$55 million to support expansion of Kagazy Recycling

The EBRD is providing the equivalent of $55 million in long-term financing to Kagazy Recycling LLP to help the Kazakh private company complete the restructuring and expansion of its paper business.

Kagazy Recycling is part of the fast-growing Kagazy Group, whose operations include a range of businesses connected with paper manufacturing based upon recycled waste paper in . The group is the leading producer and trader of a wide range of paper products in central Asia, including corrugated paper, boxes, polygraphic papers, newsprint and office paper.

has very limited forest resources and most paper products are imported. The group established its paper business in 2001, to produce paper based upon recycled wastepaper for the local market. A year later it acquired its first paper production machinery and in 2003 it started trading.

The proceeds of the loans will finance the installation of new equipment to expand significantly the company’s output, with the volume of paper production scheduled to rise to over 85,000 tonnes per annum by 2012, from 40,000 now. The aim is to build an incorporated paper business, comprising trading, manufacturing and service facilities.

André Küüsvek, EBRD Director for , said: “We are very pleased to have the opportunity to participate in the current growth of Kagazy Recycling and thus contribute to the development of the domestic paper industry in . The loan will help Kagazy Recycling make the most efficient use of resources using established Western technology and management expertise. The project also underscores the EBRD’s commitment to finance projects in the corporate sector with a strong environmental impact”.

To-date, the EBRD has invested almost €1.5 billion in the country. 70 per cent of the Bank’s portfolio in is in the private sector.

EBRD $300 million multi-country environmental loan for ’s Lukoil

Bank views programme as model for natural resources sector in whole EBRD area

The EBRD and a group of international banks are lending $300 million to fund a pioneer programme devised by Lukoil for rehabilitating or enhancing the environmental, health and safety performance of facilities belonging to ’s largest oil company across the Bank’s countries of operation.

The Bank will be the lender of record for the full $300 million under an A/B loan structure. CALYON has underwritten the $150 million B loan which will be syndicated to a consortium of commercial banks.

EBRD President Jean Lemierre said the Bank applauded the vision and courage Lukoil has shown in tackling its environmental liabilities by setting up what will be the first systematic remedial programme in the EBRD area to reduce pollution and save energy. This will, among others, cover pipeline replacement, reduction of gas flaring, and modernization of facilities to reduce energy use and improve worker safety.

“This is a good foundation for future cooperation and the EBRD is proud to finance a long-term programme that can serve as a model, not just for other oil companies, but for the whole natural resources sector in the Bank’s 29 countries of operation”, Mr. Lemierre added at a signing ceremony held during the EBRD’s Annual General Meeting in Kazan.

“We are grateful to the EBRD for this cooperation and are convinced that this financing will have a beneficial effect on the environment in our areas of operation”, said Lukoil President Vagit Alekperov.

Lukoil acknowledges its social responsibilities and does not attempt to make savings on what is needed to the protect the environment, ensure safety at work and safeguard the health of both of its staff and of the people living where it operates, Mr. Alekperov added.

The transaction highlights the EBRD’s unique ability in the region to fund important environmental and safety projects that have a lengthy, and often hard to quantify, financial pay back period. The tenor of the EBRD’s A loan will be 10 years and that of the syndicated B loan seven, thus making the loan one of the longest unsecured facility ever arranged in corporate Russia.

Lukoil originally designed its environmental programme in 2005, and the creation of a dedicated source of long-term financing by the EBRD will accelerate its implementation.

Loan disbursements will be contingent on the EBRD confirming that sub-project applications made by Lukoil are consistent with the principles established under the programme. The EBRD also reserves the right to carry out audits to check compliance. Production-related investments which lack an over-riding environmental benefit are specifically excluded.

Lukoil’s objective is to comply both with international environmental standards and national ones.