DEG promotes energy-efficient agriculture in Serbia

DEG provides the Serbian agro-industrial MK Group (MKG) with a long-term loan of 20 million euros for expansion investments. Furthermore, it arranges the complete debt financing amounting to 50 million euros. Co-financers are the development finance institutions FMO (Netherlands) and OeEB (Austria), each providing 15 million euros.

MKG is one of the leading agricultural groups in Southeast Europe. The funds will be mainly invested in new equipment to produce sugar by extraction from molasses. This new technology is expected to reduce energy costs by around one-fifth per tonne of sugar.

Furthermore, the loan will be used to invest in a steamdryer that dries wet pulp, a by-product of sugar production, to manufacture pellets. CO2 emissions associated with sugar production can thus be significantly reduced as the dryer uses existing steam instead of fuel oil.

Modern irrigation systems play a decisive role in agriculture when it comes to adapting to climate change. This is another area of investment for MKG: the loan supports the modernisation of existing and purchase of new irrigation systems, thereby extending the Group's irrigated surface to 4,600 ha.

MKG employs a staff of almost 4,000, the majority of them in Serbia and cooperates with around 21,000 local farmers. In view of Serbia's unemployment rate of 23.7 per cent, these employment effects are of particular importance. Furthermore, the company's tax payments make a valuable contribution towards reducing Serbia's budget deficit.

In its role as development finance institution, DEG also takes on commitments in transition countries such as Serbia. In this transaction, DEG acts as investor in a key sector of the local economy. On top of that, DEG has refinanced local commercial banks in Serbia in the last few years in order to facilitate access to investment capital for small and medium-sized enterprises.