UE Envirotech

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	25662
Company name	UE Envirotech Pte Ltd
Country	China
Sector	Health Care
Environmental category	B
Department	Health and Education
Status	Pending Disbursement

Date SPI disclosed	May 18, 2007
Projected board date	June 18, 2007
Previous Events	Signed: October 23, 2007 Approved: August 6, 2007

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Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The proposed project includes the construction and operation of 32 medical waste treatment facilities throughout China. UE Envirotech (UEEV) currently operates four medical waste treatment facilities, in Anshan, Dandong, Fuxin, and Liaocheng, and has five other facilities under construction. Each facility will be operated either through Build-Operate-Transfer (BOT) agreements with local governments. The contracts are such that UEEV agrees to provide the necessary infrastructure and operating resources for a city. In return, the city grants UEEV the exclusive right to service all medical waste generators within their geographic area for the term of the contract.

Anticipated development impact of the project

Medical waste treatment, a key sector in the environment industry, has drawn increasing public attention and Chinese government support after the epidemic outbreak of SARS in 2003. SARS highlighted the need for adequate containment, transportation and treatment of medical waste in China. The Ordinance of Medical Waste Management (or the Decree No. 380) was issued by State Council in June 2003, which requires the local authorities to ensure proper handling and treatment of medical waste generated from hospitals and healthcare institutions under respective jurisdictions. The government has set a goal to build 300 centralized medical waste treatment facilities throughout China. UEEV was formed in 2004 in response to this opportunity and need. UEEV has since played a pioneering role in providing medical waste treatment service and improving environmental standards. It is introducing and encouraging the use of the most advanced and environmentally friendly technology in their facilities. Non-incineration technology was first introduced by UEEV into China and then was approved by the State Environmental Protection Administration (SEPA), which is now encouraging other companies to adopt this technology. UEEV, by working closely with the regulatory agencies, municipal governments and hospitals, also sets an example of an effective Public Private Partnership (PPP) in the health sector.

IFC's expected development contribution

Through its investment in UEEV, IFC will act as a provider of long-term debt and equity to a private firm that is carrying out an essential public function and, in so doing, helping to demonstrate the viability of private investment in this activity. With IFC’s finance, UEEV can expand faster and better meet the un-met demand for effective medical waste treatment service.

In addition, IFC provides strategic advice, assists in the structuring of the investment, and will facilitate the company’s adoption of international corporate governance standard and environmental and social sustainability standards.

Environmental and social issues - Category B

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects. Environmental, social, health and safety issues which may be associated with this type of project, and which were reviewed during appraisal, included: land acquisition; management systems for environmental, health and safety (EHS), and life and fire safety issues; compliance with local and WB/IFC requirements for air emissions from incinerators, other MW treatment processes and utilities (generators) and their treatment; wastewater treatment and disposal; solid waste management and transportation, including medical and bio-hazardous waste; emergency preparedness and response indoor air quality, noise and waste management; energy, water and other material use and efficiency; labor issues and community engagement.

UEEV plays a pioneering role in providing MW treatment services and improving environmental standards in the waste industry in China by introducing and encouraging the use of the most advanced and environmentally responsible technologies in their facilities. The company currently operates four medical waste treatment facilities, in Anshan, Dandong, Fuxin and Liaocheng, and has five other facilities under construction. In establishing its facilities, the company conducts environmental and social assessments in compliance with Chinese and IFC requirements and public consultation programs with local governments and surrounding communities. Land acquired by UEEV for its existing facilities has been conducted in a manner consistent with PS 5. The land was either previously used as an existing landfill, was wasteland or land for which a maximum of 5 local farmers held the land use rights. No local residents, settlers or indigenous peoples were living on land acquired by UEEV and none were living inside the allowable area for developing MW treatment facilities. The company negotiated its land acquisition proposals with the local government who then negotiated the arrangements with local villagers in accordance with local laws. The company paid a land compensation fee for each site to the local governments, witnessed the payment of the compensation fee to affected farmers, and maintained relevant records.

UEEV facilities have developed procedures to manage environmental, health and safety, labor and life and fire safety issues, and to prevent and respond to emergencies. The company aims to certify its operations to ISO 14001in the year 2008. To protect workers’ health, the necessary Personal Protection Equipment (PPE) is provided to prevent exposure to heat, dust, chemicals and noise. Spill kits are provided for the proper collection of MW spillage on-site and in specially designed, MW transportation vehicles. In the event that workers’ are suspected of having contact with potentially, hazardous, contagious or radioactive wastes, procedures are in place for the proper isolation and treatment of workers at appropriate medical facilities and for contacting relevant authorities. No accidents have been reported as part of UEEV’s operations. The Company has also adopted a variety of measures to reduce energy and water consumption at its facilities and consumption data is tracked on a monthly basis.

UEEV’s HR Policy and Procedure Manual, and Staff Manual, outline the company’s Vision, Mission and Core Values, as well as a variety of policies and conditions of employment in compliance with national law and PS2. UEEV has paid its union fee to the local government but the local unions in each of its locations have yet to send a representative to work in the company. UEEV has a total of 107 staff with plans to expand to 1,203 by the year 2009. UEEV does not have plans for retrenchment as the company is expanding its operations.

UEEV’s operates: one SIMONDS F-3D incinerator in Liaocheng; one autoclave treatment process in Jiamusi; and three dry chemical disinfection production lines, using PIWS-3000 equipment, in Anshan, Dandong and Fuxin, with plans to open four more in the near future in Jiaozuo, Xinxiang, Shaoyang and Chenzhou. In addition to the pollution prevention and mitigation measures described below for each MW processing technology, set back requirements from populated areas for all facilities have been established to minimize noise, odor and other potential impacts.

The SIMONDS F-3D incinerator at the Liaocheng uses state-of-the-art technology that adopts the necessary air pollution control equipment to minimize air emissions. The plant also operates an induced draft fan system and properly manages fly ash and bottom ash. Based on the technology selected and known information about the incineration process, operating temperatures of 850oC and 1100oC will be achieved in the primary and secondary combustion rooms respectively, as required for the combustion of MW and pollutants such as dioxins and furans. While air emissions are therefore expected to comply with local and WB/IFC requirements, this will be confirmed through ongoing monitoring and corrective actions will be adopted if required.

Autoclave technology is a steam treatment process that does not generate substantive pollutant emissions. Bags of medical waste and other containers will be loaded into carts that will be rolled into a pressure vessel/treatment chamber. Water/vapor emissions from the MW treatment process will be treated on-site to remove any microorganisms. The water vapour drawn off the autoclave during the end stage evacuation cycle and the prevacuum air will go through a HEPA filter to minimize any bioaerosol release. Efficacy testing will be performed on the autoclave facilities to establish operational parameters and ensure compliance with local regulatory and IFC requirements; corrective actions will be adopted if needed.

The dry chemical process utilizes the Cold-Ster� chemical powder in UEEV’s PIWS-3000 WM treatment systems. Cold-Ster� is a propriety chemical, comprised of calcium oxide (CaO) and fly ash, which is now manufactured in China. Testing has been conducted to confirm that this chemical process meets the efficacy requirements of the Chinese Center for Disease Control and Prevention (CDC) for treating MW. The company has adopted industry best practice to reduce dust arising from chemical handling in the operations area by enclosing and venting the air from the grinding system to the exterior. The end product of the chemical process is extremely alkaline (pH>11) and it is stored in a separate area away from the main treatment plant and pH levels in the residual will be continuously monitored. If the waste exceeds 12.5, UEEV will allow for extended storage or re-treatment of the waste. The final waste residual is transported in specially designed, covered vehicles to local sanitary landfills. Air emission and effluent data from the Anshan facility, operating the dry chemical treatment process, comply with local and WB/IFC limits.

UEEV’s incineration operations are not expected to generate greenhouse gases (GHGs) in excess of 100,000 tons of CO2 annually and the other treatment processes, dry chemical or autoclave, do not generate GHGs.

In conclusion, IFC is satisfied that the company’s use of state of the art technologies for treating MW, and its implementation of effective systems for managing EHS issues and potential emergency situations, will set a much needed example for the medical and solid waste management industry in China. The project is expected to have a significant positive environmental impact by providing for the proper transportation, treatment and disposal of medical waste, which is a problematic waste stream designated as high priority for improved management in China.

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