LuMir

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	25659
Company name	Technopole LLP
Country	Kazakhstan
Sector	Wholesale and Retail Trade
Environmental category	B
Department	Global Manufacturing & Services
Status	Pending Disbursement

Date SPI disclosed	May 7, 2007
Projected board date	June 7, 2007
Previous Events	Signed: June 26, 2008 Approved: June 18, 2008

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

IFC is considering investing in Technopole LLP (Technopole or the company) to participate in financing the company's 2007-2011 investment program, which includes:

- refinancing some short and medium term debt and
- the expansion and upgrade of Technopole's furniture and household appliances retail network in Kazakhstan.

Founded in 1993, Technopole is engaged in the sales and distribution of furniture and household appliances in Kazakhstan. Since opening its first retail outlet in Almaty, in 1998, Technopole has grown steadily, establishing a retail network consisting of 7 outlets with a total of 9400 square meters (“m2”) of retail space in Almaty and Astana.

Anticipated development impact of the project

The project will bring modern style furniture retailing to Kazakhstan. Customers will benefit from a larger store format and a better price-quality choice in a pleasant shopping environment.

Development impacts that are not easily quantified include:

Benefits to employees and suppliers: Technopole currently employs 243 people. The project will generate additional direct employment as Technopole adds new stores. In addition, given that Technopole sources its products from a number of developing countries, including Russia, China and Malaysia, the Project will have additional positive employment benefits in these regions.

Benefits to Consumers: The large-format retail concept is new to the Kazakh retail furniture sector. The project will introduce this well-proven concept and benefit consumers by providing a wide range of quality products in a pleasant shopping environment.

Demonstration effects: Kazakh retail furniture sector is still in its early stages of development and most companies have significant room to improve their corporate governance regimes. For example, Technopole’s financial statements are not currently audited. The project will help Technopole upgrade its business practices, by, among other things, adopting international accounting standards. The adoption of more rigorous business standards will provide an example to other companies in the sector.

Corporate Governance: IFC will assist the company become more transparent and advise on improvements in corporate governance thereby assisting it with its goal of raising finance in international markets.

IFC's expected development contribution

IFC support and value-added for a strong local player: IFC’s proposed investment will help Technopole, already a strong local player, deepen its footprint in Kazakhstan as well as position the company to expand into neighboring regions.

Financial Structuring: By providing long term funding and advising on optimal financial structure, IFC will enable the company to finance its capital investments by supplying long-term funds on reasonable terms, not easily available in Kazakhstan. The IFC investment, with a back-ended repayment structure on the C-Loan will give Technopole the breathing room to implement its expansion program.

Financial Structuring: IFC will play an important role in structuring the company’s financial plan and introducing certain physical and financial benchmarks for the incurrence of additional debt, thus reducing the overall Project risk.

Environmental and social issues - Category B

The project proposed for IFC’s support is an existing retailing operation with urban locations. Future developments are also likely to be brownfield sites close to Technopole’s markets.

The key environmental and social issues in ongoing operations are environmental and social management, terms of employment and provision of a safe working conditions and management of solid waste. New sites must be developed in accordance with Kazakh and IFC land acquisition provisions, environmental assessment and planning requirements.

While all Performance Standards are applicable to this investment, the environmental and social impacts described must be managed in a manner consistent with the following Performance Standards:
- PS 1. Social and Environmental Assessment and Management System;- PS 2. Labor and Working Conditions;- PS 3. Pollution Prevention and Abatement;- PS 4. Community Health Safety and Security;
- PS 5. Land Acquisition and Involuntary Resettlement; and

As a result of its due diligence, IFC has concluded that the potential adverse environmental and social impacts presented by the project are few in number, site-specific and have been or can be readily addressed through mitigation measures. It is therefore concluded that this is a Social and Environmental Category B project.

Social and environmental mitigated measures agreed with the project sponsor are summarized in the Environmental and Social Review Summary (ESRS) and Environmental Action Plan.

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