Hitachi Construction Machinery

Location:

Russia

Project number:

42526

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

08 Nov 2011

Status:

Completed

PSD disclosed:

23 Sep 2011

Translated version of this PSD: Russian

Project Description

The EBRD is considering to provide an equity financing and a long-term loan to OOO Hitachi Construction Machinery Eurasia Manufacturing (the Company) – a Russian subsidiary of Hitachi Construction Machinery Co., Ltd, (HCM) - a globally operating Japanese machinery producer.

The Project consists of building and operating a green-field construction machinery production plant in the outskirts of Tver town in Tver Region of Russian Federation, 170 km to the North from Moscow.

The local production base will enable HCM to further strengthen its position on a growing Russian market for hydraulic excavators. In particular, it will improve HCM’s product offering to Russian customers via better cost control, improved logistics, optimized inventories, and better dealership management.

Transition Impact

The transition impact potential of the transaction derives from the following sources:

  • Transfer and dispersion of skills. The Company is looking at various ways to contribute to region’s technical level by providing adequate training scheme in related necessary engineering technology for excavators for its potential employees as well as for its dealers throughout Russia.
  • Expansion of competitive market interactions in other sectors. The Company has all the incentives to maximise the percentage of the local content in its costs structure as it should make it less dependent upon FX fluctuations and ultimately decrease the total production costs by increasing procurement from suppliers located in proximity to the plant.

The Client

OOO Hitachi Construction Machinery Eurasia Manufacturing - a fully-owned subsidiary of Hitachi Construction Machinery Co., Ltd, Japan (HCM). HCM is one of the world leading manufacturers of construction machinery and, in particular, hydraulic excavators, with production facilities located around the globe.

EBRD Finance

RUB 531 million equity investment into the Company’s share capital; and RUB 398 million term loan to the Company.

Project Cost

Total estimated cost of the Project is RUB 3,053 million

Environmental Impact

Categorised B. The environmental and social due diligence of the Project shall include an environmental and social analysis of the proposed investment; a review of the corporate environmental, health and safety management systems and procedures and social management and stakeholder engagement systems in place at OOO Hitachi Construction Machinery Eurasia Manufacturing; developing a Livelihood Restoration Plan for the land take and Stakeholder Engagement Plan for communication of Project impacts and mitigation measures to all affected parties.

Typically a project of this magnitude may be associated with the landtake and therefore the due diligence will need to review the consultation and compensation arrangements for land purchase. The project will also require an inflow of temporary construction force and the due diligence will need to identify if any migrant labour will be involved in the construction and assess employment and labour conditions.

The due diligence will also need to assess such potential impacts and develop mitigation measures for such impacts as disposal of excavation spoil and construction waste; collection and disposal of wastewater, runoff water and industrial effluent; temporary increase in noise, vibration and dust levels during the construction as well as construction-related traffic. The due diligence will identify the probability and extent and significance of such impacts and develop an Environmental and Social Action Plan to bring the Project in line with the EBRD Performance Requirements. The due diligence shall be finalised and draft ESAP developed prior to Final Review of the Project. Final ESAP will need to be agreed prior to Board submission.

Technical Cooperation

None.

Company Contact

Mr. Sergey Grigoriev
General Manager, Corporate Planning Division
Limited Liability Company Hitachi Construction Machinery Eurasia Manufacturing
Tel: +7 4822 620180; Fax: +7 4822 620182
E-mail: s.grigoriev@hitachi-kenki.com

Business opportunities

For business opportunities or procurement, contact the client company.

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Email: procurement@ebrd.com

General enquiries

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Email: projectenquiries@ebrd.com

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