The project will construct and operate an on-site air separation plant to upgrade the quality and reliability of oxygen and other industrial gases supplied to Severstal and to improve energy efficiency. Air Liquide will provide managerial and technical know-how to the JV and Severstal will ensure a long-term off-take for produced oxygen and other industrial gases from the newly created company. This is consistent with the outsourcing arrangements that Air Liquide operates around the world.
The additional project (op id 41626) starting in 2010 includes construction and operation of an additional on-site air separation plant to substantially upgrade the quality and reliability of oxygen and other industrial gases supplied to Severstal and to improve energy efficiency. The additional project replicates the main project completed in 2007 in all major parameters.
- Demonstration of new replicable behaviour and activities of a major Russian steel company: Severstal will serve as an example of restructuring in the Russian steel sector. Co-operation with leading global companies is an important element in Severstal’s business strategy. Outsourcing Severstal’s air separation production to Air Liquide – a leading global supplier of air separation technology, processes and services will further promote this process and serve as an example to other major Russian steel producers.
- The proposed project will introduce the most advanced technology worked out by Air Liquide for industrial gases production and supply, providing a high-profile model for the transfer of modern technology and know-how into a major Russian industry. There will also be significant associated skill transfers in terms of quality management, energy efficiency and environmental performance from the strategic investor.
The transition impact of the additional project (op id 41626) starting in 2010 is as follows:
Deepening the demonstration effect of new replicable behaviour and activities of a major Russian steel company: Severstal will serve as an example of restructuring in the Russian steel sector. Co-operation with leading global companies is an important element in Severstal’s business strategy. Outsourcing more than 50% of Severstal’s needs in industrial gases to Air Liquide – a leading global supplier of air separation technology, processes and services - will further promote this process and serve as an example to other major Russian steel producers.
The additional project will further promote sustainable energy investments in Russian industries and is expected to lead to further energy efficiency improvements and carbon emission reduction.
ZAO Air Liquide Severstal Joint Venture set up by Air Liquide SA (75%) and OAO Severstal (25%).
Air Liquide SA is a leading international industrial gases supplier and OAO Severstal is a major Russian integrated steel and rolled products producer.
Up to €72 million senior long term loan comprising of A-Loan of up to €36 million, B-Loan of up to €36 million syndicated to the commercial banks.
Additional project (op id 41626) in 2010: up to €15 million senior long term loan.
Additional project in 2010: €47 million.
Environmental classification and rationale
The project is categorised B. The construction of an air separation plant is associated with a number of site specific issues, which can be readily identified, assessed and mitigated through measures as defined in the Environmental and Social Action Plan.
Key environmental issues and mitigation
Environmental issues associated with the operation of an oxygen plant are not significant, notably as this will be a new installation constructed within the existing steel plant complex, employing state-of-the-art technology. The plant will be operated in accordance to Air Liquide’s environmental best practices, which are based on EU environmental standards and requirements. The location is entirely within the current boundary of the Severstal facility and no extension to any Sanitary Protection Zone is required. Noise and vibration, which are normally associated with such plants, will be mitigated at the design stage and given the installations location will not affect the background levels. All cooling water will be recycled. Waste oil will be the only liquid effluent and this will be handled at Severstal’s oil regeneration facilities. These measures are aimed to ensure that the environmental issues will be sufficiently managed to prevent or minimise impacts on staff and local population as well as on the environment.
Given that the plant will rely on the operation of the Severstal steel plant, a top level review of the steel plant was also undertaken. The steel plant has generally been meeting all local and regional environmental standards and is in compliance with Russian regulations. The plant has implemented an environmental management system and has been certified according to ISO 14001.
The project will allow for significant environmental opportunities, mainly through energy efficiency at the steel plant. The new installation will replace old unit that was characterised by low efficiency. The new plant will allow for energy saving of about 4.8MW and also benefit from the existing project through CO2 emissions reduction of up to estimated 100,000 tons of CO2 over the next several years. The new installation will be part of an overall modernization program at Severstal.
Summary of Environmental Action Plan
The Company will be required to adhere to Russian and EU environmental, health and safety regulations and standards. All relevant permits will need to be obtained during the construction period and prior to commissioning the plant. As all environmental protection measures have been incorporated in the project structure, there is no need for a stand alone Environmental Action Plan.
Disclosure of information and consultation
In the context of the EBRD’s participation in the project, the Company will release locally a summary of relevant environmental issues associated with the project and summarise mitigation measures, action plans and other initiatives agreed.
Monitoring and reporting
The Company will monitor the environmental impact of its operations in accordance with national law and regulations. The Bank will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual environmental reports prepared for the project covering:
(i) ongoing performance of project-specific environmental, health and safety activities as reflected in the results of periodic and quantitative sampling and measuring programmes, and
(ii) the status of implementation of environmental mitigation and improvement measures. The Bank’s representatives will also conduct periodic site supervision visits when deemed appropriate.
The additional project is categorised B (2008). The issues associated with this additional project are site specific and can be managed and/or mitigated through measures as defined in the Environmental and Social Action Plan (ESAP) being drafted for the implementation and operation of the Project works. Environmental issues associated with the operation of an oxygen plant are not significant, notably as this will be a new installation constructed within the existing steel plant complex, employing state-of-the-art technology. The plant will be operated in accordance to Air Liquide’s environmental best practices, which are based on EU environmental standards and requirements. Monitoring of the client’s environmental and health and safety management performance on an existing plant subject to EBRD funding (DTM 35545) shows that the client has the capability of managing operations to the Bank’s Performance Requirements.
The location of the additional project is also entirely within the current boundary of the Severstal facility and no extension to any Sanitary Protection Zone is required. The Company is committed to maintaining compliance with the permitting and operational requirements that apply in Russia.
Victor Budygin, CFO, Air Liquide Russia
Voronsovskaya str. 17, Moscow
109147, Russia, Moscow, Voronsovskaya str. 17
Tel: +7 495 641 2898; Fax: +7 495 641 2891
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