Financed ProjectsKurum International Corporate Loan II

Identification Code:

OP/11/0818

Total Operation Cost:

20.000.000

Maturity:

43 months

Operation Status:

Description and Purpose of the Operation:

Repeat corporate loan, following-up on the existing positive business relationship of the Bank with Kurum Holding. Provision of a new medium-term corporate loan to Kurum International Albania, the largest iron and steel manufacturing company, to finance the increased working capital needs, after the completion of the investment program for modernization and maintenance of existing production facilities in Albania. As planned, the completed investment programme, financed by DEG and Reiffeisen together with BSTDB in 2008, led to: - increased production capacity; - modernization and automation of existing facilities in Albania; - increased quality and production capability for higher value-added products; and - cost reduction.

Countries of Operation:

Albania (100,00 %)

Financial Product:

Loans

Sector:

Materials

Domain:

Private

Borrower/Client:

Kurum International Ltd. Albania was established in 1999 to expand the activities of Kurum Group (Turkey) in Albania. Kurum International is the largest steel producer in Albania with 70% of the country's market share, manufacturing and selling a variety of hot-rolled construction iron products to clients in Albania, the EU and the Balkans. The company is also involved in the production of liquid oxygen, lime and in boat construction and dockyard repair.

Co-Financiers/Participants:

Guarantors/Sponsors:

- Guarantor 1: Kurum Holding A.S. (Turkey) - Guarantor 2: Kurum Demir A.S. (Turkey)

Developmental and Regional Cooperation Impact:

In supporting this Turkish investment in Albania, BSTDB is not only able to promote regional cooperation and thus meet one of its key strategic priorities, but also contribute to the development of a successful company’s operations in a vital sector in Albania.

Environmental Classification and Impact (summary):

The Operation has been screened as B1, thus requiring an Environmental Assessment and an Environmental Audit. This is due mainly to the nature of the industry it represents, which generates significant negative Environmental, Health & Safety (EH&S) impacts as well as the existing risks for past contamination and legal non-compliance. The general EH&S performance of the Elbasan Metallurgical Complex has been assessed as part of the first Environmental Audit commissioned by DEG and carried out by R&P International in March 2007. The auditors concluded that the operation is of high environmental and social relevance, where air emissions are the biggest concern. Accordingly the auditors jointly with the Plant management drafted an Environmental Action Plant (EAP), which addresses all non-compliances. It aims at raising the Plant’s performance and bring it as close as possible to the widely accepted industry specific performance standards, and recommends a set of short-, and long- term corrective actions which will need to be implemented. These focus on scrap processing, Meltshop, Rolling Mills, Lime Calcination Plant, as well as actions to improve the general environmental management of the Plant. If all actions are successfully implemented it can be expected that the operation will meet the applicable air emission standards. The social aspects are complex and are common for the industry, which employs obsolete technological processes and where enforcement of the in-house worker health & safety requirements is poor. A particular critical issue relates to community health & safety due to site contamination from past activities. The region itself has inherited multiple environmental problems from past, which are being addressed at national and international level, most of which relays on foreign assistance. However, the major ongoing legacy issue remains soil and potential water contamination. The Plant management has to actively promote the dialogue with all the stakeholders in order to improve both its own environmental performance, and environmental conditions in the adjacent communities, the success of which is conditional upon implementation of the EAP. The Borrower shall be required to observe the applicable EH&S legal requirements, implement the EAP and report on annual basis on EH&S performance.

Operation Leader:

General Industries, Transport, Tourism 2

E-mail:

gitt2@bstdb.org