UCSF: Astarta WC Support

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The EBRD is considering a senior secured term loan of €20 million to finance working capital needs of the company. This project is part of the Ukrainian Corporate Support Facility which will address the reduced availability of external funding in the country and restore confidence and appetite for future projects in Ukraine among foreign and domestic investors. Astarta Group is one of the largest vertically integrated agricultural companies in Ukraine, operating nine sugar plants, c. 245,000 ha of leased arable land, as well as dairy farms. Up to €20 million (equivalent amount in USD) secured loan to Astarta is for working capital purposes. US$480 million in working capital needs. Category B. Environmental and social issues associated with providing financing to an existing sugar Company, to whom the Bank has provided financing in the past, can be readily assessed as part of the Bank’s Environmental and Social Due Diligence (ESDD). The Bank is not financing any new investments. The Company operates a number of sugar processing facilities and associated agricultural farms as well as dairy farms, which have been gradually modernized. Many of these facilities have been re-commissioned by Astarta in recent years and are currently being refurbished.   Environmental and social issues that Astarta addresses, range from use of chemicals and waste management at the farms to efficient use of energy and water, air emissions and wastewater discharge. Between 2008 and 2012, the Bank as well as FMO approved a number of tranches of financing to the Company for energy efficiency and environmental improvements. The Bank has agreed a comprehensive Environmental and Social Action Plan (ESAP) with the Company, which was amended in 2012. Overall, Company is well managed and is implementing an Environmental, Health and Safety Management System required under the existing ESAP.  As part of the current due diligence, the Bank has confirmed that the Company is in compliance with National legislation and is on track with the implementing the requirements of the existing ESAP.  A key area of improvement is associated with health and safety standards, which is being addressed by the Company. As part of the ESAP implementation the Company undertook detailed BAT Assessments of its existing facilities and is developing a five year investment program to address key EHS issues. This investment program is being implemented. Although the ongoing investment programme will allow for environmental improvements and energy efficiency gains to be made at the existing sugar plants, these will not achieve compliance with EU IED BAT (Best Available Techniques) guidelines. The sugar plants are located in rural areas and provide important social infrastructure and employment for rural communities. Compliance with the EU standards, if immediately required, would mean centralizing production, resulting in significant social impacts by closing down the old plants and relocating production. Therefore, the plants will not be able to meet all EU IED requirements in the short to medium term, and the Board approved derogation from the Bank's Environmental and Social Policy in 2012 is sought to be re-approved. Nevertheless, the on-going investment program will have a significant overall environmental and social benefit and would constitute a BAT complaint investment. The Bank is working jointly with FMO in monitoring the project and will jointly assist the Company with the planned investment program derived based on the BAT Assessment as well as implementation of an EHS management system. A join visit was undertaken in 2013 and a further monitoring trip is planned for 2014. Evgenia Pirog Credit manager, Finance Department Tel: +38 044 593-11-05