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EBRD continues support to ISTIL Ukraine steel mill
$85 million facility to meet working capital needs, generate carbon credits
The EBRD is providing an $85 million financing facility to ISTIL Ukraine, the
only modern mini steel mill in Ukraine based on an electric arc furnace and
continuous casting technology. The facility consists of a $40 million
revolving loan for working capital needs and a $45 million term loan for
energy efficiency improvements, Quality control systems installation and debt
refinance. Both loans have an A/B structure, with the B loan, which has been
syndicated to commercial banks, totalling up to USD 50 million.
ISTIL Ukraine, which produces steel billets and bars that are sold to
re-rolling mills, seamless pipe manufacturers, machine-building, automotive
producers and steel traders world-wide, has enjoyed successful cooperation
with the Bank since 2001.
Energy efficiency measures being implemented by ISTIL Ukraine include the
installation of a new oxygen plant, a steam generating unit and a new
transformer for the electric arc furnace. These measures are expected to
improve overall energy efficiency of the company and cut its CO2 emissions.
ISTIL sold EUR 3 million worth of carbon credits to the EBRD (a procedure
envisaged by the Kyoto Protocol) for the account of the Netherlands. It would
be the first such project in the steel sector in the Bank’s countries of
operations.
In the context of the carbon credits project the Netherlands-EBRD Carbon Fund
commissioned a study on a standard baseline for Joint Implementation Projects
in the field of energy generation and energy efficiency. This study will make
it easier to determine the amount of carbon credits generated by such projects
in Ukraine and hence will reduce the cost for preparing future carbon credit
transactions.
Dr. Mohammad Zahoor, Chairman of ISTIL Group said: “We have been dealing with
EBRD since 1999 and value our warm relationship. It is especially welcome that
the $85 million credit was arranged in less than three months, which is faster
than with most commercial banks. It has always been a privilege for ISTIL to
have the continuous support of the EBRD in improving its efficiency, quality
control and environmentally friendly operations. We were already proud to be
the first recipient of EBRD financing in the Ukrainian steel sector but today
we are even more honoured to be the first ever steel sector company to sell
carbon credits under the EBRD/Dutch facility. Cooperation with the EBRD has
also enhanced accountability and transparency, which in turn helps in creating
a more predictable business climate for foreign investors in the Ukrainian
capital market".
Olivier Descamps, EBRD Business Group Director for southern and eastern
Europe, said this carbon credit transaction would be a good example for
Ukraine and has the potential to demonstrate to other steel companies in the
country the financial and environmental benefits from energy efficiency
investments. We are also happy to provide continuous support to our
long-standing client ISTIL Ukraine in its development programme, he added.
The European Bank for Reconstruction and Development is the biggest financial
investor in Ukraine. As of 31 December 2006 it had committed €2.87 billion
through more then 130 projects.
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