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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 | 22295 |
| Project name | Nova Liniya |
| Country | Ukraine |
| Sector | Wholesale And Retail Trade |
| Department | Global Manufacturing & Services |
| Company name | Nova Liniya |
| Environmental category | B |
| Date SPI disclosed | December 22, 2003 |
| Projected board date | January 31, 2004 |
| Status | Active |
| Previous Events | Invested: August 26, 2004
Signed: June 25, 2004
Approved: May 24, 2004 |
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| Description of company and purpose of project |
The $13.0 million expansion project involves the construction and opening in Kiev of 2 new 10,000sq.m DIY (Do-It-Yourself) stores, in addition to the existing 5,000sq.m store, under the name Nova Liniya (NL or the company). The new stores, will follow the best practice of modern DIY format, comparable to those of Home Depot, Lowe’s, and OBI. They will offer a wide range of DIY products, more than 30,000, as well as specialized services.
The project, to be implemented in 2 stages over a 20 month period, will address the growing demand in the construction materials, home care products, and consumer electronics. The DIY concept has become well established in Ukraine. Following a slump in the aftermath of the financial crisis in Russia and the subsequent depreciation of the Ukrainian currency, Ukraine’s retail sector, and one of its fastest growing segments, DIY retailing, has posted impressive growth, exceeding 16% in 2002. It is expected that this growth will continue in the forthcoming years and NL, as a first mover, will take full advantage of its established position. |
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| Project sponsor and major shareholders of project company |
NL was established in February 2000 as a private joint stock company by its present senior management. In early 2002, an independent investment bank, Dragon Capital, acquired 35% of Nova Liniya’s shares. Currently NL’s management owns 50% of NL, Dragon Capital owns 35%, and individual investors own 15%.
Dragon Capital is the leading equity broker and a major M&A (Merger and Acquisitions) adviser in Ukraine. |
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| Total project cost and proposed IFC investment |
The total project cost is estimated at about $13 million
IFC is considering an investment of about $5 million, comprising an A Loan of about $3.5 million and a quasi-equity
investment of about $1.5 million. |
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| Location of project and description of site |
| All stores will be located in Kiev, the capital of Ukraine. NL’s existing store, with a total area of about 4.700 sq. m. is located in the densely populated and growing Kharkivsky district. The second store, to be located in the Troyeschyna district, will have a total area of about 10,000 sq. m. The site is unoccupied and is close to residential areas and bus stops. The third store is expected to be identical in size to the second store. |
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| Project Development Impact and IFC's Role |
Development Impact
The project is expected to have a significant developmental impact, as follows:
- Providing consumers with a wide range of good quality home improvement products at an affordable price.
- Upgrading business practices: The project will have a catalytic effect in developing and improving the quality of local suppliers and producers. Since part of the product range is expected to be sourced locally, the company will
have to work closely with local suppliers and producers to improve their quality in order to meet NL’s quality standards.
- Promoting SME and private sector development: The project would have a positive effect on the development of the home repair/improvement and construction services industry, which was underdeveloped during the years of state planning.
- Demonstration effect: The project would provide a significant demonstration effect, as its success would encourage other companies pursuing investment opportunities in Ukraine, as the country' s perceived risk begins to diminish.
- Increased employment: The project will create new employment, both directly and indirectly. It will provide direct employment to about 300 employees, mostly women, with a significant multiple of that number 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.
Fit With World Bank Group Strategy and IFC Role
IFC role in the proposed project could be valuable on several grounds:
- In view of the perceived macro-economic and political risks of investing in Ukraine, IFC’s presence in this transaction will help increase investors’ confidence in the country’s business environment.
- IFC's proposed financing will enable the company to support its medium-term investments by supplying long-term funds on reasonable terms otherwise not available to the company.
- IFC will play an important role in determining the project scope, structuring the financial plan, evaluating the environmental issues, thus reducing the project's risk profile. |
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| Environmental and social issues - Category B |
This is a category B project according to IFC's environmental and social review procedure. Environmental, occupational health and safety issues associated with this project include: site selection and planning, site environmental and social (including land rights and use) conditions, air emissions, liquid and solid waste treatment and disposal, hazardous materials handling, sale of materials on the IFC exclusion list, power and water supply, life and fire safety, emergency response, general worker health and safety, and environmental management systems. Opportunities for developing sustainability include promotion of recycling, certified wood products, environmentally friendly home improvement products, and proper handling by consumers of hazardous materials.
To view the environmental documents for this project, click here |
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| Location of environmental documents in locally affected community |
| The environmental documents for the project will be located in Kiev, at the gates of the project site of the second store, located at the intersection of Lyskivska and Balzaka streets. |
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| To contact the project company, please write to: |
Kremena Tenev
Investment Officer
IFC
Tel: 202-458-5466
Fax: 202-522-3089
ktenev@ifc,org |
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