The EBRD is considering providing up to €35 million loan to finance capital expenditures related to expansion and improvement of Danosha’s existing operations in Ivano-Frankivsk region, including the construction of two biogas plants, and balance sheet restructuring.
The project will demonstrate the successful modernisation of pig farms including the improvement of and the construction of adjacent biogas plants. The planned upgrades will lead to the improvement of animal welfare standards in line with the EU regulations and thus significantly going beyond prevailing levels in the sector. Furthermore, the planned expansion will go along with higher demand for fodder leading to backward linkages to local grain farmers. Finally, the project comprises an inclusion element through a strong skills transfer component by introducing high quality vocational training opportunities in rural areas where they are currently lacking.
Danosha is a leading vertically integrated pig producer in Ukraine. It is a subsidiary of the Denmark-incorporated Axzon Group, majority owned by Danish farmers.
Long term loan of up to €35.0 million.
Approximately €63.0 million.
The proposed project has been categorised B in accordance with the 2008 EBRD Environmental and Social (E&S) Policy, as the potential impacts are expected to be site specific and readily identifiable and addressed through mitigation measures.
An independent third party environmental and social due diligence (ESDD) has been undertaken and included an analysis of the proposed project and an audit of the Company’s current operational activities, including assessment of the Environmental Impact Assessments completed by the Company, past compliance records and the Client's corporate management systems and capacity to implement the project in accordance with the Bank's Performance Requirements.
In general, the Company has invested significantly in modernisation, has a very good level of environmental performance of the farms, equipment and farming operations and there is good alignment with IPPC BAT (Integrated Pollution Prevention and Control Best Available Techniques) requirements. A number of improvements however are needed in this area and the Company is required to:
- Develop a Program/Plan for design and implementation of the Corporate EHS Management System appropriate to the nature and scale of the rapid growing of operations.
- Develop a corporate audit program for the EHS management system and legal compliance to be undertaken internally or by an external consulting company to identify gaps and opportunities for Improvement.
- Undertake a waste minimisation survey in accordance with BAT (Best Available Technology) principles
- Undertake an energy efficiency and water use survey for all sites
These have been included in the ESAP.
The Company has undertaken Environmental Impact Assessment (EIA/OVOS) for the new farms under the investment programme to mitigate any adverse impacts. The construction of them is nearing the end of construction phase. The ESDD has confirmed that no significant impact on living resources, biodiversity or local communities will result from the new projects. However, continuous communication should be kept with the local communities and relevant authorities as appropriate. This will form part of the Stakeholder Engagement Plan, which will be implemented, including a grievance procedure.
Labour practices are in line with Ukrainian legislation and on a very good compliance level with the EU requirements. However there are limited policies and the Company will need to develop formal policies in areas such as recruitment, dismissal, equal opportunities etc. The projects will not result in retrenchment and there is expected to be an increase in staff over the coming years.
Due diligence found there to be effective arrangements for EHS corporate management including the senior management coordination. At a site level, however, there are a number of areas to be improved and the Company will:
- Develop a comprehensive Health & Safety Action Plan and ensure compliance with Health & Safety requirements by national legislation.
- Ensure implementation of H&S procedures and enforcement within construction projects with regards to work at height, working with electrics, hoists and lifting gear, working in confined spaces, manual handling etc.
- Ensure implementation of procedures and enforcement of the provision for PPE usage of subcontractors, visitors and the workforce
Animal husbandry and welfare arrangements were assessed by an independent UK pig farming and animal welfare specialist whose findings were that overall standards of animal welfare were acceptable and in many instances above average. Issues identified with respect to ‘enrichment objects’ are being mitigated.
An Environmental and Social Action Plan (ESAP) has been developed and should be agreed with the Company to address some areas for improvement identified during the ESDD and carry out the necessary mitigation measures which will enable the Company to comply with national regulations and the Bank’s PRs
In addition, the ESAP also requires the implementation of a Stakeholder Engagement Plan with communication and consultation strategies and grievance mechanism. The Company will also disclose locally information on its environmental and social performance.
The project will be monitored in terms of its environmental and social performance and implementation of the ESAP through annual E&S reports and site visits when deemed necessary.
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