Shanshui III

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	26088
Company name	Jinan Shanshui Group
Country	China
Sector	Nonmetallic Mineral Product Manufacturing
Environmental category	B
Department	Global Manufacturing & Services
Status	Active

Date SPI disclosed	September 28, 2007
Projected board date	November 1, 2007
Previous Events	Invested: November 26, 2007 Signed: November 16, 2007 Approved: November 15, 2007

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The Shanshui Cement Group (or the company), an existing IFC client, is undertaking a cement and clinker capacity expansion program through strategic acquisitions with follow-on capital expenditure at the site at the sites of the acquired companies in Shandong and Liaoning provinces as well as some new capacity addition in Liaoning province.

Anticipated development impact of the project

- Supporting industry consolidation:

The Government is encouraging industry consolidation, particularly through the growth of larger, efficient producers of high quality cement (such as the company), and the consolidation of small, inefficient and polluting producers of low quality cement. The company’s strategy of acquiring inefficient state owned enterprises and improving efficiencies through better management, improved technology and economies of scale complements this objective.

- Encouraging shift to more efficient technology:

IFC will continue to support the company to embrace the technological shift in the cement industry from NSP to VSK. Such shift will benefit China’s economy in terms of less pollution and greater energy efficiency.

- Supporting investment in China’s rustbelt.

The Government is encouraging companies to invest in frontier markets such as Liaoning, and to privatize state owned enterprises and improve their efficiencies. This project would be a major step in that direction. An important element of the company’s expansion strategy is to enter Liaoning province, which is the heart of China’s “rustbelt”.

IFC's expected development contribution

IFC’s expected development contribution include:

- mobilization of long-term financing through the B Loan program;
- providing strategic support and advice on effectively integrating environmental and social management plan in the acquired entities into the company’s business model; and
- supporting the company in its foray in the “frontier” province of Liaoning with long term financing (otherwise difficult to obtain) and international cement production standards.

Environmental and social issues - Category B

This is a category B project according to IFC’s Procedure for Environmental and Social Review of Projects. IFC’s appraisal consisted of:

- a review of project documentation and discussions with SSG management regarding details of the performance of assets targeted for acquisition as well as details of the proposed greenfield projects;

- site visits by Social and Environmental specialists to the four facilities targeted for acquisition and the two greenfield projects; and

- discussions with SSG corporate leadership regarding general management of the company’s current and planned operations.

SSG has demonstrated a commitment to responsible environmental and social performance through investment in quality and environmental management systems, energy efficiency, occupational health and safety and human resources management.

The complete Environmental and Social Review Summary (ESRS), including specific environmental, social and community engagement commitments made by SSG can are located in the corresponding ESRS.

IFC PROJECTS