KCM

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The EBRD is considering providing a long-term loan of €47 million to support KCM, a leading Bulgarian lead and zinc smelter, in implementing a complete reconstruction and modernisation of the lead production line and selected upgrades to the zinc process, representing Phase 1 of a comprehensive 2-stage modernisation program of the Company’s operations. The investment programme will improve significantly overall performance through the reduction of energy consumption, the improvement of yields and the reduction of maintenance and other production costs in both lines. The transition impact potential of the Project derives mainly from the following key areas: (i) Demonstration effect of successfully restructuring activities to achieve greater energy efficiency and environmental standards: The primary goal of the investment programme of KCM is to create highly efficient and competitive production of lead and zinc through significant cost reductions, higher labour productivity, as well as energy efficiency and environmental improvements. The modernisation of the lead production process included in Phase 1 of the investment programme and the additional energy efficiency investments that were identified by the TC Energy Audit will lead to significant reduction of specific energy consumption and specific carbon emissions per ton of product in both production lines. The investments will also lead to significant environmental improvements. (ii) Improvements to corporate governance standards. The investment will also include a Corporate Governance Action Plan aimed at streamlining the corporate structure and aligning interests to drive a successful restructuring effort. KCM is the largest lead and zinc smelter on the Balkans, producing LME registered high-grade metals and selected alloys. Long-term secured loan in the US$ equivalent of up to €54 million. The project is expected to be financed together with commercial lenders. €95 million. This project was categorized B in accordance with the 2008 Environmental and Social Policy. An Independent Environmental Consultant (IEC) was retained to complete an integrated environmental health safety and social audit of the existing facilities and an environmental and social analysis of the proposed investment projects. The main issues identified in the audit are related to possible legacy issues associated with historic operation of the plant (i.e. pre-privatization). Available background information indicated that soil within a few kilometres of the plant contains elevated levels of lead. Further, an independent study suggested that there were some elevated concentrations of lead in blood for the population in the vicinity of the plant. Based on this information, an Industrial Toxicologist/Medical Doctor was retained to assess the alleged elevated lead blood levels and the possible contribution to this caused by the site. Results of this work are that there are no data linking emissions from the site (current and past) to elevated concentrations of lead in blood. Other results of the audit indicate that the site has a good social engagement program and proactive environmental management system. Further, the environmental analysis of the proposed project concluded that the project has been developed in accordance with BAT; will help the plant achieve further reductions in air emissions; and will allow compliance with pertinent EU regulations. An ESAP has been developed for the project, and the main items on this ESAP include the following: The ESAP has been agreed with the client and implementation of such will be monitored by the Bank. An Energy Audit was performed that analysed the energy efficiency performance of the plant before and after the implementation of the modernization programme and proposed additional energy efficiency investments. The Energy Audit was funded by the Italian Government through the Central European Initiative (CEI). Mr. Rumen Tsonev Senior Director Corporate Development KCM 2000 Plovdiv 4009 Bulgaria E-mail: rumen.tsonev@kcm.bg