The proposed loan would enable Slovalco to proceed with the expansion of its aluminium smelter production capacity following an equity investment by the EBRD in March 2001.
Project objectives: The project will facilitate the expansion of the Slovalco aluminium smelter.
The expansion project will demonstrate that it is possible to invest in a viable part of a struggling Slovak industrial conglomerate and to consequently implement restructuring and expansion plans.
Slovalco a.s. is the primary aluminium producer in the Slovak Republic. It was established in 1994 to complete and operate a state-of-the-art smelter, allowing inefficient and polluting production units to be shut down. On 30 March 2001 the EBRD and Norsk Hydro signed agreements that will jointly give them a 65 per cent stake in Slovalco. The remaining 35 per cent is held by ZSNP, a Slovak state-controlled aluminium manufacturer.
The EBRD and Citibank are jointly arranging a co-financing credit facility in which the Bank would provide US$ 25 million (€27.9 million). Up to US$ 50 million (€55.8 million) would be syndicated to international banks and to local banks under parallel loans.
The total facility is US$ 75 million (€83.7 million).
The project was classified B/1, requiring an environmental analysis and audit. As part of the EBRD's original investment, a series of environmental covenants and an Environmental Remediation Programme (ERP) were implemented. ZSNP is required to continue implementing the ERP as some issues are still outstanding. Although Slovalco and the EBRD are only indirectly responsible for the full implementation of the ERP, the potential risk of the subsidence of the red mud pile and pollution of the River Hron due to the delay in capping the pile could be of serious concern. In relation to the Bank’s portage equity investment signed on 30 March 2001, ZSNP was required through a covenant to spend a part of the proceeds from the transaction on the completion of the ERP, namely capping the red and brown mud pile. An environmental assessment has been prepared for the capacity expansion. It confirmed that the expanded plant will continue to comply with EU and Slovak environmental regulations after the expansion.
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Text of the PIP