Shuoren

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	28214
Company name	Beijing Shuoren Hitech Energy Technology Co., Ltd
Country	China
Sector	Professional, Scientific and Technical Services
Environmental category	C
Department	Global Inform. & Comm. Tech.
Status	Pending Disbursement

Date SPI disclosed	August 7, 2009
Projected board date	September 22, 2009
Previous Events	Signed: September 30, 2009 Approved: September 28, 2009

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Founded in 2003 in Beijing, Shuoren Energy High-Tech Co. (“Shuoren,” or the “Company”) designs and implements blast furnace dehumidification technology for major steel manufacturers in China. Shuoren’s proprietary technology is designed to improve energy efficiency, both from reduced energy costs and from improved performance. Shuoren is part of an emerging group of energy management companies (“EMC”, or “ESCO”) that finance, install, operate and maintain equipment that support energy efficiencies.

Anticipated development impact of the project

Energy efficiency improvements are important for both climate change and sustainable growth. Both in China and other countries, better management of natural resources and decreased pollution will be necessary to alleviate the strains of continued economic and population growth.

Energy management companies are emerging as rapidly increasing critical supporters of energy efficiency technology, particularly in China. Since 1996, when the World Bank-supported China’s Energy Conservation Project, which helped found three pilot EMCs, over 100 EMC companies have emerged. As large industrial companies typically do not have the in-house technological, managerial or financial capacity devoted for the development of energy efficiency technologies, the services provided by EMC companies are recognized as a unique value proposition and viable standalone businesses. However, EMCs face a host of challenges themselves, and in particular have difficulty obtaining financing due to lack of familiarity with their business model.

An investment in Shuoren will greatly support the Company’s ability to develop and grow in the domestic energy efficiency sector, primarily focusing on steel but also expanding to other sectors. Efforts to reduce the energy consumption driven by China’s growth, especially with growing environmental pressures and the global financial crisis are continuing and increasingly being stressed by the national government and international community.

The Project will have significant developmental impact by:

Contributing to the development of the clean technology sector in China;

Enabling turnkey solutions for clients who benefit from the introduction of energy efficiency technology to decrease upfront capital costs required to implement projects that reduce energy use and mitigate environmental impacts; and

Assisting the government of China in achieving its energy reduction goals in the short and long term, which is an important part of global initiatives to mitigate climate change impacts.

IFC's expected development contribution

Promote clean technology and energy management services: IFC’s support will be critical to the development of Shuoren’s business and technology, and to providing additional demonstration that more efficient use of resources is an important and viable area of investment. This support extends to Shuoren’s capabilities in innovation, as IFC will help the Company expand to broader set of industries and markets in other regions in China beyond its initial target market in steel manufacturing.

Access to financing in illiquid capital markets: Local financing channels are typically not familiar with the EMC business model, which results in limited access to finance for otherwise viable projects. IFC is able to provide critical early-stage equity financing for EMC companies such as Shuoren, which are not able to obtain it elsewhere.

Institute good corporate governance: IFC will assist Shuoren in instituting best-practice corporate governance, including help with recruitment of at least one independent Board member.

Environmental and social issues - Category C

Environmental benefits result from Shuoren's activities through reductions in energy usage and carbon emissions, as well as from the partnership between Shuoren and the World Resources Institute for carbon tracking across various industries in China.

Where Shuoren conducts operations and has control over outsourced manufacturing, it will be required to manage all relevant environmental, health and safety risks according to IFC Performance Standards for the duration of IFC's investment.

The level of these risks is low, so the project is classified as Category C according to IFC's environmental and social review procedure.

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