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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 | 21071 |
| Project name | Mironovsky Khleboprodukt CJSC |
| Country | Ukraine |
| Sector | Agriculture And Forestry |
| Department | Agribusiness |
| Company name | CJSC Myronivsky Khliboprodukt |
| Environmental category | B |
| Date SPI disclosed | July 30, 2003 |
| Projected board date | August 21, 2003 |
| Status | Completed |
| Previous Events | Invested: December 16, 2003
Signed: December 1, 2003
Approved: October 10, 2003 |
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| Description of company and purpose of project |
As a vertically integrated poultry producer, Mironovsky Khleboprodukt (Mironovsky, MKP or the company) currently holds a leading position in Ukraine poultry market. The company was one of the pioneers in developing a chilled distribution system to retailers, and rapidly grew in size reaching a sale volume of 43,000mt of ready to cook poultry products in 2002. The company sells chilled poultry products (whole birds, cutup, giblets etc.) under a well recognized brand name, Nasha Ryaba, across Ukraine, with the strongest presence in the Kiev region.
The project aims to take advantage of the increasingly growing poultry consumption in Ukraine, low production costs, a robust management team and the company’s leading market position. The project will help Mironovsky to capitalize on the opportunities offered by the rapidly changing consumer preference towards chilled products. By sharing IFC’s global investment experience, the project will enable the company to improve its corporate governance and rationalize its corporate structure. The project will also directly benefit at least 400 outside workers who sell the company’s products through franchise in addition to employing some 4,000 staff on site. |
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| Project sponsor and major shareholders of project company |
| The project sponsor is Yuriy Kosyuk, also CEO of the company. Mr. Kosyuk became involved in gas clearing operation with Turkmenistan since 1999. He later decided to invest profits from gas business in the poultry business, and acquired Mironovsky feedmill and Cherkassy broiler complex. Both were facing difficulties and going through bankruptcy. Subsequently the sponsor made additional investments in another two broiler complexes and two parent farms. Currently, the sponsor’s poultry assets include a feed mill with capacity of 230,000 tpa (in Mironovsky), three broiler complexes (which include four hatcheries, three broilers and three processing plants respectively in Cherksassy, Oril Leader and Crimea), two parent stock farms (respectively in Starinska and Shaterskaya), and a chilled distribution system to retail outlets. |
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| Total project cost and proposed IFC investment |
| Total project cost is estimated $116 million of which $29 million was already incurred in 2002. The proposed IFC investment is $30 million loans to Mironovsky and its operating subsidiaries. |
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| Location of project and description of site |
| The company’s poultry operations spread across Ukraine in six major locations – Crimea (a broiler complex with hatchery, broiler and processing plant), Cherkassy (a broiler complex with hatchery, broiler and processing plant), Oril Leader (a broiler complext with hatchery, broiler and processing plant), Mironovsky (feedmill), Starinska (parent stock farm) and Shahterskaya (parent stock farm). |
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| Project Development Impact and IFC's Role |
Development Impact
Quantified benefits:
Without the project, Mironovsky would not be able to expand poultry production and further reduce production costs. The employment of about 4,000 persons (with 600 currently involved in the extensive construction) might be at risk. The project will allow Mironovsky to consolidate its leading position in the market through significant improvements in operating efficiencies. This will in turn improve the international competitiveness of the company and prepare it for the upcoming liberalization of the market that would follow WTO membership. The project will increase Mironovsky production from current 43,000 tpa (dressed weight) to an estimated 118,150 tpa in 2005 and further reduce its production costs (live weight) from the current $0.51/kg to $0.42/kg.
SME Development – As part of the project, Mironovsky has spun off its 30 retail outlets and will support the additional establishment of about 900 franchise retail outlets in open markets. Under the terms of the franchising agreement, the company will commit to providing basic training for the franchisees, a consistent supply of poultry products as well as advertising and promotional support. As of May 2003, 440 of these outlets have been established. Initial results confirm the basic economic parameters: an initial investment of about $2,000 per outlet will generate employment for a minimum of one person, and a profit of about $300 per month and per outlet. It is assumed that this level of profit will remain, as lower per unit prices are compensated by increased volumes per outlet.
Non quantified benefits
Technology transfer – The company will demonstrate the impact of modern technology on technical performance and cost efficiency in the poultry sector. The development of a Parent Stock program, in line with the government’s emphasis on animal genetics, will contribute to improve the technical performance of poultry breeding, while minimizing the risk of potential disruptions in the flow of imports.
Employment and social benefits – The production units acquired by the company are not viable by themselves in a competitive environment. Their integration into a coherent, well managed company will allow the preservation of 3,100 jobs, including 2,900 jobs in rural areas; About 450 additional jobs are expected to be created within the scope of the project.
Consumer surplus – Because of its high level of protection, the Ukrainian market would be de facto a closed market, were it not for illegal imports, essentially low priced leg quarters from the USA. Internal prices are therefore mostly determined by domestic demand and supply. The project is for expansion of production and cost improvements which will both contribute to decreasing the price of whole bird and fresh poultry meat available to the population thus generating consumer surplus. This has not been quantified.
Demonstration impact – The high-protein sunflower plant is an innovation in CIS countries; it will reduce the cost of protein in the feed rations based on the processing of locally available sunflower, while minimizing the need to import soybeans. If successful, this is likely to be imitated by other poultry breeders in Ukraine and CIS countries exposed to similar relative prices between sunflower and soybean.
IFC ROLE
LT Financing provider. The local financial market is still less developed and LT financing resources are very limited. IFC’s participation will help the company to mobilize customized LT funding as well as to reduce its overall financing costs.
Financial advisor. IFC will share with the company its global investment experience in the poultry industry. IFC already provided substantial assistance to the company in developing a business plan as well as in identifying critical factors for performance improvements. IFC has advised the company to undergo a corporate reorganization and simplify its existing structure. The company is taking advise and consolidating all its agriculture assets under one common ownership structure. At the suggestion of IFC, the company has also engaged Deloitte & Touche.
Role model. IFC will play a positive role in developing the poultry industry in Ukraine by strengthening the company’s cost leader position and introducing a specialized sunflower feedmill project, which will be the first to the country. This technique, currently only used in Spain and southern France, is expected to reduce the company’s feed cost substantially.
Social developments. The project will help secure the employment opportunity of more than 3,400 workers at operational levels. It will also create some 460 new franchise outlets, which has demonstrated revenue opportunities to the owners. |
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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 that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The following potential environment, health and safety and social impacts of the projects were analyzed:
- Water supply for chicken rearing and processing;
- air emissions and energy conservation;
- management of liquid effluents);
- management of solid waste;
- hazardous materials management; and
- occupational health and safety.
Water.
With minor exceptions all company operations rely on ground water to meet facility needs. Some data evaluated during appraisal suggested that mineral content exceeds Ukrainian and other guideline limits. A sampling and analysis baseline program to identify any problems and to be vigilant of water used for food products was suggested to the sponsor and he has embraced the idea and is moving forward with the program and is committed to install water treatment equipment if needed for specific installations.
Air emissions and energy conservation.
Mironovsky utilizes natural gas for steam and heating. Project data evaluated show that the gas is high quality as all three principal parameters of concern in air emissions are well within guideline limits and Ukrainian regulatory requirements. The State Energy Conservation Commission requires a number of energy savings measures in boilers and similar equipment (combustion air and water preheaters) and Mironovsky has this equipment. The new feedmill will operate a biomass power plant (sun flower seed hulls) that will produce approximately 72% of electric power required for existing and new feedmill facilities. This will significantly reduce natural gas consumption.
Management of liquid effluents.
In general, with a few modifications, all principal operating facilities that produce liquid effluent will be in excellent condition. Minor modification of piping systems and pond maintenance are required at Cherkassy (Peremoga Nova) Broiler Farm #1. Druzhba Narodiv Nova (Broiler Farm #2) currently utilizes an energy-intensive system inherited from the Soviet era that will be replaced with two large ponds that are not used by the city thus eliminating the need for electric energy to treat wastewater. And at Orel Leader (Broiler Farm #3) as part of the facility master plan there will be a new, consolidated wastewater treatment system that will maximize the potential for reuse of treated wastewater for agricultural purposes and will eliminate the payments required for the municipal treatment works that currently receives and manages pretreated wastewater from Mironovsky’s facilities.
Management of solid waste.
Processing waste in the three existing operations is rendered in the plant and either incorporated into feed manufacture at the Mironovsky mill or is sold to other feed manufacturers for their use.
Hazardous materials management:
Ammonia refrigeration systems predominate, thus the most common and largest volume hazardous material is ammonia. The equipment in general is older but it is well maintained. Mironovsky will continue to maintain and upgrade ammonia refrigeration systems to comply with internationally recognized norms.
Occupational health and safety.
Elements of Mironovsky’s programs, such as employee training and monitoring, are relatively well developed. However, workplace signage and lighting in some areas could be improved to aid in the safety of work performed and reduce the possibility of accidents. The company will expand employee development programs and improve workplace communication with modern graphic signage, and improve lighting to match the requirements of specific tasks. Mironovsky will seek international certification (e.g. OHSAS 18000 or equivalent) of its occupational health and safety management system.
To view the environmental documents for this project, click here |
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| Location of environmental documents in locally affected community |
Placed on website of UNIAN (Ukrainian National News Information Agency – main Ukrainian news agency), July 29,2003;
Published in newspapers “Moskowskiy Komsomoletz” and “Komsomolskaya Pravda” (both newspaper have wide audience of readers and printed in hundred thousands copies), July 31,2003;
Originals of ERS and CAP will be freely available for publicity through administrations of all group’s enterprises (Poultry farms - Peremoga Nova, Oril lider, Druzhba Narodov Nova and Mironoskiy plant) |
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| To contact the project company, please write to: |
7. Vandy Vasilevskoy Street,
Kiev, 03055,
Ukraine |
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