ISD, one of the largest Ukrainian steel making and trading companies, was founded in 1995. Its main steel subsidiaries in Ukraine are OJSC Alchevsk Iron & Steel Plant (AMK), OJSC Dniprovsky Iron & Steel Plant (DMK), and OJSC Alchevsk Coke. ISD’s steel assets outside Ukraine are Dunaferr Dunai Vasmu Zrt. in Hungary, and Huta Stali Czestochowa z.o.o. in Poland, both of which were acquired through privatization.

ISD beneficial owners are Mr. Sergey Taruta, Mrs. Olena Gayduk and Mr. Oleg Mkrtchan.

The total project cost is estimated to be approximately $3.0 billion. The proposed IFC investment is an A loan of up to $100 million for IFC’s own account and a syndicated B loan of up to $250 million.

100.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity

* These investment figures are indicative

ISD is headquartered in Donetsk, Ukraine. The project will involve modernization of the company’s steel production assets in Ukraine:

- AMK, located in the town of Alchevsk, Lugansk Oblast; and
- DMK in Dnepropetrovsk.

AMK and DMK are existing steel mills, which were founded over 100 years ago, and are located in industrial zones of their respective towns. AMK and DMK steel mills have adequate access to industrial infrastructure and transportation routes.

The proposed project is expected to have a positive development impact in several areas:

- Enhancing competitiveness of a local industry leader:

The project will further improve the competitiveness of a major emerging market steel producer and enhance its position as a low cost producer.

- The project will further improve environmental conditions at the ISD facilities in Ukraine.

- Strengthening local economy:

The project will enable ISD to further improve profitability, which will have a significant impact on Ukraine’s economy. Furthermore, AMK and DMK are town-creating enterprises, employing a significant portion of the local workforce and generating demand for additional services in the local economies.

ISD is an existing IFC’s client. Through its previous investment in the company, IFC developed a strong relationship with ISD, which is interested in IFC’s continued support. IFC’s expected developmental contribution is as follows:

- Provision of long-term financing commensurate with client’s needs.

- Resource Mobilization:

Through a $250 million syndicated unsecured loan financing, IFC will broaden the pool of international banks, expanding opportunities for ISD to obtain financing in the future.

- Long-term Partnership with a Regional Player:

ISD is an important Ukrainian industry leader, which is emerging as a strong regional player. ISD values IFC as a long-term partner and IFC’s continued support of the group could lead to joint promotion investments by companies in emerging markets to other emerging market countries.

- Continued support of environmental, health and safety improvements:

As in its first investment in ISD, IFC will continue to play a role in identifying shortcomings in environmental, health and safety standards and guiding the company’s improvements in these areas.

The proposed project will result in further environmental improvement investments.

The project is reviewed as a Direct Investment according to IFC’s Social and Environmental Sustainability Policy. The following Performance Standards (PS) are applicable:

- PS1: Social and Environmental Assessment and Management Systems with respect to the company’s continued management of its performance, including the implementation of a Corrective Action Plan; compliance with national and local permitting requirements; and engagement with local communities.
- PS2: Labor and Working Conditions with regard to fair, safe and healthy working conditions at its facilities.
- PS3: Pollution Prevention and Abatement with regard to efforts to optimize resource utilization, general emission control and energy efficiency to minimize CO2 emissions, and waste minimization and recycling.
- PS 4: Community Health, Safety and Security with regard to the impacts of the operation of facilities, including the need to minimize particulate emissions to improve the ambient air quality in the surrounding cities.

IFC has followed the company’s implementation of the Corrective Action Plan (CAP), which was agreed as part of the ISD first transaction. The company has delivered reports on time and has shown a progressive willingness to fulfill the goals of the agreed CAP. The project will:

- focus on options for optimizing the outcomes of already agreed CAP based on the initial implementation experience,
- assure financing for the next steps of the CAP, and
- set new sustainability goals for the operations (e.g., further enhance water recycling).

This is a category B project.