Project summary document

Project description
and objectives:

The project is for energy efficiency investments and working capital at ArcelorMittal Zenica. This will enable the client to implement crucial energy efficiency measures in restarting integrated steel making operations and will provide working capital needed to increase production levels. Most of the company’s products will be exported, leading to a significant increase in BiH’s total industrial exports. This will help further integrating the BiH economy in the European economy and earn export revenues for the country.

Transition impact:

ArcelorMittal’s investment in the Company is the largest FDI in BiH since the 1992-1995 war. As a result, the transition impact of the project will be significant for the country as a whole. Specific sources of transition impact would be:

• Restructuring
  The Company’s operations, including the commissioning new electric arc steelmaking, will be managed by ArcelorMittal who has a proven track record of significantly improving within a short period of time the operational practices at plants which it acquires, and developing new markets for them. ArcelorMittal maintains for all its operations a Knowledge Integration Programme which enables ArcelorMittal managers to share best practice management experience between plants belonging to the group. This will facilitate knowledge transfer to the local economy. A further element would be the energy efficiency measures which would help to reduce the energy intensity of the operations;
  
  
• Market expansion
  Under the purchase agreement, ArcelorMittal has agreed to restart integrated steel making at the site. This will mean a significant increase in output. Local suppliers to the Company such as utilities and railways, as well as the local iron ore mines that are being reopened near Ljubija, will benefit from increased business on commercial terms;
  
  
• Private ownership
  The acquisition of the BH Steel by Mittal Steel has transferred a major asset of the BiH economy to the private sector. The Bank’s participation in the operation will contribute to the success of this privatisation and provide a demonstration effect for other potential investors in BiH.

The client:

ArcelorMittal Zenica, a Bosnia and Herzegovina steel maker which is majority owned by ArcelorMittal Company N.V. the largest steel maker in the world.

EBRD finance:

Loan, EUR 25 million.

Total project cost:

EUR 160 million.

Environmental impact:

Screened B/1 (2003 policy).

The project involves the restarting of an integrated steel mill, which was temporarily closed down in 1992, without any increase of its previous production capacity, and the modernisation of a scrap-based electric steel mill. A significant part of the project is financing energy efficiency investments. The implementation of an Environmental Action Plan has been agreed with ArcelorMittal’s predecessor, Mittal Steel. The modernisation and restarting (Project ’Fenix’) suffered two years delays due to market conditions and the merger of Arcelor and Mittal. Steel making operations restarted in the middle of 2008. The implementation of the EAP experienced delays; however, apparently half of the EAP, which required project preparatory studies and management time have been implemented on time. In April 2009 independent environmental monitoring consultants verified the status of the implementation.

ArcelorMittal Zenica hired environmental and health and safety managers, commissioned consultants to conduct a BAT study following the requirements of EU IPPC Directive, developed and Environmental Management System which is being certified according to ISO 14001, developed a waste recycling plan, implemented an efficient hazardous waste management system, improved health and safety management and enforcement of using personal protective equipment, and improved emergency response plans and training.

A few items of the EAP will be implemented between 2009-2011

• Improve waste storage facilities at Raca.
• Implement an air monitoring system
• Separate industrial and sanitary waste waters and upgrade waste water treatment plant
• Implement a wastewater monitoring system
• Conduct investigation on soil and groundwater contamination
• Improve company community interaction process
• Monitor workplace environment and develop occupational health and safety management.

The implementation of these actions is delayed by the financial crisis, but according to an EBRD ArcelorMittal agreement, environmental and health and safety investments are treated as priority and as soon as production levels rise, the full programme will be implemented. The Bank increased the intensity of monitoring to quarterly reports and semi-annual monitoring visits.

Although during due diligence, the Omarska mine was not part of the project review by EBRD, after the start up of the integrated route the plant became the largest off-taker of the iron ore produced by ArcelorMittal’s Omarska mineThe Bank extended the scope of the independent monitoring audit to Omarska and shared its findings and recommendations with ArcelorMittal.

Technical
cooperation:

An energy efficiency audit has been performed which was financed under an existing framework contract, funded by the CEI, Central European Initiative (Italy).

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

Company contact:

Mr M.V. Kulkarni
ArcelorMittal Zenica
Tel: +387 32 467 001

EBRD contact:

Natalia Vassilieva, Operation Leader: vassilin@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