Viktor Lenac d.d.

completed

- 3 - International Finance CorporationA Member of the World Bank GroupInternational Finance CorporationA Member of the World Bank GroupEnvironmental Review Summary (ERS)Project Name Croatia - Viktor Lenac Region Central and Southern Europe Sector Manufacturing Project No. 009655 1. The purpose of this project, of up to US$ 92.5 million, is to expand Viktor Lenac''s operations in offshore construction and ship conversion. 2. Established in 1896, Viktor Lenac ("VL" or the "Company") is located on the Adriatic coast in Rijeka, close to Italy. It is the only one of Croatia''s six large shipyards which is privately owned and managed, and is the only heavy industrial company listed on Tier 1 of the Zagreb Stock Exchange. VL was privatized in 1993. In the ensuing six years, the Company''s management has transformed it into a productive, profit-making enterprise, reducing the work force by half, lowering inventories and utilities costs, and upgrading equipment. The Company now regularly and successfully competes with the best Western European shipyards, with over 90% of its revenues invoiced in US dollars. VL is the only shipyard in the Mediterranean and the Black Sea with both ISO 9002 (quality) and ISO 14001 (environmental) certification. It is also certified to perform repairs for the U.S. Navy.3. This is a category B project according to IFC’s environmental review procedure because specific impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental information submitted by the project sponsor, and the technical appraisal and site review completed by IFC’s technical consultant. The following potential environmental, health and safety impacts of the project were analyzed:· prevention and control of air emissions;· water quality management· solid waste management· occupational health and safety· fire prevention and emergency response· redundancy of staff following privatisation· possible economic displacement.4. The sponsor has presented plans to address these issues and demonstrate the proposed project will comply with applicable governmental and World Bank requirements. Environmental issues relate principally to the expansion of the marine constructions production facility, not the existing entity. The information provided about how these potential impacts are addressed in the development of the project is summarized in the paragraphs that follow. 5. Air Emissions: Air emissions will be minimal. There are no power generation facilities or boilers on site (power is drawn from the grid). The metal working areas will be equipped with a filtration system for fugitive emissions. A nearby stone cliff face (owned by VL) will be partly quarried, with the stone being used to extend the shoreline of the site. This process, and its impact on local air and water quality, will adhere to the high environmental norms already maintained by the company in its existing operations.6. Water Quality: On its own initiative VL has been meeting and surpassing high environmental standards - the beach 800 meters from the shipyard is clean enough that locals swim there regularly. Also, on its own initiative and for partly environmental reasons, VL has largely switched to high pressure water, instead of sand blasting, to clean steel sheets. Process and stormwater discharge is to the municipal sewer for which the company has the appropriate permits.7. Solid Waste Management: Waste is disposed of to certified and authorized private contractors and a municipal landfill. Oil is recycled. 8. Occupational Health & Safety: The company is implementing occupational safety and health measures appropriate for the size and nature of the operation. Health and safety measures meet OHSAS 18001 standards currently recognized by the British standards institute.9. Fire Prevention and Emergency Response: The company has adequate fire prevention and control capabilities and emergency response procedures.10. Staff Redundancy & Possible Economic Displacement: The Company has demonstrated strong civic responsibility in its support (financial and otherwise) of the local community. Its training programs target both employees and contractors; in 1997 and 1998 these programs recorded a total of 2000 participants. Indications are that employees made redundant following privatization were treated fairly and in accordance with the law. 11. Based on its review of available information regarding potential environmental impacts and proposed mitigation measures, IFC concludes that, the proposed project is being designed to meet Government of Croatia requirements, and World Bank policies, and environmental, health and safety guidelines.12. IFC will monitor ongoing compliance with World Bank policies and guidelines during the life of the project by evaluating monitoring reports submitted annually to IFC by the sponsor and by conducting periodic site reviews during project supervision.