Selected Press Release

Vikas Thapar
Phone: (42-2) 24 401 402
Fax: (42-2) 24 401 410


PRAGUE, June 27—The International Finance Corporation (IFC) today signed loan agreements totalling US$250 million for Nova Hut, a.s., one of the Czech Republic's principal steel producers. The IFC financing, the largest ever arranged by IFC in the Czech Republic, will enable Nova Hut to embark on a comprehensive modernization and environmental upgrade of its steel complex in Ostrava, in the Moravia region of the country.
The project is expected to be completed by 2000 at a total cost of US$650 million. It includes the modernization of the steel making technology and a shift in the product mix. Moreover, approximately 13% of the investment program will be spent on an environmental upgrade to bring Nova Hut's facilities into compliance with the Czech Republic Clean Air Act, which will come into effect December 31, 1998, and the World Bank's Safety and Environmental Guidelines.
The investment program will reduce Nova Hut's nominal crude steel capacity by one million tonnes to three million tonnes per year. However, overall product yield will be improved from the existing 80% level to 92%.
Nova Hut, which is in the process of being privatized, is one of the first major Czech privatizations incorporating a comprehensive investment program without a foreign strategic investor. It was originally a producer of long products such as bars and tubes. Nova Hut is now expanding into higher value-added flat products in order to diversify its product base and better serve the needs of its domestic and international customers. At present, it is an integrated steel company with an annual production capacity of about four million tonnes of crude steel.
IFC has been working with Nova Hut for almost two years with support from Dutch, Swiss, U.S., and Japanese trust funds being used to finance environmental studies, technical studies, market analyses, and strategic management support. These trust fund-supported efforts proved to be crucial in preparing Nova Hut for privatization.
"Today's signing is the culmination of more than two years of work between IFC and Nova Hut," said Mr. Vikas Thapar, IFC's Special Representative in Europe. "We hope that this successful effort will help encourage more privatization and modernization in Central and Eastern Europe to enable them to compete in international markets and better serve their own domestic markets."
"Nova Hut, which has served its customers for over 40 years, is now operating in highly competitive domestic and international markets, where an increase in competitiveness can only be gained through reduced costs and the use of modern technology," said Mr. Jaroslav Petros, Chairman and General Director of Nova Hut. "This investment program will help us realize that goal and I am proud to see that we have so many representatives of the international banking community here supporting us in this process."
The US$250 million financing package consists of a US$75 million, a 12-year senior loan for IFC's own account and a 10-year senior US$175 million syndicated loan. The syndicated loan, which was significantly over-subscribed, was syndicated among a total of 17 international financial institutions from Japan, Germany, Austria, Korea, U.S., France, and Belgium [list attached].
IFC, a member of the World Bank Group, is the leading multilateral source of equity and loan financing for private sector projects in developing countries.