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| Himadri |
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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 | 27560 |
| Company name | Himadri Chemicals & Industries Limited |
| Country | India |
| Sector | Chemicals |
| Environmental category | B |
| Department | Oil, Gas, Mining And Chemicals |
| Status | Active |
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| Date SPI disclosed | October 30, 2008 |
| Projected board date | December 4, 2008 |
| Date revised SPI disclosed | February 27, 2009 |
| Previous Events | Invested: April 10, 2009
Signed: April 2, 2009
Approved: March 26, 2009 |
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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 |
Himadri Chemicals & Industries Limited (“Himadri” or the “Company”) is India’s largest producer of coal tar pitch which is utilized in the production of aluminum and graphite. Himadri is known as one of the highest quality producers of coal tar pitch in the world, and its products are used by several, major international customers. The company is also only one of three companies worldwide that is able to produce zero Q.I. Coal Tar Impregnating Pitch, a high quality pitch used for impregnation of graphite electrodes, and it is the only company outside Japan able to manufacture it.
Himadri uses coal tar in India as its raw material which is a by product of recovery type high temperature coke oven batteries. The Company distills such into useful coal-tar pitch and derivatives, thereby creating useful economic value from a low-value feedstock. During the manufacturing process, the company also produces various industrial oils as by-products that can be further used as feedstock for the production of carbon black, a key input for tire manufacturers.
Given strong demand, Himadri is expanding its present coal tar pitch distillation capacity of 169,000 metric tons per annum (mtpa) in India to 400,000 mtpa. Phase I consists of (i) increasing its distillation capacity to 250,00 mtpa, (ii) setting up a 50,000 mtpa carbon black production facility and (iii) constructing an associated 12 mega-watt waste-heat recovery based power plant (together, the “Project”). |
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| Project sponsor and major shareholders of project company |
Mr. D. P. Choudhary, Company Chairman and founder and other members of the Choudhary family constitute the Sponsors.
Himadri, incorporated in 1987, is publicly traded on the Bombay, National and Calcutta stock exchanges. The stock is widely held with a strong financial investor base including the Sponsors (52%), various private companies (18%), Citicorp Venture Capital (14%), the general public (14%) and others (2%). |
| Total project cost and amount and nature of IFC's investment |
The project cost is estimated at $139 million for which IFC may provide an investment of up to $35 million.
In addition, IFC is considering providing a Carbon Delivery Guarantee (“CDG”) to enhance the value of approximately 0.5 million Certified Emission Reductions (“CERs”) to be generated from the 12 mega-watt waste-heat recovery based power plant that is being constructed as a part of the project. |
| Location of project and description of site |
| The project is located in a designated industrial area north of Kolkata, India along a major national highway. The nearest community is approximately two kilometers away. The coal tar pitch expansion project and the carbon black project are at the existing site. |
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| Anticipated development impact of the project |
The project is expected to have a strong developmental impact including environmental efficiency, employment generation and increased business opportunities for the local and wider areas.
- Carbon Footprint/Climate Change: Once the expansion is completed, waste heat generated in the production process will be used to (i) generate the entire amount of power that the plant complex would consume and generate a surplus to be sold to the local grid & (ii) meet the entire heating needs of the production process, thus eliminating the current need for burning oil or any other fuel to produce heat. Both these impacts will significantly reduce the company’s carbon footprint, even with a significantly expanded plant capacity.
- Investment in the lesser developed Eastern Region of India: Himadri’s plants are located in the eastern region of India, an economically laggard area with one of the lowest per-capita incomes in the country. The eastern part also has the largest concentration of poor in India, and its advantages in terms of low wage rates are offset by its poor business environment and the absence of adequate infrastructure. Since the economy is primarily agrarian, this project would help strengthen and diversify the region’s economic base and create new jobs. It is anticipated the project would require 150 additional employees.
- Local supplier linkages: Himadri sources a large portion of its raw material from domestic steel producers in India. As various components of the Project come on-line, Himadri will require additional large amounts of coal tar from the steel producers, providing the industry with additional sales outlets, revenue generation and flexibility in disposing of waste products.
- Efficient Waste Recycling: Reprocessing of waste coal tar from the steel industry into value-added products through this Project results in minimization of indiscriminate disposal of waste from steel mills and helps improve the overall ecological footprint.
Proposed key indicators to track the developmental impact of the project include:
- Surplus power made available to the local grid.
- Direct employment generation.
- Volume of domestic coal tar supply distilled by the company into higher-value products. |
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| IFC's expected development contribution |
Customized carbon finance transaction: IFC is able to offer a CDG entailing a combination of fixed forward and indexed tranches. By using its balance sheet, IFC is able to lock in a Euro dominated revenue stream for Himadri and to provide a transparent price linkage to international carbon markets. IFC can also provide guidance and potential support for an energy efficiency audit to further optimize the company’s efforts in reducing its emissions.
Continuing strengthening of Environmental, Health & Safety standards: Himadri has expressed a strong commitment to safety, health and the environment, and part of its vision is to address these by adopting eco-friendly technologies into its core competencies to manage EHS issues effectively. IFC’s role will be to support Himadri in upgrading its operations to international best practices. Given Himadri’s global expansion plans, IFC will also assist the company to develop a corporate ESH&S management system that Himadri can implement in its Indian operations and other overseas expansions and acquisitions.
Longer tenor: IFC can provide financing which is longer than that available to the company in the commercial market, especially under current market conditions. Long tenor financing is crucial in this capital intensive, cyclical industry, particularly for a fast growing company that desires to do so in a fiscally responsible manner. |
| Environmental and social issues - Category B |
| This is a Category B project according to IFC’s Environmental and Social Review procedures because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. Please refer to the Environmental and Social Review Summary (ESRS) for detailed information. Mitigation measures for the potential environmental and social impacts are also identified and incorporated in the Environmental and Social Action Plan (ESAP). |
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| For inquiries about the project, contact: |
Dr. Soumen Chakrobortry
Himadri Chemicals & Industries Ltd.
Mahistikry Unit – Mahistikry,
Haripal, Hooghly, West Benegal, India |
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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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