OAO Severstal - Energy Efficiency Loan

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The proposed project will facilitate Severstal’s energy efficiency investments program with up to Euro 500 million long term loan. It is estimated that the investments program would reduce Severstal’s primary energy consumption by 5 - 10% compared to existing operations with environmental benefits through CO2 emissions reduction in the order of 600,000 ton per annum. The loan will finance a number of important energy efficiency projects, including rehabilitation and enhancement of the company’s on-site energy generation capacity, modernisation of its oxygen plants and implementation of modern energy management systems. The transition impact potential of the project is derived from fostering greater energy efficiency of Severstal operations and promoting new environmental standards for the Russian steel industry. The Bank will provide both finance and an appropriate structure for the agreed package of energy efficiency investments designed to increase their priority at the Company and to accelerate their implementation. It is expected that this project will also support Company’s technological modernization. JSC Severstal is one of the Russia’s largest vertically integrated producers of flat steel products with 2006 raw steel production of 17.6 million tonnes. Initially constructed in 1955 in Cherepovets, the plant was expanded and heavily upgraded between 1970 and 1990, and it is currently accounting for roughly 16% of country steel production and supplying 19% of the domestic market’s steel needs. The EBRD will provide a 12 year unsecured loan for an amount of up to EUR 500 million to JSC Severstal, of which up to Euro 350 million will be syndicated to commercial bank(s). Total project will amount to approximately EUR 500 million. The project has been screened as B/1, requiring an environmental audit and an environmental analysis of the proposed investments. Following the completion of the audit, any resulting recommendations will be included in a time-bound environmental action plan ("EAP") to be implemented over the next twelve years. Implementation of the EAP will be covenanted in the Loan Agreement. In parallel to this update Severstal will disclose locally a summary of the Project and the associated environmental issues. The Project is expected to result in significant energy efficiency improvements and approximately 600ktpa CO2 emission reduction. Severstal has developed an Environmental Management System obtained ISO14001 certificate in 2001. None. JSC Severstal, Chief of Energy Department, Mr. Trubchanin V.A. Russia, Vologda region, Cherepovets, Street Mira 30, Tel: + 8 8202 565169 Website: www.severstal.ru