Rustavi Azot

Location:

Georgia

Project number:

47513

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

04 May 2016

Status:

Cancelled

PSD disclosed:

23 Oct 2015

Translated version of this PSD: Georgian

Project Description

The EBRD is considering extending financing of up to US$ 155 million (€136 million) to Rustavi Azot LLC, a company incorporated in Georgia (the "Company"). The Company is a producer of nitrogen based fertilisers in Georgia and is the primary supplier to customers in the Caucasus region. The Company has production capacity of up to 220,000 tonnes per annum of ammonia.

Project Objectives

The Project will finance the Company’s capital expenditure for the reconstruction, modernisation and recommissioning of a currently idle ammonia production line. It will also support balance sheet restructuring. The objective of the financial restructuring is to streamline the Company's debt obligations and extend the overall debt maturities. The new investment program will double the Company's ammonia production capacity and improve the Company's energy efficiency.

Transition Impact

The project is expected to achieve a positive transition impact primarily by setting standards for corporate governance and business conduct. The planned modernisation programme includes a number of improvements in to the old production processes, which are aimed at reducing energy consumption and CO2 emissions. The Project will significantly improve the energy efficiency and environmental performance of the plant and will set new standards in the region.

Client Information

Rustavi Azot LLC is the largest industrial enterprise in the country with 2300 employees. The Company is the primary fertiliser supplier to customers in Georgia and the Transcaucasian region, with an actual annual production capacity of up to 500,000 tonnes of ammonium nitrate (or 220,000 tonnes of ammonia) and 14,000 tonnes of sodium cyanide. In 2015 the Company generated 84 per cent of its sales from exports, making the Company one of the largest exporters in the Country.

EBRD Finance Summary

The financing will consist of syndicated (A/B) and parallel loans in aggregate amount of up to US$ 155 million (€136 million). Of this total, US$ 60,000,000 will be an EBRD “A” loan, and the balance of US$ 95,000,000 is to be syndicated with international commercial banks and/or international financing institutions and a local bank, which will continue to provide financing as parallel lender.

Total Project Cost

USD 175,000,000.00

Environmental and Social Summary

Categorised B (ESP 2014). Reconstruction and operation of chemicals manufacturing facilities carries intrinsic EHS risk, which is however site-specific and can be readily identified and mitigated through the implementation of a targeted Environmental and Social Action Plan (ESAP).

Environmental and social due diligence ("ESDD") was carried out by an independent consultants and was supplemented by site visits and a review by an ESD specialist. Major focus of the ESDD was on the operational safety practices, general EHS management systems, hazardous materials and waste management, fire safety, social and labour issues and EHS permitting. The ESDD showed that the main environmental and social impacts are associated with air emissions, energy consumption, water and chemical materials use, lack of company-level environmental, health and safety management as well as the enforcement of safe work practices. The existing controls are not sufficient to fully comply with EBRD Performance Requirements (PRs) as the Plant uses obsolete air pollution treatment and monitoring equipment.

The technical design for the new ammonia plant as well as the mitigation measures proposed in the ESAP for the whole plant will address these issues. The technical measures include reduction of gaseous emissions through the implementation of more efficient filters; reduction of dust precipitation on the granulator; reduction of natural gas consumption through the use of steam produced during production; use of less hazardous chemicals; reduction of water consumption; automated emissions

monitoring; and installation of new fire-fighting equipment. A national Environmental Impact Assessment (EIA) for a site-wide Plant upgrade was developed and approved by the authorities at an earlier stage of Project design. The Company will make additional submissions to obtain an updated permit/State Expertise approval should this be required for the updated technical design of the ammonia unit which the subject of this Project. The corrective and improvement measures to address the technical issues have been included in the ESAP which have been agreed with the Company. They include the development and implementation of environmental, health and safety and energy management systems in line with ISO 14001, 50001 and OHSAS 18001, enhancement of the existing organizational and technical capacity and management systems to prevent and respond to any emergency situations, with particular focus on community and labour safety, development and communication of HR policies in compliance with PR2, completion of all required Georgian EHSS regulatory/permitting and monitoring requirements for the ammonia plant, storage of hazardous materials in line with the requirements of the Seveso Directive, and the development of an Emergency Preparedness and Response Plan in line with best international management practices. The Non-Technical Summary (NTS) for the Project has been prepared and published on the Company's corporate web-site.

The Project will be monitored by the Bank on an annual basis thought the Annual Environmental and Social Reports, and site visits when deemed necessary.

Technical Cooperation

None.

Company Contact Information

Mr. Levan Burdiladze
l.burdiladze@azot.ge
+995 341 27 09 00
+995 341 27 09 00
www.azot.ge
2 Mshvidoba street, Rustavi 3702, Georgia

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