West Coast Paper

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	24711
Company name	West Coast Paper Mills Limited
Country	India
Sector	Pulp & Paper
Environmental category	B
Department	Global Manufacturing & Services
Status	Active

Date SPI disclosed	February 5, 2007
Projected board date	April 16, 2007
Previous Events	Invested: March 31, 2008 Signed: June 28, 2007 Approved: June 6, 2007

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

West Coast Paper Mills Ltd. (West Coast or the company), one of the largest integrated printing and writing paper manufacturers in India, is to invest about $303 million in a modernization and expansion project consisting of:

- installation of a new elemental chlorine free (ECF) fiber line with capacity of about 246,500 tpa bleached pulp and auxiliary facilities;
- addition of a new writing and printing paper machine having an installed capacity of about 135,000 tpa;
- upgrading of existing duplex board machines to improve quality and increase production by about 6,500 tpa; and
- augmentation of the existing utilities and services to support the new ECF pulp mill and paper machine.

Anticipated development impact of the project

The project will improve the competitiveness of West Coast. The installation of new and better technology equipment will allow the company to lower production cost through better utilization of raw materials and energy. Moreover, the company will improve its environmental performance, and upgrade its product quality while also achieving better economies of scale as a result of the capacity increase. Profitability should improve and consumers are expected to benefit from the widening product range and increasing proportion of value-added products. West Coast’s farm forestry research work (developing genetically enhanced seedlings) and farm forestry initiatives (contract forestry in adjoining districts) is expected to result in reduction in transportation cost due to a decrease in the average sourcing distance from about 700 km to about 200 km.

West Coast is the only company with significant operations in Dandeli and the livelihood of people in and around Dandeli is linked to West Coast either directly or indirectly. The company currently employs about 4,200 people directly and through contractors and provides indirect employment to more than 15,000 people through its farm forestry program. Further growth of West Coast’s farm forestry program will create additional indirect employment opportunities for communities in and around Dandeli.

IFC's expected development contribution

IFC’s involvement in the project will improve the company’s credibility in the domestic and international market due to IFC’s adherence to high standards of corporate governance and environmental, safety and social consciousness, and insurance coverage.

The modernization and expansion project will significantly upgrade the environmental performance of West Coast’s operations in Dandeli. IFC’s participation will further ensure that the company achieves international ‘good practice’ standards in its environmental and social performance, which will in turn support the company’s sustainable growth. Even prior to formally engaging with the company, IFC had a number of meetings with West Coast’s management and provided inputs to help the company better address environmental and social aspects of the project.

IFC will provide long term debt with longer grace period, which is not available in the market and without which it would not be possible to complete the financial plan of this sizable and ambitious investment. Thus, IFC will play an important role in stabilizing the company’s debt profile, ensuring a proper match of cash from operations with debt service requirements.

Environmental and social issues - Category B

The project involves expansion and modernization of the sponsor’s existing plant, which has been in operation since 1958. Key environmental, social, health and safety issues that were assessed include:

- social, environmental, and health and safety management systems;
- government clearance and permitting process;
- management of construction impacts;
- fair, healthy and safe working conditions during construction and operation;
- hazardous materials management;
- air and noise emissions and ambient air quality;
- minimization, treatment and disposal of liquid, solid and hazardous wastes;
- occupational health, safety, hygiene, and emergency response planning;
- community health, safety, security and engagement; and
- corporate social responsibility and community development programs.

As required by the Government of the India (GoI), the sponsor commissioned an independent Rapid Environmental Impact Assessments (REIA) of the proposed development, which was submitted on November 16, 2006. The REIA concluded that mitigation measures can and are readily be designed to address the impacts identified, that adverse impacts are not expected to be diverse or irreversible and will be limited to project site, and that no physical or economic displacement of communities will occur. IFC currently has investments in three other pulp and/or paper manufacturing companies in India, all of which are E&S category B projects. For all of these reasons the project has been classified as a Category B.

The client has made copies of the REIA and other relevant environmental documents available for public review at the West Coast Paper Mills offices in Dandeli:

Bangur Nagar, Dandeli-581 325

As required by the Ministry of Environment and Forests, a public hearing on the REIA will be held at Ambedkar Hall in Dandeli on February 20, 2007 at 11.30 A.M.

IFC PROJECTS