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“We urge not to change the conditions for the residents of the TOP”
Anna Tsivileva, Chairman of the Board of Directors of Kolmar Group LLC, on the outcomes of the WEF and new prospects for residents of the TOP
The Colmar company is implementing three investment projects in the Far East; it has long-term contracts for the supply of coal with the world's largest metallurgical companies in Japan and China. Great interest in the company's products is also shown in India, with representatives of which the leadership of Kolmar held talks at the Fifth Eastern Economic Forum. Anna Tsivileva, Chairman of the Board of Directors of LLC Kolmar Group, spoke about the results of the WEF, the new prospects of the company and the troubles for the TOP residents in the Far East in an interview with EastRussia.
- We took part in the business program of the Eastern Economic Forum and held an international mas-wrestling tournament for company prizes. This time we signed several agreements, which were aimed mainly at the social development of the region and the attraction of personnel to the Far East, South Yakutia, and to our enterprise.
First, we signed a significant agreement for us with the Government of the Republic of Sakha (Yakutia) on the construction of infrastructure facilities to attract our future employees to the region. In the next two years, we plan to increase the staff of our employees by five thousand people. The average age of our employees is 39 years, they come with families - with wives, with children, so the total influx of population into the region will be 10-15 thousand people. The question is where and how we will resettle these families. Under the agreement, we commit ourselves to constructing capital housing projects, and the Government of the republic will build infrastructure social facilities: kindergartens, schools, entertainment and leisure facilities - all that people need for a comfortable stay.
The second agreement is to attract new personnel to work in our production. We have signed a tripartite agreement with the Agency for the Development of Human Capital and the Far Eastern Federal University. We will need graduates of mining faculties of universities, engineers, because now we are buying high-tech equipment, which we need to be able to work on, we need to manage it, and repair it. Of course, we really need upscale personnel, and the process of learning how to work on this equipment is quite long.
We also took an active part in the business program of the forum itself, and made presentations at several sessions. At the Russia-India business dialogue, I talked about the company’s plans to enter our coking coal markets in India and to interact with our Indian partners.
- The company will build housing for employees, and what other support measures will it provide for employees?
- So far, this is a project of intentions, since in general it is a deep problem. We are negotiating with banks to provide our employees with a preferential mortgage rate, we are working on the issue of whether the first installment for an employee can be repaid if he works in the region for some time. We are also negotiating with developers in order to calculate the budget for the construction of this housing fund, to draw up a business plan.
- And now there is enough housing for employees?
- Yes, there is enough for now, because we have built two dormitories: for people who work on a rotational basis, and one dormitory for small families. In addition, we redeem for our employees and rent housing, which is in the fund of the city of Neryungri. These reserves are enough now, but we have practically exhausted them. That is why it is necessary to build capital houses, since any hostel implies a temporary stay, and we are interested in our employees staying in Yakutia for many years and working on a permanent basis.
- Providing a down payment for the purchase of housing will not be too costly part of the company's expenses?
- In general, doing business in the Far East and South Yakutia is costly. But since the work is going on in the conditions of the North, in severe climatic conditions, we create conditions for people to live. Families need to be attracted by something to move: a high salary, a good social package, the opportunity to purchase housing. We are aware of this and take special support measures, because we have very ambitious plans, for the implementation of which we need personnel.
- The problem with personnel is common for the Far East. One housing does not solve it. What tools do you use to attract workers?
- From the first day of work, we pay the northern allowances, we offer guaranteed additional social benefits, for example, annually paying for vacation travel to employees and their families. Now the average price of an economy class flight there and back is 70 thousand rubles. We also compensate for the cost of sanatorium-resort and tourist vouchers, trips abroad, children's recreation, we provide financial assistance to employees who find themselves in difficult life situations.
In addition, for qualified employees arriving for permanent residence, additional social guarantees are provided in the form of payment for travel to the place of work by air and railway transport. For example, we fully pay the employee and family members tickets so that they come to our workplace. We also partially compensate for rental housing.
- And where does the most employees come from?
- Up to 75% of employees are residents of the Far East and bоthe majority are residents of Yakutia. Additionally, during the growth of the company, we get employees from other regions.
- How does the company react to lower coal prices in the global market? And how much do you depend on this factor?
Many businesses, especially coal, are associated with the volatility of prices for the final product in the world market, and we were already experiencing the 2014 crisis of the year when there was a sharp drop in coal prices. Then in 2016, on the contrary, there was a maximum peak when coking coal was sold at 300 dollars per ton. Literally this summer, the price was about 200 dollars per ton, and now we have failed at 25%. But still, the coking coal market is, in my opinion, more stable and promising. All world analysts predict steel production growth at 1,4% next year in the Asia-Pacific markets, and we are engaged in the export of coking coal, which is used by metallurgists.
At the forum, my words were confirmed - there were a lot of representatives of the Indian delegation, large business, including coal, metallurgical, who said that India’s demand for coking coal is very high, the country fears that the coking coal reserves that Australia and the USA can offer, will not be enough. Therefore, they see the Russian market as an option to diversify supplies and as one of the sources of additional supply of coking coal.
- And were there any negotiations with Indian companies selling coal?
- At the away session of the Far Eastern Forum in Mumbai, we had the first acquaintances with them. After that, in Moscow, we held talks with Tata Power and Kol India. Moreover, representatives of Kol India went to our company in Neryungri to see how we work in northern conditions.
- Cooperation with Indian companies will be limited only to the sale of coal?
- We are ready to sell our products to Indian companies with pleasure. Moreover, we already have spot deliveries of coal to the Indian market. We also provide consultancy and consulting services to companies from India. After the opening of our port in the first quarter of 2020, we hope that we will switch to long-term contracts. We are already being offered to sign ten-year contracts, but so far we are not going to do this, because the market is so volatile that we need to decide on other countries: China and Japan, to which we already have obligations and where we are already supplying on a long-term basis.
- And if the company has any stressful scenarios, if the price of coal in the world market falls not by 25%, but by 50%?
- Yes, we have incorporated in our strategy financial models certain pessimistic forecasts for the price. We now see some dynamics and think that in the near future the situation will change - there are tendencies to this. Therefore, we expect that in the coming months, coking coal prices will slowly begin to rise.
- A session was held at the WEF on the further work of the preferential regimes in the Far East, and especially on the benefits that residents will have to return. How do you feel about this?
- The instrument of state support in the form of preferences for residents of the Territories of Advanced Development was created relatively recently, no one has experience, and we are pioneers, those who are working on this experience. Therefore, of course, a number of questions arise. We are grateful that such an instrument was created, because it is effective: it attracts investors and provides an opportunity to receive preferences. Thanks to the fact that we became residents of the TOP, we have increased the volume of investments almost twice - due to reinvestment, due to the very feeling of leverage that the state has set us up for. We believed in state support, and at the same time decided to move forward more confidently.
Now there are weaknesses, for example, at the time of obtaining the status of a TOP resident, companies received tax preferences, which were fixed at the time of the conclusion of the agreement. Based on this, business plans were drawn up and investment programs were developed, and borrowed capital was also attracted from banks, taking into account savings in taxes and other payments. However, in August 2018, federal law No. 300-ФЗ entered into force, in which new requirements for the application of reduced tariffs and insurance premiums appeared. They worsened the situation of residents: companies entered the business project on the same terms, but now the game conditions have changed and not for the better. Already there are companies that due to this came to bankruptcy.
This cannot be done now, since business is just beginning to trust the state, we are just beginning close and fruitful cooperation. Therefore, we urge that the initial conditions for residents be maintained.
The session was attended by representatives of the Ministry of Eastern Development and Development, who understand the whole situation, responsibility to business and the consequences of mistrust that may arise. They pledged that many changes will be worked out, and that they will take control of issues that need to be resolved with the tax authorities.