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EBRD helps Serbian copper mill restructure
€16 million for Bank’s first post-privatisation restructuring project in SCG
The EBRD is helping Serbia and Montenegro’s Sevojno Copper Mill complete the
overhaul it began after privatisation in 2004. A €16 million loan to East
Point Holdings Ltd (EPH), a Cyprus commodities-trading company which owns 35
per cent of the 1950s-built mill, will allow Sevojno to increase production
capacity and operational efficiency through the purchase and upgrade of
equipment.
At its peak in the 1980s, Sevojno turned out 65,000 tonnes a year of
semi-finished copper and brass-based products. But business was crippled
during the conflicts of the 1990s, and production dropped by more than 90 per
cent. Restructuring since privatisation has brought production back to 32,000
tonnes a year. Production costs per tonne have been trimmed and are expected
to fall further by 2007. Once EPH’s investment programme is complete,
Sevojno’s capacity should rise to 45,000-50,000 tonnes a year. The company
sells most of its products to countries in the European Union. Its target is
sales of €130 million by 2010.
EBRD First Vice President Noreen Doyle said this is the Bank’s first
post-privatisation restructuring project in Serbia and Montenegro helping
private investors turn a previously state-owned company into a successful
business. The EBRD is ready to support more investors with this type of
commitment, said Ms Doyle. Moreover, the authorities should encourage the
privatisation of other industries that can bring in much needed capital for
state coffers and attract more foreign investment to promote the country’s
transition towards a market economy, she added.
EPH deals primarily in grain and metals. Its relationship with the mill began
in 1995, when the plant was scarcely operational but EPH provided working
capital and helped Sevojno maintain limited operations. EPH bought its stake
as part of a consortium with Amalco, another Cyprus-based metals-trading
company. The two companies paid €3 million for 70 per cent of the mill. The
remaining shares are owned by employees and a government share fund.
The EBRD has worked with EPH since 1998, when the Bank made a loan to its
Romanian subsidiary, Silotrans.
Around €2 million of the current loan will be funded by the Italian Risk
Sharing Facility. This is a 2003 agreement under which the Italian government
co-finances small and medium enterprises and restructuring projects in Serbia
and Montenegro to provide the Bank with a risk-sharing mechanism.
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