Krasnodar Glass Bottling Plant, Krasnodar, Russia

Russia is a much more sophisticated market for food and beverage products than it used to be; over the last 20 years a number of companies have moved into Russia to provide items that were not available before.

The South of Russia, near the border with Turkey in the Black Sea and North Caucasus regions, is a vast market for beer, wine and mineral water. However, a plentiful supply of bottles is required for production and there is very little bottle production in the region, which has only 4% of the glass container production capacity of Russia.

Consequently, a well-known Turkish company, Turkiye Sise ve Cam Fabrikalari A.S. (SiseCam Group), is building a new bottle plant on a greenfield site. The Krasnodar plant will be operated by a new company, Ruscam-Kuban LLC, which is a majority-owned subsidiary of Anadolu Cam, a member of SiseCam Group.

GLASS ECONOMY

The new plant will have an immediate twin effect on the economy of the region. Firstly, suppliers for the quality materials for glass production such as soda ash and sand will have to be sourced. SiseCam is aware that it needs to educate local suppliers as to the quality required. Secondly, the wine - producing sector is centred in Krasnodar and is growing at a rate of 10–15% per year. The plant will therefore want to be in a position to provide bottles for the sector, focusing on sparkling wine producers in the Central Volga region.

In addition, the mineral water production of Russia is very much concentrated in the south of the country, from the mineral water sources in North Caucasus, and the new bottle plant will also be able to provide bottles for this.

The brand new plant will be situated in Krymsk, about 40km from the Black Sea port of Novorossiysk and will employ 450 people. The capacity upon completion will be around 240,000 bottles a year. The company's three existing bottle plants in Russia produce around 3 billion bottles a year, one third of Russia's total output.

CONSTRUCTION

The Krasnodar Glass Packaging Plant is being built using part funding from the European Bank for Reconstruction and Development (EBRDA) amounting to around €52.5m. This was announced in April 2008. The total investment for the plant will approach a figure of €75m.

The plant will be constructed in two phases with an initial capacity with one furnace of 140,000t per annum. A future phase will see production doubled to 280,000t per year when a second furnace is constructed.

The bottle production will based on narrow-neck-press and blow technology (NNPB), which uses around 20% less material than conventional production, has less breakages and allows a faster production cycle. The plant is being constructed by Saint Gobain of France and is scheduled to be on stream (first phase) by 2010 using state-of-the-art production technology.

EBRD FINANCE

The EBRD finance initially provided will be €37.5m (debt, seven-year loan), in two lots which will be timed to match the investment for each furnace. The two sums will be initially €26.3m (phase one) and then later €11.2m (phase two). In addition, the EBRD will provide €15m of an equity investment into the company as it is a new special purpose vehicle (SPV).