Engro Corporate

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	27933
Company name	Engro Chemicals Pakistan Limited
Country	Pakistan
Sector	Chemicals
Environmental category	B
Department	Oil, Gas, Mining And Chemicals
Status	Pending Disbursement

Date SPI disclosed	July 16, 2009
Projected board date	August 18, 2009
Previous Events	Signed: September 29, 2009 Approved: September 28, 2009

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

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The proposed IFC investment in Engro Chemicals Pakistan Limited (“Engro” or the “Company”), consists of a convertible loan of up to $50 million to help finance its corporate finance activities and efforts to diversify into new product lines in its subsidiaries such as the food and energy businesses.

Anticipated development impact of the project

The Facility is expected to have the following developmental impacts:

Support to small farmers
The Company’s dairy business relies on a milk collection network which includes over 700 village milk collectors and 400 milk collection centers. Procuring milk from 2,400 villages across Pakistan, the activities of the Company touch the lives of almost 51,000 farmers. The financing will help increase the number of small farmers in its supply chain.

Job Preservation / Creation:
Engro and its subsidiaries currently employ around 4,600 employees at its different plants. In addition it has more than 3,500 vendors in Pakistan. Engro’s growth in its fertilizer, food and other businesses will support current employment levels and create new employment opportunities in the rural areas of the Sind district.

Contribution to Government Revenues:
The Company pays taxes to the Government of Pakistan, and Engro’s growth in operations will provide additional revenues.

Enhanced Support for Local Communities:
With additional expansion and growth, the Company is expected to step up its social contributions in rural areas. Engro’s spending on community development in economically depressed areas in rural Pakistan promote development of surrounding communities.

Proposed indicators to track the developmental impact include:

- Payments to government (US$)
- Number of jobs preserved/created
- Community development outlays (US$)
- Number of small farmers in supply chain
- Purchases from local suppliers (US$)

IFC's expected development contribution

The investment will enhance IFC’s strategic partnership spanning almost two decades with Engro, by helping the Company further diversify and expand its business at a time when domestic and overseas financing is constrained.

The Project will help support an emerging regional player, promote investment in an IDA country, and strengthen the environment and social sustainability activities of the company. IFC’s roles will include:

Counter Cyclical Role: IFC will play a counter cyclical role by supporting a longstanding, well established and successful client at a time when other foreign lenders and investors are not deploying resources in the country. IFC’s investment will signal to market participants that IFC supports its clients through the economic cycle.

Long-term, strategic Partner: Engro is one of the first and, so far, only Pakistani company in the chemical industry that has succeeded in building a scalable, diversified business. Engro sees IFC, with its deep sectoral expertise, as a strategic partner that can support its efforts to follow industry best practice, become an industry leader, and a competitive, well positioned multinational.

Technical and Industry Knowledge: IFC will provide Engro with access to its sectoral expertise and a window to global trends in the Fertilizer, Chemical, Food, and Energy sectors. IFC has been a sounding board for Engro in formulating its investment plans, and has been continuously helping the company diversify and expand.

Environmental and social issues - Category B

IFC's early review of this investment has identified the following environmental, social, health and safety issues: air emission, wastewater treatment and discharge, solid and hazardous waste management, operation hazard and hazardous material management, employee health and safety, fire protection and emergency response, community health/safety, and community relationship and development. IFC will require the client to continue improving its corporate E&S management to ensure its entire operations meet the requirements of IFC Performance Standards and World Bank Group EHS Guidelines. Emissions and operations safety for its fertilizer and polymer facilities are main concerns. IFC will review its process safety management (PSM) for key manufacturing facilities and emergency response for all related operations at Engro.

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence 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
PS2: Labor and Working Conditions
PS3: Pollution Prevention and Abatement
PS4: Community Health, Safety and Security

Based on this early review, this investment will require 30 days disclosure by IFC prior to Board approval and has been categorized as B.

IFC PROJECTS

RECENTLY DISCLOSED