Perpetual Mine Management Obligations

The perpetual mine management obligations resulting from the coal-mining operations of the RAG Corporation (also referred to as “inherited liabilities with unlimited duration”), which the RAG-Stiftung will finance beginning in 2019, are water management measures that will continue in perpetuity even after coal mining has ceased. The RAG-Stiftung  invests its assets in a safe and profitable manner so that it will be able to finance the perpetual mine management starting in 2019. It is estimated that from 2019 on the foundation will have to spend around €220 million annually in order to finance the perpetual mine management.

Pit water that seeps into mines deep underground has to be continuously pumped to the surface in order to keep the shafts and tunnels dry so that the coal can be mined. Even after the last mine is closed at the end of 2018, the pit water will have to be pumped out if necessary, especially in order to prevent it from mixing with drinking water. Currently the RAG Corporation has 13 pit water management facilities in North Rhine-Westphalia and five in Saarland. These facilities are located at the deepest points of the shafts, often more than 1,000 meters underground. They collect the pit water, and huge pumps then transport it to the surface through meter-wide pipes. The pump system has a redundant arrangement so that if a pump fails it can be quickly replaced by another. Engineers are continuously working on concepts for the long-term optimization of the pit water management measures in the mining areas.

Over the centuries, mining has also caused changes to landscapes. Entire regions have subsided — in extreme cases, by up to 25 meters. The surface water will always have to be actively regulated in these areas in order to prevent it from collecting in the depressions. To ensure that the water is properly drained, the foundation has to operate and maintain special pumping facilities and deepen bodies of water.

Some former mining facilities, especially former coking plants, have contaminated areas that must be cleaned up. After it has been determined where groundwater is contaminated, the water is collected and cleaned to prevent it from mixing with clean water and spreading. Regular checks are made to ensure that the measures are successful.

Beginning in 2019, the RAG-Stiftung will have to spend an estimated €220 million annually on perpetual mine management. The management of the pit water alone will account for about two thirds of these costs. The RAG-Stiftung has committed itself to funding the perpetual management measures in order to reduce the costs for the public sector and thus for the taxpayers.

The foundation will obtain the funds for these tasks by selling its shares in Evonik Industries AG, through the income from its holdings, and through the income from its diversified financial assets. With the IPO of Evonik Industries AG in April 2013, the foundation achieved an important milestone in its efforts to accumulate capital. Past and future income from the sale of shares, as well as the annual Evonik dividends, supply a large part of the funds needed by the foundation to perform its tasks.

In order to have a sustained income and minimize risks, the RAG-Stiftung had a diversified portfolio of financial assets worth around €4.0 billion at the middle of 2015. This portfolio was in line with the foundation’s guidelines. One part of it consisted of investments in low-risk securities. The financial asset was diversified through shares, corporate bonds and forther asset classes. According to a resolution passed by the Board of Trustees in December 2012, the RAG-Stiftung can invest up to 35 percent of its capital in primarily yield-oriented, illiquid investments. These mainly consist of real estate and private equity investments. Among other things, the private equity strategy aims to increase the foundation’s investments in medium-sized companies.

As stipulated by the agreement on inherited liabilities with unlimited duration that was concluded in 2007, RAG will give the RAG-Stiftung an additional €1.6 billion in covering funds at the end of 2018.

The correction of mining-related damage is expressly not a perpetual management measure. This is damage to buildings, properties, and roads that has been caused by mining. As was the case in the past, the correction of mining-related damage is paid for not by the RAG-Stiftung but directly by the RAG Corporation. This will also be the case after 2018.