Integra

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The EBRD is considering a loan to Integra Group, the leading Russian oil field services company, to refinance short-term liabilities of the company, to improve balance sheet structure and reduce cost of funding for the company; to purchase drilling, seismic and technology services equipment to enable the company to provide advanced technical solutions to its clients while at the same time improving its own energy efficiency standards. The proposed transaction will support the growth of a private, independent supplier of oil field services which offers an alternative to in-house operations to oil and gas companies. It will have a demonstration effect by introducing in Russia modern international drilling technologies and promoting sound business practices in the industry. Through the project, the Bank will promote (i) increased outsourcing of OFS to the private sector, as the equipment investment will allow Integra to compete with in-house services of the large Russian oil and gas companies and other international market players and (ii) support setting higher standards of environmental and business conduct by promoting an energy conservation culture through approaching energy saving issues in a systemic way. This will include the adoption of and compliance with the Bank’s Environmental Action Plan. Integra Group, an LSE-listed company, one of the leading Russian independent providers of oilfield services and also one of the leading manufacturers of drilling rigs with heavy lifting capacity, cementing equipment and certain specialized equipment used in the exploration, development and production of oil and gas in the Russian Federation and the CIS. Up to USD 75 million senior loan as part of USD 300 million debt financing to be syndicated to commercial banks. Up to USD 300 million. 1. Environmental classification and rationale Screened B/1. The project has several components. Environmental, health, safety and labour issues associated with modernisation and re-equipment of manufacturing facilities can be readily identified, assessed and mitigated through an environmental analysis. Other components of the project (purchase of drilling, seismic, and cementing equipment; refinancing short-term liabilities; and core-business acquisitions) do not require an environmental analysis. An audit of the existing operations has also been required. 2. Due Diligence Outcomes and Management and Mitigation Measures As part of the environmental due diligence three sites of Integra, namely Kostroma manufacturing plant, drilling activities in Nizhnevartovsk, and KRS in Nizhnevartovsk (well work-over activities) were audited. In addition, a corporate level environmental audit was also carried out. The audit concluded that the current operations of the Company have no significant impacts on the environment and the Company is in general in compliance with Russian regulations and EU Directives. There are a number of issues identified with regard to environmental, health and safety (EHS) management system, waste, wastewater, soil contamination and occupational health and safety. However these issues can be easily mitigated through the implementation of the agreed Environmental Action Plan. The Environmental Analysis for future operations was also undertaken by independent consultants. The Environmental Analysis concluded that the adverse environmental impacts associated with the project are expected to be limited and not significant. An Environmental Action Plan (EAP) has been prepared and agreed with the Company to bring it into compliance with the Russian regulations and European Directives and good international practices. The main implementation requirements for the EAP are as follows: 3. Disclosure of Information and Consultation Environmental information on the project will be disclosed to public in accordance with the Russian Federation law. In the context of EBRD’s participation in the project, this environmental summary will be disclosed locally at the Integra local offices and the local media as well as in English on EBRD website at www.ebrd.com. 4. Monitoring and Reporting Integra will continue monitoring its performance in accordance with the Russian Federation regulatory requirements and the EAP agreed under the project. The Company will report to the EBRD annually on the measured environmental impacts and on the implementation of the EAP mitigation measures. The Bank will evaluate the project's compliance with the applicable environmental and social standards during the lifetime of the project by reviewing these reports. The EBRD may also conduct monitoring visits to the project when and if deemed appropriate. None. Dmitriy Avdeev, Chief Financial Officer E-mail: avdeev@integra.ru Tel +7 495 9330621