The project sponsor is Agrokor (the group or the sponsor), a privately held company. Over the last 25 years, Agrokor has expanded from a small family business for flower production and trade into a EUR 1.8-billion-revenue company in 2004. The group consolidates over 30 companies. Its core businesses are:

- the production and distribution of food and beverage,
- food retailing, and
- the trading, production, processing and storage of agricultural goods.

Total project cost is estimated at EUR 65 million over the next few years plus working capital and contingencies. The proposed IFC investment is an A-Loan of up to EUR 40 million for IFC’s own account.

49.26 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	49.26
Equity

* These investment figures are indicative

Belje is located in the Baranja province, at the East most point of Croatia, not far from the town of Osijek. Belje operates 20,000 ha of arable land for crop farming, pig and cattle farms, dairy farms and a cheese factory, a meat processing plant, a feed mill, and a flour mill.

PIK Vrbovec is located about 40 km away from Zagreb. It has pig breeding and growing farms, beef feed lots, a slaughterhouse for pigs and cattle, a meat processing plant for fresh meat packing and processed meat.

The proposed project will allow Agrokor to implement its operational restructuring plan, and return PIK Vrbovec and Belje to profitability by providing investment in quality processing and rationalization of productive assets. The result of the turnaround plan should be larger output, higher productivity and improved cost structure for both companies.

Agrokor will also work with IFC on improving operational standards, quality management systems and occupational health and safety, in line with EU standards, introducing HACCP (Hazard Analysis and Control Point) where appropriate. PIK Vrbovec and Belje were not sustainable enterprises. By restructuring these companies, Agrokor will be providing sustainable jobs for their employees and seasonal workers

IFC would be playing a key role by providing long-term financing matching the investment needs of PIK Vrbovec and Belje. Long-term financing is not easily available to the Borrowers on terms that would allow for sufficient time to turn the business around.

IFC would also support the recent privatization of PIK and Belje, two companies in need of strategic investments and modernization, as well as changes in management practices to become more efficient and leverage their brand names, synergies and productive assets. IFC will support a local player providing its management expertise and presenting many opportunities for operational synergies to optimize the industry’s efficiency in Croatia. Finally, IFC and Agrokor are working together to improve management systems and environment practices.

This is a Category B project according to IFC''s Procedure for the Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

The following potential environment, health and safety areas of the project were analyzed:

- agricultural operations within Kopački rit nature preserve;
- existing and planned integrated management systems encompassing quality, environmental and social affairs; - animal husbandry, disease and zoonosis control, welfare, and traceability;
- food safety;
- emissions to the environment (air, wastewater and solid waste, odors, and noise), clean production and eco-efficiency in processing operations including minimization of water use and wastewater production, recycling, and efficient use of energy;
- management of hazardous materials and hazardous wastes including bio-hazards, use of chemical and ozone-depleting refrigerants; occupational health, safety and emergency response, life and fire safety;
- social issues and employment, communications, community development and land acquisition; and
- technical assistance in the supply chain.

Remedial actions to correct noted deficiencies in compliance with Croatian regulatory and IFC/World Bank policies and guidelines compliance are summarized in a Corrective Action Plan (CAP) with mandatory completion dates. Upon successful implementation of the mitigation measures in the CAP as well as project elements described in the ERS, IFC concludes that the proposed project will meet applicable Croatian regulatory requirements as well as World Bank/IFC environment and social policies and the environmental, health and safety guideline requirements.

The Environment Documents will be made available in publicly accessible locations within the towns of Beli Manastir and Vrbovec. An advertisement will be published in local newspapers indicating where the documents may be obtained.