Universal - White Goods

Location:

Egypt

Project number:

44001

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

18 Dec 2012

Status:

Repaying

PSD disclosed:

19 Nov 2012

Translated version of this PSD: Arabic

Project Description

The EBRD is considering providing long-term secured senior loan of up to EGP 150 million (around USD 25 million) to Universal Metallurgical Company S.A.E. to finance the completion of the Borrower’s manufacturing facility, including the acquisition of industrial equipment, to increase the Borrower’s capacity to manufacture washing machines.

Transition Impact

a) Demonstration effect of successful restructuring: Currently, all domestic appliances available in Egypt are either assembled locally or imported. The Project will introduce a large scale manufacturing facility to the market, with an expected demonstration, to household appliance companies in Egypt, of the opportunity and benefits to successfully move from simple assembly to manufacturing. Through this shift, the Project will:

  • introduce modern technology in large scale washing machines production in Egypt, which will enhance the know-how and skills of the workers in the Company, and eventually throughout other companies in the industry. Universal has a strong R&D team developing new technologies such as dyed cast made of anti-monia, improved inner drum designs, etc. Some other innovations include technological improvements resulting in a more efficient use of washing powder and electricity, such as an optionality to use a fractional load and to interrupt the washing cycle. These new technologies will be introduced in design and production at the new factory financed by EBRD loan.
  • have a positive impact on the production efficiency, as existing inefficient facilities will be replaced by more efficient and larger scale production, eliminating production, procurement and logistics inefficiencies. Current production capacity and asset quality in the manufacturing sector in Egypt are low and require replacement with more modern, cost competitive capacity. The Client will transfer existing assembly lines from multiple inefficient factories to a single modern plant. Existing old assembly factories are small and sub-optimally located, resulting in complicated and inefficient components transportation logistics; their upgrading/extension is not considered to be a viable option.
  • allow to substantially increase the value of local production in the final products by increasing the number of components manufactured locally.

b) Setting standards of corporate governance and business conduct: Universal has strong commitment to corporate governance and is aiming to achieve international standards in production, environmental and social sphere and corporate governance. The company is working on streamlining its ownership structure and is aiming to introduce comprehensive accounting and management reporting system (SAP – which has not yet been adopted by many companies in Egypt) by 2014 – neither of these attributes are common in Egypt and will set a strong example to follow by other private companies.

c) Transfer of skills: Universal is looking to hire around 15 experienced international managers and engineers to operate the plant. It is expected that the strong management team will introduce comprehensive operational procedures and training programs at international standards.

The Client

Universal Metallurgical Company is part of the Universal group. It was established in 2006 and was initially involved in manufacturing of cut-to-size metal sheets required for the cookers business. In 2010, as a part of the business restructuring, washing machines assembly was added to the company’s product range and since then twin tub, top loading and front loading washing machines have become the company’s core products.

EBRD Finance

EBRD is considering providing a long-term secured senior loan of up to EGP 150 million (around USD 25 million).

Project Cost

EGP 510 million (around USD 84 million).

Environmental Impact

Category B. An Environmental and Social Due Diligence (ESDD) was carried out by an independent consultant and consisted of E&S analysis of the investment programme, comprising of new production facility completion and purchase of equipment for washing machines manufacturing (the Project); and top level review of corporate E&S performance of the Company.

The ESDD confirmed that Universal has the institutional capacity to implement the Bank’s Performance Requirements (PRs) over time. The E&S issues identified by consultants will need to be addressed and mitigated via implementation of the Environmental and Social Action Plan (ESAP).

Key environmental impacts of future operations are associated with potential contamination by metals, particulate matter and VOCs due to surface treatment of metals and painting activities, waste management and recycling, hazardous materials and waste handling, storage and transport procedures, and noise among others. The Project site is situated approximately 5km from the nearest residential zone, thus there are limited effects on public safety.

The social issues can be associated with a gender imbalance not-atypical for the country. Occupational health and safety risks can be related to workers exposure to noise, heavy machinery and hazardous substances and can be minimised through appropriate risk evaluation for each position, provision of PPE and training of the staff.

The ESAP is still pending agreement with the Company; its main provisions include the following among others:

  • Obtain official approval of EIA and permit for new site;
  • Develop EHS management system (based on ISO14001 and OHSAS1800 standards);
  • Introduce workers representation committees;
  • Contractors management improvements;
  • Hazardous materials management improvements;
  • Carry out Best Available Techniques (BAT) Assessment when the plant is operational to evaluate pollution prevention and abatement arrangements adequacy;
  • Prepared Emergency Response Plans for the site;
  • Implement Traffic Management Plans for own fleet;
  • Improve information disclosure and consultation with public by implementing Stakeholder Engagement Plan (SEP).

The Company will provide the Bank with Annual Environmental and Social Reports (AESR) and notify on any material accidents or incidents. The Bank will evaluate the Project’s environmental and social performance in accordance with the Bank’s PR’s through reviewing the Client reporting and undertake periodic monitoring visits.

Technical Cooperation

None.

 

Business opportunities

For business opportunities or procurement, contact the client company.

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