Upgrading the manufacturing facilities for production of the "Volga" range of passenger cars and improving the quality and design of this range. The project will allow the borrower to meet increasing domestic market competition by facilitating prompt and efficient re-equipment of the borrower, with emphasis on products (family passenger cars) which were under-invested in the planned central economy of the former Soviet Union, and which are now in the greatest demand.
The strategic investment and related procurement by GAZ and its sales growth will have a direct positive impact on the businesses of its suppliers and customers. Improvement of the quality of Russian-produced cars will also create an additional incentive for the Russian government to decrease import tariffs to the levels accepted by the World Trade Organisation.
The borrower will be GAZ Joint Stock Company located in Nizhny Novgorod (Russia). The borrower's core businesses are the Volga range of passenger cars (mid-class family saloon cars), the GAZelle range of light commercial vehicles (1.5 tonne payload trucks, mini vans and minibuses) and medium trucks (4.5 tonne payload). The borrower's revenues in 1996 were US$ 1,449 million, and profit after tax was US$ 132 million.
US$ 65 million senior secured loan (ECU 52 million equivalent). Avtobank, a private Russian bank, will enter into a parallel loan facility to provide a US$ 15 million loan (ECU 12 million equivalent) to the borrower on terms analogous to the EBRD loan.
US$ 251.27 million (ECU 201 million equivalent).
The GAZ Volga project was screened B/1, requiring an environmental audit of the existing facilities and an environmental analysis of the proposed investment project. As part of the due diligence associated with a previous EBRD project at GAZ, an environmental audit and analysis has already been conducted by independent consultants. These investigations confirmed that the environmental issues associated with the operations of GAZ are typical of large manufacturing complexes in the automotive sector and include: atmospheric emissions from foundry and forging operations, waste-water discharges, hazardous waste storage, oil and chemical storage, and worker health and safety issues. GAZ currently meets all of its obligations related to the Environmental Action Plan attached to the previous loan agreement with the Bank. These included requirements to design and construct a controlled landfill with liners and leachate collection to receive hazardous waste; the installation of new scrubbers for air pollution control equipment; and a phase-out of fuel oil and replacement with natural gas. Significant improvements have also been made to standards of waste-water discharge as a result of the construction of a general waste-water treatment plant (for run-off and other discharges).
In the framework of the GAZ Volga project, new equipment, produced by western European and US companies, will be commissioned under the supervision of the manufacturers. This will ensure that the new passenger car production facilities meet both national and EU environmental and health and safety standards and regulations. According to the independent audit, there were no non-compliance issues identified in relation to the new production line, which will make a positive contribution to the environment and to health and safety. The proposed standards of engine for the new GAZ Volga vehicle models were tested by an EU-accredited committee and meet EU standards for vehicle emissions (EU Directive 93/59/EEC) and noise.
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