Sutas Bingol

Location:

Turkey

Project number:

50520

Business sector:

Agribusiness

Notice type:

Private

Environmental category:

B

Target board date:

25 Apr 2019

Status:

Board Approved

PSD disclosed:

11 Mar 2019

Translated version of this PSD: Turkish

Project Description

Provision of a EUR50 million loan to Sutas Sut Urunleri A.S. ("Sutas"), a company incorporated and existing in the Republic of Turkey.

Project Objectives

The proceeds of the transaction will finance the Sutas' investment into a Greenfield integrated dairy farming, processing, feed, and electricity production plant in Bingol, Eastern Turkey. The Company will provide direct employment to more than 1000 people as part of its investment in Bingol.

Transition Impact

The transition impact of the project is expected to derive from two transition qualities:
• The primary transition impact quality is "Inclusive", the project will open up access to new economic opportunities in a less-developed region of Turkey by providing training and skills to
a large number of local people. As part of the project, the client will establish a dairy farming training centre and develop a work-based learning programme in cooperation with a local university

• The secondary transition impact quality is "Green", as the investments associated to the operations are expected to improve resource efficiency and reduce the environmental footprint of
the Company's operations.

Client Information

SUTAS SUT URUNLERI AS
Sutas started its operations in 1975 in Karacabey, Bursa, and has grown to become one of the main players in the dairy sector both in terms of size and brand awareness. The Company has more than 5,000 employees.

EBRD Finance Summary

EUR 50,000,000.00

Total Project Cost

EUR 127,000,000.00

Environmental and Social Summary

Categorised B (ESP 2014). Following an initial environmental and social examination (IESE) the project was categorised B.  The IESE was conducted by a member of the Bank's Environment and Sustainability Department and concluded that the new facilities are located at a sufficient distance from the nearest residences; are not located close to any other sensitive receptors such as protected areas; and would not be associated with any significant adverse impacts which could not be mitigated. The Company has already completed the nationally required environmental impact assessment (EIA) process for the integrated dairy facility, the biomass facility and for the cattle rearing facility, and has received a positive approval from the national authorities.  The Bank's environmental and social due diligence included a review of these EIAs to identify gaps against EBRD requirements, site visits to the location of the new facilities and meetings with the Company and other key stakeholders. In addition to the EIAs, the consultants also reviewed other documents including site investigations to determine the suitability of the sites and resource and energy efficiency studies completed by the Bank.

The Company is an existing client of the Bank and has demonstrated adequate environmental and social policies and procedures in the context of previous projects financed by the Bank.  In the context of this facility, the Company will apply the same management systems covering environment, health and safety, labour and quality issues.  The company has adequate staffing in place to manage these issues.  The project includes a range of best practice approaches to energy and resource efficiency including the processing of wastes to produce biogas, the production of organic fertiliser, the installation of a best practice waste water treatment system, the recovery of whey from waste waters and the installation of high efficiency ammonia compressors.  These, and other investments, will greatly reduce the environmental impact of this facility and ensure compliance with EU standards and best industry practice.  The project will also bring a number of social benefits through the local employment provided.

The Company has adequate systems in place to manage key health and safety risks, although it will need to ensure that these systems are extended to contractors undertaking construction works for the Company.  Likewise, the Company has adequate systems in place to deal with key human resource management issues.  These again have been reviewed in the context of previous projects with the Bank, and were re-confirmed in the context of this new project.  HR policies and procedures are open to every employee via the Company's intranet and all rights and responsibilities of employees are described and codified within written employment contracts.  The Company has a grievance mechanism and employee feedback system, and grievances can be submitted in both verbal and written form. A number of complaints have been raised against the Company in respect of the dismissal of unionised workers.  This has included a number of cases raised through the courts.  The Company has re-confirmed its commitment to the requirements of national law and EBRD's Performance Requirement 2 and will ensure that the Company's HR policies recognize all employee rights arising from Turkish Labor legislation for employees. The Company will ensure that these written commitments are available to workers.

To address issues identified through due diligence an environmental and social action plan has been drafted and has been agreed with the Company.  Key issues include to ensure application of formalised management systems for quality, food safety, environmental and health and safety, to ensure that livestock facilities are designed and operated to meet EU animal welfare requirements, to ensure that contractors are covered by key health and safety commitments, and to ensure that there is an adequate system in place for stakeholder communication and grievance management.

Technical Cooperation

TC funds of approximately EUR 30,000 have been utilized to identify and analyse energy/resource efficiency opportunities in line with the Company's strategy for the plant, funded by the EU IPA 2013 - "EBRD i EU Energy Efficiency and Renewable Energy Programme for Turkey" under the Near Zero Waste (NOW) programme.

Company Contact Information

Mr. Mustafa Çevik (CFO)
+ 90 (216) 572 30 50
https://www.sutas.com.tr/en/
Dudullu Organize Sanayi 1. Cadde, No:21, Umraniye, Istanbul, Turkey

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