Equity investment to construct and operate a new radiator plant for Korado a.s, a central heating unit manufacturer based in Ceska Trebova, a city in north-eastern Bohemia.
Project objectives: By raising Korado's manufacturing capacity, the project will enable the company to meet high product demand and increase its share in existing markets and throughout Europe. Margins are expected to expand due to economies of scale.
The increased production of radiators to meet the high demand will ensure that competition is maintained in this market segment. The project will allow for the transformation of a small, closely held Czech limited liability company into a medium-size company, which may be able to go public in future. It will also demonstrate to other Czech companies the advantages of expansion via equity investment.
Korado a.s. is a private Czech manufacturer of central heating units. It was established in 1991 as a limited liability company, and transformed into a joint-stock company in 1996.
The EBRD will contribute CZK 1.1 billion (ECU 33 million) in equity financing. Ceska Sporitelna, a leading Czech bank, will provide CZK 2.2 billion in the form of debt financing.
CZK 4.3 billion (ECU 127.3 million), including working capital requirements.
Korado is one of the largest radiator manufacturers in central Europe. The company, which employs almost 500 people, has recently initiated the construction of a new plant for the production of radiators, which would be partially financed by the EBRD's investment. The project was screened 'B/1', requiring an environmental analysis of the proposed plant and an environmental audit of the existing production facilities. An EIA was prepared in accordance with Czech law. A member of the Environmental Appraisal Unit visited the site in February 1997.
The company will meet Czech Republic and EU standards. Equipment is to be supplied from EU countries, and will be built to EU emission standards for volatile organic compounds. The company does not have a history of any fines, penalties or enforcement actions. The District Department of Environment at the District Authorities in Ústí nad Orlicí has approved the new plant, subject to the conditions which have been incorporated into the Environmental Action Plan (EAP).
The EIA was presented to the relevant authorities and to the local community. Concerns raised focused on 1) odour from welding fumes; 2) noise from presses, and 3) increase of water consumption from public water supply. Public notification of the modernisation programme and a description of the community interaction programme are included in the Environmental Action Plan.
Concerns were raised by the public regarding odour from welding fumes at the old plant. Since the new plant will produce emissions approximately four times the volume of the old plant, a filtration facility will separate oil, particles, textiles and organics from the emissions. Efficiency rates of the filters range from 70 per cent to 99 per cent. The Bank will continue to monitor this issue.
Traffic congestion and noise
The main gate from the old plant led onto a residential street, which created traffic congestion and noise, and was a source of concern to the local residents. Public meetings were held regarding this issue, and the main gate has been moved to the side of the plant remote from the residential area. The nearby railway will be used as much as possible for transportation of the construction material and product. Noise at the fenceline was a concern of local residents. The presses in the new plant will be moved to the side of the plant which is furthest from the residential area. They will be seated on floating pile foundations and insulated for noise. A noise survey will be required prior to start-up of operations.
Public concern was raised regarding increased use of municipal water. The new plant will meet the increased demand for water by an on-site well. The new plant will have closed water-cycles, conserving a maximum amount of water.
Contamination and remediation
Part of the construction site was formerly used as a landfill. The old landfill was removed, in accordance with Czech law, and the company is required to revegetate the area with trees or bushes. This is included in their Environmental Action Plan and budget.
The Bank will receive an annual environmental report on the implementation of the Environmental Action Plan, and on the environmental and worker safety status of the facility. These issues will be reported to the company's Board of Directors on a routine basis. In addition, the Bank will be notified in the event of an accident or incident. An independent audit will be required five years following completion.
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