Azer-Yod II

complete

The EBRD is considering providing a long-term loan to Azer-Yod LLC which owns and operates an iodine production plant in Hasanabad, Neftchala district, Azerbaijan. The proceeds of the loan will be used to purchase and install a new production line, revamp the infrastructure and acquire additional equipment in line with the Company’s strategy to increase its design capacity and output. The iodine produced is mainly exported. The project will foster private sector development and economic diversification in the regions of Azerbaijan. In addition, the contemplated environmental improvements will enable the Company to achieve compliance with EU standards. The transition impact will stem from the demonstration effect of a successful restructuring of the Company and setting higher standards for corporate governance and business conduct. Azer-Yod LLC, a limited liability company incorporated and existing under the laws of the Republic of Azerbaijan (the ‘Company’). The Company is the only iodine producer in Azerbaijan. Up to USD 15.0 million senior loan Approximately USD 17.0 million Screening category The project is screened as B/1. The increased production of iodine at an existing plant has only limited environmental and social impacts, which can be readily identified and quantified in an Environmental Analysis. An audit of the existing facilities has also been carried out. Information reviewed A project with the same client was first proposed to EBRD in 2005. At the time, an environmental analysis and an audit were carried out for the project by independent consultants and an EAP was prepared. The current proposed project reflects the initial project with minor differences. For the current project, the original Environmental Analysis has been reviewed by the EBRD to confirm its adequacy. In addition, the site was visited by EBRD Environmental Specialists in 2007 to review the implementation status of the initial EAP which was agreed in 2005. Environmental and social issues The review of the Environmental Analysis report concluded that the impact analysis and the mitigation measures proposed in the 2005 report are still valid. The main environmental issues identified in that report can be summarised as follows: The environmental analysis concluded that all the health, safety and environmental risks identified in connection with iodine production rehabilitation at the project site are controllable and the risk is rated as medium /low. The Environmental Analysis indicates that, with adoption of the mitigation measures specified in the Environmental Action Plan (EAP), the overall environmental impacts of construction and operation of the project will not be significant. Separate from the environmental due diligence carried out by the EBRD, the Ministry of Ecology has raised potential compliance issues with respect to wastewater discharges. Subsequently, an agency of the Ministry conducted additional tests in October 2008 which proved that the Company is in compliance. In November 2010, the Bank commissioned an independent consultant to undertake a monitoring site visit and review the environmental, social, workers’ health and safety and labour aspects of the project against EBRD requirements and to address the specific issues raised by stakeholders. The consultant's findings indicated a need for a more comprehensive effluent and air quality monitoring programme to determine the impact of the project on the local environment and that the existing occupational health and safety management practices needed to be improved. We are currently in the process of revising the project Environmental Action Plan (EAP). Summary of Environmental Plan Based on the findings of the Environmental Analysis and the review of baseline conditions, the Consultants prepared a set of recommendations in the form of an Environmental Action Plan in 2005. During the EBRD site visit in October 2007, it was observed that some of the actions in the EAP had already been taken. The EAP was revised to reflect the progress made until that date. After the monitoring site visit in November 2010, an updated EAP reflecting the findings of the audit was agreed with the Client in May 2011. The main implementation requirements in the current revised EAP can be summarised as follows: The Client is required to provide to the EBRD annual reports on environmental and social matters. None Mr. Iskender Sadikhov General Director Azer-Yod LLC Tel.: +994 12 5674553 Fax: +994 12 5674558 Email: isrcc@mail.ru