Strominvest/Erilin

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	26107
Company name	Erilin Holdings Limited
Country	Belarus
Sector	Wholesale and Retail Trade
Environmental category	B
Department	Global Manufacturing & Services
Status	Pending Disbursement

Date SPI disclosed	March 21, 2008
Projected board date	April 21, 2008
Date revised SPI disclosed	March 24, 2008
Previous Events	Signed: June 23, 2008 Approved: June 23, 2008

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

JV Strominvest LLC (Strominvest or the sponsor) and Erilin Holdings Limited (Erilin or the Borrower) have undertaken to develop a new 7-floor Class-A commercial real-estate building with 12,185 sqm usable space on the Myasnikova St., in Minsk, Belarus. The building, currently under construction, is expected to be completed and made available for lease by November 2008. During the construction phase, Strominvest will act as the project administrator and main contractor at an arms-length basis and Erilin will provide for the necessary financing. On completion of construction, the building’s ownership will be transferred to Erilin. Total project cost on completion is estimated to be around EUR16 million (approximately $24 million equivalent). 50% of the project cost up to EUR8 million ($12 million equivalent) is financed by Erilin, of which EUR5.1 million ($7.7 million equivalent) has already been provided, and IFC has been approached to provide the balance 50%, up to EUR8 million (approximately $12 million equivalent), to Erilin as a long-term loan.

Anticipated development impact of the project

The project will support a private sector company to diversify its operations as well as facilitate the development of the commercial infrastructure in Minsk by addressing the current commercial building supply shortage. It is also expected that the availability of Class A buildings will facilitate the entrance of Russian and other international businesses into Belarus, thereby contributing to FDI inflows and private sector development. IFC’s requirement for Strominvest to implement and maintain high environmental, fire and life safety and social standards, including utilizing international Property Appraiser, obtaining Construction All Risk and Property Damage insurances will have a demonstration effect on other firms in the industry.

The project will create new employment, both directly and indirectly. It will provide additional direct employment in the maintenance and service areas. In addition, temporary employment will be provided to local labor during the construction phase.

IFC has required Erilin to prepare its audited financials in accordance with IFRS to ensure financial accountability.

IFC's expected development contribution

IFC will play an important role in supporting a domestic company in expanding its operations, while enhancing its corporate governance and EHS standards. Specifically, IFC’s additionality will be:

- Providing long-term flexible financing;

Long term funding alternatives are scarce in Belarus. IFC will provide long term flexible financing which the Sponsor or the Borrower would not able to raise from commercial banks in Belarus. IFC's C Loan structure, which is not available in the Belarus market, provides long term funding in a form that meets the Sponsor’s and the Borrower’s needs;

- Setting international EHS standards:

IFC has conducted a thorough environmental and social review ensuring that the sponsor and borrower implement international standards in their environmental, fire and life safety and social practices, and;

Improving corporate governance:

IFC will assist the sponsor in improving its corporate governance standards. This is expected to raise the sponsor’s and the borrower’s profiles.

Environmental and social issues - Category B

The project is a category B investment according to IFC’s Environmental and Social Review Procedure. A summary of IFC’s environmental and social review findings for the project including the rationale for the B categorization is publicly available in the Environmental and Social Review Summary.

The key environmental and social aspects of the project, which have been considered are the following:

- Social and Environmental management systems and structure;
- Labor and working conditions;
- Life and fire safety;
- Food hygiene.

Measures to mitigate potential risks and impacts identified during the appraisal are publicly available in the Environmental and Social Action Plan.

IFC PROJECTS