Project summary document

Project description
and objectives:

An equity investment of DM 25 million (ECU 12.76 million) in Merkur d.d.

The project's core objectives are to: (i) allow Merkur to expand its domestic retail network; (ii) strengthen the company and allow it to remain a market leader able to sustain foreign competition; (iii) reinforce its capital structure; and (iv) prepare the company for a successful introduction on the Ljubljana Stock Exchange.

Transition impact:

(i) Development of the distribution and merchandising infrastructure in Slovenia. The project is expected to enhance competition both in the project sector and in upstream sectors. (ii) Demonstration of ways of financing activities in Slovenia. External equity finance for Slovene-owned non-financial businesses is still new in Slovenia. The present facility would be the largest so far in this category, and the Bank's involvement would provide a positive signal to potential foreign investors.

The client:

Merkur d.d. is a Slovenian wholesaler and retailer of technical products, construction material, ferrous products and electrical goods. Merkur was transformed into a joint-stock company in 1994 and employs 1,312 people. With sales of DM 446 million in 1996, Merkur is the largest trading company in this sector in Slovenia. The net profit was DM 7 million in 1996.

EBRD finance:

An equity investment of DM 25 million (ECU 12.76 million) alongside a group of commercial banks, which will provide DM 30 million in long-term financing.

Total project cost:

DM 55 million (ECU 28 million) to finance the construction of four new stores and to provide a permanent working capital facility.

Environmental impact:

The project was screened as B/0, requiring an environmental analysis of the proposed development. The project will introduce modern operating practices, which are energy efficient and environmentally friendly.

A detailed review of the company's current environmental, health and safety practices was carried out. The Company Business Plan included an assessment of the ecological aspects of the investment and detailed the measures that are planned to reduce adverse environmental impact.

The company's facilities comply with relevant Slovenian environmental, health and safety regulations and with the conditions stipulated by their environmental permits. No environment-related fines have been imposed on any of the company's facilities. The company's wholesale operations have obtained ISO 9001 certification for quality.

The company has a designated environmental manager in the technical division, who assumes responsibility for all environmental aspects of day-to-day operations. In addition, the construction department coordinates environmental issues in granting permission, planning and design for new stores.

Further strengthening of the environmental management structure will be pursued to reinforce organisation and to respond to new issues that may arise, and also to help on the adoption of an integrated Environmental Management System, which ensures full compliance with Slovenian and European Union environmental standards.

The company appears to be continuously developing and implementing environmental improvement programmes. It has switched its facilities to natural gas as an energy source; it has a recycling programme for packaging wastes and internal procedures for the management of underground fuel storage tanks which are at present at some of its sites.

The Environmental Action Plan for this project covers two main issues:

• developing a programme for upgrading the cooling systems, which will carefully examine the choice of a coolant and will exclude, in accordance with relevant international agreements and EU requirements, systems based on ozone-depleting substances; and
• developing and implementing a corporate Environmental Management in line with international standards.

Technical
cooperation:

Assistance is provided by the Bank's TurnAround Management programme.

For consultant opportunities for projects financed by technical cooperation funds, visit procurement of consultants.

Company contact:

EBRD contact:

Nadja Cvek, Operation Leader: cvekn@ebrd.com

Business opportunities:

For business opportunities or procurement, contact the client company.

General enquiries:

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168; Fax: +44 20 7338 7380
Email: projectenquiries@ebrd.com