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| Summary of Project Information (SPI) |
| This Summary of Project Information is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
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| Project number | 21680 |
| Project name | Drujba A.D. |
| Country | Bulgaria |
| Sector | Nonmetallic Mineral Product Manufacturing |
| Department | Global Manufacturing & Services |
| Company name | Drujba Glassworks A.D. |
| Environmental category | B |
| Date SPI disclosed | December 12, 2003 |
| Projected board date | January 15, 2004 |
| Status | Active |
| Previous Events | Invested: June 7, 2004
Signed: April 27, 2004
Approved: April 27, 2004 |
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| Description of company and purpose of project |
Drujba A.D. (Drujba) is the result of the merger in April 2003 of Stind A.D. (Stind; located in Sofia) and Drujba (which originally consisted solely of a plant at Plovdiv, in southern Bulgaria), both of which have been owned by Yioula Glassworks S.A (Yioula), Greece, since their privatizations in 1997 and in 1998, respectively. In 2002, the combined sales of Drujba were Euro 46.9 million ($ 49.8 million) and net earnings amounted to Euro 5.4 million ($ 5.7 million).
After the merger, the company’s share of the Bulgarian market is about 72%. The combined capacity at the two plants (after full commissioning of the new furnace in early 2004) will be approximately 264,000 tons per year. The merger of Drujba’s original Plovdiv and Stind operations aimed at more efficient production planning, better capacity utilizations, and more efficient use of management time. Although the sponsor had sought the merger several years ago it was delayed due to lengthy regulatory requirements of Bulgaria’s State Securities Commission and various other regulatory agencies.
The proposed project is to refurbish and modernize the operations of an existing Bulgarian glass manufacturer, Drujba. The project involves an investment in a modern 120,000 tpy natural gas fired furnace and related production lines at the company’s plant in Plovdiv. Capacity at the company’s Sofia operation will not increase. |
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| Project sponsor and major shareholders of project company |
Project Sponsor:
Drujba is 52.6% owned by Bareck Overseas Limited and 46.9% by Glassinvest Limited, both of which are registered in Cypress. Yioula in turn has an 83.3% interest in these two companies through its subsidiary, Yalos Holdings (Overseas) Limited (Yalos), which was set up to purchase companies in the Balkans. The remaining 16.7% of Yalos is owned by the Black Sea Fund (12.0%), the Euromerchant Balkan Fund (3.0%), and Hellenic Industrial Development Bank (1.7%). IFC has a 16.0% interest in the Black Sea Fund and a 18.3% interest in the Euromerchant Balkan Fund.
Major Shareholders of the Project:
Founded in 1947, Yioula is a privately-owned firm that is now the largest glass container producer in the Balkans. In total, Yioula has 2500 employees, ranks sixth in Europe in glass container production, and has an excellent reputation in the food and drinks glass packaging industry. With two production facilities in Greece, one in Romania, and two in Bulgaria, Yioula holds a strong position in the Balkan glass container market. Yioula’s clients include local wine and beer companies and numerous multi-national companies with business interests in the Balkans such as: Coke, Pepsi, Interbrew, Heineken, Carlsberg, and Glaxo Smith Klein Beecham.
Yioula is 59% owned by the Voulgarakis family and 41% by four reputable Greek banks and two investment funds. The shareholding structure is as follows: 59.00% the Voulgarakis family, 24.48% Global Capital Investors, 5.96% National Bank of Greece, 4.02% ETVA Bank, 3.36% EFG Eurobank – Ergasias, 1.68% Greek Progress Fund, and 1.50% Commercial Bank of Greece. |
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| Total project cost and proposed IFC investment |
The estimated project cost is Euro 47.0 million. This is divided up according to the following components:
Equipment and Machinery 20.50
Building and Civil Works 7.60
Contingencies 2.40
Debt Refinancing 16.50
Total 47.00
The proposed project cost is estimated at Euro 47.0 million and consists of building and installation of a new furnace, six production lines, molds and the related warehouses at the plant in Plovdiv. Contingencies are estimated at 9% of the capital cost. Also, the project cost includes Euro 16.5 million to refinance part of Drujba’s existing short-term debt.
The financial plan is detailed in the following below:
Equity:
Internal Cash Generation--15.00
Debt:
IFC’s Loan--20.00
Local Banks Loans--12.00
Sub-Total--32.00
Total 47.00
The proposed financial plan includes Euro 15.0 million of internal cash generation and loans of Euro 32.0 million including Euro 20.0 million for IFC’s own account. |
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| Location of project and description of site |
| The new furnace, the production lines and the related assets being constructed as part of the project are located at the company’s plant in Plovdiv, Bulgaria, which is situated about 130 Km southeast of Sofia on an area of 170,000 square meters. The plant’s buildings, warehouses and other facilities occupy about 70,000 square meters. Electricity is provided to the plant from the local grid, which is very reliable. However, in the event that power from that source were to become unavailable, there is a power generator at the plant that can supply the necessary electricity. Water is provided by the city, and the plant also has access to its own water wells. As for transportation, about 70% of the products are transported by trucks and the remainder by rail, and both the roads and the rail facilities are good. |
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| Project Development Impact and IFC's Role |
The proposed project will allow Drujba to improve its production in order to meet the more stringent requirements of the EU and neighboring markets in terms of specifications and quality, while maintaining its dominant position in Bulgaria.
Drujba is already a lower cost supplier to its local and export markets and is expected to further lower its production costs by implementing the project. The project represents a low cost expansion of effective capacity.
The proposed project will have a positive environmental and social impact. The Dujba plants originally consisted of old equipment and congested workspace. The company’s investment program will upgrade the overall environmental standards and allow both plants to realize about 60% to 75% energy savings and increase the amount of recycled glass used. It will also improve the working conditions of the employees.
The proposed project will encourage the development of local enterprises in a commercial way by supporting a small machine tool and mold manufacturer.
IFC’s Role:
IFC supports Bulgaria’s privatization efforts by focusing on financing recently privatized enterprises, and by supporting manufacturing opportunities in various sectors which have strategic importance for Bulgaria.
IFC’s role in the proposed project involves:
--providing long-term funding which is not readily available from local financial institutions;
--supporting environmental sustainability and higher health and safety standards,
--establishing a relationship with a reputable sponsor who has further expansion plans in other emerging markets (e.g. Serbia and Romania),
--helping the company address its accounting issues, and
--assisting the company to develop an improved capital structure. |
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| Environmental and social issues - Category B |
This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical, environmental, and social information submitted by Drujba as well as site visits to the plants in Sofia and Plovdiv and to Yioula operations in Greece and Romania. The following potential environment, health, safety and social impacts of the projects were analyzed.
- Compliance of the Drujba operations in Sofia and Plovdiv with IFC and Bulgarian environmental, health and safety (EHS) requirements;
- Investments to improve the EHS performance of the Plovdiv operation;
- Drujba’s commitment to quality and efficiency improvements; and
- Labor and community issues.
To view the environmental documents for this project, click here |
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| Location of environmental documents in locally affected community |
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| To contact the project company, please write to: |
Mr. Nikolaos Georgopoulos, Executive Director
Fax No.: 359.2.3911.247 |
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