Danosha

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The EBRD is considering providing up to €35 million loan to finance capital expenditures related to expansion and improvement of Danosha’s existing operations in Ivano-Frankivsk region, including the construction of two biogas plants, and balance sheet restructuring. The project will demonstrate the successful modernisation of pig farms including the improvement of and the construction of adjacent biogas plants. The planned upgrades will lead to the improvement of animal welfare standards in line with the EU regulations and thus significantly going beyond prevailing levels in the sector. Furthermore, the planned expansion will go along with higher demand for fodder leading to backward linkages to local grain farmers. Finally, the project comprises an inclusion element through a strong skills transfer component by introducing high quality vocational training opportunities in rural areas where they are currently lacking. Danosha is a leading vertically integrated pig producer in Ukraine. It is a subsidiary of the Denmark-incorporated Axzon Group, majority owned by Danish farmers. Long term loan of up to €35.0 million. Approximately €63.0 million. The proposed project has been categorised B in accordance with the 2008 EBRD Environmental and Social (E&S) Policy, as the potential impacts are expected to be site specific and readily identifiable and addressed through mitigation measures. An independent third party environmental and social due diligence (ESDD) has been undertaken and included an analysis of the proposed project and an audit of the Company’s current operational activities, including assessment of the Environmental Impact Assessments completed by the Company, past compliance records and the Client's corporate management systems and capacity to implement the project in accordance with the Bank's Performance Requirements. In general, the Company has invested significantly in modernisation, has a very good level of environmental performance of the farms, equipment and farming operations and there is good alignment with IPPC BAT (Integrated Pollution Prevention and Control Best Available Techniques) requirements. A number of improvements however are needed in this area and the Company is required to: These have been included in the ESAP. The Company has undertaken Environmental Impact Assessment (EIA/OVOS) for the new farms under the investment programme to mitigate any adverse impacts. The construction of them is nearing the end of construction phase. The ESDD has confirmed that no significant impact on living resources, biodiversity or local communities will result from the new projects. However, continuous communication should be kept with the local communities and relevant authorities as appropriate. This will form part of the Stakeholder Engagement Plan, which will be implemented, including a grievance procedure. Labour practices are in line with Ukrainian legislation and on a very good compliance level with the EU requirements. However there are limited policies and the Company will need to develop formal policies in areas such as recruitment, dismissal, equal opportunities etc. The projects will not result in retrenchment and there is expected to be an increase in staff over the coming years. Due diligence found there to be effective arrangements for EHS corporate management including the senior management coordination. At a site level, however, there are a number of areas to be improved and the Company will: Animal husbandry and welfare arrangements were assessed by an independent UK pig farming and animal welfare specialist whose findings were that overall standards of animal welfare were acceptable and in many instances above average. Issues identified with respect to ‘enrichment objects’ are being mitigated. An Environmental and Social Action Plan (ESAP) has been developed and should be agreed with the Company to address some areas for improvement identified during the ESDD and carry out the necessary mitigation measures which will enable the Company to comply with national regulations and the Bank’s PRs In addition, the ESAP also requires the implementation of a Stakeholder Engagement Plan with communication and consultation strategies and grievance mechanism. The Company will also disclose locally information on its environmental and social performance. The project will be monitored in terms of its environmental and social performance and implementation of the ESAP through annual E&S reports and site visits when deemed necessary. For consultant opportunities for projects financed by technical cooperation funds, visit procurement of consultants. Axzon Birk Centerpark 40 7400 Herning Denmark Tom Axelgaard Chief Executive Officer Email: Tom.Axelgaard@axzon.eu