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| A1 Belarus |
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| 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 | 26253 |
| Company name | Tigullio Holdings |
| Country | Belarus |
| Sector | Wholesale and Retail Trade |
| Environmental category | B |
| Department | Global Manufacturing & Services |
| Status | Active |
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| Date SPI disclosed | October 12, 2007 |
| Projected board date | November 12, 2007 |
| Previous Events | Invested: February 13, 2009
Signed: July 1, 2008
Approved: June 24, 2008 |
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| View Environmental & Social Review Summary (ESRS), click here |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
| The A1 Group (the A1 Group or the sponsor) plans to open 128 discount stores in the six largest cities of Belarus, which the sponsor plans to complete by 2010. Discount stores are characterized by low numbers of Stock Keeping Units (SKUs), limited in-store service, and, as a result, low prices. The first stores will open in Minsk, and will be followed by stores in other Belarusian cities. The sponsor has an expected ratio of owned to rented stores of 40:60. These stores, located in residential areas, will have an average trading area of 500 m2 and will serve low- to mid-level income customers. |
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| Project sponsor and major shareholders of project company |
| The A1 Group, the 100% owner of the company, is the direct-investment vehicle the Alfa Group, and a leading investment company in Russia and CIS. The strategic approach followed by the sponsor is to undertake investments that develop sustainable, competitive businesses offering high quality products and services in Russia and other CIS countries. The A1 Group invests both its own funds and, as a management company, the capital of its investors, the shareholders of Alfa Group. The retail chain will be established through an offshore Cyprus holding company, Tugillio Holding Ltd. (Tugillio Holding Ltd. or the company), with subsidiaries IOOO Landgraf, a real estate company (Landgraf) and IOOO BelMarket, an operating company (BelMarket). |
| Total project cost and amount and nature of IFC's investment |
The total project cost of the project is estimated at $83 million. The proposed IFC investment is;
- an A loan of up to $10 million for IFC’s own account, and
- a convertible C loan of up to $6 million for IFC’s account. |
| Location of project and description of site |
| The sponsor plans to open 128 discount stores, targeting the middle to low income consumer, in the six largest cities of Belarus. The first stores will open in Minsk, followed by stores in Mogilev, Brest, Bobruisk, Gomel and Vitebsk. The company plans to buy or lease existing retail space in the six largest cities, with an expected ratio of owned to rented stores of 40:60. |
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| Anticipated development impact of the project |
| Retail infrastructure in Belarus is poor and in need of improvement. The project is expected to help address the strong household demand for modern retailing in Belarus, mainly driven by gains in consumer income as a result of rapid economic growth. The opening up of 128 modern discount stores in Belarus as a result of this project will open up new retail options for consumers and facilitate the transfer of modern warehousing and retail techniques to a country where the modern format retail industry is still in the early stages of development. The establishment of this retail chain across the country will be instrumental in improving the quality and quantity of retail operations in Belarus. The project will also support a South-South investment, thereby encouraging other companies to pursue investment opportunities in Belarus as the country’s perceived risk continues to diminish. |
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| IFC's expected development contribution |
IFC will support A1 in its efforts to establish retail operations in Belarus. IFC's expected development contribution will be as follows:
- Long term financing:
Long term funding alternatives are scarce in Belarus. IFC will provide long term flexible financing which the company would not able to raise from commercial banks in Belarus. IFC's C loan structure, which is not available in the Belarus market, provides long term funding in a form that meets the company's needs.
- IFC’s Retail Expertise:
A1 views that IFC’s sector expertise, regional knowledge and its experience in other retails projects in the region brings value to the proposed investment. IFC is providing its global industry expertise and technical knowledge to help the company sharpen its retail expansion strategy in Belarus. Once the company has reached a critical mass of stores, IFC will look into the possibility of assisting the company improve its local supply chains with local small and medium manufacturers and farmers.
- E&S Standards:
IFC will assist the company to maintain higher environmental, fire & life safety and social standards.
- Political Risk Mitigation:
The domestic political situation, as well as the country's heavy economic dependence on its neighbors, in particular Russia, has led A1 to request the support of IFC in developing its investment in Belarus. |
| Environmental and social issues - Category B |
The key environmental and social aspects of the project, which have been considered are the following:
- Environmental assessment and site planning processes;
- Social and Environmental management systems and structure;
- Labor and working conditions;
- Resource efficiency;
- Refrigerant selection;
- Emissions to water;
- Solid waste disposal and management;
- Life and fire safety;
- Food hygiene;
- Site acquisition.
This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because the project has limited potential adverse environmental and social impacts that are few in number, site specific and readily mitigated. |
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| For inquiries about the project, contact: |
Mr. Denis Gorbuzov, CEO
IOOO BelMarket
Logoysky Trakt 50
Akvabel Hotel
4th Floor
Minsk, Belarus
Telephone: +375 17 237 9425
Fax: +375 17 237 9433
E-mail: a1x5@tut.by
The environmental documents will be made available at the following location:
Business center "Akvabel",
Minsk region,
Cross of Logoiskii trakt and MKAD,
office 302 |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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