Sinara Transport Machines

complete

The proposed project is an up to USD 65 million subordinated loan to the Company to: i) consolidate Lyudinovo Diesel Locomotives (LTZ), located in Kaluga region, into the Company’s holding structure, ii) finance installation of new equipment at LTZ and Ural Railway Engineering Plant (UZGM), located in Sverdlovsk region, and iii) finance energy efficiency projects identified by the EBRD at LTZ and UZGM sites. The financing will allow the Company to (i) undertake priority investment programme to enable serial production of main-line electric locomotives, (ii) optimize its capital structure, (iii) raise the priority of energy efficiency projects. The project will promote competition, support new and existing product development and contribute to the development of Russia’s infrastructure. The transition impact will also derive from adoption by the Company of the best corporate governance standards. OJSC Sinara Transport Machines, an open joint stock company, (the “Company”), holding and management vehicle for rail transport manufacturing assets of Sinara Group, a diversified investment management company headquartered in Ekaterinburg. Up to USD 65 million subordinated loan. USD 289 million. Screening category and justification The project was screened as B/1 requiring an environmental due diligence consisting of an Environmental Audit of the existing production facilities in the Sverdlovsk and Kaluga Oblasts and an Environmental Analysis of the proposed investment plan to ascertain future compliance with national and the EU environmental standards. Due diligence undertaken and outcomes The environmental due diligence was undertaken by an independent international environmental consultant and included site visits to the Company headquarters in Yekaterinburg as well as site visits to the production facilities . During the due diligence meetings where also held with senior technical and production managers at the corporate and site levels. The Company utilizes a number of operations, which can result in environmental impacts. These range from foundry and forge operations to welding and painting. Many of the operations require skilled labor and precision engineering. Some of the sites have a long history and the main assembly shop will regenerate old and unused facilities. The Company is engaged in a significant investment programme to modernize the existing facilities. The environmental due diligence has confirmed that the current and planned operations are in compliance with National environmental standards and the planned investment programme will commission existing capacity and rationalize production. The new investment project is structured to meet EU environmental standards, albeit some of the existing operations would not fully meet state-of-the-art technology. The Bank is working with the Company through the implementation of the proposed Environmental and Social Action Plan (ESAP) to improve future operations and ensure compliance with international best practices. Overall, the proposed project will further improve the environmental performance of the plants and allow for higher energy efficiency levels and future compliance with best international environmental standards and practices. Based on the environmental due diligence an Environmental and Social Action Plan (ESAP) was developed and is being agreed with the Company. This includes the development of a systematic approach to environmental issues at the Company and individual site level, including the implementation of an environmental, health and safety management system as well as further investments to reduce energy use as well as improve the abatement of air emissions and wastewater in line with best international practice. The Company will undertake additional BAT Assessment of existing operations once the ongoing production restructuring has been implemented and production reaches planned levels to review additional opportunities for further energy efficiency and environmental improvements. Implementation requirements As part of the Project, EBRD has arranged an energy efficiency audit to help the Company assess potential for improved energy efficiency. The audit was conducted within EBRD’s donor-funded Industrial Energy Efficiency Programme. Evgeny Ivanovich Gritsenko Deputy General Director ZAO Sinara Group Tel. (343) 310-3300