Two year roll-over facility for AO Magnitogorsk (MMK) iron and steel works, Magnitogorsk, Chelyabinsk region.
The facility has been designed primarily to allow the company to substitute barter and tolling arrangements for cash payments, and to procure major raw materials, energy and transport. The overall effect will be a reduction in the price of the raw materials, alongside an increase in the export prices.
In addition to the "anti-barter" effect, the project will be supplemented by a two-year management support programme, including immediate environmental improvements, introduction of a management information system and total quality control.
AO Magnitogorsk iron and steel works produces steel products which account for 16 per cent of the total Russian metal output.
US$ 100 million asset-backed pre-export financing facility, to be drawn down in tranches and to be rolled over for a maximum of two years. The EBRD's portion will be US$ 35 million; the remainder is to be syndicated to commercial banks.
US$ 100 million (ECU 87 million).
The project has been screened in category C/1, requiring an environmental audit. No large-scale investment is associated with this specific financing operation. An environmental audit and baseline assessment has been conducted.
Currently, MMK has severe compliance problems, the result of developments over the past sixty years being driven by production capacity. The main areas of non-compliance are: fugitive dust emissions; emissions of SO2, NOX, particulates and volatile organic compounds; noise and vibration; concentrations of greases, oils and phosphates and low pH level in effluent waste water; slag and other waste-disposal issues; and environmental and occupational health and safety concerns. Specific energy and raw material use is much higher than that of a typical OECD steel plant.
A strategic analysis of MMK was prepared for the Bank by consultants in July 1996. This provides a list of priority environmental investments. The company and its consultants have reviewed and commented on this programme, and an Environmental Action Plan (EAP) has been prepared. The capital expenditure in the first two years related to the implementation of this plan will be financed by MMK itself. MMK will, in parallel, implement a medium-term "management support programme". The company will gradually reach full compliance through the implementation of the EAP. MMK management is both aware of and committed to the implementation of the EAP. In 1997 the EAP requires the completion of a coke gas scrubbing and by-product manufacturing plant (US$ 40 million) and the installation of a secondary gas cleaning facility and improvements to the transport system in the oxygen converter shop (US$ 2 million).
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