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| Closed Joint Stock Company Rise |
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| 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 | 27244 |
| Company name | Closed Joint Stock Company Rise |
| Country | Ukraine |
| Sector | Agriculture and Forestry |
| Environmental category | B |
| Department | Agribusiness |
| Status | Hold |
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| Date SPI disclosed | May 19, 2008 |
| Projected board date | June 19, 2008 |
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| View Environmental & Social Review Summary (ESRS), click here |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
Closed joint stock company Rise (Rise or the company), an existing IFC client, is a number one provider of inputs to Ukrainian farming sector and one of the larger industrial land operators in the country producing its own wheat, corn, rape seed and sugar beet. Under a one-stop-shopping concept, Rise distributes a full-range of agricultural input products (such as seeds, fertilizers, crop protection products and agriculture machinery/spare parts) and provides training and consultancy services to nearly 9,000 farms in Ukraine. Employing more than 5,000 staff, the company owns 47 distribution centers across Ukraine allowing it full service coverage of all farms in Ukraine. The company manages a land bank of 135,000 hectares of land, where it produces primary crops, such as wheat, barley, rape seed, and sugar beet.
The proposed project is to expand Rise’s grain collection infrastructure through the construction of new grain silos, acquisition of farm land and farming machinery, increase its own seed production and address the working capital needs of its rapidly expanding agri-inputs distribution business. More specifically, the project includes:
- acquisition of farm land rights to increase the company’s own land bank from 135,000 hectares to over 200,000 hectares by 2010;
- construction of new grain silos;
- acquiring farming machinery and transportation for own agricultural crop production operations;
- modernizing the sugar plant and dairy farming operations; and
- additional working capital finance.
Total project cost is estimated at $547 million. IFC has been asked to provide $50 million in senior debt and $50 million through a revolving working capital line. |
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| Project sponsor and major shareholders of project company |
| The project sponsor and major shareholder is Mr. Vitaliy Tsekhmistrenko (99.46%), a Ukrainian businessman. The balance is owned by current and former employees. Mr. Tsekhmistrenko is 45 years old and holds a degree in economics and management of agricultural production. From 1992 to 1998 he has served as General Director of the company. In 1998, Mr. Tsekhmistrenko was elected a Member of Parliament of Ukraine, where he served until 2005 as the Chairman of the Subcommittee on Agricultural Policy and Land Relations. Since 2005 Mr Tsekhmistrenko has left civil service and has been managing Rise, the only business he owns. |
| Total project cost and amount and nature of IFC's investment |
| The total project cost is estimated at $547 million. The proposed IFC investment is a senior corporate loan of $50 million and $50 million revolving working capital facility. |
| Location of project and description of site |
| The IFC loans will be used to finance two silos in Chervonozvodske and Stepanivka, a sugar plant in Poltava, acquisition of farm land and machinery, and to fund working capital requirements for its distribution business, which has 47 distribution centers across Ukraine. |
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| Anticipated development impact of the project |
| The project is to help the company strengthen and diversify its seed production business and grain production as it continues to develop its business lines to increase production and supply of agricultural commodities. The project will support the continued evolution of Ukrainian agriculture sector toward a competitive private sector. In the absence of an effective public agricultural extension system, and because the perceived country risk has limited foreign suppliers' investment in distribution network, Rise and its competitors have de facto become the primary conduit for agricultural extension and the distribution of quality input and equipment. Rise passes on information on agricultural best practices from its suppliers to its clients. Its increased territorial coverage and expansion into new services will benefit its existing clients and will allow Rise to reach and serve new categories of clients. Indirect benefits from the project will therefore come in the form of higher land productivity, reduced losses and better terms of trade for farmers. |
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| IFC's expected development contribution |
Through this investment, IFC is extending its partnership with an existing client and supporting the governance and business transparency improvements from its previous investment. Over the course of the relationship, IFC has shared its sector knowledge and strategic advice on financing and operational activities.
The underdeveloped local finance sector is not ready to provide credit to farmers, and as such the company provides credit terms to farmers. With IFC funding Rise will have working capital to provide credit to its customers, who in turn will be able to benefit from the products and services provided by Rise, resulting in higher land productivity and less losses. |
| Environmental and social issues - Category B |
While all Performance Standards are applicable to this investment, a preliminary review of company information indicates that the investment will have impacts that must be managed in a manner consistent with the following Performance Standards:
- PS1: Social and Environmental Assessment and Management Systems with respect to the management of Company’s environmental, health and safety performance in the construction and operation of the facilities; compliance with national and local permitting requirements as well as relevant IFC guidelines; and its engagement with local communities regarding environmental, health and safety performance (including disclosure).
- PS2: Labor and Working Conditions with regard to fair, safe and healthy working conditions in the construction and operation of its facilities.
- PS3: Pollution Prevention and Abatement with regard to the company’s efforts to optimize resource inputs, and management of emissions to air and water arising from both construction and operation of its facilities, and the management of solid and hazardous wastes.
- PS4: Community Health, Safety and Security with regard to the impacts of the construction and operations of facilities, including: movement of vehicles, operation of equipment during construction as well as operation, containment of dust, noise and other nuisance factors.
The company has already leased the land required for the construction of silos and seed processing plant and has been expanding its land bank on a willing buyer, willing seller basis (either purchase or lease). For this reason, PS5 (Land Acquisition and Involuntary Resettlement) does not apply for this project.
A condition of IFC’s investment will be that company’s operations shall consider all relevant social and environmental risks and impacts, including issues covered in all IFC Performance Standards.
More details on the above can be found in the Environmental and Social Review. |
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| For inquiries about the project, contact: |
Vitaliy Tsekhmistrenko, Chairman of the Board
152, Zabolotnogo Str., Kyiv, 03680, Ukraine
Tel: +38 044 585 2440, Fax: +38 044 585 2444 |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
| Local access of project documentation |
The project documents will be accessible at the following locations:
Rise Website (http://www.rise.ua)
Rise Corporate Office in Kyiv, Ukraine:
152, Zabolotnogo Str., Kyiv, 03860, Ukraine
Tel: +38 044 585 2440, Fax: +38 044 585 2444
Rise Regional Office in Chervonozavods’ke, Poltava region, Ukraine:
10, Matrosova str., Chervonozavods’ke town, Lohvitsa district, Poltava region.
Tel: +380 5356 3 49 70
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