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| 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. |
Summary of Project Information (SPI) |
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| Project number | 10682 |
| Project name | Okean Shipyards, Mikolaev, Ukraine |
| Country | Ukraine |
| Sector | Industrial & Consumer Products |
| Department | Global Manufacturing & Services |
| Company name | JSC Damen Shipyards Okean |
| Environmental category | B |
| Date SPI disclosed | May 29, 2001 |
| Projected board date | June 28, 2001 |
| Status | Completed |
| Previous Events | Signed: May 30, 2002
Approved: June 26, 2001 |
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| Project sponsor and major shareholders of project company |
The project sponsor is Damen Shipbuilding Group (Damen or the sponsor), a privately-owned international company. Damen was founded in 1927 in the Netherlands and today includes 31 shipbuilding companies, 18 of which are based in the Netherlands and 13 of which are abroad (China, Cuba, Germany, Poland, Romania, Singapore, Sweden, the United Kingdom, and Ukraine). A significant player in its industry, Damen sells about 65-70 vessels a year into 117 countries, capturing about 5% of the global market of about 1,500 commercial craft per annum. Damen has a well-diversified product mix that includes tugs and work boats, dredges, ferries, small and medium-sized dry cargo ships, fishing vessels, naval ships, high-speed boats and yachts.
Damen is the world leader in designing and building tugs and work boats, holding a 40% share in this market. In 1994 Damen acquired its first production capacity for cargo vessels through the acquisition of a shipyard in Hoogezand, the Netherlands. In 1998 Damen started expanding its cargo business through acquisitions in labor cost competitive countries, first in Romania, and now in Ukraine.
The project company is JSC Shipyard Okean (Okean or the company), a shipyard in Mykolaiv, Ukraine. Currently, Damen owns 78% of Okean's shares. The remaining shares are dispersed among funds and employees. |
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| Total project cost and proposed IFC investment |
| The total project cost is estimated at US$ 40.7 million. The proposed IFC investment is a US$ 10.0 million senior A loan. IFC has been instrumental in raising co-financing in the form of a parallel US$ 7.0 million senior loan to be provided by Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO) from the Netherlands. |
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| Location of project and description of site |
| Okean is located in Mykolaiv, an Ukrainian city on the Black Sea. The ship-building facilities are situated in the estuary of the Bug river on a site, which covers an area of 115.5 hectares and has allocated harborage of 57.3 hectares. The site has 155 facilities, including the main production shops, open stock places, dry and floating docks, finishing quays, auxiliary production shops, storage areas and warehouses, acetylene and oxygen plants, a boiler house, office buildings, canteens, etc. The site neighbors other industrial facilities and residential apartment complexes. The minimal distance from the site to the residential area is 400 meters. The yard was built in 1951 and was significantly expanded in the 1960s and 1970s. It has a good access to transportation routes, utilities supplies and other industrial infrastructure. |
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| Description of company and purpose of project |
Okean is a large shipyard with the capacity to build 400,000 -- 500,000 dead weight tons worth of ships per annum. During Soviet days, it was a leading yard specialized in building large commercial cargo vessels. A considerable proportion of the vessels built at Okean was exported worldwide. After the collapse of the Soviet Union, problems with securing the working capital financing and other commercial difficulties led to a major decrease in Okean's efficiency. In 1998 the ruin of Okean's major client fatally depleted the company's working capital and blocked Okean's production lines.
The goal of the project is to revive the company and transform it into an efficient production center through a spin-off program, modernization and introduction of Western business practices. The sponsor estimates that, as a result of the implementation of the project, Okean will eventually achieve European levels of efficiency. In combination with (i) competitive Ukrainian labor, energy and steel prices, (ii) Damen's high business reputation and (iii) the sponsor's profound knowledge of the industry, the high level of efficiency would allow Okean to compete successfully in its market sector.
The project is expected to have major developmental benefits. First, its implementation will help restart a business, which has been idling for three years and provide employment to most of its actual work force. Second, the project will help make the production and repair process more efficient through the improvement in the quality of vessels and the reduction in production costs as well as through the transfer of efficiency-enhancing technologies and business management techniques. Third, the recovery of the shipyard should provide net foreign exchange earnings. Finally, the project is expected to have significant indirect benefits: as the shipbuilding industry relies heavily on inputs from numerous sources, shipyard operations will have a significant developmental impact on upstream activities as well as on sub-contracting industries.
IFC’s role is to raise necessary long-term financing for its own account and for the account of FMO, and to provide the sponsor a measure of political comfort in its investment in Ukraine. In addition, IFC is considering possibilities of implementing a technical assistance project to support a spin-off program at Okean and promote additional foreign investments in spun-off companies, which are expected to constitute a network of independent suppliers for Okean. If successful, this network should have a considerable multiplier effect, especially as it begins extending its services to other businesses in the area, thereby helping rejuvenate the local industry. |
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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/or social impacts may result which, can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.
To view the environmental documents for this project, click here
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| Location of environmental documents in locally affected community |
| The environmental documents are available at the Planning Economic Department of the the local Municipality and the State Administration. |
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| To contact the project company, please write to: |
Mr. Nikolai P. Romanchuk, President
1 Zavodskaya Ploschad
Mykolaiv 54050, Ukraine
Phone: (+38-0512) 551950
Fax: (+38-0512) 551968 |
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