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| Guangdong Chigo AC Company Ltd |
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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 | 25855 |
| Company name | Chigo Holding Limited |
| Country | China |
| Sector | Industrial & Consumer Products |
| Environmental category | B |
| Department | Global Manufacturing & Services |
| Status | Pending Signing |
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| Date SPI disclosed | July 7, 2008 |
| Projected board date | August 8, 2008 |
| Previous Events | Approved: August 19, 2008 |
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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 |
Chigo Holding Limited (Chigo or the company), through its wholly foreign-owned entity established in China, is one of the five largest air-conditioning (‘AC’) product manufacturers in China. Over recent years China has become the biggest residential AC manufacturer in the world accounting for a majority of the world’s total production.
The company’s business plan over the 2008-2009 period focuses on the following four main areas:
- the development of its commercial AC manufacturing and distribution operations;
- further expanding its parts and components manufacturing capacity;
- the development and production of new multi-split AC systems; and
- strengthening the company’s domestic distribution network and Chigo brand awareness within the Chinese market. |
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| Project sponsor and major shareholders of project company |
Chigo designs and manufactures a wide range of split type (including both wall mounted and floor standing types), window type and portable type AC products for residential use and commercial AC products (central and ducted AC systems) for use in residential apartments and houses as well as in commercial buildings, hotels, shopping malls and public infrastructures, and it is one of the five largest AC product manufacturers in China. The company’s main manufacturing operations are located in Foshan, Guangdong province. The company has also recently acquired land use rights in Wuhu, Anhui province and Jiu Jiang, Jiangxi province, to expand its domestic manufacturing operations.
The company generated about 41% of its revenues from export sales in FY2007, exporting to customers in Europe, North America, Central & South America, Africa and Australasia, both under its own ‘Chigo’ brand and as an OEM supplier. Other minor activities of Chigo include production and distribution of home appliance products, including air-curtains, water coolers, dehumidifiers, refrigerating appliances and other small domestic appliances.
Mr. Li Xinghao, a local entrepreneur, founded the business of Chigo in 1994. Chairman Li started in business in 1982 and, prior to founding Chigo, worked with a number of companies involved in textiles, plastics, medical devices and electronics. |
| Total project cost and amount and nature of IFC's investment |
| The proposed IFC investment is an equity investment in the common shares of the company of up to $25.0 million. |
| Location of project and description of site |
| The company existing facilities are based in Foshan, Guangdong province. The project will include the expansion of existing facilities and the construction of facilities in Wuhu, Anhui province and Jiu Jiang, Jiangxi province manufacturing commercial air-conditioning products. |
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| Anticipated development impact of the project |
The project is expected to help further consolidate the AC products manufacturing industry in China. Although the industry has experienced a period of rapid consolidation over the last five years, the profitability of the majority of the remaining players is marginal and further consolidation is likely. Consolidation of the marginal players, many of whom focus on low-end and low energy efficiency window units, will help increase the overall energy efficiency of China’s AC manufacturing industry and help the industry meet tougher energy efficiency standards.
Currently AC units (typically window units) sold in the domestic market are of relatively low energy efficiency rating with room for improvement, including those of the company. One of the three main focuses of the company’s research and design operation is to improve the energy efficiency of AC units and to make higher energy efficiency rated units more affordable for the Chinese mass market. |
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| IFC's expected development contribution |
IFC’s role in this proposed investment is expected to be to:
- support the development of a privately-owned Chinese AC company competing with state-controlled enterprises as a world-class AC manufacturer partnering with global electrical equipment companies and distributors; and
- support the company’s expansion of capacity to manufacture air-conditioner products of higher efficiency grades as China’s domestic demand for more efficient air-conditioners increases. |
| Environmental and social issues - Category B |
The key ESHS issues and impacts from this proposed investment include product specification (refrigerant, energy consumption), manufacturing and assembly, land acquisition, emergency preparedness and response, labor issues, workplace conditions and company management commitment and control. These are limited adverse social and environmental impacts, generally site specific and which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, design criteria, local regulations and industry certification schemes. As such, this has been classified as a Category B project under IFC’s Environmental and Social Review Procedure.
The company has presented plans to address these impacts to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with the applicable Performance Standards and the host country laws and regulations. Information on how these potential impacts will be addressed by the sponsor is summarized in the Environmental and Social Review Summary and in the Environmental and Social Action Plan (ESAP) appended to it. |
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| For inquiries about the project, contact: |
Mr. Hu Zhengfu, Vice President, Finance
Chigo Holding Limited
Telephone: +86 757 8563 5625
Fax: +86 757 8562 5751
Mr. Donald Leung, Company Secretary
Chigo Holding Limited
Telephone: +86 757 8878 1611
Fax: +86 757 8878 1611
Mr. Zeng Xiao Liang, Manager, Legal Department
Chigo Holding Limited
Telephone: +86 757 8562 8012
Fax: +86 757 8562 8012 |
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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: +1 202 473 3800
Fax: +1 202 974 4384
E Mail: Webmaster |
| Local access of project documentation |
Environmental documentation will be made available at the following location:
Chigo Holding Limited
Shengli Industrial Park,Lishui Town,Nanhai
Foshan Guangdong 528244, China |
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