Delta Petroleum

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	25395
Company name	Delta Petrol Urunleri Ticaret Anonim Sirketi
Country	Turkey
Sector	Transportation and Warehousing
Environmental category	B
Department	Oil, Gas, Mining And Chemicals
Status	Active

Date SPI disclosed	May 31, 2007
Projected board date	June 30, 2007
Previous Events	Invested: November 29, 2007 Signed: October 17, 2007 Approved: October 11, 2007

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project entails a $45 million corporate loan to Delta Petrol Urunleri Ticaret A.S (Delta). The proceeds of the loan will be used:

- to expand the company’s current 300,000 m3 Dortyol Petroleum Products Storage Terminal, through the construction of an additional 300,000m3 of capacity, in addition to a jetty with three berthing stations, with capacity to load and discharge vessels of up to 165,000 dwt; and
- to expand Delta's petroleum products distribution network, through its “Gulf” branded service stations.

Delta engages in three related business lines:

- storage of petroleum products at its Dortyol storage facility, in Iskanderin Bay, in the eastern Meditteranean;
- trading and transport of petroleum products, primarily based on sales to, or purchases from, Iraq over the Iraq / Turkey Northern Corridor, supported by a fleet of Delta-owned LPG trailers, and a transport contracting operation; and
- distribution of petroleum products in Turkey, through a network of “Gulf” and Delta branded service stations.

Anticipated development impact of the project

The project will enable Delta to import and store larger quantities of petroleum products and improve reliability of supply, while simultaneously supporting growth in the company’s petroleum products distribution business. The project will significantly increase third party storage capacity in Turkey, and the Mediterranean region, contribute to the expansion of the petroleum products distribution sector and improve the availability of petroleum products, both in Turkey and the region.

Growth impacts of the project would arise from lower petroleum products prices, more reliable supply, and the impacts on the economy associated with the financial return of Delta.

At the same time the project would be expected to increase access to petroleum products, in Turkey – especially in the rural areas served by Delta’s expanded distribution network – and in the region.

IFC would also be supporting an expanding medium sized Turkish company, with attendant economic linkages. Delta already has significant regional interests, which IFC’s financing would strengthen, thus contributing to South-South linkages.

IFC's expected development contribution

IFC’s development contribution includes the following:

Long-term partnership:

Turkish companies, especially medium-sized ones, are still very mindful of the 2000 economic crisis, where many commercial banks took a very short-term view on their client relationships. In this environment, IFC’s reputation as a more stable and long-term partner, willing to work with clients in times of economic crisis, provides significant value-added for client such as Delta.

Credibility and Risk Mitigation:

Delta has long term expansion goals, in and outside of Turkey. The company also has exposure to challenging markets such as Iraq, Georgia, Russia, the Middle East and Sudan. The company believes that a partnership with IFC will strengthen its profile and provide a degree of political risk mitigation for its business.

C Loan:

Unlike commercial banks, IFC is willing to provide a subordinated convertible C Loan to Delta, which could ultimately result in IFC taking an equity stake in the company. This is important to Delta, as Delta intends to prepare for an IPO in the next 5-6 years, and believes that the presence of IFC as a potential equity holder would improve the success of the IPO.

Environmental and social standards:

Delta is aware that compliance with IFC’s environmental and social performance standards is an important seal of approval, which it can leverage in developing its business.

Environmental and social issues - Category B

This is a Category B project because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to the applicable performance standards, guidelines or design criteria. Delta operates its existing facilities in compliance with applicable and relevant environmental and social requirements of Turkey. Upon implementation of specific mitigation measures identified by the company’s environmental assessment of the Dortyol Terminal expansion, as well as some additional measures identified by IFC’s appraisal (as reflected in the ESRS), Delta will ensure compliance with IFC Performance Standards.

IFC PROJECTS