OSKOL ELECTROMETALLURGICAL PLANT

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A loan of US$ 110 million to Oskol Electrometallurgical Plant for the modernisation of an existing rolling mill and construction and installation of a building and related infrastructure for a new mill. The project consists of: (i) modernisation of existing rolling mill 700; (ii) construction of building and related infrastructure for mill 350; and (iii) installation of rolling mill 350. The project will provide support to the Russian manufacturing company in the process of restructuring, strengthen the international and domestic competitiveness of the Russian producer, introduce improvements in corporate governance and encourage the introduction of Western marketing and management skills. The borrower is the Oskol Electrometallurgical Plant (OEMK), the most modern steelworks in Russia producing high-quality rolled steel products. A loan of US$ 110 million (ECU 99.5 million) consisting of a term loan of US$ 100 million and a revolving working capital loan of US$ 10 million. The term loan will comprise an "A Loan" portion of US$ 70 million for the account of the EBRD and a "B Loan" portion of US$ 30 million for the account of participating commercial banks. The total project costs are estimated at US$ 576 million (ECU 521 million). The project has been classified as B/1, requiring an audit of the existing facilities and an Environmental Analysis of the proposed investment. OEMK is a relatively new plant. It was built between 1975 and 1982 according to the least polluting and most energy-efficient direct iron reduction process and electric arc furnace steel production. As OEMK has no sintering process, coke batteries or blast furnaces, the overall operations are much less polluting than typical for an integrated iron and steel work, and the plant is widely recognised as one of the cleanest and most modern plants in Russia. The environmental consultants found that the environmental awareness and appreciation of environmental, health and safety performance and liabilities of OEMK's management is high and as a result, many of the necessary monitoring and management systems are already in place. The company is making considerable investments in maintenance and renovation of environmental protection facilities and in other activities for continual improvement of its environmental performance. OEMK has developed an Environmental Action Plan to address the issues raised by the environmental audit and analysis. The implementation schedule has been agreed with the Bank and will be monitored closely. None