A1 Belarus

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	Pending Disbursement

Date SPI disclosed	October 12, 2007
Projected board date	November 12, 2007
Previous Events	Signed: July 1, 2008 Approved: June 24, 2008

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

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.

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.

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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