The EBRD is considering refinancing outstanding debt of OAO European Bearing Corporation. The EBRD financing is a direct crisis response which will enable the company to restructure its debt portfolio to a longer average maturity. Thereby, the company will be in the position to continue focusing on its pre-crisis objectives of implementing product quality improvements, developing the cooperation with global industry leaders and realizing cost savings due to the enhancement of energy efficiency.
Through this transaction the Bank will support high value added production in the Russian regions. Bearings are important components for key Russian industries such as railway, automotive and aviation. In addition, the client will implement higher standards of business conduct which will contribute to further improvements in its operations. Substantial investments into energy efficiency as part of the project will contribute to a more resource efficient production.
European Bearing Corporation is the largest bearing producer in Russia with a strong presence in all key bearing market segments, i.e. in railroad bearings, precision bearings for the aircraft industry, automotive bearings and industrial bearings. The company operates three bearing plants in the Russian regions and one in Northern Kazakhstan. In 2009, total sales of the company amounted to about USD 250 million.
Senior A/B-loan of USD 90 million with USD 60 million syndicated to commercial banks.
Mezzanine loan of USD 30 million.
USD 120 million.
Categorised B (2008). Potential significant adverse environmental and social impacts associated with the project are site specific and can be readily identified and addressed through mitigation measures. In accordance with the Bank’s Environmental and Social Policy (2008), the Project has been categorised as B.
The Bank’s due diligence included an integrated corporate environmental, health and safety and social (EHSS) audit of EBC. The audit, which was carried out by an independent consultant, assessed the Company’s corporate EHSS policies and procedures, environmental management systems and overall capacity to implement the Bank’s Performance Requirements (PRs). The due diligence also included site specific audits at the Company’s Saratov and Stepnogorsk facilities to gain a better understanding of how EBC is operating "on the ground".
Results of the audit identified weaknesses at the corporate level with regards to staff resources and capacity to deliver the EHSS improvements required at its manufacturing facilities. The Company also lacks corporate EHSS policies and formal procedures to manage key risks associated with soil and groundwater contamination, hazardous waste, and/or emissions to air and water. At the site level, none of the Company’s facilities have Environmental Management Systems or effective EHSS monitoring programs, including Stakeholder Engagement. Saratov in particular suffers from environmental legacy problems associated with contaminated soils and groundwater, while the landfill at Stepnogorsk is currently reaching its maximum capacity and has been subject to recent environmental fines.
To help improve the Company's EHSS performance across its operations and bring its facilities in line with Russian and EU environmental standards and the Bank’s PRs, a comprehensive and time bound Environmental and Social Action Plan (ESAP) has been developed. Specifically, the ESAP includes, but is not limited to the following actions at the corporate and site level:
Corporate level ESAP requirements:
- Implementation of corporate policies for all Group activities, focussing on soil and groundwater protection, energy efficiency, waste water management, air emission abatement and asbestos and PCB management and community engagement.
- Implement a corporate-wide and facility specific environmental management system, ideally externally audited and certified to ISO 14001:2004.
Saratov and Stepnogorsk requirements:
- Undertake an audit of transformers and other equipment to assess the PCB inventory at the site.
- Undertake an audit of asbestos and asbestos-containing materials at the site and implement safe handling procedures.
- Improvement of the chemical and oil storage areas are required to ensure protection against spillage. Install of a new oil management system.
- Waste storage areas need to be improved, notably for waste sludge, substances containing heavy metals, railway sleepers and oily residues.
- Undertake a full ground investigation, including the borehole well installation and groundwater monitoring plan required by the local authorities to understand the potential liabilities related to ground and soil contamination at the facilities.
- Assess the effectiveness of emissions capture and existing air emissions abatement plants.
EBRD and the Company are currently finalising the ESAP with the goal of coming to an agreement prior to EBRD Board submission.
An Energy Efficiency Audit is being carried out in the main 4 plants of the company in Russia and Kazakhstan funded by the existing TC framework programme for the corporate sector. The amount of the assignment is around EUR 75,000 funded by Germany and the SSF.
Alexander Kuznetsov, Director of Corporate Finance
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