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| 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. |
Summary of Project Information (SPI) |
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| Project number | 10448 |
| Project name | Ispat Karmet SME Resource |
| Country | Kazakhstan |
| Sector | Collective Investment Vehicles |
| Department | Global Manufacturing & Services |
| Company name | Mittal Steel SME Resource TOO |
| Environmental category | FI |
| Date SPI disclosed | November 28, 2000 |
| Projected board date | December 29, 2000 |
| Status | Active |
| Previous Events | Invested: November 23, 2001
Signed: November 20, 2001
Approved: May 3, 2001 |
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| Project sponsor and major shareholders of project company |
| The project sponsor is Ispat Karmet (IK), which has been an IFC client since 1997. Ispat Karmet is part of the LNM Group, one of the world's fastest growing steel producers with operations in the US, Canada, Mexico, Trinidad, Germany, France, Ireland, Kazakhstan, and Indonesia. The project company is Ispat Karmet SME Resource (IKR or the Resource), in which Ispat Karmet will have a 51% shareholding. |
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| Total project cost and proposed IFC investment |
| The project cost is estimated at $6.9 million, of which IFC will subscribe up to $3.4 million in preferred and common equity. The project is to establish the Ispat Karmet Resource in Temirtau, an industrial city located in Karaganda Oblast, in north Kazakhstan. |
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| Location of project and description of site |
| IKR will be located on the premises of Ispat Karmet, in Temirtau, Kazakhstan. |
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| Description of company and purpose of project |
The Resource will be managed by Ispat Karmet. The Resource will provide loan, quasi-equity, and equity financing, while the manager will provide technical and business assistance to small and medium enterprises (SMEs) located in Karaganda Oblast. Target size of investments is $20,000 to $1million.
The proposed Resource is specific in that it aims to stimulate the relationship between the large corporate sector (in this case, Ispat Karmet) and the private SME sector. Specifically, IKR will target its investments primarily at SMEs that already are or have a good potential to become suppliers to Ispat Karmet, which is the largest steel producer in Kazakhstan.
This project is the result of IFC's effort to identify a fully commercial and economically-sustainable model for strengthening SMEs affiliated with large international organizations in general, and with Ispat Karmet in particular. The concept of this Resource is based on an existing model: the Anglo-American SME funds, whereby Anglo-American of South Africa has provided financial, technical, and managerial support to enable local SMEs to become suppliers to its mines and businesses. The Anglo-American initiatives have been successfully operating since 1989, substantially increasing supplies from local SMEs, and providing good financial returns on investment.
IFC Role and Development Impact:
IFC's primary role in this project is to promote corporate citizenship. If successful, this project could have considerable replication possibilities as many large organizations working in developing environments, many of them IFC clients, have similar needs.
The proposed project has substantial development impact. Important impediments to the development of the Kazakh SME sector include lack of access to equity capital, limited availability of long-term lending, and business managers’ insufficient business expertise and technical training. The IKR aims to alleviate these constraints by providing financing supplemented by appropriate technical assistance.
The project is consistent with the World Bank Group strategy to support the growth of the private sector in Central Asia. In line with this strategy, IFC's priorities for Central Asia include supporting SMEs through financial intermediaries as well as through corporate-sponsored financing. |
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| Environmental and social issues - Category FI |
This is a Category FI Type 2 project according to IFC's environmental and social review procedure. IKR will be required to establish an environmental management system to ensure that subprojects comply with host country environmental standards and applicable IFC policies and guidelines. Category A subprojects must be subject to prior review and clearance by IFC's Environment Division. IKR must provide IFC with an annual monitoring report on its environmental management system and the environmental performance of its portfolio.
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| To contact the project company, please write to: |
| Mr. N. Chaudhary, General Director, Ispat Karmet, 1 Lenin Avenue, Temirtau, Kazakhstan |
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