Debbas

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	27505
Company name	Debbas Holding Sal
Country	Lebanon
Sector	Construction and Real Estate
Environmental category	B
Department	Global Manufacturing & Services
Status	Pending Approval

Date SPI disclosed	October 28, 2008
Projected board date	November 28, 2008

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Debbas Group (Debbas) is a mid-sized family owned electrical solution company based in Beirut, Lebanon. Debbas provides electric lighting solutions and integrated systems along with contracting services to the construction industry. It operates 4 assembly lines in Lebanon, the GCC and France and more than 20 project supply offices in Middle East, Africa and Europe.

Debbas’ strategy is to provide innovative and environmental friendly solutions to the construction and infrastructure sectors in developing countries. Its growth plan involves the geographic expansion of its core project supply activities through the opening of new offices & the development of new assembly and manufacturing facilities including in Egypt, Lebanon, India, and China). In order to strengthen its balance sheet and support its expansion plan, Debbas has requested up to $12 million in IFC quasi-equity financing.

Anticipated development impact of the project

The project will enable a Lebanese electrical system engineering company with local knowledge and a global supplier network to expand its operations to surrounding regional countries, and will support the development of low energy consumption lighting systems. Moreover, through its planned expansion of overseas operations, Debbas will earn valuable foreign exchange, and will contribute to the tax revenues of the target countries. The project is also expected to create new permanent and temporary jobs in Lebanon, as well as in target countries. In addition, the project is expected to help improve the company’s corporate governance, thereby setting a benchmark for other local companies.

Changing energy inefficient light bulbs to efficient, low energy consuming lighting systems is considered “low hanging fruit” for making a positive climate change impact. The project will support the development and market penetration of low energy consumption lighting systems. To the extent that Debbas is able to encourage its downstream clients to adopt more energy efficient lighting solutions will also help stimulate, through its own bulb sourcing and supply chain, growth of upstream manufacturers of efficient bulbs.

Finally, the project is expected to help improve the company’s corporate governance.

IFC's expected development contribution

IFC’s unique contributions to this project are as follows:

- Sector Advice and Assistance:
Drawing on its global knowledge and experience, IFC has already assisted and advised Debabs in updating its management systems and strategic priorities.

- Support Debbas in its Expansion Strategy:
IFC will provide long-term equity financing at the holding level to strengthen the company’s balance sheet and help it pursue its expansion strategy.

- Corporate Governance:
IFC will help the company establish good corporate government principles and practices, which in turn will improve Debbas’s operational efficiency and prepare it for future strategic partnership or IPO.

- Political Risk Mitigation:
IFC’s participation will provide additional comfort to Debbas to continue expanding into newer territories such as Libya and other untested North African and Middle Eastern countries.

- Stamp of Approval:

Debbas values IFC as an equity partner and believes that IFC’s presence in the company will make it more attractive for strategic investors to participate in a future financing round or a future IPO.

Environmental and social issues - Category B

This is a Category B Project according to IFC’s Environmental and Social Review Procedure because, it has been concluded that the potential adverse environmental and social impacts presented by the project are limited and have been or can be readily mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

Key issues reviewed during the appraisal include:

-environmental and social management systems ,
- occupational health and safety
- labor relations,
- energy efficiency
- hazardous materials management
- wastes, effluents and emissions management,
- community health, safety and security

These issues will have to be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management Systems;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement; and
- PS4: Community Health, Safety and Security.

No land acquisition by Debbas is anticipated at this stage, however the possibility for the future cannot be excluded. In case future expansion projects involves land acquisition and construction by Debbas, the Group will have systems to assess and to address potential impacts relevant to PS5 to 8 in addition to the above mentioned performance standards.

The Group actually demonstrates technical capability and compliance to the international design and engineering standards through established quality management systems for its manufacturing and contracting operations and will expand this management system approach to cover its social and environmental management practices in all countries of operations.

The Environmental and Social Review Summary and the relevant action plan describe further mitigation measures for the key environmental and social issues.

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