Kulon Yugros

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	27869
Company name	Kulon Yugros ZAO
Country	Russian Federation
Sector	Transportation and Warehousing
Environmental category	B
Department	Infrastructure
Status	Pending Disbursement

Date SPI disclosed	July 6, 2009
Projected board date	August 7, 2009
Previous Events	Signed: October 12, 2009 Approved: October 5, 2009

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The proposed project involves a construction and operation of a top quality logistics warehouse and office facility of 51,202 square meters near the city of Mineralnye Vody, Stavropol region of Russian Federation by ZAO Kulon-Yugros (“the Project”). The Project will consist of two phases of approximately equal amounts of leasable space. Upon completion, all the facilities of the Project will be leased out to a number of tenants (e.g., retailers, wholesalers, distributors and logistics companies) under long-term (3 to 7 years) lease contracts.

Anticipated development impact of the project

The Project addresses the issue of undersupply of quality logistics warehousing facilities in Mineralnye Vody region. The Project would have a strong demonstration effect as the first international standard warehouse in the region. It would improve competitiveness and efficiency of the manufacturers and distributors using the facility. New jobs will be created by ZAO Kulon-Yugros and its tenants. The final consumers would benefit from a potential increased choice and cost savings arising from improved operating efficiencies and availability of high quality warehousing space for the storage and distribution of goods. The government would benefit through taxes paid by the Project and infrastructure improvement facilitating logistics and trade and thus attracting new business in the region.

IFC's expected development contribution

IFC’s role and additionality in the Project includes:
provision of financing adequate for the needs of the client, otherwise unavailable in the current market environment, including a project finance structure and a long tenor of the investment;
assistance to the Project in enhancing its environmental and social standards; and
mobilization of parallel debt for the Project.

Environmental and social issues - Category B

This is a Category B project according to IFC’s Policy and Performance Standards on Social and Environmental Sustainability. The Project’s construction and operation practices are not associated with significant adverse impacts on environment or health and safety of local communities. The key environmental, health and safety issues, which will be addressed as part of the project implementation, are: (i) management capacity of the sponsor and the company to oversee environmental and social performance of third parties; and (ii) mitigation of adverse impacts on a protected area Caucasian Mineralnye Vody, where the project is located.

ZAO Kulon-Yugros has presented a plan to address these issues and ensure that the Project would comply with the environmental and social requirements, Russian laws and regulations and IFC’s Performance Standards. Detailed information about the potential impacts and ZAO Kulon-Yugros’s action plan is summarized in the Environmental and Social Review Summary (ESRS) and Environmental and Social Action Plan (ESAP).

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