares                                                      153,917          566,482
A.*** Net operating cash flow                                                                1,587,110        1,156,195


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            Investment activity
            B.1. Acquisition of fixed assets                                             -872,198     -480,079
              B.1.1. Acquisition of tangible fixed assets                                -420,872     -320,199
              B.1.2. Acquisition of intangible fixed assets                               -11,526       -8,149
              B.1.3. Acquisition of long-term investments                                -439,800     -151,731
            B.2. Proceeds from sales of fixed assets                                      250,485       37,447
              B.2.1.Proceeds from sales of tangible and intangible fixed assets            75,883       36,437
              B.2.2. Proceeds from sales of financial investments                         174,602        1,010
            B.3. Advances and loans to related parties                                    128,500       21,251
            B.*** Net cash flow from investment activity                                -439,213     -421,381
            Financial activity
            C.1. Change in long-term liabilities and bank loans                          -50,000    -2,708,564
            C.2. Increase and decrease in equity from cash transactions                 -324,611        -8,400
              C.2.1.Subscription of shares and investments
              C.2.2. Equity paid to shareholders
              C.2.3. Other cash contributions from partners and shareholders
              C.2.4. Loss settlement from partners
              C.2.5.Payments from funds created from net profit                           -11,171       -8,400
              C.2.6.Dividends paid and profit shares, including withholding tax paid     -313,440
            C.*** Net cash flow from financial activity                                 -374,611    -2,716,964
            F. Net increase or decrease in cash balance                                  719,286    -1,982,150
            R. S Cash and cash equivalents, end of period                              1,526,054       806,768




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3.2 Long-term Asset Replacement: MUS Capital                                                                                                                                             contents




    Expenditure, and Description of Maintenance in 2006
3.2.1 Expenditure on Long-term Replacement of Assets and Asset                                        Capital expenditure, including internal maintenance – year-on year comparison
      Development in 2006                                                                                                                (CZK ‘000)

Recapitulation of Expenditure                                                                                                                      2004           2005           2006
In 2006 CZK 741,681,000 was spent on long-term asset replacement and asset development            Land                                             5,576          4,037         81,625
(i.e., complete overhauls, renovation, technical improvement and capital expenditure in 2006).    Buildings and structures                        77,687         90,386         46,995
This amount breaks down as follows:                                                               Plant and machinery                            197,529        163,902        186,125
                                                                                                  Vehicles and delivery equipment                 22,202         16,428         36,098
 Amounts spent on capital expenditure and complete overhauls in 2004 – 2006 (CZK ‘000)            Tangible fixed assets in progress              114,124         73,944         69,827
                                                                                                  Advances paid                                    2,481          5,153
Expenditures on long-term asset replacement in 2006                               741,681         Intangible results of research and development   3,088          2,903          7,339
 Expenditure on asset replacement in 2006                                          289,444        Software                                         3,797          3,115            476
  - Of which, complete overhauls in 2006                                           252,994        Intangible fixed assets in progress              6,629          3,447          3,711
  - Technical improvements, renovation                                              36,450        Other movable assets                                 x              x            202
Internal maintenance combined with long-term repairs                                19,839       Total                                           433,113        363,315        432,398
Capital expenditure, including internal maintenance                               432,398
  - Land                                                                            81,625
  - Buildings and structures                                                        46,995                                   Complete overhauls (in CZK ‘000)
  - Plant and machinery                                                            186,125
  - Vehicles and delivery equipment                                                 36,098                                                         2004           2005           2006
  - Tangible fixed assets in progress                                               69,827       Complete overhauls, total (prime costs)         384,963        541,771        252,994
  - Advances paid                                                                        0
  - Intangible results of research and development                                   7,339
  - Software                                                                           476
  - Intangible fixed assets in progress                                              3,711
  - Other movable assets                                                               202


                                                                                                                                                                                         105
                                        Complete overhauls – the most important projects                                                 Examples of projects carried out in 2006:
                                  Most important projects related to long-term asset replacement
                                                                                                                                         LONG-TERM REPAIR OF THE DPD 223, 224, 225, 127, 254, and 52 CONVEYERS
              Project                                                             Actual expenditure in 2006 in CZK ‘000                  The complete refurbishment of the electrical system included replacement of all power and control
                                                                                   Operating        Capital       Total                   wiring, and replacement of the switchboard and all safety and control elements. Mechanical
                                                                                      costs      expenditure                              refurbishment included adjustment of the frames under the switchboard, repair of damaged and worn
              Complete overhaul of the K73 excavator                                    77,262                      30,000     107,262    parts, replacement of grates and replacement of rollers.
              Complete overhaul of the K84 excavator                                    20,000                                  20,000
              Complete overhaul of the Z59 back filler                                  21,694                                  21,694   LONG-TERM REPAIR OF THE ZD 1800 – Z59 STACKER
                                                                                                                                          Complete refurbishment of the distribution wiring for the travel drives and cable drum winding system
              Complete overhaul of the PD 127                                           12,528                        2,989     15,517
              belt conveyer                                                                                                               on the cable drum transporter + replacement of the W.L. unit by direct current converters. Refurbishment
                                                                                                                                          of the engines of the travelling mechanism. The refurbishment also included other modifications of all
              Complete overhaul of the PD 222 – 225                                     28,367                        5,754     34,121    the related fields and wiring circuits.
              belt conveyer
              Complete overhaul of the PS 52                                            13,256                        3,653     16,909   RENOVATION OF THE COAL FEEDING SYSTEM FOR THE LOW ASH COAL SORTING PLANT
              conveyer driving unit
                                                                                                                                          This was a challenging and extensive change of the equipment during the planned complete closedown.
              Complete overhaul of diesel locomotives                                   13,025                                  13,025
                                                                                                                                          It included installation of two new IFE Trisomat vibration screens, aimed at improving coal production.
              Complete overhaul of electrical locomotives                               20,101                        1,874     21,975
              Coal lifts at the ČSA site                                                                            32,238      32,238   COAL LIFTS AT THE ČSA SITE
              Motor locomotive                                                                                      18,887      18,887    Construction of new coal lifts continued in 2006 with focus on electrical and mechanical work. The work
              Refurbishment of the coal feeding                                                                                           included the construction and installation of the relocated DPD 662, DPD 882 and DPD 992 belt
                                                                                                                    13,826      13,826
              system in the low ash coal sorting plant                                                                                    conveyers, including the respective transfers.
            Note: Operating costs mean the initial costs and internal costs of the individual projects.The data was audited.
                                                                                                                                         LONG-TERM REPAIR OF 2 SETS OF THE E.A.R EQUIPMENT FOR EXCAVATOR BUCKET CHAIN
                                                                                                                                         REPLACEMENT
                                                                                                                                          Complete renovation of the electrical installations included the replacement of all power and control
                                                                                                                                          circuits, replacement of switchboards, drives and travel controls, and all the safety and control elements.
            3.2.2 Description of Maintenance in MUS                                                                                       The mechanical renovation included adjustment of the frames under the engines of the travelling
                                                                                                                                          mechanisms and the repair of damaged and worn parts.
            The Maintenance Officer’s control department is responsible for optimising all the maintenance work
            provided for MUS not only by the Maintenance Unit but also the subsidiaries. The objective is to ensure                      To reduce maintenance costs, MUS continued its effort to centralise mechanical and electrical maintenance
            that the maintenance resources are utilised as thoroughly and possible at the lowest possible cost. The                      in 2006. The mechanical maintenance teams in the surface mines and in the coal preparation plant were
            Maintenance Unit, whose key task is to provide high-quality services in the area of MUS asset                                merged into a single mechanical maintenance department. These measures made it possible to clear the
            maintenance and repairs, preforms most of the work. In addition to the routine operating maintenance, it                     respective premises and to improve the organisation and productivity of the Maintenance Unit.
            also carries out larger projects.


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4. ANNEXES


             109
           4.1 List of the Group Companies Reported
           Mostecká uhelná a.s.                                          Krušnohorské strojírny Komořany a.s. (KSK a.s.)             Hipodrom Most, a.s.
           Established on:         28 December 2004                      Established on:                11 November 1998 under the   Established on:                 22 February 1996
           Registered office at:   V. Řezáče 315, 434 67 Most                                           name VARIMATIK SLOKOV a.s.   Registered office at:           Velebudice 213, 434 01 Most
           Telephone:              476 201 111                                                          26 June 2002 the name was    Company Number (IČ):            64653269
           Company Number (IČ):    27261824                                                             changed to Krušnohorské      www.hipodrom-mo.cz
           www.mus.cz                                                                                   strojírny Komořany a.s.
           www.spoluziti.cz                                              Registered office at:          Dřínovská 3, 434 01 Most –   MUS – Uniservis, spol. s r.o.
                                                                                                        Komořany.                    Established on                  1 April 1996
           Czech Coal a.s.                                               Company Number (IČ):           25544187                     Registered office at:           Jaroslava Seiferta 2179, 434 01
           Established on:         8 May 1999                            www.varimatik.cz                                                                            Most
           Registered office at:   Jankovcova 1566/2b, 170 00            www.ksk-as.cz                                               Company Number (IČ):            25000683
                                   Prague 7                                                                                          www.musuni.cz
           Company Number (IČ):    25764284                              Důl Kohinoor a.s.
           www.czechcoal.cz                                              Established on:             1 January 2000
                                                                         Registered office at:       Dolní Jiřetín 5, 434 43 Horní
           E-Gate a.s.                                                                               Jiřetín
           Established on:         16 June 2003, as a special-purpose    Company Number (IČ):        25411616
                                   vehicle for the construction of the
                                   Administrative Centre in Evropská     HUMECO, a.s.
                                   Street in Praha 6                     Established on:             4 February 1991
           Registered office at:   Jankovcova 1566/2b, 170 00            Registered office at:       Most – Kopisty 1, 434 01 Most
                                   Prague 7                              Company Number (IČ):        14864657
           Company Number (IČ):    27067726                              www.humeco.cz
           www.e-gate.cz
                                                                         Infotea s.r.o.
           DTS Vrbenský, a.s.                                            Established on:             30 August 2005
           Established on:         1 July 1995                           Registered office at:       V. Řezáče 313, 434 67 Most
           Registered office at:   Souš 7, 434 03 Most                   Company Number (IČ):        26421348
           Company Number (IČ):    63145251                              Tax Reg. No. (DIČ):         CZ26421348
           www.mus-dts.cz                                                www.infotea.cz

          RENOGUM – NILOS a.s.                                           REKULTIVACE a.s.
          Established on:          1 June 1995                           Established on:             14 April 2000
          Registered office at:    Most-Kopisty 1, 434 01 Most           Registered office at:       V. Řezáče 315, 434 67 Most
      110 Company Number (IČ):     63144417                              Company Number (IČ):        25416456
          www.renogum-nilos.cz                                           www.rekultivace..mus.cz


contents
4.2 Overview of GRI Contents and Indicators                                                                                                                                                                                                                                 contents



Czech Coal Group Global Reporting Initiative Checklist
This Report of the Czech Coal Group has reported in accordance with the GRI (Sustainability Reporting Guidelines, 2002 and 2005 Mining and Metals Sector Supplement indicators) and our report takes into account the
assessed risks identified by the business. Our website (www.czechcoal.cz/en/ur/index.html and www.udrzitelnyrozvoj.cz, or enclosed CD-ROM) provides this GRI index with a full overview of our 'in accordance' reporting.


Summary table
                                                                                                                             fully reported                                                         partially reported*                                    not reported**
Vision and Strategy                                                                                                                 2/2
Profile                                                                                                                           22/22
Governance Structure and Management Systems                                                                                       17/20                                                                      3/20
GRI Content Index (GRI 2002)                                                                                                        1/1


Performance Indicators (GRI 2002)                                                                                                                   reported core indicators                                                        reported additional indicators
                                                                                                                      fully reported                  partially reported*                  not reported**
 EEC       Economic Performance                                                                                              8/10                                                                2/10
 EN        Environmental Performance                                                                                         8/16                               1/16                             7/16                                             3
           Social Performance
 LA             Labour Practices and Decent Work                                                                            10/11                                                                1/11                                             3
 HR             Human Rights                                                                                                  5/7                                                                 2/7                                             1
 SO             Society                                                                                                       2/3                                                                 1/3
 PR             Product Responsibility                                                                                        3/3
 MM        Mining and Metals Sector Suplement Performance Indicators                                                        10/13                               2/13                             1/13
* Partially Reported (only part of the indicator may be relevant, detailed data not available due to lack of data systems to generate the required information, or commercially confidential, or protected as proprietary information)
** Not reported (Not relevant, data not available due to lack of data systems to generate the required information, or commercially confidential, or protected as proprietary information)




A complete table with the specific reporting elements referred to in the GRI 2002 content index, including indication of the respective chapter, and with the GRI performance indicators,
including explanation of the omission of certain indicators, is contained only in the PDF version of the Report (on CD-ROM or the website at www.czechcoal.cz/en/ur/index.html).




                                                                                                                                                                                                                                                                            111
                      GRI Report “Content Index” (GRI 2002)                                      Chapters and Paragraphs in the Czech Coal Group Report                               Page
            1 Vision and Strategy
            1.1 Statement of the organisation’s vision and strategy regarding its
                                                                                         2.2.1 Vision and Strategy of the Group in the Context of Sustainable Development              39
                contribution to sustainable development.
                                                                                         1.1 Statement by the Chief Executive Officer of Mostecká uhelná a.s.
            1.2 Statement from the CEO (or equivalent senior manager) describing                                                                                                       14
                                                                                         2.1 Our Concept of Sustainable Development, Statement by the Chief Executive Officer of
                key elements of the report.                                                                                                                                            38
                                                                                             Czech Coal a.s.

            2 Profile
              Organisational Profile

            2.1 Name of reporting organisation.                                          1.2 Group Profile and its Results: Ownership Structure and Equity Interests                    15

                                                                                         1.3.1 Czech Coal a.s. Trading in Electricity                                                   19
            2.2 Major products and/or services, including brands if appropriate.         1.4.1 Czech Coal a.s. and its Brown Coal Trade                                                 22
                                                                                         1.9 Other Business Lines in the Group                                                          32

                                                                                         1.2 Group Profile and its Results: Ownership Structure and Equity Interests; Governing and
            2.3 Operational structure of the organisation.                                                                                                                            15, 17
                                                                                             Supervisory Bodies of Mostecká uhelná a.s. and Czech Coal a.s.

                                                                                         1.2 Group Profile and its Results: Core Business Lines of the Group; History of the Group    15, 17
                                                                                         Map No. 1 Companies and Major Facilities of the Group in the Ústí nad Labem Region            16
            2.4 Description of major divisions, operating companies, subsidiaries, and   1.3.1 Czech Coal a.s. Trading in Electricity                                                  19
                joint ventures.                                                          1.4.1 Czech Coal a.s. and its Brown Coal Trade                                                22
                                                                                         1.5 Brown Coal Production                                                                     24
                                                                                         1.9 Other Business Lines in the Group                                                         32

            2.5 Countries in which the organisation’s operations are located.            Czech Republic


            2.6 Nature of ownership; legal form.                                         1.2 Group Profile and its Results: Ownership Structure and Equity Interests                   15


                                                                                         1.3.2 Electricity Market in the Czech Republic                                                19
                                                                                         1.4.1 Czech Coal a.s. and its Brown Coal Trade                                                22
            2.7 Nature of markets served.                                                1.9 Other Business Lines in the Group                                                         32
                                                                                         2.2.3 Risks and Opportunities of the Group’s Sustainable Business Development                 42
                                                                                         2.3.3 Importance of Brown Coal Power Generation in the Czech Republic                         48
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                    GRI Report “Content Index” (GRI 2002)                                                   Chapters and Paragraphs in the Czech Coal Group Report                                        Page

2.8 Scale of the reporting organisation:


                                                                                                 Map No. 5 The Significance of the Group as the Employer in the Ústí nad Labem Region in 2006              70
     number of employees; number of employees by region                                                      (% of Group employees out of the employed population of the municipalities)
                                                                                                 2.7.2 Personnel Policy                                                                                    75

                                                                                                 1.3 Electricity Trading                                                                                   19
                                                                                                 1.4 Brown Coal Trading                                                                                    22
     products produced/services offered (quantity or volume)
                                                                                                 1.5 Brown Coal Production                                                                                 24
                                                                                                 1.9 Other Business Lines in the Group                                                                     32

     net sales; and total capitalisation broken down in terms of debt and equity, value added,   1.2 Group Profile and its Results: Consolidated Key Financials for the Group                              18
     total assets, sales/revenues; costs                                                         3.1 Financial Results of Mostecká uhelná a.s. in 2006                                                     95




                                                                                                 (The Group general approaches)
                                                                                                 2.2.3 Risks and Opportunities of the Group’s Sustainable Business Development                             42
2.9 List of stakeholders, key attributes of each, and relationship to the reporting              2.2.4 Relationships with Stakeholders                                                                     44
    organisation.                                                                                2.2.2 Environmental and Social Responsibility in the Group: Projects that Enhance Environmental and      40, 41
                                                                                                       Social Responsibility in MUS; Internal Codes and Guidelines of Ethics for the Areas of Economic,
                                                                                                       Environmental and Social Activities

                                                                                                 2.4.2 Financial Benefits from Brown Coal Extraction to Communities in the Most/Chomutov Area              52
                                                                                                 2.4.3 Management of Reserved Mineral Deposits and the Determination and Closure of Working Districts      53
                                                                                                 2.4.4 Method of Identification and Buyout of Land in Mining Districts                                     54
                                                                                                 2.5.3 Environmental Protection in MUS Brown Coal Production: Measuring Air Pollution and Noise Levels    59, 60
                                                                                                       Caused by Surface Mine Operation; Protection Zones
                                                                                                 2.6.1 Reclamation of the Areas Affected by Brown Coal Extraction: Reclamation Project Approval Process    63
                                                                                                 Maps No. 3 and 4 State of Reclamation in 2006 and the Location of Important Reclamation Sites            65, 66
     communities, regional governments, NGOs                                                     2.6.2 MUS Reclamation: MUS Reclamation Projects Currently under Way                                       68
                                                                                                 Map No. 5 The Significance of the Group as the Employer in the Ústí nad Labem Region in 2006              70
                                                                                                 (% of Group employees out of the employed population of the municipalities)
                                                                                                 2.8.1 Regional Policy of the Group                                                                        79
                                                                                                 2.8.2 MUS Regional Co-operation Programme                                                                 80
                                                                                                 2.8.5 Opinion of the Inhabitants of the Ústí nad Labem Region on the Activities of MUS                    81
                                                                                                 2.8.7 Results of the Programme of Monitoring Sustainable Development Factors 2003-2005                    83
                                                                                                 2.8.8 Project to Unlock Brown Coal Reserves for Future Generations                                        92




                                                                                                                                                                                                                   113
                      GRI Report “Content Index” (GRI 2002)                                        Chapters and Paragraphs in the Czech Coal Group Report                                      Page
                                                                                           1.3.1 Czech Coal a.s. Trading in Electricity                                                         19
                 customers and suppliers                                                   1.4.1 Czech Coal a.s. and its Brown Coal Trade                                                       22
                                                                                           1.9 Other Business Lines in the Group                                                                32

                                                                                           1.2 Group Profile and its Results: Ownership Structure and Equity Interests; History of the
                 shareholders and providers of capital                                                                                                                                         15, 17
                                                                                              Group

                                                                                           2.7.1 Shared Principles of Employee Policy                                                           71
                 workforce, trade unions                                                   2.7.2 Personnel Policy                                                                               75
                                                                                           2.7.3 Employee Participation in Company Management                                                   78
                                                                                           2.8.3 Support for Social Projects at the National Level                                              80
                 other stakeholders
                                                                                           2.8.4 Support to Universities                                                                        81


              Report Scope

            2.10 Contact person(s) for the report, including e-mail and web addresses.     4.4 Report Evaluation - Survey                                                                       128



            2.11 Reporting period for information provided.                                January - December 2006




            2.12 Date of most recent previous report (if any).                             2005, 2006 (See www.czechcoal.cz/en/ur/index.html)


            2.13 Boundaries of report (countries/regions, products/services, divisions/
                                                                                           2.2.5 Reporting on the Activities and Sustainable Development of the Group: Major Changes
                 facilities/joint ventures/subsidiaries) and any specific limitations on                                                                                                        46
                                                                                                 that Affect Data Continuity; Method of Data Processing and Standardisation
                 the scope.

                                                                                           1.2 Group Profile and its Results: Ownership Structure and Equity Interests; History of the Group   15, 17
            2.14 Significant changes in size, structure, ownership, or products/services
                                                                                           2.2.5 Reporting on the Activities and Sustainable Development of the Group: Major Changes            46
                 that have occurred since the previous report.
                                                                                                 that Affect Data Continuity

                                                                                           2.2.5 Reporting on the Activities and Sustainable Development of the Group                           45
            2.15 Basis for reporting on joint ventures, partially owned subsidiaries,
                 leader facilities, outsourced operations, and other situations that can
                                                                                           The Annual Report of Czech Coal a.s. and the Annual Reports of MUS and its subsidiaries
                 significantly affect comparability from period to period and/or
                                                                                           (available upon request at the address contained in Chapter 4.1 List of the Group Companies
                 between reporting organisations.
                                                                                           Reported, p. 111)
      114




contents
                                                                                                                                                                                                               contents
                    GRI Report “Content Index” (GRI 2002)                                               Chapters and Paragraphs in the Czech Coal Group Report                                        Page
2.16 Explanation of the nature and effect of any re-statements of information                1.2 Group Profile and its Results: Ownership Structure and Equity Interests; History of the Group
                                                                                                                                                                                                      15, 17
     provided in earlier reports, and the reasons for such re-statement (e.g., mergers/      2.2.5 Reporting on the Activities and Sustainable Development of the Group: Major Changes that Affect
                                                                                                                                                                                                       46
     acquisitions, change of base years/periods, nature of business, measurement methods).         Data Continuity


Report Profile

2.17 Decisions not to apply GRI principles or protocols in the preparation of the            2.2.5 Reporting on the Activities and Sustainable Development of the Group: Method of Data Processing
                                                                                                                                                                                                       46
     report.                                                                                       and Standardisation

                                                                                             2.2.5 Reporting on the Activities and Sustainable Development of the Group: Structure and Key Elements
2.18 Criteria/definitions used in any accounting for economic, environmental, and
                                                                                                   of the Report on Activities and Sustainable Development of the Group; Method of Data Processing    45,46
     social costs and benefits.
                                                                                                   and Standardisation

                                                                                             1.2 Group Profile and its Results: Consolidated Key Financials for the Group
2.19 Significant changes from previous years in the measurement methods applied                                                                                                                        18
                                                                                             2.2.5 Reporting on the Activities and Sustainable Development of the Group: Major Changes that Affect
     to key economic, environmental, and social information.                                                                                                                                           46
                                                                                                   Data Continuity

2.20 Policies and internal practices to enhance and provide assurance about the
     accuracy, completeness, and reliability that can be placed on the sustainability        2.2.5 Reporting on the Activities and Sustainable Development of the Group                                45
     report.


2.21 Policy and current practice with regard to providing independent assurance              2.2.5 Reporting on the Activities and Sustainable Development of the Group: Method of Data Processing
                                                                                                                                                                                                       46
     for the full report.                                                                    and Standardisation


2.22 Means by which report users can obtain additional information and reports
                                                                                             2.2.5 Reporting on the Activities and Sustainable Development of the Group: Method of Data Processing
     about economic, environmental, and social aspects of the organisation’s                                                                                                                           46
                                                                                             and Standardisation
     activities.


3 Governance Structure and Management Systems
  Structure and Governance


3.1 Governance structure of the organisation, including major committees under
    the board of directors that are responsible for setting strategy and for
    oversight of the organisation.                                                           1.2 Group Profile and its Results: Ownership Structure and Equity Interests; Governing and Supervisory
                                                                                                                                                                                                      15, 17
                                                                                                 Bodies of Mostecká uhelná a.s. and Czech Coal a.s.

3.2 Percentage of the board of directors that are independent, non-executive
    directors.




                                                                                                                                                                                                               115
                      GRI Report “Content Index” (GRI 2002)                                        Chapters and Paragraphs in the Czech Coal Group Report                                 Page

            3.3 Process for determining the expertise board members need to guide
                the strategic direction of the organisation, including issues related to
                environmental and social risks and opportunities.
                                                                                           2.2.2 Environmental and Social Responsibility in the Group: Implementation of Economic,
                                                                                                  Environmental and Social Projects
            3.4 Board-level processes for overseeing the organisation’s identification                                                                                                     40
                                                                                           Partially reported. Detailed data protected as proprietary information.
                and management of economic, environmental, and social risks and
                opportunities.

            3.5 Linkage between executive compensation and achievement of the
                organisation’s financial and non-financial goals.

            3.6 Organisational structure and key individuals responsible for oversight,    1.2 Group Profile and its Results: Governing and Supervisory Bodies of Mostecká uhelná a.s.     17
                implementation, and audit of economic, environmental, social, and              and Czech Coal a.s.
                related policies.                                                          4.4 Report Evaluation - Survey                                                                  128

                                                                                           2.2.2 Environmental and Social Responsibility in the Group:
                                                                                           Targets of the Group’s Environmental and Social Responsibility;
            3.7 Mission and values statements, internally developed codes of conduct                                                                                                       39
                                                                                           Facts about the Transformation of Mostecká uhelná a.s.;
                or principles, and polices relevant to economic, environmental, and                                                                                                        40
                                                                                           Projects that Enhance Environmental and Social Responsibility in MUS;
                social performance and the status of implementation.                                                                                                                       41
                                                                                           Internal Codes of Ethics, Principles, Methodologies and Concepts for Economic, Environmental
                                                                                           and Social Performance

            3.8 Mechanisms for shareholders to provide recommendations or                  2.2.2 Environmental and Social Responsibility in the Group: Implementation of Economic,
                                                                                                                                                                                           40
                direction to the board of directors.                                             Environmental and Social Projects

            Stakeholder Engagement
                                                                                           2.2.2 Environmental and Social Responsibility in the Group: Targets of the Group’s              39
                                                                                                 Environmental and Social Responsibility
                                                                                           2.2.3 Risks and Opportunities of the Group’ Sustainable Business Development                    42
                                                                                           2.2.4 Relationships with Stakeholders                                                           44
                                                                                           2.4 Economic Relationships with the Local Communities                                           52
            3.9 Basis for identification and selection of major stakeholders.                                                                                                              63
                                                                                           2.6.1 Reclamation of the Areas Affected by Brown Coal Extraction: Reclamation Project
                                                                                                 Approval Process
                                                                                           2.7.1 Shared Principles of Employee Policy                                                      71
                                                                                           2.8.1 Regional Policy of the Group                                                              79
                                                                                           2.8.8 Project to Unlock Brown Coal Reserves for Future Generations                              92

                                                                                           2.2.4 Relationships with Stakeholders                                                           44
            3.10 Approaches to stakeholder consultation reported in terms of
                                                                                           2.8.6 Programme of Monitoring Sustainable Development Factors                                   83
                 frequency of consultations by type and by stakeholder group.
                                                                                           2.8.8 Project to Unlock Brown Coal Reserves for Future Generations                              92
      116




contents
                                                                                                                                                                                                                             contents
                     GRI Report “Content Index” (GRI 2002)                                                    Chapters and Paragraphs in the Czech Coal Group Report                                                Page
                                                                                                   2.8.2 MUS Regional Co-operation Programme                                                                         80
                                                                                                   2.8.5 Opinion of the Inhabitants of the Ústí nad Labem Region on the Activities of MUS                            81
3.11 Type of information generated by stakeholder consultations.                                   2.8.7 Results of the Programme of Monitoring Sustainable Development Factors 2003-2005                            83
                                                                                                   2.8.8 Project to Unlock Brown Coal Reserves for Future Generations: Direct Negotiation between MUS                92
                                                                                                         and the Property Owners and Other Citizens of Horní Jiřetín and Černice

                                                                                                   2.2.3 Risks and Opportunities of the Group’s Sustainable Business Development                                     42
                                                                                                   2.3.2 Pollutant Emissions from Coal Combustion in the Czech Republic                                              47
                                                                                                   2.2.2 Environmental and Social Responsibility in the Group: Projects that Enhance Environmental and Social        40
                                                                                                         Responsibility in MUS
                                                                                                   2.8.2 MUS Regional Co-operation Programme                                                                         80
3.12 Use of information resulting from stakeholder engagements.
                                                                                                   2.8.4 Support to Universities                                                                                     81
                                                                                                   2.8.7 Results of the Programme of Monitoring Sustainable Development Factors 2003-2005: Seminar on the Co-        86
                                                                                                         existence of Industry and Communities; Reporting of the Benefits and Impacts on Neighbouring Communities
                                                                                                   2.8.8 Project to Unlock Brown Coal Reserves for Future Generations: Offer of Settlement for the Citizens of       92
                                                                                                         Horní Jiřetín in the Case of Resettlement

Overarching Policies and Management Systems
                                                                                                   2.2.2 Environmental and Social Responsibility in the Group: Projects that Enhance Environmental and Social 40, 41
                                                                                                         Responsibility in MUS; Internal Codes of Ethics, Principles, Methodologies and Concepts for Economic,
3.13 Explanation of whether and how the precautionary approach or principle is
                                                                                                         Environmental and Social Performance;
     addressed by the organisation.
                                                                                                   2.7.1 Shared Principles of Employee Policy: Operation of the Most Main Mine Rescue Station (HBZS); Fire     73
                                                                                                         Brigade of Mostecká uhelná a.s.

3.14 Externally developed, voluntary economic, environmental, and social charters, sets of         1.7 Standards and Certificates in the Group’s Companies                                                           29
     principles, or other initiatives to which the organisation subscribes or which it endorses.   Sustainability Reporting Guidelines GRI, 2002 and GRI Mining and Metals Sector Supplement, 2005
3.15 Principal memberships in industry and business associations, and/or                           2.2.4 Relationships with Stakeholders: The Group’s Membership of Local and International Organisations
                                                                                                                                                                                                                     44
     national/international advocacy organisations.                                                      and Associations
                                                                                                   1.4.1 Czech Coal a.s. and its Brown Coal Trade: Average Quality Parameters of the Most Brown Coal;                22
                                                                                                         Customer Health and Safety, Information on the Environmental Impacts of Products
                                                                                                   1.5.2 Clean-up and Reclamation of the Land Affected by MUS Mining                                                 26
                                                                                                   1.5.3 Monitoring Brown Coal Quality. Automatic Ash Meters and Sulphur Meters; Automatic Samplers                 26, 27
                                                                                                   1.7 Standards and Certificates in the Group’s Companies                                                           29
                                                                                                   1.8 Applied Research and Services                                                                                 30
                                                                                                   1.9 Other Business Lines in the Group: Rubber-related Services                                                    33
3.16 Policies and/or systems for managing upstream and downstream impacts.
                                                                                                   2.2.2 Environmental and Social Responsibility in the Group: Projects that Enhance Environmental and              40, 41
                                                                                                         Social Responsibility in MUS; Internal Codes of Ethics, Principles, Methodologies and Concepts for
                                                                                                         Economic, Environmental and Social performance
                                                                                                   2.5.3 Environmental Protection in MUS Brown Coal Production: Use of Energy By-products from the Coal             59, 60
                                                                                                         Combustion Process; System of Monitoring the Side Slopes of the ČSA Surface Mine; Protection Zones
                                                                                                   2.6.2 MUS Reclamation                                                                                             65
                                                                                                   2.8.4 Support to Universities                                                                                     81



                                                                                                                                                                                                                             117
                       GRI Report “Content Index” (GRI 2002)                                    Chapters and Paragraphs in the Czech Coal Group Report                                                  Page
                                                                                      1.5.3 Monitoring Brown Coal Quality. Automatic Ash Meters and Sulphur Meters; Automatic Samplers 26, 27
                                                                                      2.2.2 Environmental and Social Responsibility in the Group: Projects that Enhance                 40
                                                                                            Environmental and Social Responsibility in MUS
            3.17 Reporting organisation’s approach to managing indirect economic,     2.4.2 Financial Benefits from Brown Coal Extraction to Communities in the Most/Chomutov Area      52
                 environmental, and social impacts resulting from its activities.     2.5.3 Environmental Protection in MUS Brown Coal Production: Use of Energy By-products            59
                                                                                            from the Coal Combustion Process
                                                                                      2.6.2 MUS Reclamation: Energy Crop Growing in Reclaimed Areas                                     69
                                                                                      2.8.2 MUS Regional Co-operation Programme                                                         80
                                                                                      1.2 Group Profile and its Results: Ownership Structure and Equity Interests;                                       15
                                                                                      1.3.3 Electricity Trading – Offer to Customers (change)                                                            21
            3.18 Major decisions during the reporting period regarding the location
                                                                                      1.9 Other Business Lines in the Group: Deep Brown Coal Mining (closedown)                                          32
                 of, or changes in, operations.
                                                                                      2.8.8 Project to Unlock Brown Coal Reserves for Future Generations: Direct Negotiation                             92
                                                                                            between MUS and the Property Owners and Other Citizens of Horní Jiřetín and Černice
            3.19 Programmes and procedures pertaining to economic, environmental,
                 and social performance. Include discussion of:
                                                                                      2.2.1 Vision and Strategy of the Group in the Context of Sustainable Development                                    39
                 priority and target setting;                                         2.2.2 Environmental and Social Responsibility in the Group: Targets of the Group’s                                  39
                                                                                            Environmental and Social Responsibility
                                                                                      1.3.1 Czech Coal a.s. Trading in Electricity                                                                       19
                                                                                      1.4.1 Czech Coal a.s. and its Brown Coal Trade                                                                     22
                                                                                      2.2.2 Environmental and Social Responsibility in the Group: Projects that Enhance                                  40
                 major programmes to improve performance;
                                                                                            Environmental and Social Responsibility in MUS
                                                                                      3.2 Investments and Expenditure on Long-term Asset Replacement and Description of                                  105
                                                                                          Maintenance in MUS in 2006

                                                                                      2.7.2 Personnel Policy: Overview of Employee Education in 2006; MUS Programme for
                 internal communication and training;                                       Graduates; Information System of the MUS Employee Centre; Employee Education;                               76, 77
                                                                                            Labour Psychology and Organisation
                                                                                      2.2.2 Environmental and Social Responsibility in the Group: Targets of the Group’s
                                                                                            Environmental and Social Responsibility: Facts about the Transformation of Mostecká                         39, 40
                 performance monitoring;
                                                                                            uhelná a.s.; Projects that Enhance Environmental and Social Responsibility in MUS;
                                                                                            Implementation of Economic, Environmental and Social Projects
                                                                                      The Annual Report of Czech Coal a.s. and the Annual Reports of MUS and its Subsidiaries (available
                                                                                      upon request at the address contained in Chapter 4.1 List of the Group Companies Reported, p. 111)
                 internal and external auditing;                                      2.2.5 Reporting on the Activities and Sustainable Development of the Group: Method of Data                         46
                                                                                            Processing and Standardisation
                                                                                      4.3 Auditor’s Opinion in Accordance with the GRI 2002                                                              127
                 senior management review                                             1.2 Group Profile and its Results: Governing and Supervisory Bodies of Mostecká uhelná a.s. and Czech Coal a.s.    17
            3.20 Status of certification pertaining to economic, environmental, and
                                                                                      1.7 Standards and Certificates in the Group’s Companies                                                            29
      118        social management systems.




contents
                                                                                                                                                                                                                                            contents
GRI Indicators (GRI 2002)
(In italics: additional GRI Indicators)
                          Economic Factors of Sustainable Development                                Economic Performance Indicators                       Chapters of the Report of the Czech Coal Group                           Pages

                                                                                                                                                          1.2 Group Profile and its Results: Consolidated Key Financials for the     18
                                         EC1     Net sales                                   Net sales. As listed in the profile section under 2.8.           Group
                                                                                                                                                          3.1 Financial Results of Mostecká uhelná a.s. in 2006                      96
                          Customers
                                                                                                                                                          1.4.1 Czech Coal a.s. and its Brown Coal Trade; Results of Brown Coal      22
                                         EC2     Geographic breakdown of markets             Geographic breakdown of markets                                    Trade
                                                                                                                                                          1.9 Other Business Lines in the Group: Mechanical Engineering              32

                                                                                                                                                          1.2 Group Profile and its Results: Consolidated Key Financials for the     18
                                         EC3     Cost of materials purchased                 Cost of all goods, materials, and services purchased             Group
                                                                                                                                                          3.1 Financial Results of Mostecká uhelná a.s. in 2006                      96
                          Suppliers
                                                                                             Percent of contracts that were paid in accordance with       1.2 Group Profile and its Results: Consolidated Key Financials for the
                                         EC4     Percent of contracts paid by agreed terms                                                                                                                                           18
                                                                                             agreed terms, excluding agreed penalty arrangements              Group
Direct Economic Impact




                                                                                             Total payroll and benefits (including wages, pension,        1.2 Group Profile and its Results: Consolidated Key Financials for the     18
                          Employees      EC5     Total payroll and benefits                  other benefits, and redundancy payments) broken down             Group
                                                                                             by country or region                                         3.1 Financial Results of Mostecká uhelná a.s. in 2006                      96

                                                                                             Distributions to providers of capital broken down by
                                                                                             interest on debt and borrowings, and dividends on all
                                         EC6     Distributions to providers of capital                                                                    Data protected as proprietary information
                         Providers of                                                        classes of shares, with any arrears of preferred dividends
                         Capital                                                             to be disclosed

                                         EC7     Changes in retained earnings                Increase/decrease in retained earnings at end of period      Data protected as proprietary information


                                                                                                                                                          1.2 Group Profile and its Results: Consolidated Key Financials for the     18
                                                                                             Total sum of taxes of all types paid broken down by
                                         EC8     Total sum of taxes                                                                                           Group
                                                                                             country
                                                                                                                                                          3.1 Financial Results of Mostecká uhelná a.s. in 2006                      96


                                                                                                                                                          1.2 Group Profile and its Results: Consolidated Key Financials for the     18
                                                                                                                                                              Group
                                                                                             Subsidies received broken down by country or region. This
                                                                                                                                                          other (environmental) subsidies:
                         Public Sector                                                       refers to grants, tax relief, and other types of financial
                                         EC9     Subsidies received                                                                                       2.5.2 Information on the Environmental Impact of the Group’s Production    56
                                                                                             benefits that do not represent a transaction of goods and
                                                                                                                                                                 Companies in 2006: The summarised environmental indicators for
                                                                                             services
                                                                                                                                                                 the Group’s production companies, 2006
                                                                                                                                                          2.6.2 MUS Reclamation: Reclamation Costs 1994 - 2006                       67

                                                                                             Donations to community, civil society, and other groups
                                         EC10    Donations to community                      broken down in terms of cash and in-kind donations per       2.8.1 Regional Policy of the Group                                         79
                                                                                             type of group




                                                                                                                                                                                                                                            119
                           Enviromental Factors of Sustainable Development                Environmental Performance Indicators                              Chapters of the Report of the Czech Coal Group                                  Pages

                                                                                                                                                         Data not available due to lack of data systems to generate the required
                                         EN1     Total material use                       Total materials use other than water, by type
                                                                                                                                                         information.The Group will look for ways of complex monitoring of this indicator
                                                                                                                                                         2.5.2 Information on the Environmental Impact of the Group’s
                                                                                          Percentage of materials used that are wastes
                           Materials                                                                                                                            Production Companies in 2006: The summarised environmental
                                                                                          (processed or unprocessed) from sources external to
                                                                                                                                                                indicators for the Group’s production companies, 2006
                                         EN2     Percentage of waste materials used       the reporting organisation. Refers to both                                                                                                         57
                                                                                                                                                         Partially reported - only RENOGUM-NILOS a.s.. Detailed data on the
                                                                                          post-consumer recycled material and waste from
                                                                                                                                                         other companies not available due to lack of data systems to generate
                                                                                          industrial sources
                                                                                                                                                         the required information
                                                                                          Direct energy use by primary source. Report on all
                                                                                                                                                         2.5.2 Information on the Environmental Impact of the Group’s
                                                                                          energy sources used by the reporting organisation
                                                                                                                                                               Production Companies in 2006: The summarised
                                         EN3     Direct energy use by primary source      for its own operations as well as for the production                                                                                               57
                                                                                                                                                               environmental indicators for the Group’s production
                                                                                          and delivery of energy products (e.g., electricity or
                                                                                                                                                               companies, 2006
                                                                                          heat) to other organisations
                            Energy
                                                                                          Indirect energy use. Report on all energy use to               Data not available due to lack of data systems to generate the
                                         EN4     Indirect energy use                      produce and deliver energy products purchased by               required information. The Group will look for ways how to check its
                                                                                          the reporting organisation (e.g., electricity or heat)         suppliers' data on energy use

                                                 Initiatives to use renewable energy      Initiatives to use renewable energy sources and to
            Environment




                                         EN17                                                                                                            2.6.2 MUS Reclamation: Energy Crop Growing in Reclaimed Areas                        69
                                                 sources                                  increase energy efficiency

                                                                                                                                                         2.5.2 Information on the Environmental Impact of the Group’s
                            Water        EN5     Total water use                          Total water use                                                      Production Companies in 2006: The summarised environmental                    57
                                                                                                                                                               indicators for the Group’s production companies, 2006
                                                                                          Total amoutnt of land owned, leased, or managed for            2.5.2 Information on the Environmental Impact of the Group’s                        57
                                                                                          production activities or extrative use
                                                                                                                                                                Production Companies in 2006: The summarised
                                                                                          Commentary for the Metal and Mining Sector: Mining                    environmental indicators for the Group’s production
                                                                                          companies should report the following:                                companies, 2006
                                                                                          1. Total land disturbed and not yet rehabilitated (opening
                                                 Total amount of land owned, leased, or                                                                                                                                                      26
                                         EN23                                             balance);                                                      1.5.2 Clean-up and Reclamation of the Land Affected by MUS
                                                 managed for production                   2. Total amount of land newly disturbed within the reporting         Mining
                                                                                          period;                                                        2.6.2 MUS Reclamation: Reclamation Projects under Way and                          67, 68
                                                                                          3. Total amount of land newly rehabilitated within the
                                                                                          reporting period to the agreed upon end use; and
                                                                                                                                                               Completed by MUS in 2006; MUS Reclaimed Areas
                                                                                          4. Total land disturbed and not yet rehabilitated (closing
                          Biodiversity
                                                                                          balance).

                                                                                                                                                         The Group has no operations at sites with habitats that are rich in
                                                                                          Location and size of land owned, leased, or
                                         EN6     Biodiversity rich habitats                                                                              terms of biodiversity (protected areas). This indicator is determined
                                                                                          managed in biodiversity-rich habitats
                                                                                                                                                         not relevant to the reporting organisation
                                                                                          Description of the major impacts on biodiversity
                                                Description of the major impacts on                                                                      2.6.1 Reclamation of the Areas Affected by Brown Coal Extraction                    62
                                         EN7                                              associated with activities and/or products and services in
                                                            biodiversity                                                                                 2.6.2 MUS Reclamation                                                               65
                                                                                          terestrial, fresh-water, and marine environments
      120                                                                                 Objectives, programmes, and targets for protecting and
                                         EN27            Restoring ecosystems             restoring native ecosystems and species in degraded areas
                                                                                                                                                         2.6 Reclamation – Landscape and Environment Regeneration                            62



contents
                                                                                                                                                                                                                                                      contents
                   Economic Factors of Sustainable Development                                        Social Performance Indicators                          Chapters of the Report of the Czech Coal Group                                 Pages

                                                                                            Greenhouse gas emissions. (CO2, CH4, N2O, HFCs, PFCs,
                                                                                            SF6). Report separate subtotals for each gas in tonnes and     Obligations under Section 35 of the Czech Clean Air Act (Act No.
                                                                                            in tonnes of CO2 equivalent for the following:                 86/2002) do not apply to the Group. The Group does not operate any
                                      EN8    Greenhouse gas emissions                        - direct emissions from sources owned or controlled by        particularly large or large stationary sources of air pollution. The sources
                                                                                               the reporting entity                                        are too small to be accounted for as greenhouse gas generating sources.
                                                                                             - indirect emissions from imported electricity heat or        Data not available
                                                                                               steam
                                                                                                                                                           Data not available. Obligations under Section 29 of the Czech Clean Air
                                             Use and emission of ozone-depleting                                                                           Act (Act No. 86/2002) do not apply to the Group. The handling of such
                                      EN9                                                   Use and emission of ozone-depleting substances
                                             substances                                                                                                    substances is outside the Group’s lines of business


                                                                                                                                                           2.5.2 Information on the Environmental Impact of the Group’s Production            57
                                                                                                                                                                 Companies in 2006: The summarised environmental indicators for the
                                                                                                                                                                 Group’s production companies, 2006
                                             NOx, SOx, and other significant air emission
                                      EN10                                                  NOx, SOx, and other significant air emission by type           2.5.3 Environmental Protection in MUS Brown Coal Production: Total Emission      58, 59,
              Emissions, Effluents,          by type
                                                                                                                                                                 and Waste Production in MUS Coal Extraction and Preparation; Measuring       60
                  and Waste
                                                                                                                                                                 Air Pollution and Noise Levels Caused by Surface Mine Operation; Air
                                                                                                                                                                 Quality Protection in Brown Coal Sorting and Preparation

                                                                                                                                                           2.5.2 Information on the Environmental Impact of the Group’s Production            57
Environment




                                                                                                                                                                 Companies in 2006: The summarised environmental indicators for
                                             Total amount of waste by type and
                                      EN11                                                  Total amount of waste by type and destination                        the Group’s production companies, 2006
                                             destination
                                                                                                                                                           2.5.3 Environmental Protection in MUS Brown Coal Production. Use of Energy By-   59, 61
                                                                                                                                                                 products from the Coal Combustion Process;Waste Management

                                                                                                                                                           2.5.2 Information on the Environmental Impact of the Group’s Production
                                      EN12   Significant discharges to water                Significant discharges to water by type                              Companies in 2006: The summarised environmental indicators for               57
                                                                                                                                                                 the Group’s production companies, 2006
                                                                                            Significant spills of chemicals, oils, and fuels in terms of
                                                                                            total number and total volume. Significance is defined in
                                      EN13   Significant spills                                                                                            No accidents occurred in 2006
                                                                                            terms of both the size of the spill and impact on the
                                                                                            surrounding environment

                                                                                            Significant environmental impacts of principal products        2.3.2 Pollutant Emissions from Coal Combustion in the Czech Republic
                                      EN14   Environmental impact of products                                                                                                                                                                 47
                                                                                            and services. Describe and quantify where relevant

                 Products and                                                               Percentage of the weight of products sold that is
                   Services                                                                                                                                1.9 Other Business Lines in the Group: Rubber-related Services                    32
                                                                                            reclaimable at the end of the products’ useful life and
                                                                                                                                                           2.5.2 Information on the Environmental Impact of the Group’s Production           57
                                      EN15   Reclaimable products                           percentage that is actually reclaimed. “Reclaimable”
                                                                                                                                                                 Companies in 2006: The summarised environmental indicators for
                                                                                            refers to either the recycling or reuse of the product
                                                                                                                                                                 the Group’s production companies, 2006
                                                                                            materials or components

                                                                                            Incidents of and fines for noncompliance with all
                                                                                            applicable international declarations/conventions/treaties,    No fines for non-compliance with environmental regulations were
                  Compliance          EN16   Incidents and fines
                                                                                            and national, sub-national, regional, and local regulations    imposed on any of the Group companies in 2006
                                                                                            associated with environmental issues




                                                                                                                                                                                                                                                      121
                                                Social Factors of Sustainable Development                            Social Performance Indicators                                   Chapters of the Report of the Czech Coal Group                                  Pages

                                                                                                              Breakdown of workforce, where possible, by
                                                                                                                                                                                  Map No. 5 The Significance of the Group as the Employer in the                      70
                                                                                                              region/country, status (employee/non-employee),
                                                                                                                                                                                  Ústí nad Labem Region in 2006 (% of Group employees out of the
                                                                  LA1    Workforce breakdown in the region    employment type (ful/part time), and by employment
                                                                                                                                                                                  employed population of the municipalities)
                                                                                                              contract (indefinite or permanent/fixed term or
                                                                                                                                                                                  2.7.2 Personnel Policy: Principles of Employment Management                         75
                                                                                                              temporary)

                                                 Employment                                                   Employee benefits beyond those legally mandated
                                                                                                                                                                                  2.7.1 Shared Principles of Employee Policy: Overview of Social and
                                                                  LA12   Employee benefits                    (e.g., contributions to health care, disability,                                                                                                       72, 74
                                                                                                                                                                                        Health Benefits in 2006; Social and Health Benefits
                                                                                                              maternity, education, and retirement)


                                                                                                              Net employment creation and average turnover
                                                                  LA2    Employment creation                                                                                      2.7.2 Personnel Policy: New Job Creation                                           75, 76
                                                                                                              segmented by region/country

                                                                                                              Percentage of employees represented by independent                  2.7.1 Shared Principles of Employee Policy: Overview of Social and                  72
                                                                                                              trade union organisations or other bona fide                              Health Benefits in 2006 (Collective Agreements)
                                                                                                              employee representatives broken down                                2.7.3 Employee Participation in Company Management                                  78
                                                                  LA3    Trade union representation
                                                                                                              geographically OR percentage of employees covered                   Collective Agreements cover all employees in the companies where
            Labour Practise and Decent Work




                                                                                                              by collective bargaining agreements broken down by                  such agreements exist, i.e. 96% of the Group’s employees
                                                                                                              region/country
                                                                                                              Policy and procedures involving information,                        2.2.2 Environmental and Social Responsibility in the Group: Internal                41
                                              Labour/Management                                               consultation, and negotiation with employees over                         Codes of Ethics, Principles, Methodologies and Concepts for
                                                                  LA4    Consultation policy and procedures
                                                   Relations                                                  changes in the reporting organisation’s operations                        Economic, Environmental and Social Performance
                                                                                                              (e.g., restructuring)                                               2.7.3 Employee Participation in Company Management                                  78

                                                                                                                                                                                  1.2 Group Profile and its Results: Governing and Supervisory                        17
                                                                                                                                                                                      Bodies of Mostecká uhelná a.s. and Czech Coal a.s.
                                                                                                              Provision for formal worker representation in
                                                                                                                                                                                  2.2.2 Environmental and Social Responsibility in the Group: Internal                41
                                                                  LA13   Worker representation                decision-making or management, including corporate
                                                                                                                                                                                        Codes of Ethics, Principles, Methodologies and Concepts for
                                                                                                              governance
                                                                                                                                                                                        Economic, Environmental and Social performance
                                                                                                                                                                                  2.7.1 Shared Principles of Employee Policy: Safety at Work                          78
                                                                                                              Practices on recording and notification of occupational accidents
                                                                         Labour protection, occupation
                                                                  LA5                                         and diseases, and how they relate to ILO Code of Practice on        2.7.1 Shared Principles of Employee Policy: Safety at Work                         71, 73
                                                                         accidents/procedures
                                                                                                              Recording and Notification of occupational Accidents and Diseases

                                                                                                              Description of formal joint health and safety                       2.2.2 Environmental and Social Responsibility in the Group: Internal                41
                                                                                                              committees comprising management and worker                               Codes of Ethics, Principles, Methodologies and Concepts for
                                                                  LA6    Joint Health & Safety committees
                                                                                                              representatives and proportion of workforce covered                       Economic, Environmental and Social Performance
                                                                                                              by any such committees                                              2.7.1 Shared Principles of Employee Policy: Safety at Work                          73
                                                Health and
                                                Safety
                                                                                                              Standard injury, lost days, and absentee rates and
                                                                  LA7    Injury lost days                                                                                         2.7.1 Shared Principles of Employee Policy                                          71
                                                                                                              number of work-related fatalities

                                                                                                                                                                                  Considering the situation in respect of HIV/AIDS in the Czech Republic, we do
                                                                                                                                                                                  not regard this indicator as relevant for the activities of industrial companies
                                                                                                              Description of policies or programes (for the                       in the Czech Republic. HIV/AIDS policy/programs are fully covered by health
                                                                  LA8    HIV/AIDS policy/programes
      122                                                                                                     workplace and beyond) on HIV/AIDS                                   authorities, educational system and non-governmental organizations in the
                                                                                                                                                                                  Czech Republic; both prevention and care are intensively dealt with. The
                                                                                                                                                                                  Group has no policies and programmes in this respect


contents
                                                                                                                                                                                                                                                                    contents
                           Economic Factors of Sustainable Development                                   Social Performance Indicators                                       Chapters of the Report of the Czech Coal Group                                Pages


                                                                                            Average hours of training per year per employee by
                                              LA9    Training and education                                                                                                2.7.2 Personnel Policy: Employee Education                                       77
Labour Practise and

                                                                                            category of employee
                          Training and
                           Education
   Decent Work


                                                                                            Specific policies and programmes for skills management                         2.7.2 Personnel Policy: Overview of Employee Education in 2006; MUS Programme
                                              LA17   Lifelong learning                                                                                                                                                                                     76, 77
                                                                                            or for lifelong learning                                                             for Graduates ; Employee Education; Labour Psychology and Organisation

                                                                                            Description of equal opportunity policies or programmes,                       2.2.2 Environmental and Social Responsibility in the Group: Internal
                                              LA10   Equal opportunities                    as well as monitoring systems to ensure compliance and                               Codes of Ethics, Principles, Methodologies and Concepts for                41
                          Diversity and                                                     results of monitoring                                                                Economic, Environmental and Social Performance
                          Opportunity
                                                                                            Composition of senior management and corporate governance
                                                     Senior management and corporate                                                                                       1.2 Group Profile and its Results: Governing and Supervisory Bodies of
                                              LA11                                          bodies (including the board of directors), including female/male                                                                                                17
                                                     governance bodies                                                                                                         Mostecká uhelná a.s. and Czech Coal a.s.
                                                                                            ratio and other indicators of diversity as culturally appropriate
                                                                                            Description of policies, guidelines, corporate structure, and
                                                                                            procedure to deal with all aspects of human rights relevant                    Human rights are covered by legislation and other legal regulations in
                                                                                            to operations, including monitoring mechanisms and                             the Czech Republic, including the Universal Declaration of Human Rights
                                              HR1    Human rights policies
                                                                                            results. State how policies relate to existing international                   and ILO conventions on human rights. As such, these laws and
                                                                                            standards such as the Universal Declaration and the                            regulations are binding on the Group companies
                                                                                            Fundamental Human Rights Conventions of the ILO
                          Strategy and
                                                                                            Evidence of consideration of human rights impact as part
                          Management
                                              HR2    Human rights and investment            of investment and procurement decisions, including                             2.2.2 Environmental and Social Responsibility in the Group: Internal             41
                                                                                            selection of supliers/contractors                                                    Codes of Ethics, Principles, Methodologies and Concepts for
                                                                                            Description of policies and procedures to evaluate and                               Economic, Environmental and Social Performance
                                                                                            address human rights performance within the supply                             2.7.1 Shared Principles of Employee Policy: Safety at Work                       73
                                              HR3    Human rights and suppliers
                                                                                            chain and contractors, including monitoring system and
Human Rights




                                                                                            results of monitoring
                                                                                                                                                                           2.2.2 Environmental and Social Responsibility in the Group: Internal             41
                                                                                            Description of global policy and procedures/programmes
                                                                                                                                                                                 Codes of Ethics, Principles, Methodologies and Concepts for
                       Non-discrimination     HR4    Non-discrimination policy              preventing all forms of discrimination in operations,
                                                                                                                                                                                 Economic, Environmental and Social Performance
                                                                                            including monitoring systems and results of monitoring
                                                                                                                                                                           2.7.3 Employee Participation in Company Management                               78
                                                                                            Description of freedom of association policy and extent to
                           Freedom of
                                                                                            which this policy is universally applied independent of                        2.7.3 Employee Participation in Company Management: Trade Union
                        Association and       HR5    Freedom of Association policy                                                                                                                                                                          78
                                                                                            local laws, as well as description of procedures/                                    Membership
                      Collective Bargaining
                                                                                            programmes to address this issue
                                                                                            Description of policy excluding child labour as defined,
                                                                                                                                                                           These policies are incorporated in legislation and other legal regulations
                                                                                            stated and applied, as well as description of
                          Child Labour        HR6    Policy excluding child labour                                                                                         in the Czech Republic and as such they are binding on the Group
                                                                                            procedures/programmes to address this issue, including
                                                                                                                                                                           Companies
                                                                                            monitoring systems and results of monitoring
                                                                                            Description of policy to prevent forced and compulsory labour and extent
                                                                                                                                                                           These policies are incorporated in legislation and other legal regulations
                         Forced and                                                         to which this policy is visibly stated and applied as well as description of
                                              HR7    Policy preventing forced labour                                                                                       in the Czech Republic and as such they are binding on the Group
                      Compulsory Labour                                                     procedures/ programmes to address this issue,including monitoring
                                                                                                                                                                           Companies
                                                                                            systems and results of monitoring.See ILO Convention No. 29,Article 2
                                                                                                                                                                           2.4.1 Types of Statutory Levies on Brown Coal Mining                             52
                                                     Share of operating revenues that are   Share of operating revenues from the area of operations
                        Indigenous Right      HR14                                                                                                                         2.4.2 Financial Benefits from Brown Coal Extraction to Communities in            52
                                                     redistributed to local communities     that are redistributed to local communities
                                                                                                                                                                                  the Most/Chomutov Area

                                                                                                                                                                                                                                                                    123
                                      Social Factors of Sustainable Development                                    Social Performance Indicators                              Chapters of the Report of the Czech Coal Group                           Pages
                                                                                                                                                                                                                                                        41
                                                                                                                                                                            2.2.2 Environmental and Social Responsibility in the Group: Internal
                                                                                                                                                                                  Codes of Ethics, Principles, Methodologies and Concepts for
                                                                                                                                                                                  Economic, Environmental and Social Performance
                                                                                                                                                                                                                                                        53
                                                                                                                                                                            2.4.3 Management of Reserved Mineral Deposits and the
                                                                                                                                                                                  Determination and Closure of Working Districts
                                                                                                             Description of policies to manage impacts on                                                                                               61
                                                                                                                                                                            2.5.3 Environmental Protection in MUS Brown Coal Production:
                                                                                                             communities in areas affected by activities, as well as
                                                               Policies to manage impacts on                                                                                      Inspections of Air Pollution Sources, Water Management
                                       Community       SO1                                                   description of procedures/programmes to address
                                                               communities                                                                                                        Facilities and Waste Disposal Facilities; System of Monitoring
            Society




                                                                                                             this issue, including monitoring systems and results
                                                                                                                                                                                  the Side Slopes of the ČSA Surface Mine
                                                                                                             of monitoring                                                                                                                              81
                                                                                                                                                                            2.8.5 Opinion of the Inhabitants of the Ústí nad Labem Region on
                                                                                                                                                                                  the MUS Activities
                                                                                                                                                                                                                                                        83
                                                                                                                                                                            2.8.7 Results of the Programme of Monitoring Sustainable
                                                                                                                                                                                  Development Factors 2003-2005
                                                                                                                                                                                                                                                        92
                                                                                                                                                                            2.8.8 Project to Unlock Brown Coal Reserves for Future Generations

                                                                                                             Description of the policy, procedures/management systems,
                                                                                                             and compliance mechanisms for organisations and                2.2.2 Environmental and Social Responsibility in the Group: Internal
                                       Bribery and
                                                       SO2     Policies to adress bribery/corruption         employees addressing bribery and corruption. Include                 Codes of Ethics, Principles, Methodologies and Concepts for           41
                                       Corruption
                                                                                                             a description of how the organisation meets the requirements         Economic, Environmental and Social Performance
                                                                                                             of the OECD Convention on Combating Bribery

                                                                                                                                                                            This indicator is not relevant. The Group provides no contributions
                                                                                                             Description of policy, procedures/management
                                         Political                                                                                                                          to political parties or related institutions. The Group has no policies,
                                                       SO3     Policies to address political contributions   systems, and compliance mechanisms for managing
                                       Contribution                                                                                                                         procedures or management system to regulate lobbying beyond the
                                                                                                             political lobbying and contributions
                                                                                                                                                                            legislation and rules in force in the Czech Republic

                                                                                                             Description of policy for preserving customer health
                                                                                                                                                                            1.4.1 Czech Coal a.s. and its Brown Coal Trade: Customer Health and         22
                                                                                                             and safety during use of products and services, and
                                                                                                                                                                                  Safety, Information on the Environmental Impacts of Products
                                     Customer Health           Policy for preserving customer health and     extend to which this policy is visibly stated and
                                                       PR1                                                                                                                  2.2.2 Environmental and Social Responsibility in the Group: Internal        41
                                       and Safety              safety                                        applied, as well as description of
                                                                                                                                                                                  Codes of Ethics, Principles, Methodologies and Concepts for
            Product Responsibility




                                                                                                             procedures/programes to address this issue, including
                                                                                                                                                                                  Economic, Environmental and Social Performance
                                                                                                             monitoring systems and results of monitoring
                                                                                                                                                                            1.5.3 Monitoring Brown Coal Quality                                        26, 27
                                                                                                                                                                            1.7 Standards and Certificates in the Group’s Companies                     29
                                                                                                             Description of policy, procedures/management
                                      Products and                                                                                                                          1.8 Applied Research and Services: Laboratory Services                      31
                                                       PR2     Policy related to product information         systems, and compliance mechanisms related to
                                        Services                                                                                                                            2.2.2 Environmental and Social Responsibility in the Group: Internal        41
                                                                                                             product information and labeling
                                                                                                                                                                                  Codes of Ethics, Principles, Methodologies and Concepts for
                                                                                                                                                                                  Economic, Environmental and Social Performance



                                                                                                                                                                            2.2.2 Environmental and Social Responsibility in the Group:
                                                                                                             Description of policy, procedures/management
                                       Respect for                                                                                                                                Internal Codes of Ethics, Principles, Methodologies and
                                                       PR3     Policy for consumer privacy                   systems, and compliance mechanisms for consumer                                                                                            41
                                         Privacy                                                                                                                                  Concepts for Economic, Environmental and Social
                                                                                                             privacy
                                                                                                                                                                                  Performance



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contents
                                                                                                                                                                                                                                                   contents
           GRI 2002 Mining and Metal Sector Supplement Indicators                                                                                                 Chapters of the Report of the Czech Coal Group                          Pages


                                                                                                                                                                   2.4.1 Types of Statutory Levies on Brown Coal Mining                    52
                                                                                                                                                                   2.4.2 Financial Benefits from Brown Coal Extraction to                  52
                                                                               Local economic contribution and development impact and relevant policies
                                                                                                                                                                         Communities in the Most/Chomutov Area
                                                                                                                                                                   2.8.2 MUS Regional Co-operation Programme                               80


 Revenue Capture,                                                                                                                                                  Partially reported. Data not available due to lack of data
                               Local economic contribution and                 Percentage of goods, materials, and services purchased locally
 Management, and         MM1                                                                                                                                       systems to generate the required information
                               development impact and relevant policies
   Distribution
                                                                               Percentage of workforce from local communities;                                     100% Czech Republic

                                                                               Investment in public infrastructure and its maintenance; and                        2.6 Reclamation – Landscape and Environment Regeneration                62

                                                                                                                                                                   2.4.1 Types of Statutory Levies on Brown Coal Mining                    52
                                                                               Compensation payments                                                               2.4.2 Financial Benefits from Brown Coal Extraction to                  52
                                                                                                                                                                         Communities in the Most/Chomutov Area


                                                                                                                                                                   1.2 Group Profile and its Results: Consolidated Key Financials
    Value added          MM2   Value added                                     Value added broken down by country level                                                                                                                    18
                                                                                                                                                                       for the Group


                                                                               The number/percentage of sites identified as requiring biodiversity                 2.6.1 Reclamation of the Areas Affected by Brown Coal Extraction:       63
                                                                               management plans, and the number/percentage of sites with plans in                        Caring for Biodiversity and Original Vegetation Cover
     Biodiversity        MM3   Biodiversity management plans
                                                                               place. Also include criteria for deciding that a biodiversity management            2.6.2 MUS Reclamation: MUS Reclamation Projects Currently               68
                                                                               plan is required and the key components of a plan                                         under Way; Landmark Reclamation Projects

                                                                                                                                                                   2.5.3 Environmental Protection in MUS Brown Coal Production: Use        59
                                                                                                                                                                         of Energy By-products from the Coal Combustion Process
                                                                               Percentage of product(s) derived from secondary materials. This includes            2.5.2 Information on the Environmental Impact of the Group’s            57
                               Percentage of product(s) derived from           both post-consumer recycled material and waste from industrial sources                    Production Companies in 2006;The summarised environmental
      Materials          MM4
                               secondary materials                             (e.g., new scrap from fabricators and old scrap from end of-life equipment),              indicators for the Group’s production companies, 2006
                                                                               but excludes internal recycling within the facility                                 Partially reported - only MUS and RENOGUM-NILOS a.s..
                                                                                                                                                                   Detailed data on the other companies not available due to lack
                                                                                                                                                                   of data systems to generate the required information

                                                                                                                                                                   2.2.2 Environmental and Social Responsibility in the Group: Internal
                               Policies for assessing the eco-efficiency and   Describe policies for assessing the eco-efficiency and sustainability attributes
Materials stewardship    MM5                                                                                                                                             Codes of Ethics, Principles, Methodologies and Concepts for       41
                               sustainability attributies of products          of products (e.g., recyclability, material use, energy use, toxicity, etc.)
                                                                                                                                                                         Economic, Environmental and Social Performance

                                                                                                                                                                   2.5.2 Information on the Environmental Impact of the Group’s            57
                                                                                                                                                                         Production Companies in 2006
                                                                                                                                                                   2.5.3 Environmental Protection in MUS Brown Coal Production:            59
 Large volume mining                                                           Describe approach to management of overburden, rock, tailings, and                        Use of Energy By-products from the Coal Combustion
                               Description of approaches to the management
and mineral processing   MM6                                                   sludges/residues including: assessment of risks; structural stability of                  Process; System of Monitoring the Side Slopes of the ČSA
                               of overburden, rock, tailings and sludges
        waste                                                                  storage facilities; metal leaching potential; and hazardous properties                    Surface Mine; Protection Zones
                                                                                                                                                                   2.6.1 Reclamation of the Areas Affected by Brown Coal                  62, 63
                                                                                                                                                                         Extraction: Key Issues Addressed by Reclamation;
                                                                                                                                                                         Relationships between Reclamation and Space Planning


                                                                                                                                                                                                                                                   125
                           GRI 2002 Mining and Metal Sector Supplement Indicators                                                                             Chapters of the Report of the Czech Coal Group                    Pages



                                                                                                                                                         2.2.4 Relationships with Stakeholders: Communication with                44
                                                                                                                                                               Stakeholder Groups
                                                                                   Describe significant incidents affecting communities during the
                                        Significant incidents affecting                                                                                  2.8.8 Project to Unlock Brown Coal Reserves for Future Generations:      92
                               MM7                                                 reporting period, and grievance mechanisms used to resolve
                                        communities                                                                                                            The “Co-existence” Information and Contact Centre at
                                                                                   the incidents and their outcomes
              Community                                                                                                                                        Litvínov; Direct Negotiation between MUS and the Property
                                                                                                                                                               Owners and Other Citizens of Horní Jiřetín and Černice


                                                                                   Describe programmes in which the reporting organisation has
                               MM8      Small-scale mining                         been involved that addressed artisanal and small-scale mining         This indicator is not relevant for the Czech Coal Group’s activities
                                                                                   (ASM) within company areas of operation
                                                                                                                                                         2.8.8 Project to Unlock Brown Coal Reserves for Future
                                                                                   Description of resettlement policies and activities. Identify sites
                                                                                                                                                               Generations: Offer of Settlement for the Citizens of Horní
                                                                                   where resettlements took place and the number of households
                                        Description of resettlement policies and                                                                               Jiřetín in the Case of Resettlement. (The project of potential
             Resettlement      MM9                                                 resettled in each. Include practices regarding resettlement and                                                                                92
                                        activities                                                                                                             resettlement is in full compliance with Czech legislation,
                                                                                   compensation, and the degree of alignment with the World
                                                                                                                                                               which in our opinion meets the requirements of The World
                                                                                   Bank Operational Directive on Involuntary Resettlement
                                                                                                                                                               Bank Operational Directive on Involuntary Resettlement.)

                                                                                   Number or percentage of operations with closure plans,
                                                                                   covering social – including labour transition, environmental
                                        Number or percentage of operations
             Closure Plans     MM10                                                and economic aspects. Describe company policy, stakeholder            1.9 Other Business Lines in the Group: Deep Brown Coal Mining            32
                                        with closure plans
                                                                                   engagement processes, frequency of plan review, and amount
                                                                                   and type of financial provisions for closure

                                                                                                                                                         2.4.3 Management of Reserved Mineral Deposits and the
                                                                                   Describe process for identifying local communities’ land and                                                                                   53
                                        Process for identifying local                                                                                          Determination and Closure of Working Districts
             Land Rights       MM11                                                customary rights, including those of indigenous peoples, and
                                        communities’ land                                                                                                2.4.4 Method of Identification and Buyout of Land in Mining
                                                                                   grievance mechanisms used to resolve any disputes                                                                                              54
                                                                                                                                                               Districts
                                                                                   Describe approach to identifying, preparing for, and
                                                                                   responding to emergency situations affecting employees,
                                                                                                                                                         2.2.2 Environmental and Social Responsibility in the Group: Internal
              Emergency                 Aproach and documents for emergency        communities, or the environment. Include a description of the
                               MM12                                                                                                                            Codes of Ethics, Principles, Methodologies and Concepts for        41
             Preparedness               situation                                  nature of existing skills, teams who respond to emergency
                                                                                                                                                               Economic, Environmental and Social Performance
                                                                                   situations, training, drills, review processes and community
                                                                                   involvement



                                        Number of new cases of occupational        Number of new cases of occupational disease by type.                  2.7.1 Shared Principles of Employee Policy: Safety at Work;            71, 73,
            Health & Safety    MM13
                                        disease by type                            Describe programmes to prevent occupational disease                         Social and Health Benefits                                         74




      126




contents
4.3 Auditor’s Opinion in Accordance with the GRI 2002                                                      contents




                                 In Accordance status of this Czech Coal Group's Report has been checked
                                 by the Global Reporting Initiative.


                                                                                                           127
            4.4 Report Evaluation - Survey
            Dear Reader,

            The Czech Coal Group presents this Sustainable Development Report to provide you with easily comprehensible detailed information on the impact and benefits of the activities of Czech Coal Group
            companies on the environment and on the stakeholders. Thinking already of the next Sustainable Development Report, we would like to get still closer to your wishes and needs, and therefore we will
            welcome your comments on the contents of the present Report.
            Please, send your comments, views and suggestions to the address of Czech Coal a.s. (on the website www.czechcoal.cz), or by e-mail to info@czechcoal.cz. The questionnaire below offers a framework
            for your comments.

            Thank you very much for your views.

            Radek Stavěl, Project Manager
            Stanislav Kužel, author



                1. Which areas or data do you lack in this Report?

                ............................................................................................................................................................................................................................

                2. Which data and information do you consider redundant?

                ............................................................................................................................................................................................................................


                3. Which pages were the least clear to you?

                ............................................................................................................................................................................................................................

                4. Other comments

                ............................................................................................................................................................................................................................

      128
                We would welcome your signature and/or your e-mail address: ............................................................................................................................



contents

								
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