The European Bank for Reconstruction and Development (EBRD) has entered into a loan agreement with Russia’s second biggest pipe producer for the equivalent of €205mn.The loan will finance a new mini-mill based on energy efficient, low emissions technologies, and will restructure the group’s balance sheet to help it implement its investment programme.
The loan to the CHTPZ group is divided into two tranches. Part of each tranche is being syndicated to commercial banks with the bank remaining the lender of record for the full amount.
The first tranche of €145mn covers the construction of mini-mill at Pervouralsk with the EBRD providing €50mn on its own account and syndicating the remaining €95mn.
The tenor will be nine years for the EBRD’s A loan and seven years for the syndicated B loan.
An US$80mn second tranche will refinance two of the existing EBRD loans to the group, reducing debt payments and extending maturities. Half of this second tranche will be syndicated. The tenor of the A and B loans under this second tranche will both be seven years.
EBRD first vice-president Varel Freeman said at a signing ceremony during the bank’s annual general meeting in Kazan that these new loans confirmed the benefits of a long partnership with a group committed to improvements in corporate governance and ready to invest wisely not only in raising the quality of its output, but also in energy efficiency and a cleaner environment.
In 2004, a US$190mn EBRD loan enabled Chelyabinsk Tube to acquire a controlling stake in Pervouralsk New Pipe Plant in what proved a major sector consolidation. Chelyabinsk Tube Rolling Plant and the Pervouralsk New Pipe Plant, whose integration was completed in the fist quarter of 2007, are the core assets of CHTPZ Group, one of the leading industrial groups in the Russian metallurgical sector.
An audit financed by the Greek government identified a series of investments needed to improve energy efficiency at both plants. These will be partly funded by the first tranche of the EBRD’s loan and are expected to generate energy savings of at least 8%.
The new mini-mill will allow the group to close down its outdated open hearth furnaces, which are very inefficient in terms of energy usage and are also the source of significant air pollution. They will be replaced by modern electric arc furnaces. It will also enable the group to reduce significantly its dependence on outside suppliers of round steel billets, the semi-finished raw material used by both the Cheliabinsk and Pervouralsk plants for the production of seamless pipes.