The provision of a US$ 6.3 million (€ 6.0 million) senior secured loan (the Loan) to Uzbekistan based producer of spreads and butter JV Milk Euro Food LLC. It will consist of two tranches: the amortising tranche of US$ 3.3 million (Tranche 1) and the revolving tranche of US$ 3.0 million (Tranche 2).
Up to US$ 750,000 of the loan amount will be co-financed by the Innovation and Sustainability in Agribusiness Value Chains Account of the Financial Intermediary and Private Enterprises Investment Special Fund sponsored by Taiwan International Cooperation and Development Fund (the TaiwanICDF).
The Bank's financing will be used to (i) consolidate and extend the maturity of existing loans from local banks (US$ 3.3 million), (ii) finance working capital needs (US$ 2.7 million) and (iii) the acquisition of refrigerators US$ 0.3 million (together, the Project).
ETI score: 80
The DFF SME framework primarily targets the Competitive quality by helping SMEs to restructure and become more efficient or professional. Sub-projects can target any of the other transition qualities as secondary objective. This Project is supporting framework objectives by supporting an SME in the following areas: Competitive and Well-Governed. Under Competitive quality, the project will help the company to improve standards in line with internationally recognised certification by obtaining the ISO 45001 and increase capacity utilisation. Under Well-Governed quality, the project will help the company to improve its financial management.
JV MILK EURO FOOD LLC
JV Milk Euro Food LLC ("MEF", "Milk Euro Food", the "Borrower" or the Company), organised under the laws of Uzbekistan and located in Chirchik, Tashkent region, is a privately owned producer of spreads and butter.
EBRD Finance Summary
Total Project Cost
A significant share (at least 30 per cent) of the Project is for refinancing: The rationale for the refinancing is the current deficiency of the financing structure that does not reflect the seasonality of the business and does not allow for full capacity utilisation of the Borrower.
Financing Structure. The EBRD offers a tenor, which is longer than available to the client in the market on reasonable terms and conditions.
Standard-setting: Client seeks/makes use of the EBRD expertise on higher financial standards, including through financial covenants.
Standard-setting: Client seeks/makes use of the EBRD expertise on higher environmental standards, above 'business as usual' (e.g. adoption of emissions standards, climate-related ISO standards etc.).
Environmental and Social Summary
Categorised B (ESP 2019). Environmental and social risks related to the Milk Euro Food's operations in margarine production and distribution are predominantly site specific and can be managed by appropriate mitigation measures. The ESDD was carried out in-house by ESD in line with the COVID-19 approach through the review of E&S questionnaires, supporting documents and calls. The project is consistent with the GET approach and the GET share is 4.8 per cent. The E&S review covered a wide range of topics including the potential E&S risks and liabilities of Company's own production facility, occupational health & safety, supply chain management, labour practices, emissions and potential climate risks. No significant or unidentified risks were revealed through the due diligence process. The review demonstrated the Company's operations have limited E&S impacts which are largely managed through implementation of ISO-certified food and quality management systems and implementation of a new H&S management system. The Company's core raw material is a blended vegetable edible oil that contains palm oil. Due to its limited buying power and location the Company has few supplier options for its vegetable oil and none that can offer 100 per cent Roundtable for Sustainable Palm Oil (RSPO)-certified palm oil. The Company's only current supplier is Cargill (since 2013) who source their palm products (oil and related products) from their own plantations and from third party mills, refiners and traders currently 22.27 per cent of their palm products are certified by the RSPO. Cargill have full traceability in their palm oil supply chain to the mills; and are working towards full traceability to palm plantations in high risk/priority landscapes in order to better manage E&S risks present in some areas, in addition to extensive monitoring and reporting.
The project was deemed to be significantly exposed to physical climate risks (PCR), with a PCR score of 9 out of 10 at CRM. This scoring was related to a number of physical climate risk issues such as extreme heat events, drought and flooding. Due diligence revealed that the Borrower has mitigation/resilience measures in place to cope with the predicted physical climate risks: the production facility and warehouses are equipped with climate control systems that can withstand project extreme heat; limited water is used in the production process and is used mainly for washing equipment and therefore droughts have very limited effects on the Borrower's operations and the production facility and the warehouses are located 50 meters above the maximum water level in case of extreme flooding. To address the limited identified issues, an environmental and social action plan (ESAP) has been developed and will be agreed prior to signing. The ESAP includes implementation of accident reporting and GBVH policy. The Company is required to provide annual reporting on its E&S performance and implementation of the ESAP.
Technical Cooperation and Grant Financing
1. Market due diligence / ID 96484. TCRS project # 14378. Grant approval date: 20.07.2021. Donor: SBIF, partial client contribution;
2. Legal due diligence / ID 96484. TCRS project # 14378. Grant approval date: 20.07.2021. Donor: SBIF, partial client contribution.
3. A non-TC FINTECC grant. Amount: EUR 39,000. Source: Global Environment Facility.
4. 10% first loss risk cover by IFCA 2.
Company Contact Information
+998 (78) 750 5656
+998 (78) 750 5656
Chirchik city, Tashkent region Uzbekistan
PSD last updated
18 May 2022
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