Financed ProjectsSTAR Refinery

Identification Code:

OP/13/0010

Total Operation Cost:

5.299.000.000

Maturity:

216 months

Operation Status:

Description and Purpose of the Operation:

Provision of USD 58 million long-term project finance debt facility to the Borrower to finance the design, development, permitting, procurement, engineering, financing, construction, completion, commissioning, insurance, ownership, management, operation, maintenance and implementation of an oil refinery complex to be located at Aliaga in the Republic of Turkey ("Refinery") and the production and sale of naphtha, mixed xylenes, reformate, liquefied petroleum gas, jet fuel, ultra-low sulphur diesel, sulphur and petroleum coke ("Project" or "Operation"). STAR Rafineri A.S. ("STAR"), a joint stock company incorporated under the laws of the Republic of Turkey, is the developer, owner and operator of the STAR Refinery.The completion of the Project is scheduled to occur during 2017. The Refinery will be adjacent to the existing petrochemical complex owned and operated by Petkim Petrokimya Holding A.S. ("Petkim") at Aliaga in the Republic of Turkey. STAR will generate most of its utilities (i.e. steam) and Petkim will supply water to STAR under a water supply agreement. STAR plans to source nitrogen and oxygen from third party suppliers.

Countries of Operation:

Türkiye (100,00 %)

Financial Product:

Loans

Sector:

Energy

Domain:

Private

Borrower/Client:

STAR

Co-Financiers/Participants:

The Senior Project Lenders shall consist of all persons who, from time to time, are lenders to the Borrowers under the financing facilities including any ECAs in their capacity as lenders under any financing facility and any lender which accedes to the common terms agreement as a Senior Project Lender following assignment or novation from a Senior Project Lender.

Guarantors/Sponsors:

HoldCo ("HoldCo") shall own 100% of the shares in STAR. HoldCo’s shareholders include: (a) The State Oil Company of the Azerbaijan Republic ("SOCAR"); (b) The State Oil Fund of the Republic of Azerbaijan ("SOFAZ"). It shall provide its equity funding through the Ministry of Economic Development of the Republic of Azerbaijan; (c) Turcas Petrol A.S. ("Turcas")

Developmental and Regional Cooperation Impact:

The Project contributes to the development of the petroleum refining sector in Turkey, improves competitiveness in the sector and creates employment opportunities in the country. The Refinery is of strong macroeconomic importance for Turkey; it is considered as one of the largest foreign investments ever made and will reduce Turkey’s reliance on diesel and jet fuel imports and contribute to the reduction of Turkey’s current account deficit. The Project symbolizes the strategic partnership and contributes to further cooperation between the two member countries of BSTDB, Azerbaijan and Turkey. It is also expected to have positive regional spill-over effect as the refinery output can potentially target the markets in the wider Black Sea region.

Environmental Classification and Impact (summary):

Screened as Category A due to the fact that the industry of petroleum refining is associated with complex technological processes and installations which are energy- and raw material intensive and have the potential to generate significant negative environmental, health and safety (EHS) impacts that can be diverse, irreversible, and can propagate beyond the site boundaries. The project also involves construction of sea loading and unloading facilities (sea terminal and 3 jetties) on the immediate Aegean coast and has the potential to directly impact on the marine environment and biodiversity, as well as on the local fishing and tourism industries. The project however is to be realized in an existing industrial area that already hosts oil refining, petrochemicals, iron and steel manufacturing plants, ship breaking facilities and various other industrial facilities, and therefore is classified as a brown-field development. The Environmental Impact Assessment (EIA) study of the Project has been approved by the Turkish Ministry of Environment and Forestry. A local EIA for jetty No.1 and No.2 was also prepared and approved. It has been applied to Ministry of Environment and Urbanism for the EIA positive certificate and the EIA positive approval of Jetty No.3 and No.4 (Jetty No.4 will not be constructed within the scope of the engineering, procurement and construction contract of the Refinery) is expected to be achieved in August 2013. The local EIA of the refinery has been revised and upgraded by Golder Associates (Italy) to fulfill International Financing Institutions (IFIs) requirements with focus on Equator Principles and IFC 2012 Performance Standards. The Independent Consultant (D’Appolonia) has carried out the environmental and social due diligence. It reviewed the environmental, social and health and safety (ESHS) aspects associated with the Project and identified gaps in the environmental and social assessment documentation and indicated which actions should be taken by the Client in order to achieve compliance with applicable international standards, namely IFC PSs and EBRD Performance Requirements (PRs), as well as IFC General EHS guidelines, IFC EHS guidelines for Petroleum Refinery, and IFC EHS Guidelines for Ports, Harbors and Terminals. According to D’Appolonia’s review the Project largely meets these requirements, however there are issues, which currently are not- compliant and for which the Independent Consultant drafted the necessary measures in form of an Environmental and Social Action Plan (ESAP) that will need to be implemented by the Client. The main actions relate to the following areas: the Environmental and Social Management System of STAR; Labor and Working Conditions; Pollution Prevention and Abatement; Community Health, Safety and Security; and Biodiversity Conservation and Sustainable Natural Resource Management. Upon implementation of these actions it is expected that the Project will fully comply with applicable national and IFI’s ESHS requirements.

Operation Leader:

Energy & Infrastructure

E-mail:

ei@bstdb.org