INTERNATIONAL FINANCE CORPORATION

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INTERNATIONAL FINANCE CORPORATION Helping
Russian Chemical and Petrochemical Companies
Succeed Prepared for the Conference Business
Strategy of Russian Chemical and Petrochemical
Companies
Moscow, September 2002 http//www.ifc.org/ogc
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InternationalFinanceCorporation
Chemical Sector Activities
Working with IFC
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IFC is the private sector arm of the World Bank
Group

• Promotes economic development by encouraging
  foreign and
• domestic private investment in emerging markets
• Supports private sector ventures that are
  financially viable, benefit the host country
  economy, promote high environmental standards,
  and provide strong demonstration effect
• Provides long-term financing, capital
  mobilization and advisory services
• Three guiding principles for supporting an
  investment
• - Catalytic minority role, investment limit,
  mobilization of capital
• - Business partnership same risks as other
  investors, no government guarantees,
  satisfactory returns as well as benefit
• to host country
• - Additionality private sector not displaced

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IFC is the largest source of loan and equity
financing for the private sector in emerging
economies

• 174 member countries
• AAA rated member of World Bank
• FY02 commitments US3.6 bn in 204 projects,
  including US518 million in syndicated B loans
• (June
  2002)

US14.3 bn portfolio (own account)
Since 1956, approximately US55 bn invested in
2,840 companies in 140 developing countries
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IFC combines the resources of a development bank
with the flexibility of a merchant bank,
reassuring investors and Governments

• Long Term Financing
• Corporate / Project Loans
• Equity / Quasi-equity
• Innovative Instruments

Industry knowledge contacts

• Capital Mobilization
• B loan syndications - exempt from
  withholding tax provisioning requirements
• Export Credit Agency co-financing
• Partial Credit Guarantees

IFCs Products
Sensitivity to Government priorities
Commercial and technical skills in emerging
markets

• Advisory Services
• Country, industry, financial and technical

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Market approach coupled with political risk
mitigation adds value to sponsors

• Fixed/floating rates, US, Euro and some local
  currencies available
• Commercial rates, repayment tailored to project
  needs
• Long maturities 7-12 years, appropriate grace
  periods
• Range of security packages suited to
  project/country

Flexible Loans
Credit Enhancement

• Partial guarantee on local / foreign currency
  bonds or bank loans
• Credit enhancement mechanisms for asset
  securitization

• Neutral broker between foreign and local owners
• Technical /commercial knowledge as partner
• Long-term partnership without controlling interest

Equity Participation
Capital Mobilization

• B Loan Program International bank syndications
• Co-financing with Export Credit Agencies and
  other multilaterals

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InternationalFinanceCorporation
Chemical Sector Activities
Working with IFC
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IFC supports upstream downstream projects in
developing countries

• Upstream
• Onshore/Offshore
• Appraisal development
• (no pure exploration)
• LPG / LNG
• Oil field services
• Oil and gas pipelines
• Downstream
• Oil refining
• Petrochemicals
• Fertilizers
• Other chemicals
• Biotechnology
• Infrastructure (terminals, etc.)

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FY 01 Oil, Gas and Chemicals Portfolio US 2.6
billion
US 1.2 billion for IFCs account / US 1.4
billion held by participants
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Chemicals Sector Experience to Date

• Petrochemicals
• Refineries
• Naphtha crackers
• PP/PE
• VCM/PVC
• PTA/PET
• Ethylene derivatives
• Methanol

• Inorganics
• Hydrogen peroxide
• Chlor-alkali
• Carbon black
• Other inorganics
• Infrastructure
• Storage facilities
• Marine terminals
• LPG distribution

• Fertilizers
• Ammonia/urea
• Phosphoric acid
• DAP
• Soda ash

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Chemicals Sector Experience in Eastern Europe

• Investments
• Cabot C.S. Carbon Black, Czech Republic
• Dunastyr Styrene, Hungary
• Gaspol LPG Distribution, Poland
• Strategic Overview
• Oltchim - Romania

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Retrofit/Modernization Refineries, Chemicals,
Petrochemicals, Fertilizers

• The need to retrofit/modernize existing
  operations can result from the following factors
  
• Limited local availability of hydrocarbon
  feedstocks
• Pressure on prices as tariff protection/price
  supports are reduced
• Plants based on outdated technologies at a
  competitive disadvantage compared to modern
  facilities
• Non-compliance with current or proposed standards
  of environment, waste treatment, and handling of
  hazardous materials
• Rising energy costs
• Inefficient material handling systems which cause
  loss of material, environmental problems and
  health hazards.

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IFC designs financing plans of greenfield
projects to meet sponsor needs

• Pakistan - Engro Asahi
• Construction of a greenfield 100,000 tpy PVC
  manufacturing plant at a cost of US83 million
• JV between Engro Chemical Pakistan, Asahi Glass
  Co. and Mitsubishi Corporation
• IFC committed US14.25 mm A Loan
• Thailand - Vinythai
• Fully integrated PVC plant with a capacity of
  195,000 tpa at a total cost of US416 million
• IFC assisted the company through the Thai crisis
  by providing restructuring advice and
  facilitating a capital increase
• Total IFC financing was US115 million (A Loan
  US28 million, B Loan US70 million and C Loan
  US17 million)

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IFC funds not only greenfield but also expansion
and modernization projects

• India Continentals Carbon India Limited
• Modernization/expansion of carbon black plant at
  total cost of US34 mm
• The project will retrofit and clean up an
  existing carbon black plant and bring production
  to globally accepted environmental, technical and
  quality standards
• IFC investment of US20.5mm (A Loan US9mm, B
  Loan US11.5mm)
• Philippines Philipinas Shell Petroleum
  Corporation
• Replacement of old refinery with modern 110,000
  bpd refinery with thermal cracking unit at total
  cost of US667 mm
• IFC investment of A Loan US35 mm and B Loan
  US85 mm)

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IFC facilitates financing in difficult
environments

• China - Chengdu Chemical
• Modernization and expansion of a 30,000 tpa
  potassium hydroxide facility at a cost of US30
  million
• IFC enabled a 100 local company to access
  international financial markets
• IFC provided loans and equity of US19 million
• China Darong
• Expansion of calcium cyanamide production from
  50,000 tpa to 150,000 tpa at a total cost of
  US30 mm
• Environmental upgrade of existing calcium carbide
  furnaces to reduce air emissions and recover
  waste heat
• IFC investment of US18 mm (A Loan US10 mm, B
  Loan US8mm)

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IFC supports chemical infrastructure and
distribution

• China Zhong Chen LPG Facility
• Construction of 50,000 ton liquefied petroleum
  gas (LPG) storage and harbor facility at a total
  cost of US99 mm
• IFC finalizing investment of US57 mm (A Loan
  US25 mm, B Loan US32 mm)

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IFC provides financial and technical advisory
services

• Bangladesh KAFCO Fertilizer Complex
• Helped negotiate offtake and feedstock supply
  agreements needed to ensure financial viability
  of the company
• Developed capex program needed to mitigate
  technical issues
• Helped the company secure US250 mm of ECA
  restructured debt and US30 mm of equity infusion

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International Finance Corporation
Chemical Sector Activities
Working with IFC
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Companies or entrepreneurs setting up facilities
in emerging markets can approach IFC

• Foreign or domestic sponsors can request IFC
  financing
• New venture or expansion private sector majority
  ownership required
• Project must be developmentally sound as well as
  commercially viable
• Sponsor commitment is required
• Equity participation pre-completion
  support/guarantees
• Submit preliminary business plan or feasibility
  study
• Brief project description, including technical
  feasibility / market study
• Information on sponsors and operator
• Environmental studies
• Information on investment requirements, financing
  plan and cash flow projections

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Beyond its own investment limits, IFC can help
mobilize financing from commercial banks, export
credit agencies and bilaterals/ multilaterals
Project type

IFC's investment for its own account

Greenfield, total cost
Up to 35 of project cost
less than 50 mn
Greenfield, total cost
Up to 25 of project cost
more than 50 mn
Expansion or
Up to 50 of project cost
rehabilitation


IFC's total financing must be less than 25 of
total company capitalization, and IFC does not
manage or have largest stake.
.
IFC umbrella for B Loan participants IFC lender
of record, immunity from taxation and
provisioning requirements.


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IFC team works closely with theclient/sponsor to
finalize the investment
Internal to IFC
As Seen By Client
Initial Discussions
Initial Review Authorization to Appraise
Mandate Letter Appraisal Financing Negotiations
Management Approval
Board Approval
Information Memo and Syndication Legal
Documentation Disbursement
Supervision
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How can we help?Please contact us for further
information
Alzbeta Klein Senior Investment Officer, IFC
Moscow tel [phone] E-Mail
aklein_at_ifc.org
Address 7/5 Bolshaya Dmitrovka Str Moscow,
103009 Russia Telefax 7-095-755-8296 www.ifc.org/
ogc