Tianrui Cement

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	25459
Company name	Tianrui Group Cement Company Limited
Country	China
Sector	Nonmetallic Mineral Product Manufacturing
Environmental category	B
Department	Global Manufacturing & Services
Status	Active

Date SPI disclosed	February 14, 2007
Projected board date	March 16, 2007
Date revised SPI disclosed	March 6, 2007
Previous Events	Invested: July 10, 2007 Signed: June 27, 2007 Approved: April 5, 2007

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Tianrui Cement (Tianrui or the company), a large private cement company in Henan Province, is implementing an expansion program through a combination of an organic and inorganic growth.

Anticipated development impact of the project

- Support for China’s Cement Consolidation:

The government has stated repeatedly that the cement industry needs to update its technologies to cleaner, more energy efficient New Suspension Pre-heater (NSP) technology, and undergo an industry consolidation. In the past few years, the government has implemented a series of regulations aimed at ensuring that all new cement facilities use NSP technology, and that producers using Vertical Shaft Kiln (VSK) technology are phased out. These regulations have been partially successful, as the number of cement manufacturers nation-wide has fallen from over 8,000 to less than 5,000 over the past five years. Over the same period, the percentage of cement produced using NSP technology has increased from about 25-30% to over 50% nation-wide. The project will accelerate the consolidation process and solidify Tianrui’s position as regional industry leader, thereby furthering the country’s development goals and helping to rationalize the Chinese cement industry.

- Support for the Development of Central and Northeastern Provinces in China:

The government has encouraged greater development in the Western (including central provinces such as Henan) and Northeastern (including Liaoning) provinces of China, in an attempt to establish a more balanced and harmonious development approach, and counter-balance the very fast development along the eastern coast of China. This Project, with its investment in Henan and Liaoning, fits well into the government’s broader development goals for the country.

IFC's expected development contribution

IFC would be supporting a leading cement producer in China by providing equity and debt financing to help the company implement its long-term development strategy. Among other things, IFC will assist Tianrui in:

- improving its market position;
- introducing Tianrui to a number of other international financial institutions though raising a B Loan, thereby expanding the company’s future options for raising capital; and
- providing much-needed long-term financing, more appropriate to the company’s capital expansion plans than the short-term debt that is primarily available locally.

IFC would also be instrumental at introducing international best practices at Tianrui in such areas as corporate governance, environmental and social practices, and good financial management. Indeed, IFC has encouraged Tianrui to undertake its first IFRS audit, and, along with KKR, IFC will help the company establish good governance practices.

IFC is also playing an honest broker role.

Environmental and social issues - Category B

The proposed project is to improve and expand Tianrui’s production based within its existing operation sites. The project does not require additional land take, and the project review has concluded that all operations either already are, or as a consequence of the project will be in full compliance with the local regulations and IFC Policies, Performance Standards, and environmental and social guidelines. Based on the Company’s current material compliance with the above the project has been reviewed as a Category B project.

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