Garadagh Expansion

Project Description

The EBRD is considering arranging the financing of Garadagh Cement OJSC modernisation and expansion. The company is planning to increase clinker production capacity from 2,616 tpd to 4,000 tpd and annual cement production capacity from 1.1 mt to 1.7mt, without clinker imports. The plant is located approximately 35km south of Baku, the capital of Azerbaijan. The financing will be drawn down during the construction period from mid 2009 through the first half of 2011, when commissioning of the new kiln is expected.

Transition Impact

The project will achieve significant energy savings through the use of dry technology (in excess of 50% reduction of energy use per unit of clinker produced). The introduction of state-of-the-art technology will provide the opportunity for a massive transfer and upgrading of skills. The EBRD loan will support a company that pioneers high corporate governance and business standards in a challenging environment. As the largest foreign direct investment outside the oil and energy sectors in Azerbaijan, the project should have a demonstration effect for other potential private sector investors. It is geared to attract co-financing from commercial banks in amounts and maturities not yet achieved outside the oil sector in Azerbaijan.

The Client

Garadagh OJSC is the largest cement and sole clinker producer in Azerbaijan. Holcim, a leading global supplier of concrete and cement based in Switzerland, acquired a controlling stake in Garadagh privatisation in 1999. Today it owns 69.4% of the company’s share capital and provides managerial, technical and commercial resources. The project implementation under a turnkey contract is directly supervised by Garadagh.

EBRD Finance

EUR 170 million structured corporate loan with a senior A/B loan of EUR 150 million, of which approximately 50% will be offered to commercial banks (B lenders), and a EUR 20 million subordinated C loan for EBRD’s account. An additional EUR 30 million loan subordinated to all bank debt is to be provided by Holcim.

Project Cost

Approximately EUR 330 million.

Environmental Impact

Environmental classification and rationale

The project has been screened A/1, requiring an environmental and social impact assessment (ESIA) in line with the Bank’s Environmental Policy (2003) and Public Information Policy. The project is also subject to Azeri EIA requirements.

Due diligence undertaken and outcomes

An Environmental, Social Impact Assessment was undertaken of the dry cement plant project by an independent international consultant. The project has also been subject to local permitting requirements. The Bank has undertaken past due diligence of the site as part of its previous investments with the company. The construction of a new dry cement plant that replaces the current wet technology will have significant environmental and energy efficiency gains. This was confirmed by the Bank’s environmental and social due diligence and is presented in further detail in the company’s ESIA disclose documentation.

The new cement plant will be designed in line with best international practice and appropriate environmental and social management systems are to be implemented during the construction and operation phases of the Project. The project has also been structured to meet European Union Integrated Pollution and Prevention “IPPC” Directive, BREF Note for Cement and Lime Manufacture and the IFC EHS Guidelines for Cement Manufacture. The project will include appropriate dust and NOx abatement, meeting both Azerbaijan’s and EU environmental standards.

Garadagh Cement will operate the new cement plant and associated quarries in compliance with Azeri laws and regulations as well as in accordance with EU environmental standards and IFC EHS Guidelines. An environmental management system and continuous monitoring will be incorporated into day-to-day operations of the cement plant.

Disclosure of information and consultation

The Project is subject to a public consultation and a disclosure plan (PCDP) that has been developed and approved by the Bank.
Disclosed materials include:

• ESIA Non Technical Summary in Azeri and English
• Environmental and Social Impact Statement, Main Report plus appendixes in Azeri and English
• Public Consultation and Disclosure Plan (PCDP) in Azeri and English

The materials are available in hard copy at the following locations in Azerbaijan:

• Garadagh Cement" OJSC; Sahil Settlement, Salyan Highway,Baku AZ -1083, Azerbaijan. Contact : Mr. Nariman MantashevQAOHSSE Manager . Tel : (994 12) 441 88 88 Ext.5-91 E-mail: Nariman.Mantashev@garadagh.com
   
• Mrs Elmira Aliyeva 012 446 16 14 and Mr Etibar Imanov 050 465 75 62, 012 446 18 00 – Sahil settlement
   
• Mr Huseyn Babayev 012 446 78 00, 050 362 14 60 – Umid settlement
   
• EBRD Resident Office in Baku; Landmark I, 4th Floor 96 Nizami Street; AZ1010 Baku Azerbaijan; Phone +994 12 497 1014; Fax: +994 12 497 1019; Head of Office: Francis Delaey; Contact: delaeyf@ebrd.com

The EIA package and Executive Summary have also been released for public review by the project sponsor on its website www.garadagh.com and released locally.

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 Bank will undertake monitoring of the Project, inclusive of site visits by Bank staff as well as independent audits and an additional commissioning audit once the plant has been constructed.

There is an Environmental and Social Impact Assessment available for this project.

Technical Cooperation

None.

Company Contact

Horia Adrian, General Director
E-mail: Horia.adrian@garadagh.com

 

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