Proposed project to facilitate the expansion of Slovalco a.s., an aluminium smelter located in Ziar nad Hronom.
The project will facilitate the expansion of the Slovalco aluminium smelter. This is an essential step for the restructuring and privatisation of ZSNP.
The expansion project will demonstrate that it is possible to invest in a viable part of a struggling Slovak industrial conglomerate and to consequently implement restructuring and expansion plans.
Slovalco is a subsidiary of ZSNP, the state aluminium monopoly. It was established to complete and operate a state-of-the-art smelter, allowing inefficient and polluting production units to be shut down. The EBRD and Hydro Aluminium have been shareholders in Slovalco since 1994.
The EBRD proposes to purchase additional voting shares and preference shares from ZSNP for US$ 62.6 million (€74.9 million).
The project was classified as B/1, requiring an environmental analysis and audit. As part of the Bank’s original investment, a series of environmental covenants and an Environmental Remediation Programme were implemented. ZSNP’s two old Soderberg potlines and the Sinter and Bayer alumina plants, which caused serious environmental and health and safety concerns, have been permanently closed down. A new safely sealed hazardous waste storage facility has been built. A bentonite wall and a run-off water drainage system have been built around the red and brown mud pile to contain it and prevent further soil and groundwater contamination.
ZSNP will be required to spend part of the proceeds of the Bank’s financing on the completion of the Environmental Remediation Programme as a number of environmental issues are still outstanding. Slovalco and the EBRD are only indirectly responsible for the full implementation of the Environmental Remediation Programme, but the potential risk of the subsidence of the red mud pile and pollution of River Hron due to the delay in capping the pile could be of serious public concern. The environmental analysis and the audit have resulted in an update of the Environmental Remediation Programme. A letter undertaking with ZSNP and the Fund for National Property setting out a schedule for completion of the outstanding elements of the Environmental Remediation Programme will be required for the transaction to take place.
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