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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 | 10581 |
| Project name | Sofia Med |
| Country | Bulgaria |
| Sector | Primary Metals |
| Department | Global Manufacturing & Services |
| Company name | Sofia Med |
| Environmental category | B |
| Date SPI disclosed | April 10, 2001 |
| Projected board date | May 15, 2001 |
| Status | Completed |
| Previous Events | Invested: September 23, 2002
Signed: June 21, 2001
Approved: May 31, 2001 |
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| Project sponsor and major shareholders of project company |
Halcor, the project sponsor and major shareholder (89.8%), is a big Greek manufacturer of copper and copper alloy products with more than 50 years industry experience. Part of the Viohalco Group, a large Greek industrial group, the company employs more than 550 people and has been listed on the Athens Stock Exchange since 1996. Based on the high quality of its products and timely delivery, Halcor has already developed a very reputable name abroad and exports more than 50% of its production. The company has been consistently profitable and is financially strong.
Minority shareholders in Sofia Med are:
Steelmet (0.2%), which is another company of the Viohalco Group, located in Sofia, Bulgaria. It has two major types of operations i) aluminum profile production, and ii) marketing and sales of Steelmet and Halcor products to the Bulgarian market.
Union Miniere Pirdop Copper (UM), a subsidiary of Union Miniere S.A., Belgium, which has recently acquired and currently holds a 10% stake in Sofia Med. UM is an international metals and materials group, with industrial operations in Europe, North America, Asia and Africa. UM is one of the leading copper producers in Europe with total output exceeding 500,000 tpy. In Bulgaria, UM operates a smelter with annual capacity of around 150,000 tpy and refinery with 45,000 tpy. A vast modernization and expansion program is currently being implemented at the Pirdop site. The environmental portion of this program is financed by the Bulgarian government and the World Bank. |
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| Total project cost and proposed IFC investment |
| The total project cost is estimated at Euro 88.7 million. The proposed IFC investment is Euro 13.5 million A Loan for IFC's own account. |
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| Location of project and description of site |
| The project is located in Sofia, Bulgaria's capital. The project site occupies about 190,000 sq.m, alongside Gara Iskar, at about 10km from downtown Sofia. The area is predominantly industrial, but not far from some residential buildings. |
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| Description of company and purpose of project |
The proposed project is to revamp a nearly idle and ill-maintained copper processing facility, Sofia Med, and to transform it into a modern, cost efficient plant producing 120,000 tpy of copper and copper alloy products.
In December 1999, Halcor acquired the assets of the former Bulgarian copper processor, KOCM, and established a new company, Sofia Med. At the time of the acquisition, KOCM was facing bankruptcy, it had ceased production and its creditors were selling the pledged assets. KOCM was notoriously privatized in 1997. The local owner did not put any money into the plant, nor made any effort to reduce production costs. The plant's losses continued to accumulate, and in 1999 it stopped production and was put in the hands of the court.
Halcor will refurbish the plant, inject necessary capital to restart production, and improve production methods to facilitate the transition to high value added products. The project will be implemented in two stages over a five-year period. The first stage will comprise mainly environmental investments (environmental clean-up of the project site, switching the main energy source from fuel oil to natural gas; replacing oil cooling with water-cooling, etc.), and investments needed to facilitate immediate commencement of the facility's operations. The second stage will comprise investments in the casting, extrusion, and rolling mills departments, which will allow gradual improvement in capacity utilization. The plant is currently producing small quantities of brass tubes and bars. At project completion, the company will be manufacturing 120,000 tpy of copper and brass products, which will be marketed by Halcor, primarily to existing customers through its various global distribution outlets.
IFC Role
This project is an example of an established Greek company seeking IFC's help in pursuing pioneering investments in riskier operating environments. Though Halcor has an established market position globally, this would be its first overseas manufacturing investment. IFC's presence therefore is vital to mitigate some of the risks that Halcor would face in a different regulatory environment. IFC is playing an important role in : (i) structuring the financial plan; (ii) prioritizing important environmental investments; and (iii) helping to revive and sustain a major productive asset and a key employer in the region. IFC would also help the company obtain adequate long term financing at reasonable terms, which is not otherwise available. IFC also expects to do a possible co-financing with Greek banks, thereby serving as an important catalyst in the transaction.
Developmental Impact
The proposed project will have a significant developmental impact:
(i) Positive environmental impact: This will include switching to energy efficient and environmentally friendly energy sources; implementing significantly better employee health and safety practices, compared to past and present practices in Bulgaria. IFC's participation and expertise will contribute to the implementation of an investment program which meets all World Bank, EU, and Bulgarian environmental standards.
(ii) Demonstration effect: In view of the perceived macroeconomic and political risks involved in investing in Bulgaria, IFC's participation, along with the proposed co-financing from Greek banks, and presence of Halcor and Union Miniere (important and well reputed players in the field of metal processing and distribution) will have a significant demonstration effect in supporting foreign direct investment in Bulgaria's manufacturing sector.
(iii) Know-how transfer: The project will benefit from the know-how and management expertise of a strong sponsor, who has significant technological know-how in investment and production of copper and copper alloy processing. Also, the sponsor will bring into the project advanced marketing and sales techniques and a proven quality control system.
(iv) Improved skills base: An important part of the sponsors' support will be on job training, which will be provided by Halcor.
(v) Increased employment: The project will create new employment in Bulgaria, both directly and indirectly, having an important impact in a period of high unemployment in the country. Currently there are 200 employees in the plant, and Halcor expects to increase direct employment to about 500 people within a six-year period. Additional employment is expected to be generated in the supply stream and in ancillary activities. In addition, temporary employment will be provided to local labor during the construction phase.
(vi) Supporting sustainable industries producing higher value added products: The project would help the Bulgarian government support sustainable industries with strong sponsors, producing higher value added products.
Over the long term, the project is expected to serve as a model for further private-sector development by: (1) providing a clear example of the application of modern management and corporate governance in Bulgaria; (2) attracting a sponsor with first-class expertise; and (3) promoting the development of a key industry for the Bulgarian economy through a strategic alliance with a well established player in the extremely competitive metal alloy processing industry.
World Bank Group strategy
The project fits well with the World Bank Group strategy for fostering sustainable economic growth by accelerating structural reform and rapid development of the private sector. 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. |
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| Environmental and social issues - Category B |
This is a Category B project, according to IFC’s environmental review procedure because a limited number of specific environmental 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 initially of appraising technical and environmental information submitted by the project sponsor and a site visit by IFC’s technical and environmental department staff. In addition to this initial review, IFC subsequently retained an independent consultant to conduct an environmental audit of the existing facilities to identify any environmental and health and safety concerns associated with the project. The following potential environmental, safety and health impacts of the project were analyzed:
· effluent treatment and discharge;
· air emissions;
· solid and hazardous waste management;
· chemical/fuel storage and handling;
· waste management including recycling, minimization and building a landfill for industrial waste
· PCBs and Asbestos containing equipment;
· potential contamination to soils and groundwater due to past operations;
· ambient noise;
· fire prevention and emergency response;
· general housekeeping, occupational safety and general health and safety awareness;
· worker exposure to high temperature, noise and dust; and
· environmental monitoring.
With input from the corrective action recommendations of the independent environmental audit requested by IFC, the sponsor has presented plans to address these issues and demonstrate that the proposed project will comply with applicable Bulgarian, EU, and World Bank requirements. The information about how these potential impacts will be addressed by Sofia Med is summarized in the ERS
To view the environmental documents for this project, click here
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| Location of environmental documents in locally affected community |
| The environmetal documentation (ERS) will be posted in the notice board at the entrance of Sofia Med AD, as well as in the notice board of Gara Iskar Municipality. In addition, an announcement regarding the ERS disclosure will be made in a local newspaper, Capital. |
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| To contact the project company, please write to: |
| Mr. Stavros Theodoropoulos
Deputy Chairman of the Board of Sofia Med
Tel. 30-1-6861-421
Fax 30-1-6861-286
16 Himaras Str., Gr 151 25 Maroussi-Greece |
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