Italcementi - Shymkent

Location:

Kazakhstan

Project number:

45251

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

03 Sep 2014

Status:

Board approved, Pending signing

PSD disclosed:

30 Jul 2014

Translated version of this PSD: Russian

Project Description

The EBRD is considering supporting the refurbishment of a cement plant in Shymkent, Kazakhstan, owned and operated by ShymkentCement, a member of the Italcementi Group.

The funding will go towards the replacement of the 4 existing ‘wet process’ kilns with a new, energy efficient ‘ dry process’ kiln. The Project will substantially reduce the plant’s energy consumption and emissions.

Transition Impact

With the new ‘dry process kiln’ the plant is expected to have the best energy efficiency and lowest carbon intensity in the Kazakh cement industry. As part of this, the Company is committed to reduce its carbon footprint by introducing alternative fuels, a first in Kazakhstan. All of this will be underpinned by the introduction and expansion of comprehensive energy (ISO 50001) and environmental management systems.

By going beyond the prevalent standards, the Project could become a new benchmark when it comes to determining the carbon intensity of the cement sector in the Country. This links with the Bank’s policy dialogue with Kazakh authorities on regulations related to CO2 emissions verification, how to incentivise offset investments and on how to link the Kazakh emission trading systems with those used elsewhere in the world.

The Company aims to disseminate knowledge about energy efficiency, carbon emission reduction and environmental, health & safety standards in a workshop in cooperation with the Bank and open to all relevant stakeholders including other industrial players. Furthermore, the Company will document its performance in these areas in a new annual Corporate Social Responsibility Report in local language.

Knowledge about energy efficient technology and about how to operate with high environmental standards will also be spread via the Company’s education initiatives. It will offers traineeships and placements for up to 10 students from the South Kazakhstan University every two years. It is also aiming to establish a vocational programme with a local technical college in which the Company provides on-the-job learning related to energy efficient technology and training in environmental, health & safety standards while the college provides the theoretical education.

The Client

ShymkentCement is the Kazakh affiliate of Italcementi SpA. It produces cement and ready-mix concrete. Italcementi SpA, headquartered in Bergamo in Italy and listed on the Milan stock exchange, constitutes the world’s 5th largest cement group with 60mt capacity. It has 150 years of cement-making experience. The construction of the new dry kiln will be led by Chinese EPC contractor China Triumph International Engineering (CTIEC).

EBRD Finance

The Bank is considering providing a loan to ShymkentCement in the amount of up to KZT 5 billion (€ 20 million equivalent) and a share subscription with an aggregate subscription price of up to KZT 1 billion (€4 million equivalent).

Project Cost

Total project cost will by KZT 15,1bn (€60 million equivalent).

Environmental Impact

Categorised B. Independent due diligence has shown that the environmental and social impacts associated with the replacement of the existing wet production lines with a new dry line at ShymkentCement can be readily identified and addressed through appropriate mitigation and management measures. 

The new dry line is expected to result in environmental benefits including reduced emissions and energy requirements.  The existing quarries will not be expanded as a result of the new line. 

Due diligence included a site visit, a corporate audit of existing management systems and procedures, a review of the Project’s area of influence as well as a Best Available Techniques (BAT) assessment of the Project. 

Due diligence confirmed that the Project is structured to comply with the Bank’s Performance Requirements (PRs).  The necessary management systems, procedures and capacities are in place and the Bank is confident that the Borrower can effectively implement and operate the Project in line with the PRs, mitigate the associated environmental and social impacts and also enhance the environmental benefits. 

The Borrower, as part of implementing international best practice, will further extend their E&S, including health and safety, requirements to the construction and operation of the Project as well as existing contractors and the quarries they operate. 

The Project has undergone a local EIA process and authorisation has been granted.  Work on site is due to commence shortly. At the time of Bank’s due diligence, the Project design has already been agreed with the Contractor and the NOx emissions were set higher than EU standards. 

Following the Bank’s due diligence, the Borrower agreed to apply EU limits in line with EU Bref note standards (BAT) within two years following plant commissioning.  This will bring the Project’s emissions fully in compliance with EU BAT requirements. 

The Project is in line with EU standards for dust and SOx and these together with NOx will be monitored through a Continuous Emissions Monitoring System (CEMS).  It should be noted that NOx emissions have historically been a focus of the regulators and fines have been levied on the old plant. The Project will allow for the use of state of the art technology and the Borrower will work with the regulators to address the methodology to be applied to monitor NOx emission in line with international best practice. 

Wastes are handled through the Borrower’s waste management plan which further targets a 5% reduction in waste volumes.  Wastewater is directed to the local sewage network. The Borrower has also agreed to fully decommission the old wet lines as part of the Project

The Borrower meets PR 2 requirements and has a high level of gender equality at the management and administration level through its commitment to equal opportunities and non-discrimination.  Due diligence further focussed on potential community issues.  Although the plant is located in an industrial area, a number of what were once illegal dwellings were constructed within the plant’s Sanitary Protection Zone (SPZ).  With the closure of the wet lines and the expected decrease in emissions from the new dry line, the Borrower has committed to agreeing with the relevant authorities a reduction in the extent of the SPZ.  The Borrower will continue to monitor ambient air quality at the SPZ boundaries as required by its permit.  With the new dry line, the transfer of clay in slurry form via a pipeline from the clay quarry will cease and will now be transported by truck in dry form.  Truck load bins will be covered to prevent dust.  Transport routes have been selected to avoid residential areas.

The Borrower engages with various stakeholders and undertook a series of public meetings during the EIA process.  A Project specific Stakeholder Engagement Plan (SEP) has been developed for the Project as part of the due diligence and will be implemented prior to and during construction and operation. 

The SEP will be supported with the disclosure of a Non-Technical Summary document, in English, Russian and Kazakh, and making the local EIA available through the Borrower’s website. The SEP includes a provision for an appropriate grievance mechanism. The Borrower has in place a well-developed skills transfer and training programme with a local university and a vocational college.

An Environmental and Social Action Plan has been agreed with the Borrower, and in addition to the actions described above, includes: the development, implementation and certification of an energy management system; the development, together with the EBRD, of a roadmap for the use of alternative fuels ; the development of a wet line decommissioning plan and a quarry re-cultivation plan; the commitment to organise a workshop in the local area to showcase the Borrower’s approach to the management of environmental, social and health and safety issues; the undertaking of an audit of contractor worker accommodation against the  EBRD’s and IFC’s  “Workers’ accommodation: processes and standards” guideline; and the development of a corporate social responsibility (CSR) report in local language starting in 2017.  The Borrower will be required to submit annual environmental and social reports to the EBRD.  The EBRD will conduct monitoring visits to the project as deemed necessary.

A Non-Technical Summary (NTS) is available for the Project in English and  Kazakh. A Russian version will be uploaded soon.
 
 
The NTS is also available on the Company website.

Company Contact

Gabriel Morin g.morin@shymkentcement.kz

 

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