Samara Metallurgical Plant

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The proposed $75mln project will partially finance modernisation and upgrade of two aluminium fabricating plants, Samara and Belaya Kalitva (Rostov region). The plants were recently acquired by Alcoa Inc. from RUSAL for $257 million. Alcoa plans additional investment to revamp the production facilities, IT and infrastructure development; as well as environmental and health and labour safety improvements. Alcoa Russia will become a fully integrated part of Alcoa’s global business by 2008, sharing its high standards of quality and manufacturing culture. The plants are the major part of Alcoa Inc’s recent investment into Russia, grouped under “Alcoa Russia”. The proposed project will help to create competition in the Russian aluminium fabricating sector, open new export markets for the Russian plants and introduce them to the stringent requirements necessary to supply the world’s leading aircraft, automotive and packaging manufacturers. The proposed project will contribute to the dramatic enhancement of product mix and quality, and implementation of the Environmental, Health and Safety programme will ensure Alcoa Russia’s compliance with the best international industrial manufacturing practices. OAO Samara Metallurgical Plant and OAO Belaya Kalitva Metallurgical Production Association specialise in aluminium fabricated products and supply automotive, aircraft, construction, and packaging industries. Alcoa Inc., the parent organization in the plants’ ownership structure, will implement the proposed project and provide necessary technical, managerial and financial support. USD 75 million senior loan with a tenor of up to 8 years will have an A/B structure, with up to USD 25 million syndicated to B-lenders. The 2005 budget for the project is USD 80 million, representing the first stage of a programme which will extend to 2008. Screening categories and rationale for classification The modernisation of the two plants is associated with a number of EHS issues, which can be readily identified, assessed and mitigated. Therefore, the European Bank of Regional Development (EBRD), has classified the project B/1, requiring an Environmental Analysis of the proposed investment programme and an Environmental Audit of the existing facilities. Information reviewed during the environmental appraisal A series of environmental investigations have been carried out on the two plants by Alcoa’s internal experts as well as independent consultants. Environmental assessment of the Project sites included laboratory analysis of soil and water samples, investigation of documents pertaining to emissions and discharges, assessment of operational controls and review of the environmental management programs. Alcoa Alcoa has high corporate EHS standards, which are being implemented at their facilities worldwide. Alcoa is a recipient of many external awards for environmental achievements and has been an element in the aluminium industry group of the Dow Jones Sustainability Index since 2001. It has recently been nominated one of the top three most sustainable corporations in the world based on the environmental, social and economic impacts of its business. Alcoa’s goal is to implement at the Russian plants corporate health and safety standards consistent with its world-wide standards. Key environmental issues and mitigation The environmental investigations identified several issues associated with the existing facilities as well as opportunities for environmental, health and safety and energy efficiency improvements. The identified issues relating to existing operations have been addressed in the agreed interim Environmental Action Plan (EAP). The EAP consists of a number of measures to reduce air emissions, water consumption and wastewater discharges as well as to improve energy efficiency, oil and chemical storage and handling and worker health and safety. As part of the EAP, a number of further investigations will be undertaken for developing a long-term EHS programme aiming at bringing the Company into full compliance with Russian EHS regulations and with EU environmental standards based on best available techniques. Disclosure of information and consultation Alcoa will carry out environmental assessments and public consultation in accordance with requirements of Russian permitting procedures for the modernisation programme. In the context of EBRD’s potential participation in the project, Alcoa has released locally this summary of the relevant environmental issues associated with the project and the mitigation measures. Monitoring Alcoa will measure and assess the EHS performance of the Russian plants in accordance with its corporate standards and Russian regulatory requirements. The Bank will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual environmental reports prepared for the project covering: (i) ongoing performance of project-specific environmental, health and safety activities as reflected in the results of periodic and quantitative sampling and measuring programmes, (ii) the status of implementation of environmental mitigation and improvement measures. The Bank’s representatives will also conduct periodic site supervision visits when deemed appropriate None. Website: http://www.alcoa.com