CHTPZ Steel

Location:

Russia

Project number:

37254

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

A

Target board date:

14 May 2007

Status:

Completed

PSD disclosed:

06 Mar 2007

Project Description

The proposed project consists of debt financing to Chelyabinsk Tube Rolling Plant as follows:

1st Tranche will refinance existing EBRD loans to reduce debt servicing and provide additional financial and operational flexibility for the Group during 2007-2008, the period when the key elements of investment programme are being implemented.

2nd Tranche up to EUR 145 mln will finance a construction of a steel mini-mill with design capacity of 950,000 tons per year to produce billets for seamless pipes at Pervouralsk New Pipe Plant (PNTZ, part of CHTPZ Group) located in Pervouralsk, Sverdlovsk Region.

This investment will allow CHTPZ Group to achieve vertical integration in seamless pipe segment, making it almost self-sufficient in billets for seamless pipe production. The project will replace CHTPZ Group’s outdated open hearth furnaces currently in operation at CHTPZ Group’s Chelyabinsk Tube Rolling Plant in Chelyabinsk.

The loan will also finance investments in energy efficiency improvements identified during energy audit commissioned by the Bank

The loan will also finance significant investments in energy efficiency improvements for both facilities of the Group, in Chelyabinsk and Pervouralsk, identified during energy audit commissioned by the Bank.

Transition Impact

The transition impact of this project will derive from further progress in the client’s technological modernisation and restructuring process, namely such future financing would allow the Group

(i) to gain better control over the raw materials supply; and

(ii) to significantly improve energy efficiency of its steel and pipe making facilities by closing outdated open-hearth furnaces and replacing them with a modern electric arc furnace.

The Client

CHTPZ Group (“the Group”) is Russia’s 2nd biggest pipe producer with pipe production facilities in Chelyabinsk (Chelyabinsk Tube Rolling Plant, CHTPZ) and Pervouralsk (Pervouralsk New Pipe Plant, PNTZ).

EBRD Finance

The EBRD would provide:

Tranche 1: 7-year senior debt financing in the amount of up to USD 80 mln, part of which will be syndicated to commercial banks.

Tranche 2: 9-year senior debt financing in the amount of up to EUR 145 mln, part of which will be syndicated to commercial banks.

Project Cost

EUR 395 million

Environmental Impact

Screening category and justification

The construction of a new electric arc furnace (EAF) and a continuous casting machine (CCM) at PNTZ tube manufacturing plant is associated with a number of potential Environmental, Health and Safety issues (EHS), which have been assessed as part of an Environmental and Social Impact Assessment (ESIA) in line with Bank’s Environmental Policy and Procedures. The new plant will replace old and obsolete open hearth furnaces (OHFs) at the Chelyabinsk facility and will therefore reduce the emission per ton of steel from by CHTPZ Group. In 2006, an associated modernisation and restructuring project (DTM#37255) was screened B/1 and an Environmental Audit was undertaken of both the CHTZP and PNTZ tube manufacturing plants to assess historic liabilities and current compliance, as well as an Environmental Analysis to assess the modernisation plans in terms of meeting national and EU environmental standards. An Environmental Social Action Plan (ESAP) was developed and agreed as part of the modernisation and restructuring project in 2006.

Due diligence undertaken and outcomes

An Environmental, Social Impact Assessment was undertaken of the mini mill Project by an independent international consultant. The Project has also been subject to Russian EIA (OVOS) and a technical review was made of the project by an international technical consultant. Members of the Bank’s Environment Department visited the site as well as the German technology supplier as part of the due diligence.

The environmental due diligence confirmed that the Project will have limited environmental impacts and that state-of-the-art technology is to be employed. The new mini mill will be located within the existing tube manufacturing plant and within the existing sanitation zones. The new plant will be using state-of-the-art pollution control technology and meet relevant EU and Russian emission standards, notably as specified by the EU Integrated Pollution and Prevention (“IPPC”) Directive BREF Note for the Steel Sector. PNTZ will operate the new mini mill in compliance with Russian laws and regulations as well as in accordance with EU environmental standards, including the IPPC defined Best Available Technique’s (“BAT”) guidelines. An environmental management system and continuous monitoring will be incorporated into day-to-day operations of the mini mill plant as well as the CHTPZ Group.

Disclosure of information and consultation

The Project has been subject to a public consultation and a disclosure plan (PCDP) has been developed to the satisfaction of the Bank. Disclosed materials include:

1. 2007 ESIA Non Technical Summary in Russian and English

2. 2007 Environmental and Social Impact Statement, Main Report plus appendixes in Russian and English

3. 2007 Public Consultation and Disclosure Plan (PCDP) in Russian and English

There is an Environmental Impact Assessment available for this project

The materials are available in hard copy at the following locations in Russia

  • PNTZ PR Department, Torgovaya Street 1, Pervouralsk, 623112, Sverdlovsk region, Tel. (34392) 5-87-69. Contact: Mrs Janna Olkhovikova, e-mail: pntzpres@pntz.ru

  • EBRD Regional Office Yekaterinburg; Office 413, 22 Karla Liebknekta Street, 620075 Yekaterinburg, Russia. Tel: +7 343 33 000 60; Fax: +7 343 33 000 62.

Contact: Artyom Sitnikov email: SitnikoA@ebrd.com

  • ERBD Office Moscow, 6 Gasheka Street; Dukat Place III, 123056 Moscow; Russia; Tel: +7 495 787 1111. Contact: Eric Rasmussen

The EIA package and Executive Summary have also been released for public review by the project sponsor on its website www.pntz.ru and released locally in the following locations:

  • Newspaper “Uralsky trubnik”, Gertsena str.,12 623112, Pervouralsk Contacts: Sergey Pagnuev – chief editor; Victor Makarenko – executive secretary

  • PNTZ Environmental Department, Torgovaya 1, Pevrovalsk, 623112, Sverldlovsk Oblast Tel, (34392) 769-78. Contact Mr Viktor Kuznehov; e-mail: VK_Kuznetsov@pntz.ru

Additionally the executive summary is available on the EBRD internet sites at www.ebrd.com.

Monitoring and reporting

The Company will monitor the environmental impact of its operations in accordance with national law and regulations. The Bank will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual environmental reports prepared for the project covering:

(i) ongoing performance of project-specific environmental, health and safety activities as reflected in the results of periodic and quantitative sampling and measuring programmes, and

(ii) the status of implementation of environmental mitigation and improvement measures. The Bank’s representatives will also conduct periodic site supervision visits when deemed appropriate.

The Bank will undertake monitoring of the Project, inclusive of site visits by Bank staff as well as independent audits and an additional BAT Assessment of the Project and CHTPZ facilities.

 

There is an Environmental and Social Impact Assessment available for this project.

Technical Cooperation

An Energy Efficiency Audit was carried out by Energo Group SA, a Greek Consulting firm with which EBRD has a framework contract funded by the Greek Government. The audit covered the facilities in Chelyabinsk and Pervouralsk and resulted in proposals for investments projects that will be included in the loan.

Company Contact

Anna Levitanskaya, PR Director

ARKLEY CAPITAL S.`a r.l., Moscow branch
48, Myasnitskaya Str
Moscow, 107078,
Russia

tel.: +7 (495) 933-2780
fax.: +7 (495) 933-2783

E-mail: Anna.Levitanskaya@arkley.ru

 

Business opportunities

For business opportunities or procurement, contact the client company.

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Text of the PIP

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Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.