SEVERSTAL PEFF

complete

The project consists of the provision of direct pre-export working capital financing for a leading Russian steel producer and exporter. The EBRD is considering providing medium or long-term debt financing for capital expenditure in a follow-on financing, which is at an earlier stage in the Bank’s approval process. The project aims to encourage the re-opening of direct bank trade financing as opposed to indirect trade financing by export buyers for Russian companies that are making progress towards good trade practice, improved corporate governance, sound business practices and transparency. The project will lead to improvements in environmental and health and safety compliance. It will also have a demonstration effect, showing that a company such as Severstal, which made considerable progress towards improved corporate governance and transparency, can regain access to regular pre-export financing despite the current difficult environment in Russia. Assuming that Severstal achieves a satisfactory performance under the pre-export financing facility, further impact on the transition will be achieved through the capital expenditure financing. OAO Severstal is the largest Russian integrated steel and rolled product manufacturer and operates as a full-production-cycle steel mill, located in Cherepovets, Vologda region, Russia. The financing consists of a three-year working capital facility structured as a revolving pre-export loan financing against the letters of credit from banks acceptable to the EBRD. The facility will be syndicated to commercial banks. US$ 35 million (approximately EUR 35 million). The project will introduce low-cost improvements in environment, health and safety. More wide-ranging improvements would be facilitated through a contemplated capital expenditure facility. The project has been screened C/1, requiring an environmental audit. This was carried out by international consultants, and recommendations for an Environmental Action Plan (EAP) have been presented to the EBRD to improve environmental, health and safety practices at the mill. Severstal committed itself to the implementation of the short-term EAP. Technical co-operation funding may be sought/provided for an enhanced environmental monitoring system for the city of Cherepovets.