Galnaftogaz

Location:

Ukraine

Project number:

35320

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Target board date:

04 Oct 2005

Status:

Completed

PSD disclosed:

25 Aug 2005

Project Description

The EBRD loan will partly fund the Company’s ongoing programme of reconstruction, construction and acquisition of petrol stations providing high levels of quality and service and meeting the highest environmental, health and safety standards. In addition, EBRD involvement will support strategic goals of the Company such as:

  • Development of an in-house trading unit to diversify and maintain independence of supply
  • Expand the LPG market
  • Emphasise sales of non-petroleum products (motoring, grocery and convenience items)
  • Develop the OKKO brand
  • Promote transparent corporate management practices and Code of Conduct
  • Build an effective, professional Ukrainian team able to attain these strategic goals

Use of EBRD proceeds by the Company will be monitored by the Bank and its independent engineer along with the representatives of the IFC and BSTDB which have independently extended related loans to the Company.

Transition Impact

The proposed project supports an effective independent player committed to the highest standards of corporate governance and environmental protection. The project will increase private sector competition and will be the first example of transforming a former state merchandising apparatus in Ukraine.

While physical expansion is a necessary element of growth, the current financing is specifically conditioned on maintaining the Company’s focus on environmental renovation, good accounting systems for transparency, and proper working capital provision for financial stability. Specific undertakings will be to diversify supply and to make provision for independent board representation. Among the ancillary benefits will be demonstration of the viability of a high quality/service niche player, and increased local participation and development of local management.

The Client

OJSC Galnaftogaz (GNG or the Company), is the largest independent (not tied to a refinery) owner/operator of petrol stations in the Ukraine. Headquartered in Lviv, the Company was formed in 2001 from the merger and privatisation of three, former Soviet, West Ukrainian oil product manufacturing and distribution companies (“naftoprodukt”) dating back to the 1930’s. The Company has most of its petrol stations in Western Ukraine but is building a presence in the Kiev area and elsewhere under its popular “OKKO” brand.

EBRD Finance

USD 25 million Senior Secured Loan.

Project Cost

The EBRD loan is part of ongoing expansion which will be reviewed from time to time based upon results and further resources available.

Environmental Impact

The project was screened B/1.

Independent environmental investigations including a site visit by the Bank’s Environmental Specialist confirmed that, as a result of control, preventive and mitigation measures applied, the environmental, health and safety issues are unlikely to present significant impacts. The Bank's due diligence confirmed that the Company adheres to high international standards and the proposed transaction will result in further modernisation of the filling stations in line with international good practice, including compliance with the relevant EU Directives relating to fuel quality, vapour recovery, recycling and energy efficiency.

The stations currently sell high quality and unleaded fuels which are not common in the market particularly in Western Ukraine. There are a number of improvements, which when implemented would further increase EHS performance. These are included in an extensive environmental action plan (EAP) which has already been developed. According to IFC the project also meets all applicable World Bank/IFC environment and social policies on completion of the EAP.

Technical Cooperation

None.

Company Contact

c/o Paul Shapiro
Senior Banker, EBRD

E-mail: shapirop@ebrd.com

 

Business opportunities

For business opportunities or procurement, contact the client company.

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Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

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.