24965 - Neophotonics

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Environmental Review Summary

Project Number

24965

Company Name

NeoPhotonics (China) Co., Ltd.

Date ERS Disclosed

Apr 12, 2006

Country

China

Region

East Asia and the Pacific

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 1, 2006
Signed : Jun 2, 2006
Invested : Jun 6, 2006

Sector

Engineering Services

Industry

other

Department

TMT, Venture Capital & Funds

Project Description

Neophotonics Corporation (“Neophotonics or the company”), a Delaware incorporated company, designs, assembles, manufactures and distributes a complete line of active and passive optical components, modules and sub systems for broadband data networks. The Company maintains its headquarters and development facilities in San Jose, California and substantial R&D and manufacturing facilities in Shenzhen, China. Over 90% of Neophotonics’ operations are based in Shenzhen, China, making it the largest optical components manufacturer in China. The Shenzen facility is located in an industrial park with infrastructure support for energy, water and wastewater. Approval for construction and subsequent operations in Shenzen has been approved by regulatory agencies in China after a review of an Environmental Impact Assessment study conducted by the company. The Shenzen facility is ISO 9001 and 14001 certified. Neophotonics will implement similar best management practices that are in use at their San Jose facility, including their Environmental Management System, in their Shenzen operations.

Environmental and Social

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the Company is summarized in the paragraphs that follow.

- Wastewater management –

Wastewater at the Shenzen facility is generated from process operations and sanitary usage. Process wastewater primarily consists of wash water from cleaning operations, laboratory usage and miscellaneous process activities. Wastewater from process operations is treated onsite in a wastewater pretreatment facility before discharge to the municipal sewer system. Sanitary/cafeterias and non-contact cooling water are discharged directly to the sewer. All effluent discharged to the sewer is treated in a wastewater treatment plant operated by the municipality. The discharge of effluent from the Neophotonics facility is regulated by a permit, and data reported to the local regulatory agency.

- Solid and hazardous waste management –

Solid waste is segregated into recyclable and non-recyclables. Recyclables are collected by vendors, and no-recyclables are collected and disposed by the local municipal corporation. Hazardous waste at the Shenzen facility is stored in limited quantities on site in accordance with local regulatory requirements. Disposal of hazardous waste are handled by licensed contractors who collect the waste from the facilities. Records are maintained as per local regulatory requirements.

- Occupational health and safety –

Occupational health and safety (OH&S) are comparable to best practices followed elsewhere for the industry sector. Neophotonics has been certified by SGS Societe Generale de Surveillance, a Swiss certification, testing and training company) for ISO-9001-2000 and TL9000 R3.0/3.5, ISO14001-1996 in 2004 and they plan to be certified for ISO 14001-2004 in May of this year. Workers and staff are trained routinely in the use of appropriate PPE and emergency procedures such as waste handling and general precautions, emergency first aid and fire safety. Special training is completed for chemical knowledge, emergency response and related information for employees who store, handle and use all potentially hazardous material. Occupational health statistics such as lost time accidents, injuries, severity, etc. are recorded and reported to the local regulatory agency. Noise levels are monitored at various locations within the facility, and data recorded. Baseline medical tests are mandatory for all employees and performed annually to track employee health. Results from the medical are provided to the employees, and counseling available as necessary.

- Life and Fire Safety -

The design for the facility was approved by the Environmental Protection Bureau of Shenzhen Municipality and the Shenshen Environment Engineering Consulting Service Center that is certified by the State Environmental Protection Administration of China. The building has clear means of egress signed and routes posted, with emergency lighting on all floors. All floors also have alarms and fire detection systems, as well as fire walls, doors, and other measures to control fire and smoke (through compartmentalization). There are automated sprinklers and manual portable hoses and extinguishers. Fire protection equipment is periodically checked, for example, extinguishers and hoses, on a monthly basis. Emergency Reponse Plans are reviewed annually, and internal fire men are trained and assigned for each floor. The building is built to the national, provincial and local standards and regulations for Life and Fire Safety.

- Labor -

The minimum age for working at Neophotonics is sixteen and National Identity cards are used to check age of potential employees. Employees need to have completed nine years of schooling. Pre-employment medical examinations are required. The company complies with all national and local laws on labor. There is a voluntary workers union, although it has no collective bargaining agreements. Women are represented in the work force (44%), as well as in management roles (18%). There are dormitories available on site for workers if they choose to use them.

- Corporate Social Responsibility -

Neophotonics is actively engaged in local community development. It has sponsored the Project Hope School in Guizhou Province since 2001 sending clothes, tools, and equipment which benefits approximately 500 people using the school. Community development activities are organized by the labor union and assisted by volunteer employees.

Conclusion & Monitoring

IFC will evaluate the project’s compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the Annual Monitoring Reports (AMRs) prepared for the project covering: ongoing performance of project-specific environmental, health and safety activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.

Environmental and Social Documentation

File Name	Actions
CAP_Neophotonics.pdf

This Environmental Review Summary (ERS) is prepared and distributed 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 of Director’s decision. Any documentation that is attached to this ERS has been prepared by the project sponsor or in conjunction with the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content. The following ERS is disclosed in accordance with IFC's Disclosure of Information Policy that went into effect September 1998.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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