Duferco Regional Working Capital

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The EBRD is considering a framework agreement with Duferco (the ultimate beneficiary of the facility), under which the Bank would agree to guarantee against specified events, existing working capital lines for pre-defined amounts and steel plants in eastern Europe. The facility will help Duferco make additional resources available to existing investments in astern Europe and/or additional prospective investments. Duferco has demonstrated its ability to restructure and turn around steel plants in complex environments. The project will present an opportunity for the Bank to promote restructuring goals, which have often been hampered by the difficulty of attracting strategic sponsors into investee companies. Steel plants in FYR Macedonia, Russia and elsewhere in the region, which are owned/controlled by Duferco, who is providing significant external credit and management support. The Bank is involved, or has reasonable chances of being involved, in providing long-term capital expenditure financing to the plants. Working capital guarantee facility of up to US$ 120 million (€137.7 million), of which US$ 70 million (€80.3 million) is guaranteed and US$ 50 million (€57.4 million) is non-guaranteed. US$ 120 million (€137.7 million). This operation was screened as C/1. Environmental audits were carried out by independent environmental consultants on the two proposed sub-projects, Makstil and Viz-Stal, and Environmental Action Plans (EAPs) have been developed and are currently being implemented. The EAPs will bring the steel plants into compliance with the relevant national and EU environmental, health and safety standards over a period of two years for Viz-Stal and five years for Makstil. Duferco will be required, through a covenant, to commit and conduct environmental due diligence on further sub-projects and to implement the EAPs to the Bank’s satisfaction. Environmental due diligence will need to determine the extent of environmental, health and safety risks and propose a mitigation programme (in the form of EAPs) to be included in the project. The likely high cost implications of such programmes will need to be considered by the Bank at an early stage. Environmental standards, the planned remedy actions and the commitment of the Duferco and the steel plants to attain, in the longer term, a high standard of environmental performance and improvements are key eligibility criteria for these companies to be included in the facility. Duferco will ensure that these companies comply with national and local environment, health and safety regulations and standards, and also with applicable EU environment, health and safety standards. The environmental due diligence for each company will be summarised in an environmental report which will form part of the summary business plan. These reports will be circulated to the Environmental Appraisal Unit (EAU) who will provide feedback, and give their approval. On an annual basis, Duferco will submit an environmental report, in format and content satisfactory to the Bank. None.