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| Summary of Project Information (SPI) |
| This Summary of Project Information 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. |
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| Project number | 24764 |
| Project name | Velyka Kyshenya |
| Country | Ukraine |
| Sector | Wholesale And Retail Trade |
| Department | Global Manufacturing & Services |
| Company name | Limited liability company "Kviza-Trade" |
| Environmental category | B |
| Date SPI disclosed | April 25, 2006 |
| Projected board date | May 31, 2006 |
| Status | Completed |
| Previous Events | Signed: June 23, 2006
Approved: June 22, 2006 |
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| Description of company and purpose of project |
| The Velyka Kyshenya Group of Ukraine (the Group) was established in 1998, and currently operates 23 Velyka Kyshenya (VK) supermarkets, 15 of which are located in Kyiv and 8 in other large Ukrainian cities. The project will support the Group’s expansion in major cities outside of Kyiv in the next two to three years and refinancing of its short term loans. |
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| Project sponsor and major shareholders of project company |
The project Sponsor is Mr. Roman Lunin, a Ukrainian individual, who founded the Group in 2000. With sales of above $230 million for 2005, the Group ranks among the top five supermarket chains in the country. The Group currently consists of two companies, including:
- OJSC Retail Group, which is 88% controlled by Mr. Lunin and 12% by eight financial investors (mostly European private equity funds and asset management companies), and - OJSC Aeroholding which is 100% controlled by Mr. Lunin. |
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| Total project cost and proposed IFC investment |
The total project cost is estimated at $197 million comprising of:
- the $137 million regional expansion of its grocery retail operations by opening 35 VK supermarkets throughout Ukraine in the next two to three years;
- and the refinancing of about $60 million of short-term loans with long-term.
IFC is considering financing the project by providing long-term debt of about 100 million including:
- A loan of up to $35 million and C loan of up to $10 million, for IFC’s own account, and - B loan of up to $55 million, for participants’ account. |
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| Location of project and description of site |
| The new VK stores will be in major cities including Kyiv, Obukhiv, Kharkiv, Kherson, Ivano-Frankivsk, Dnipropetrovsk, and Mykolaiv. The Group is also in the process of identifying locations in other major cities in Ukraine. New sites will be close to the residential areas and major roads. |
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| Project Development Impact and IFC's Role |
The project will bring western style supermarket retailing to Ukraine’s largest cities. Consumers will benefit from larger store format, a better price-quality choice in a pleasant shopping environment. Management effort to track consumer preferences also allows the Group to improve service quality of its supermarket operations. Development impacts include:
- Benefits to consumers
Prices are expected to lower on some items as economies of scale in purchasing result in lower costs. In addition, the convenience of one-stop shopping is expected to result in time and search cost savings and higher consumer satisfaction of previously under-served customers.
- Benefits to local suppliers and producers
The project will have a catalytic effect in developing and improving the quality of local suppliers and producers. The Group will continue to work closely with local suppliers and producers to improve their quality in order to meet VK’s quality standards. Moreover, the Group will provide an outlet for local production and foster competitiveness of local industry, which would result in improved supply quality. The expansion of modern retailing also helps to regularize the informal sector, increasing the tax base.
- Benefits to employees
The project will create new employment, both directly and indirectly. It will provide direct employment to about 10,000 employees. A significant multiple of that number is expected to be added in the supply stream and in ancillary activities. In addition, temporary employment will be provided to local labor during the construction phase of the project.
- Demonstration effect
The adoption of stricter environmental practices for the Group will set an example for other companies to follow.
IFC’s role in the proposed project could be valuable on several grounds: (i) IFC's proposed investment will enable the Group to finance its expansion by supplying long-term funds on reasonable terms otherwise not easily available in Ukraine; (ii) IFC will mobilize additional financing through a B Loan syndication, and thus introduce the Group to Western commercial banks. This will ensure access to commercial international markets, which will be essential for the Group’s growth in the long run; (iii) IFC will play an important role in structuring the financial plan and introducing certain physical and financial completion benchmarks for the different project implementation stages, thus reducing the overall project risk profile; and (iv)IFC will help the Group to improve environmental performance and in particular life and fire safety in its retail business. |
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| Environmental and social issues - Category B |
This is a category B project according to IFC’s procedure for the Environmental and Social Review of projects. The potential environmental, health & safety, and social issues associated with Velyka Kyshenya operations that will be evaluated as part of investment project appraisal include the following:
- Land acquisition and planning procedures;
- Occupational health & safety issues related to fire protection and emergency response;
- Hazardous materials and solid waste management; (iv) Use of appropriate refrigerants;
- Traffic generation.
To view the environmental documents for this project, click here |
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| Location of environmental documents in locally affected community |
The Environment Review Summary will be posted in the administrative office at the Group's headquarter at the following address:
57, Zaliznychne shose, Kyiv, 01103, Ukraine. |
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| To contact the project company, please write to: |
Mr. Roman Lunin
Chairman of Supervisory Board
57, Zaliznychne shose, Kyiv, 01103, Ukraine |
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