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| Stomana II |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment 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. |
| Project number | 25090 |
| Company name | Stomana Industry A.D. |
| Country | Bulgaria |
| Sector | Primary Metals |
| Environmental category | B |
| Department | Global Manufacturing & Services |
| Status | Active |
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| Date SPI disclosed | May 8, 2006 |
| Projected board date | June 15, 2006 |
| Previous Events | Invested: August 15, 2006
Signed: June 22, 2006
Approved: June 20, 2006 |
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| View Environmental & Social Review Summary (ESRS), click here |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
Steel mini-mill Stomana Industry A.D. (Stomana or the company), an existing IFC client, is the second largest steel producer in Bulgaria. The company plans to bring into operation a new hot rolling mill, to be located within its existing facilities. The project, expected to cost about Euro 43 million in capital investment, is going to be implemented over a one and a half to two-year period. It is not going to affect Stomana's crude steel capacity as planned investment is in downstream operation.
The installation of a new long products rolling mill in Stomana is an important strategic investment for Sidenor allowing it to:
- rationalize its total production and take a full advantage of Stomana’s upstream capacity.
- gradually replace low value added products with the higher added value long products; and
- improve cost competitiveness due to:
- reduction in overall transportation costs;
- more efficient new equipment and processes of the new rolling mill; and
- lower labor cost in Bulgaria than those in Greece.
The project will be sponsored by Sidenor Steel Products Manufacturing S.A. ("Sidenor") a large Greek manufacturer and marketer of steel products, listed in the Athens Stock Exchange, who acquired Stomana in 2001. After Sidenor’s acquisition, Stomana was turned around and transformed into a sound and quite profitable enterprise. Sidenor is part of Viohalco, Greece, the largest metal processing group in the country, which also sponsored two other IFC projects. |
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| Project sponsor and major shareholders of project company |
| The project sponsor, Sidenor (with 86% shareholding in Stomana), is based in Greece and is the largest long steel products manufacturer in the country. It operates two steel mini-mills in Greece and has holdings in several companies which manufacture and market a wide range of steel products. Established in 1962, Sidenor has been continuously profitable without a single year of financial loss. Sidenor is listed on the Athens Stock Exchange. |
| Total project cost and amount and nature of IFC's investment |
| The total project cost (excluding incremental working capital) is estimated at about Euro 43.0 million. IFC is considering a senior A loan for IFC’s account of up to Euro 18.0 million. |
| Location of project and description of site |
| The project will be implemented on Stomana’s existing premises, located in the industrial zone of the town of Pernik, Bulgaria. Pernik is situated about 30 kilometers southwest of Bulgaria’s capital, Sofia. |
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| Anticipated development impact of the project |
As part of an overall rationalization of Sidenor, the project will allow increased downstream processing in Bulgaria, thus increasing value generated in Bulgaria and saving the company transport costs from Greece where the bulk of Sidenor’s long products is currently produced. Stomana’s product quality will increase and comply with EU requirements enabling the company to satisfy expected medium-term robust demand growth in the region. The project will benefit from the management expertise of a strong sponsor, who has significant technological know-how. Also, the sponsor will bring into the project advanced marketing and customer support activities with the aim to providing global solutions to its customers along with established product quality. The project is expected to result in better efficiency due to implementation of new, better technology.
The project is important for strengthening the cross border cooperation and Bulgarian economic growth, especially in light of Bulgaria’s accession to the EU in 2007. Over the long term, the project is expected to serve as a model for further private-sector development by: providing a clear example of continuity in application of modern management and corporate governance in Bulgaria; attracting a sponsor with first-class expertise; and promoting the development of a key industry for the Bulgarian economy. |
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| IFC's expected development contribution |
| IFC has a major role to play in this project by providing continuous support to an existing client, which seeks to establish itself in the Balkans not only as a low cost producer but also as a solutions provider to its customers. IFC’s support of Stomana’s growth will bring additional comfort to the sponsor and will facilitate the implementation of Sidenor’s extensive investment program. IFC will review the environmental impact of the company’s investment program and provide suggestions for improvements, if necessary, so that the company is in conformity with IFC’s and World Bank environmental and safety guidelines. |
| 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 and environmental [/social] information submitted by the project sponsor. The following potential environment, worker health and safety (EHS), labor and community impacts of the projects were analyzed.
- The compliance of the hot rolling mill with Bulgarian and IFC environmental, worker health and safety (EHS) requirements;
- The commitment of Stomana to quality and to efficiency improvements as well as high EHS performance, including international certification; and
- Labor and community issues. |
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| For inquiries about the project, contact: |
Konstantin Stamenov
Stomana Industry
1, Vladaisko Vastanie St.
2304 Pernik, Bulgaria
The ERS will be disclosed on Stomana’s factory gate in Pernik and on Stomana’s website. |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennslyvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Webform: http://www.ifc.org/ifcext/home.nsf/Content/WebFeedbackForm
E Mail: Webmaster |
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