Project Name Russian Federation: KuAz
Region: Central and Eastern Europe
Sector: Chemicals
Project: #23114

1. Kuibyshevazot Joint Stock Company is a chemical company in Russia located in Togliatti, Samara region. It is the leading producer of caprolactam in Russia and the CIS (caprolactam is the raw material for producing polyamide resins, synthetic fibres and engineering plastics used in textiles, automotive, and many other downstream industries). In addition to caprolactam, the Company also produces ammonia, nitrogenous fertilizers and industrial gases. The Company is currently executing an investment program aimed at refurbishing, upgrading and expanding its production facilities; t he investment to date has been mainly financed by own resources, by domestic corporate bond issue and by local Russian bank. IFC has been requested to provide a corporate loan to Kuibyshevazot to help refinance the bond and fund the Company’s ongoing capital expenditure program.
   
2. This is a category B project according to IFC’s Environmental and Social Review Procedure Environmental, social and health and safety issues associated with this project include:
   • Environmental impact and safety management of associated facilities;
   • Plant site past contamination and HAZOP review;
   • Occupational health and safety issues;
   • Corporate capacity in environmental management and monitoring ; and
   • Sustainable community relations and HIV initiatives.
     An Environmental, Social, Health and Safety (ESHS) Audit is currently underway, and subsequent corrective actions will be included in the Environmental and Social Action Plan (ESAP) to be completed by the end of October 2004.
     
3. The sponsor has demonstrated that the proposed expansion project will comply with applicable Russian Federation regulatory framework and meet IFC requirements. The information provided about how these potential impacts are addressed in the development of the project is summarized in the paragraphs that follow. IFC is satisfied with Kuibyshevazot’s current social, environmental, health and safety performance.
   
4. Kuibyshevazot has developed an Environmental Policy, which says that “Kuibyshevazot strives to protect the environment while dealing with different production challenges and boosting its capacities”. There is a team of professionals in charge of the environmental, health and safety aspects of the operation, under the responsibility of the Deputy Chief Engineer. Kuibyshevazot will upgrade the environmental function to ensure proper environmental monitoring and implement all appropriate mitigation measuresincluded in the ESAP. Kuibyshevazot will formalize and develop a capacity building program and training plan on environmental issues for company management, employees and contractors. The existent scope, purpose and data from environmental monitoring will be broadened to provide an assessment of the impacts of the production operations on the environment, as well as recommendations for preventive measures in case of emergency situations.
   
5. During the last years, an effort was made to reduce process water consumption (using recycling techniques), gaseous emissions (less dust, new scrubbers, nitric acid off gas) and waste generation (sludge, sewerage, specific production waste). Over the last two years Kuibyshevazot has spent about US$1 million annually for environmental improvements. The Company is looking at using phenol as a substitute to benzene. As part of the Project, KuAz will upgrade its various emergency response, contingency plans and HAZOP for the plant and associated operations up to international best practice.
   
6. Kuibyshevazot will update its health and safety management system in accordance with the international standards. Necessary additions, adjustments and rethinking of the safety training system will be done in the framework of the Company’s adopted health and safety policies. It will include restatement of procedures and work instructions. The focus will be to develop a work-related risk assessment plan, conducts training, implement additional work-place monitoring, equipment/machinery preventive maintenance, and introduction of constant monitoring at the most dangerous activities in the production cycle . A medical system is in place, based on physical capability requirements for the various occupations, and general routine medical examination. Kuibyshevazot has agreed to review its organizational structure for OHS management and to improve prevention measures (such as Personal Protective Equipment, posting) rather then being responsive to accident.
   
7. In order to improve its relationship with all stakeholders, a Public Consultation and Disclosure Plan (PCDP) is currently being prepared, which will be disclosed. Included in the ESAP requirements its implementation will be closely monitored in the next month. Kuibyshevazot c onducts regular worker and union meetings at the plant site as well as maintaining open communications with local citizens, municipal authorities and community organizations.
   
8. Based on the audit findings including the action plan (ESAP), Kuibyshevazot will develop and implement a complete set of environmental, occupational health and safety activities and management tools to meet best practices. The ESAP will include a number of activities (as outlined above) that will be implemented during the life of the IFC project. Additionally, as part of its partnership with IFC, Kuibyshevazot will consider programs or projects to improve energy efficiency and discharges to the natural environment.
   
9. IFC will monitor ongoing compliance with the above commitments and with applicable IFC/World Bank Group environmental, health and safety policies and guidelines during the lifetime of the project by evaluating reports submitted annually to IFC by Kuibyshevazot and by conducting periodic supervision. Kuibyshevazot has expressed interest to work with IFC against AIDS, although it was mentioned that there is cultural sensitivities on the issues in Togliatti.