Project number:


Business sector:

Natural resources

Notice type:


Environmental category:


Approval date:

25 Nov 2003



PSD disclosed:

07 Oct 2003

Project Description

Strengthening long term KO viability and competitiveness through:
  1. Efficiency (both energy and operational) improvements in the Company's existing operations, representing approximately 20% of development plan.
  2. Balance Sheet restructuring through the reduction of short term debt, representing approx 20% of development plan. The Bank's financing will also enhance KO financial standing and resources for the development of a second mining pit (Korpanga) located in the vicinity of the Company's existing operations.

Transition Impact

  • Restructuring of the company. Facility will assist KO in its restructuring to focus on its core business and divesting its non-core assets. 
  • Transparency and corporate governance. Severstal will adopt a corporate governance charter during the KO facility availability period, which will further strengthen Severstal's corporate governance. KO is also in the process of preparing IAS statements specifically to satisfy Bank requirements. 
  • Regional effects - KO is the leading enterprise in the area and contributes 25% of the local budget of the Republic of Karelia. The Project will help improve efficiency, thus ensuring long term survival of this regionally important industry. 
  • Greater competition in the Russian mining sector: Development of the mine will reduce KO's costs and will help raise both KO and Severstal competitiveness in this sector in Russia. 
  • Export generation: As KO exports approx. 40% of its output this investment will allow KO to maintain its export competitiveness in an area where the country has a good comparative advantage as one of the main iron pellet exporters. 
  • Environmental effect: The Bank will create a strong incentive for further environmental improvements to fulfil the EAP satisfactory to the Bank. KO is in the process of implementing an Environmental Management System (ESM) obtaining an ISO 14001 certificate by the end of 2004. 
  • Severstal support: The sponsor in the project (Severstal) has been a frontrunner in terms of corporate governance in the metal sector. Continued support for the company can be seen as a reward for this track record

The Client

Karelsky Okatysh (KO), a Company focused on the production of iron pellets, located in the Karelia region of Russia, whose ownership is 57.20% Severstal (through OAO Severstal-Resurs), 22.80% individual investors and employees and 20% local government. The facility will benefit from strong Severstal support.

EBRD Finance

US$ 60 million (€ 53.4 million equivalent) senior amortising loan (the loan) including A loan of US$ 45 million and B loan of US$ 15 million.

Project Cost

US$ 147 million (€ 130.8 million equivalent)

Environmental Impact

The project has been screened B/1 given potential environmental, health and safety risks and liabilities associated with past and current operation of the manufacturing facilities, particularly issues related to dust emissions, effluent discharges and waste from refractory production. Environmental due diligence has been carried out on the project and on the company and an Environmental Action Plan has been developed to address issues of non-compliance.

Technical Cooperation


Company Contact

Mr. Mikhailov Oleg Yurievich, CEO, 
29 Zvezdnaya St.,
Republic of Karelia , 
186930, Russia
Tel.: +7 (81459) 22511 
Fax: +7 (81459) 22713 
E-mail: mihailov@kostomuksha.ru

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

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

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