NECaF ING Bank

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	559586
Company name	ING Bank WHS.
Country	Ukraine
Sector	Other (For Non-Investment Projects)
Environmental category	FI
Department	Environment & Social Development
Status	Non-Invest Proj

Date SPI disclosed	August 30, 2007
Projected board date	October 1, 2007

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

ING Bank N.V. (ING Bank), is IFC’s counterparty for emission reductions sourced from greenhouse gas mitigation projects, which will produce Emission Reduction Units (ERUs) under the Joint Implementation mechanism of the Kyoto Protocol, and possibly ‘Early Reductions’ prior to 2008. ING Bank adds significant value to domestic companies by helping these companies commercialize their carbon assets, introducing them to international business practices and standards as well as encouraging compliance with required environmental standards in the respective domestic jurisdictions. ING Bank may also pass on advances provided by IFC, as a Trustee of the Government of Netherlands, to the underlying project companies to meet capital expenditure and other upfront costs. ING Bank will act as intermediary between IFC and the project company and sell, on a back-to-back basis the resulting emission reductions from underlying project activities. In addition, this transaction represents one of the first emission reduction transactions for ING Bank.

Anticipated development impact of the project

By sale of the Emission Reduction Units to the Government of Netherlands with IFC acting as an intermediary, ING Bank will help its client companies commercialize their carbon assets. The commercial benefits of such emission reduction projects will likely have a strong demonstration effect on the nascent market for Joint Implementation projects in Central and Eastern Europe.

IFC's expected development contribution

IFC’s goal is to encourage emerging market private sector participation in the carbon market by providing value added services to support project’s long-term sustainability. As a global investor and advisor committed to developing sustainable private sector in emerging markets, IFC is well positioned to assist project sponsors to participate in the carbon market.
IFC’s experience and knowledge in evaluating and financing private sector projects in developing countries is leveraged to structure contracts that minimize the risks associated with delivery of ERUs from projects.

Environmental and social issues - Category FI

This a FI Category project according to IFC’s Environmental and Social Review Procedure. The financial intermediary is ING Bank and emission reduction projects are considered as underlying sub-projects. The environmental appraisal included field visits of IFC’s environmental specialist in August 2007 to a coal mine methane project in the Eastern Ukraine that could provide delivery of ERUs/AAUs via ING Bank.

Through the appraisal, IFC confirmed that the sample project is in basic compliance with Ukrainian environmental laws and regulations. The project mines coal in deep seams located down to 950 meters below the surface. The mine does not provide for coal washing or other enrichment operations, as the coal is delivered “as-mined” to coking facilities located approximately 200 kilometers away. Historically this mine has had a number of environmental and safety issues to deal with. The main safety issue relates to the high methane content in the coal, and this has in the past resulted in several methane gas explosions and fatalities. The current methane extraction project will, besides limiting the direct methane emissions help the company further reduce the risk for methane explosions. IFC has recommended additional safety upgrades, which can help the company reduce the risks involved.

Environmental issues have mainly been related to significant particulate emissions from coal fired boilers at the mine site and water extracted from the mine. The methane extraction project has resulted in the conversion of one boiler on the mine site from coal to gas burning, and a second (new) boiler specifically designed for gas burning is under construction. As a result the burning of coal at the mine site has now stopped and the emission of particulates has ceased. The mine is a relatively dry mine, but the company is still working on long-term solutions for handling the limited amounts of water extracted from the mine. Currently the water is being discharged to a series of settling ponds, after which the cleared water is returned to the mine operations for technical water usage.

The mine is testing option for treating the water to a quality where it can substitute the current water supply from public water utilities and own wells. The mining operation is located away from any residences, is only carried out under open farmland with no buildings present, and due to the significant depth of the mining operation, the narrow seams (height typically below two meters) and a thick buffering sand layer in between the mining operation and the surface, no subsidence problems are evident. As a result no resettlement is necessary and no surface damage to building etc. has occurred.

Evaluation of the above mentioned sample project’s performance against IFC E&S Performance Standards has identified the areas for improvement beyond the minimum compliance requirement for FI projects. All the Performance Standards are applicable and will be used to indicate best practices and IFC will encourage, through ING Bank, all projects to implement the better practices.

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