In 2Q 2012, the operating loss in the ferroalloys segment rose by 300.6% and totaled $135.3 million, or -87.6% of total segment's revenue, as compared to operating loss of $33.8 million, or -22.1% of total segment's revenue, in 1Q2012. The adjusted EBITDA in the ferroalloys segment in 2Q2012 increased by 1.6% and amounted to negative $7.4 million, compared to segment's adjusted negative EBITDA of $7.5 million in 1Q2012. The adjusted EBITDA margin of the ferroalloys segment comprised -4.8% in 2Q2012 compared to the adjusted EBITDA margin of -4.9% in 1Q2012. Ferroalloys segment's depreciation, depletion and amortization in 2Q2012 were $27.4 million, an increase of 3.4% over $26.5 million in 1Q2012.

Mechel-Ferroalloys Management OOO's Chief Executive Officer Sergei Zhilyakov noted:  "The segment demonstrated rather stable performance in the reporting period. In spite of the weaker market for nickel and ferrosilicon, we managed to keep our revenue flat quarter-on-quarter, primarily due to higher sales volumes of chrome ore concentrate and ferrochrome. EBITDA remained flat. At the same time net loss, net of non-recurrent accounting write-offs, decreased more than twofold quarter-on-quarter. Once the upgraded furnace is fully operational at the Bratsk Ferroalloy Plant, additional positive effect is further expected from higher ferrosilicon production and sales volumes."

Power Segment Results for The 1H 2012
US$ thousand 1 H 2012 (1) 1H 2011 (1) Change Y-on-Y
Revenue from external customers 418,133 401,955 4.0%
Intersegment sales 249,261 267,752 -6.9%
Operating (loss) / income (31,358) 33,359 -194.0%
Net (loss) / income attributable to shareholders of Mechel OAO (48,619) 13,473 -460.9%
Adjusted net income (1) (2) 5,274 13,473 -60.9%
Adjusted EBITDA (1) (3) 27,794 40,552 -31.5%
Adjusted EBITDA, margin (4) 4.16 % 6.06 % --
(1) See Attachment A.      
(2) Adjusted net (loss) income is net (loss) income adjusted for effects of impairment of long-lived assets and goodwill and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)       
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for the loan given to related parties, amounts attributable to noncontrolling interests and interest income.      
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.      
US$ thousand 2Q 2012 (1) 1Q 2012 (1) Change Q-on-Q
Revenue from external customers 174,691 243,442 -28.2%
Intersegment sales 113,099 136,162 -16.9%
Operating (loss) / income (56,237) 24,879 -326.0%
Net (loss) / income attributable to shareholders of Mechel OAO (60,053) 11,435 -625.2%
Adjusted net (loss) / income (1) (2) (6,160) 11,435 -153.9%
Adjusted EBITDA (1) (3) 287 27,510 -99.0%
Adjusted EBITDA, margin (4) 0.10 % 7.25 % --
(1) See Attachment A.      
(2) Adjusted net income is net income adjusted for effects of impairment of long-lived assets and goodwill and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)      
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for the loan given to related parties, amounts attributable to noncontrolling interests and interest income.      
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.      

Power Segment Output and Sales For The 1H 2012
Product name 1Q 2012 1Q 2011 1Q 2012 vs. 1Q 2011, %
Electric power generation (ths. kWh) 2,252,048 2,117,425 6%
Heat power generation (Gcal) 4,398,183 3,940,848 12%

Mechel's power segment's revenue from external customers in 2Q 2012 comprised $174.7 million, or 6% of consolidated net revenue, a decrease of 28.2% compared with the segment's revenue from external customers of $243.4 million or 8% of consolidated net revenue in 1Q2012.

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