Port of Bar Privatisation

Country:

Montenegro

Project number:

49335

Business sector:

Transport

Notice type:

Private

Target board date:

13 Dec 2017

Status:

Passed Structure Review, Pending Final Review

PSD disclosed:

10 Nov 2017

Project Description

A senior corporate loan to Port of Adria, formerly known as Container Terminal and General Cargo, in the amount of up to EUR 20 million in an A/B loan structure, to co-finance capital expenditure and labour restructuring privatisation commitments.

Project Objectives

The project aims to support the sponsor in fulfilment of its privatisation commitments, in particular with regard to its investment and social programmes. It facilitates investments in port infrastructure by the private sector in line with best European industry norms in terms of regulation, operational practice and service provision, allowing the company to operate on a transparent and commercially viable basis.

Transition Impact

The transition impact of the project is expected to come from (a) Competitive quality through privatisation in a country with minimal private sector involvement in infrastructure, and achievement of cost reduction and profitability and (b) Well-governed quality through the introduction of ISO certifications in quality, environmental and occupational health & safety areas.

Client Information

PORT OF ADRIA

The borrower is JSC Port of Adria, formerly known as Container Terminal and General Cargo, which operates terminals in the Port of Bar, Montenegro. The company's majority shareholder is a Turkish port operator Global Ports Holding, which acquired 64 per cent of the company's shares in November 2013 in an open privatisation process. Port of Adria is a holder of a 30-year concession right to operate the container and general cargo terminals of the Port of Bar.

EBRD Finance Summary

EUR 20,000,000.00

A senior secured loan of up to EUR 20 million, structured as the A/B loan.

Total Project Cost

EUR 30,000,000.00

The total project cost is estimated to be up to EUR 30 million, expected to be co-financed by the sponsor and a commercial co-lender.

Environmental and Social Summary

The project was categorised B in line with the 2014 Environmental and Social Policy. The project includes the purchase of new equipment, upgrade of existing quay wall and a social programme, related to the ongoing reduction of the workforce and a comprehensive training programme in health and safety, operational excellence and commercial/corporate identity may result in environmental and social impacts, which can be readily identified and mitigated through application of relevant environmental and social management practices.

The EBRD commissioned environmental and social due diligence (ESDD) which was carried out by independent consultants in 2015 and updated in 2017. ESDD reviewed potential environmental and social impacts related to all project components and current environmental and social practices within the port, through interviews with the company management, staff and workers representatives and the audit of port activities. An Environmental Impact Assessment (EIA) as per national legislation has been prepared for the quay wall reconstruction which resulted in a positive decision being granted by the Ministry of Environment in 2016.

ESDD confirmed that the reconstruction of the quay wall and purchase of equipment will result in limited and localised environmental (dust emissions, noise emissions, potentials for spill of hazardous substances, waste generation) and health and safety risks (increased heavy vehicles traffic, construction works by the water). These will be addressed  through the implementation of mitigation measures within the national EIA and associated permit requirements, implementation of the Project Environmental and Social Management Plan incorporating detailed ESDD recommendations; preparation of a Transport Management Plan, implementing detailed requirement for Environment, Health and Safety (EHS) management of works from the general contractor, through contract documents, and appointment of a qualified EHS construction supervisor. The port and project area are not directly located within a designated nature protection area. The nearest sensitive area for biodiversity is the Ratac Peninsula Terrestrial Nature Reserve situated approximately 5 km to the north west of the project area.

The port operations are largely compliant with Montenegrin environmental and social regulations which have been transposed from applicable EU Directives, however further efforts are required in the areas of: health and safety management, waste management, storage and labelling of hazardous materials including hazardous wastes. Monitoring of waste water discharges is needed to meet both national and EBRD requirements. Following the 2013 privatisation, the company is implementing an integrated management system (covering quality, environment and health and safety) aligned with the corporate systems of its sponsor, Global Ports Holding. The ESDD found that strengthening of the internal team with relevant EHS professionals is required, in order for the company to have the capacity to carry out the project in line with EBRD Performance Requirements. The company has committed to carrying out a greenhouse gas and climate change assessment, developing energy efficiency plans, developing an emergency preparedness and response plan, and a number of health and safety actions, such as: establishing a health and safety committee and monitoring programmes, improvements in the use of personal protectice equipment, management of the lifting equipment, and carrying out third party life and fire safety audits.

The workforce at the Port of Adria has been in the process of restructuring since 2010, when in preparation for privatisation, the workforce was reduced from 1111 employees to 585 (solely through voluntary means, including early retirement and voluntary termination by mutual consent). Further five voluntary redundancy phases (as part of the social programme) were undertaken between 2014 and 2016 leading to further reduction in staff numbers to circa 340 in 2017. A plan for further reduction of the workforce has not yet been formalised by the Port of Adria. Following any decision to consider compulsory retrenchment, the company will act according to provisions of the Montenegrin legislation, EBRD Performance Requirement (PR) 5 and EBRD retrenchment guidelines. This will include: timely notification of trade unions, the Employment Agency of Montenegro and the EBRD, preparation of a draft retrenchment plan in line with EBRD PR2 (and related guidance note) to form the basis for consultation.

A detailed Environmental and Social Plan (ESAP) was developed to address findings of the ESDD and has been agreed with the company. In addition to the environmental and social mitigation measures and management commitments described above, the ESAP addresses implementation of the Environmental and Health and Safety Management Systems, development, formalisation and communication of the company's human resources policies and revisions to the company's rulebook addressing PR2 requirements for a non-discrimination policy and workers' grievance mechanism. The project will also need to develop a public grievance mechanism and implement a Stakeholder Engagement Plan.

The Bank will monitor the project through review of Annual Environmental and Social Reports and monitoring site visits as required.

Technical Cooperation

None.

Company Contact Information

Mr. Sedat Kara
sedat.kara@portofadria.me
+382 30 301 140
+382 30 301 105
https://www.portofadria.me/
Obala 13 jula bb, 85000 Bar, Montenegro

Mrs. Ferdag Ildir
Telephone: +90(212)244 4440
Website: http://www.globalportsholding.com/
Email: ferdagi@globalportsholding.com
Fax: +90(212)244 6047
Rihtim Caddesi No: 51 Karakoy, 34425 Istanbul, Turkey

Mr. Cevdet Akcali
Telephone: +90(212)244 6000
Website: http://www.globalportsholding.com/
Email: cevdeta@global.com.tr
Fax: +90(212)244 6161
Rihtim Caddesi No: 51 Karakoy, 34425 Istanbul, Turkey

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