DIROL -- DANSK TYGGEGUMMI FABRIK A/S

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A DM 90 million loan to ZAO Dirol, a newly created company, for construction of a new chewing gum factory, located in Novgorod, Russian Federation. The main objective of the project is to substitute imported finished and semi-finished products with chewing gum produced in Russia in a modern, state-of the-art facility. The proceeds of the loan will be used to pay for construction of the building, acquisition of equipment and related services. The operation will promote competition in the consumer goods market, have a demonstration effect regarding modern cost-effective production in Russia and encourage skills transfer. ZAO Dirol – a joint-stock company established for the purposes of manufacturing chewing gum for the Russian market. The sponsor of the project is Dansk Tyggegummi Fabrik A/S, Denmark – the largest manufacturer of coated chewing gum in Europe. A DM 90 million (ECU 45.9 million) loan will comprise an "A" loan portion of DM 60 million for the Bank's account and a "B" loan portion of DM 30 million for the account of participating commercial banks. The total project cost is DM 175 million. The project was classified as B/0, requiring an Environmental Analysis of the potential impact resulting from the construction and operation of the facility. As the project had already undergone the Russian OVOS (equivalent to an Environmental Impact Assessment), it was not considered necessary to undertake further environmental impact studies. An English translation of the OVOS was reviewed by EBRD staff, and judged to be satisfactory. Further information was required to assess compliance with European Union environmental standards. The Russian factory will be based on the same design as the parent company in Denmark, utilising the same production equipment. The Danish facility complies with strict Danish and EU environmental standards, and therefore the Russian facility will operate to the same standards. Dansk Tyggegummi Fabrik A/S is committed to ensuring that both Russian and EU standards will apply, and ZAO Dirol intends to develop an Environmental Action Plan, incorporating improvement suggestions from the Russian environmental experts, to assist in the implementation of this commitment. ZAO Dirol will submit to the EBRD an annual environmental report, including updates on the implementation of the Action Plan. The production of chewing gum is not associated with major environmental impact. Issues that might be of concern include hygiene issues related to raw materials, production, odours, dust, noise and product standards, workers' health and safety, solid waste and waste-water management and issues related to auxiliary facilities, including air emissions from boilers, energy consumption and efficiency. All of the above issues will be adequately mitigated through project design and process technology. For example, the exhaust ventilation system will include various air filters to ensure a cleansing efficiency of 98 per cent of pollutants, boilers will be powered by natural gas and include economisers to save energy, many waste streams will be sent for recycling and a waste-water treatment station will be incorporated into the facility, thus ensuring waste-water discharges comply with both EU and World Bank guidelines. None