CCIL CPLP

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	28571
Company name	Continental Carbon India Limited
Country	India
Sector	Chemicals
Environmental category	C
Department	Oil, Gas, Mining And Chemicals
Status	Pending Signing

Date SPI disclosed	October 1, 2009
Projected board date	November 2, 2009

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Continental Carbon India Limited (‘CCIL’) is a leading carbon black manufacturer in India. CCIL’s manufacturing facility is located in Ghaziabad, Uttar Pradesh, India and the Company sells its carbon black to tire and non tire companies across the country. The Company also operates a 15MW waste heat recovery power plant and sells the power to the national grid. To become more competitive, the Company has embarked on several cost reduction initiatives to improve its operational and financial performance. The proposed Project is one of these many initiatives.

This Project consists of four (4) individual sub-projects including the installation and commissioning of new reactors, air blowing and drying systems. These sub-projects will reduce costs and increase productivity of both the carbon black and the power production. They include the installation of: i) a highly energy efficient air blower that will reduce the oil consumption and provide a spare for existing Hard Black side process air blower, avoiding production loss; ii) an improved carcass reactor that will reduce electrical and thermal energy consumption during the conversion process; and iii) two smoke drying systems that will reduce the need for waste gas from the dryer now used to dry wet carbon black pellets, gas which will then be used for steam and power generation.
Total expected annual cost savings is $2.2 million.

Project sponsor and major shareholders of project company

The Company, which was incorporated in 2000, is a subsidiary of Continental Carbon Company (“CCC”), a US company, and of China Synthetic Rubber Company (“CSRC”), a company incorporated in Singapore. CSRC holds 55% of the total paid capital in CCIL, CCC 35%, and IFC 10%. China Synthetic Rubber Corporation of Taiwan, China is one of the leading carbon black global producers and technology providers. Continental Carbon Company (Houston, Texas), its US subsidiary, is the majority shareholder of CCIL. CCIL has been The Sponsors have consistently demonstrated a strong commitment to CCIL.

Total project cost and amount and nature of IFC's investment

Total project cost is estimated at $6 million, of which IFC will finance up to $3.5 million via a Clean Production Lending Pilot (CPLP) loan facility on its own account. CPLP, a joint initiative between GMS and CES, is a US$20 million delegated authority facility approved by the Board in 2007 to support cleaner production projects of portfolio clients in good standing. The proposed loan has a three (3) years tenor, including two (1) years grace. The balance will come either through sponsor’s equity or through internally generated cash flow.

Location of project and description of site

The Project will be implemented at the carbon black plant located in Ghaziabad, State of Uttar Pradesh, India. Uttar Pradesh (UP) has the highest population of any state in Indian (190 million people). UP is also one of the poorest states. Between 1999 and 2008, the economy grew only 4.4% per year, one of the lowest rates in India. In 2003-4 per capita income was $212, less than half that of national per capita income of $450. Over the past decade, UP’s GDP growth has significantly lagged behind the All-India averages, as well as the averages for the 16 major states. UP’s per capita income only grew at 3.1%, one of the lowest in all major states, while the national average was 8.6%.

The Project includes the installation of: i) a highly energy efficient air blower that will reduce the oil consumption and provide a spare for existing Hard Black side process air blower, avoiding production loss; ii) an improved carcass reactor that will reduce electrical and thermal energy consumption during the conversion process; and iii) two smoke drying systems that will reduce the need for waste gas from the dryer now used to dry wet carbon black pellets, gas which will then be used for steam and power generation. Total expected annual cost savings is $2.2 million

Anticipated development impact of the project

This Project supports cleaner production at the CCIL plant, which makes more efficient the use of inputs such as raw materials, energy and water along the chain of production. It results in cost savings and environmental benefits with fewer waste and lower CO2 emissions. The Project will also generate a few new employment opportunities during the implementation phase.

The key development indicators that are proposed to be monitored during the life of the IFC investment are:

- Annual electricity savings
- Annual oil savings
- Reduction in emissions
- Loss reduction/ productivity increase
- Power generation increase

The Project fits well with the objective of CPLP to finance CP investments that provide quantifiable cost saving benefits and positively impact the environment. This reduction in cost will enable the company to remain competitive in an industry where higher production cost have squeezed margins, and maintain its level of operations and of employment, as well as its current clientele. It will also provide incremental carbon black sales from the improved efficiency of its operations.

IFC's expected development contribution

The Project fits well with IFC’s strategic Climate Change priority and specific corporate objective of supporting investments in energy efficiency and renewable energy. The objective of the CPLP facility is to finance CP investments for portfolio clients in good standing which bring about quantifiable benefits in terms of cost savings and positive environmental impact. Through this project, IFC is supporting the World Bank Group’s commitment to cleaner energy and energy efficiency, IFC’s long term goal to increase the implementation of such projects in the private sector.

More specifically, IFC’s objectives of the Cleaner Production Lending Pilot (CPLP) is to i) work with its real sector clients to create strong demonstration projects whose success stories can be widely disseminated and ii) promote the initiation of CP lending programs to IFC’s financial sector clients.

Environmental and social issues - Category C

The project will further enhance the energy efficiency initiatives the company has been undertaken and will have only positive environmental impacts. By helping reduce fuel consumption and electrical and thermal energy the project will help reducing the air emissions generated by the company as well as those generated from the production of energy to satisfy the company operation needs. In addition, by producing steam and power from the latent energy in the waste gases, the company also reduces air emissions generation. The environmental category of this project is C since the project does not have negative environmental or social impacts

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