Viro

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The EBRD is considering providing up to EUR 40 million senior secured loan to finance the comprehensive modernisation of Viro Tvornica Secera, Croatia’s leading sugar producer with sales of EUR 102.1 million in 2007. The company is planning this modernisation programme in order to improve its cost competitiveness and energy efficiency in advance of Croatia’s anticipated EU accession. Alongside the modernization programme, the EBRD might finance a potential capacity expansion programme of the company. Corporate restructuring Viro will invest in the modernization of its production facilities, which will generate positive effects in the production process. The benefits will be generated by: (1) lowering operational cost through technological innovation, which will increase Viro’s processing capacity; (2) energy efficiency investments will result in a reduction of energy consumption of approximately 30%. In line with that, the Bank has carried an energy efficiency audit at the company’s factory site. Backward linkages and transfer of know-how The company works with small and medium size farmers, as well as cooperatives, supporting their activities through pre-financing of their needs, such as providing seeds, fertilizers, etc. Viro’s financial support is also associated with strong technical assistance and transfer of know-how to the farmers. The company has embraced a significant programme to enlarge the area under cultivation and to improve the yields. Viro has started collaborating with the LIZ Sugar Beet Institute in Germany to help improve the land efficiency and increase know-how with the sugar beet growers. As a result of this project, the company is planning to increase sugar beet yields from 7.3 t/ha to 10 t of sugar/ha within a three year period through efficient land management and farmer education. Viro is Croatia’s leading sugar producer, with sales of EUR 102.1 million in 2007. The company holds a 68% market share in Croatia and exports approximately 43% of its sales. The company processes about 80,000 tonnes of raw sugar and 60,000 tonnes of sugar from beet sugar per annum, and is HACCP certified. In June 2007, Viro was awarded the Halal certificate for sugar, thus becoming the first sugar factory in Europe with such a certificate. Up to EUR 40 million senior secured loan out of which EUR 20 million of the loan will be offered to B-Banks. Up to EUR 52 m Screening category and justification The project was screened as B/1 requiring an environmental due diligence consisting of an Environmental Audit of the existing sugar plant 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 visit to the company. During the due diligence meetings where also held with senior technical and production managers at the corporate and site levels. Viro operates the largest sugar processing facility in Croatia, which has been subject to a comprehensive modernization programme, which is currently being implemented with the main investments to be made in 2008 and 2009. The majority of the investments are intended to facilitate two main objectives: As a result the site expects to reduce unit costs, decrease energy consumption by up to 30% and also reduce dependency on cold weather in winter time by being able to faster process sugar beet during the campaign. CO2 emissions are expected to decrease by at least 20%. The environmental due diligence has confirmed that the plant is in compliance with National environmental standards and is in general compliance with European Union IPPC requirements as set out in the IPPC Reference Document on Best Available Techniques (BREF Note) in the Food, Drink & Milk Industries. The proposed project will further improve the environmental performance of the plant and allow for higher energy efficiency levels and future compliance with the IPPC Best Available Techniques (BAT) requirements. 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, 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 also establish a more formalised and structured stakeholder engagement programme. Implementation requirements None. Mr Damir Baric, Viro Tvornica Secera d.d. Email: damir.baric@secerana.hr