Financed ProjectsEuroterm II Armenia

Identification Code:

OP/12/0042

Total Operation Cost:

0

Maturity:

84 months

Operation Status:

Description and Purpose of the Operation:

Parallel Senior Secured Loan to Euroterm CJSC on terms and conditions materially similar to those of the IFC loan with proceeds earmarked for: a) refinancing of the short-term debt related with the Borrower's capital expenditure on a new production line and b) financing of the increase in the permanent working capital requirements related to the operation of the new production line. The loan will provide Euroterm with the appropriate debt profile matching the long-term payback of its capital investment program.

Countries of Operation:

Armenia (100,00 %)

Financial Product:

Loans

Sector:

Consumer Staples

Domain:

Private

Borrower/Client:

Euroterm CJSC

Co-Financiers/Participants:

IFC, with a senior secured parallel loan of USD 2.5 million under similar terms and conditions.

Guarantors/Sponsors:

Developmental and Regional Cooperation Impact:

BSTDB's facility will contribute to the development of Armenia's food processing industry and the agribusiness sector of the country. The proposed operation is in line with the mandate of BSTDB as it supports the further development of a local producer, enabling him to become more competitive, increase capacity and effectiveness of production thus granting access to markets previously unattainable. Up to the EUR 1.5 million of the total financing from BSTDB and IFC will be used to cover the increased permanent working capital needs of the Company which every year needs to procure its raw materials at harvest time. In Armenia agriculture accounts for 20% of its GDP and through this project the Bank supports the development of the local farms production as Euroterm sources 99% of its raw materials from 325 farmers in Armavir valley and 247 farmers near Yerevan (the rest of 1% is from company owned orchards) The new production line whose costs would be refinanced by the Operation has created jobs for circa 40-50 employees in this first year of operations and will create another 60-70 jobs in the second year. Therefore the proposed Operation is expected to enhance quality and stability of employment in a rural area which has to offer very few opportunities for employment. By insuring the stability of Euroterm's operations those jobs will remain secure on the long term. Euroterm sales come 61% from exports to Russia and a number of other countries in the region such as Ukraine (to companies such as Vitmak) Europe and the US. The increased exports to such countries will strengthen the economic ties between the BTDB member countries.

Environmental Classification and Impact (summary):

According to the BSTDB environmental screening categories, the Operation has been screened as category B due to the fact that none of the environmental, health and safety risks and impacts are likely to be significant and the existing ones are site specific and limited and can be effectively mitigated and/or avoided by adhering to generally recognized performance standards, design criteria and guidelines for food and beverage processing industry. It is reported that the new plant is in compliance with national laws and regulations and has obtained all the necessary operational licenses and environmental permits from the relevant regulatory authorities. The Environmental Impact Assessment (EIA) for the new plant has been carried out in accordance with local regulations and its scope included assessment of air emissions, water supply, wastewater discharge systems, and overview of solid and organic waste management. The EIA has been approved by the Ministry of Nature Protection. IFC agreed jointly with BSTDB and the Client an Environmental and Social Action Plan (ESAP). Among others it specifies that the Borrower will further develop the EHS and food safety management system elements consistent with ISO 14001, OHSAS 18001 and HACCP/ISO 22001 and integrate these into a unified Management System in compliance with applicable local laws and regulation and IFC’s Performance Standards requirements applicable to Food and Beverage Processing Industry.

Operation Leader:

General Industries, Transport, Tourism 1

E-mail:

gitt1@bstdb.org