Macquarie India Infrastructure Opportunities Fund

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	26334
Company name	Macquarie SBI Infrastructure Trust
Country	India
Sector	Collective Investment Vehicles
Environmental category	FI
Department	Infrastructure
Status	Pending Disbursement

Date SPI disclosed	September 20, 2007
Projected board date	November 1, 2007
Previous Events	Signed: October 24, 2008 Approved: November 1, 2007

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Subject to Macquarie and IFC Board and other internal approvals, the Macquarie India Infrastructure Opportunities Fund (MIIOF or the Fund) is being created as a closed-end fund that will make equity and equity-like investments in infrastructure and infrastructure related assets in India and other countries in South Asia.

The Fund is designed to invest in a diversified range of greenfield and brownfield assets in roads, airports, ports, power generation, power transmission & distribution, telecom towers, water & waste treatment, rail, and other infrastructure-related sectors.

Project sponsor and major shareholders of project company

Subject to Macquarie and IFC Board and other internal approvals, the project sponsor will be Macquarie Bank Limited Group (Macquarie). Macquarie is an Australian investment bank that, together with its worldwide subsidiaries and affiliates, provides specialist investment advisory and financial services in select markets around the world.

Macquarie recognized the potential of infrastructure as an emerging asset class in the early 1990s. Macquarie is a global leader in the infrastructure finance sector, with recognized strength in both infrastructure funds management and infrastructure advisory services. Macquarie through its specialist management companies manages a global portfolio of infrastructure and specialist investments with equity under management in excess of $47 billion. The portfolio comprises investments in 109 assets (as at June 2007) in 25 countries, including the US, Canada, Australia, South Korea, the UK, Germany, China, Poland, Sweden, Belgium, Denmark, Portugal and Italy.

Macquarie’s IB Funds division has established 31 listed and unlisted vehicles with a focus on infrastructure. Infrastructure funds management and infrastructure finance generally are a core business of Macquarie and have been one of the key drivers of Macquarie’s growth for over a decade.

The Fund is proposed to be managed by a management company (Manager) to be jointly owned by Macquarie (90%) and IFC (10%). The Manager believes that Macquarie’s business model, with its large number of employees and the depth of their experience in all aspects of infrastructure advisory and funds management, provides strong support for acquiring and managing a diversified portfolio of infrastructure assets for MIIOF.

Macquarie Group will not guarantee performance or any capital returns in respect of an investment in the fund.

Total project cost and amount and nature of IFC's investment

The target size of the Fund, subject to Macquarie and IFC internal approvals, is $1 billion. The proposed IFC equity investment is up to $150 million.

Location of project and description of site

MIIOF will be a Bermudian-registered fund and will invest in India and other countries in South Asia.

Anticipated development impact of the project

Infrastructure is the underlying foundation of basic services, facilities and institutions upon which the growth and development of a modern community depends. Assets such as reliable transport corridors, communications networks and energy distribution systems are essential to the sustainability and growth of an economy, and to the quality of life of the people living within and across the communities connected and served by those assets.

The project will address a key constraint for developers of private or public-private partnership infrastructure projects in India and other countries in South Asia – the availability of equity capital. Given the large funding requirements and the long gestation periods of infrastructure projects, we anticipate that the fund will facilitate the development of infrastructure projects in the region.

The Fund is also expected to impose market discipline on investee projects, leading to better alignment with demand for infrastructure services, more efficient management, and lower operating and maintenance costs.

IFC's expected development contribution

With its commitment to sustainable development objectives and track record in the South Asian region, IFC’s participation is complementary to Macquarie’s global experience and expertise in infrastructure investment financial management. IFC’s involvement will facilitate the delivery of high-quality infrastructure projects within MIIOF’s target geographies in South Asia. IFC will work with MIIOF to develop its Social & Environmental Management System, through which the Fund will oversee the social and environmental risks of all Fund investments, thus ensuring improved performance of all projects in which the Fund invests.

IFC will add value with its knowledge of fund structuring to comply with new regulations in India.

Environmental and social issues - Category FI

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will analyze the activities proposed to be supported with IFC financing for types of transactions and infrastructure sectors, and determine the applicable requirements, that are expected to be:

- The IFC FI Exclusion List,
- The applicable Indian Social and Environmental Laws and regulations, and
- The IFC Performance Standards (PS).

IFC will also review the capacity of MIIOF to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS.

Based on the review, MIIOF will be required to:

- Develop or upgrade, if necessary, the SEMS, prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that investments supported by IFC financing are in compliance with the Applicable Requirements;
- Commit to take action to remedy any gaps in SEMS implementation on an ongoing basis; and
- Submit a periodic report to IFC describing the environmental and social performance of MIIOF’s investments.

Additionally, IFC will also review the implementation and performance of MIIOF’s SEMS for the first two to three projects, in advance of MIIOF investment, to ensure that the MIIOF SEMS is robust. For all category A subprojects, MIIOF will provide IFC in advance of any investment, information relating to their evaluation of social and environmental risks.

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