Water Capital (Leasing Operations de Mexico) I

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	28108
Company name	Leasing Operations de Mexico. S. de R.L. de C.V.
Country	Mexico
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Pend FAP

Date SPI disclosed	October 28, 2009
Projected board date	December 15, 2009

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Leasing Operations de Mexico, S. de R.L. de C.V. (“WCAP” or the “Company”) was founded in 1998 in response to the growing demand for specialized financing in the environmental sector. Since inception, WCAP business model has been focused on originating, funding, and distributing lease receivables of equipment. WCAP is largely dedicated to provide operational lease of equipments used for water treatment and efficient water use (“Water Efficiency” or “WE”), as well as Energy Efficiency (“EE”) projects, thus supporting private sector investments aligned with sustainability and climate change. WCAP's vision is to finance worldwide development of sustainable industrial, commercial and residential projects that have a minimum ecological footprint. The company aims to carry out its mission and vision in North, Central, and South America, as well as in Europe and Asia. The Company was recognized as the runner up for the 2009 FT Sustainable Banking Awards, which is co-sponsored by IFC.

Anticipated development impact of the project

-Increase access to financial services: IFC’s investment will help WCAP to broaden its reach in extending leases to other SMEs and Corporates;
-Commitment to Sustainability/Energy Efficiency: WCAP would be able to support the growing number of initiatives involving EE/WE with industrial application taking place in Mexico, which may including the use of alternative energy sources;
-Market development: WCAP’s sales/securitization plans will help to develop the Mexican market; and
-Demonstration Effect: WCAP’s business model focused in the water treatment industry and equipments related to energy efficiency initiatives is unique in Mexico, where access to operational lease for these types of capital goods is rather limited. WCAP has developed a profitable model on this basis, which could be replicated by other FIs in both Mexico and other countries.

IFC's expected development contribution

-IFC’s investment will help WCAP increase its support to Sustainability/Energy Efficiency projects, while allowing private companies to continue pursuing these investments, even under potential budget and indebtedness constraints on the private sector resulting from the global crisis (use of operational leasing for off-balance sheet treatment of non-core capital expenditures);
-By sharing its global knowledge, IFC is going to be able to introduce international best practices to the Company;
IFC’s presence in the Company’s ownership structure and support in improving its governance procedures and practices will give comfort to prospective investors; and
-IFC will act as an anchor lender, helping WCAP raise additional financing from the Mexican market and other commercial banks.

Environmental and social issues - Category FI

This project involves IFC support for the leasing business and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. During appraisal, IFC will analyze the company’s portfolio, leasing assets and activities proposed to be supported with IFC financing. IFC will also review the company’s labor practice and its capacity to manage social and environmental risks. Considering the nature of activities supported, the company will be required to:

-Develop and implement a Social and Environmental Management System (SEMS), prior to disbursement, that is satisfactory to IFC, and that ensures that all its investments are screened and processed to avoid supporting activities on the FI exclusion list, and ensures that the maintenance and operation of the leased equipment complies with the applicable national ESHS laws and standards;
-Identify qualified persons to manage and implement the SEMS;
-Demonstrate commitment and resources to implementing the SEMS;
-Demonstrate commitment to applying the labor standards established by the IFC Performance Standard 2: Labor and Working Conditions;
-When leasing to business activities with potentially significant environmental and social risks (e.g., mining, oil production), inquire and review S&E information available in the public domain and avoid leasing to businesses that have substantial unresolved environmental and social issues. In such cases, the Company will also need to satisfy itself that the activity is being undertaken in compliance with the applicable national laws; and
Submit a periodic report to IFC as per a format to be provided by IFC.

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