The Company is founded by Mr. XU Guosheng, a Chinese national entrepreneur. The Company’s shareholders include Zhaoheng (BVI) Limited, AEP China Hydro Ltd. and Olympus Capital Asia Mauritius Ltd. collectively managed by Olympus Capital, Elipse Holdings B.V. managed by Morgan Stanley Infrastructure Fund, Prosperity Aquarius Ltd managed by FountainVest Partners, and Improve Frame Fund managed by Chinese national Mr. YU Feng.

Zhaoheng (BVI) Limited is 100% owned by Zhaoheng Hydropower Ltd., a British Virgin Islands business company 91.67% owned by Embedded Internet Solutions Ltd., a Cayman Islands exempted company principally owned and controlled by Mr. XU Guosheng.

The total Project Cost is estimated at US$400 million including the construction of 125MW of hydropower projects and future acquisitions and expansions of hydropower projects. The proposed IFC investment consists of an equity investment of up to US$25 million, an “A” loan for IFC’s own account of up to US$50 million, and potentially a B Loan of up to US$50 million if feasible subject to market climate and appetite.

75.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity	25.0

* These investment figures are indicative

The three hydropower assets (comprising 7 projects) to be financed by the IFC “A” Loan are located at Yinjiang County in Yunnan Province, Daguan County in Yunnan Province and Dushan Country in Guizhou Province, China. The project sites are in rural areas and accessible by public road

a) Support hydro power development: Despite significant hydro power potential, the country is at a nascent stage in terms of harnessing this abundant resource for power generation. The Project is expected to help demonstrate the viability of small-scale hydro power generation in China and thus help attract further investments into this sub-sector.

b) Support climate change mitigation: The Project is expected to displace fossil fuel based power stations, helping reduce local air pollutants, improving air quality for the local population, reducing global greenhouse gas emissions and contributing to climate change mitigation.

c) Private sector development. The project will develop critical infrastructure to end-users, while adding more capacity in new private hydro power generation.

d) Benefits to the Government: Development of this project will support GoC''s long term energy security policy. Additionally, the project will generate income taxes which will be paid over the life of IFC''s investment.

e) Benefits to Customers: Demand for electricity in China is expected to grow in the medium to long term, in line with expected GDP growth. The increase in energy supply will serve not only individuals, but also industrial clients.

a) Providing access to stable, long-term financing as a financial partner that has a long-term investment horizon while the Company currently only can secure 5-7 year loans from local financial markets. Local debt is even harder to obtain for very small-hydro projects with single capacity under 30MW which account for a big portion of the assets developed by the Company;

b) Sharing significant sector expertise in a nascent industry and providing a framework of guidance in environmental and social standards;

c) Standard Setting on E&S: IFC''s involvement in the Project ensures that it will operate in accordance with IFC''s Performance Standards on Social and Environmental Sustainability, a role that is highly appreciated by commercial lenders. IFC''s E&S team will work closely with the Sponsors during the due diligence phase to ensure that the appropriate E&S management system and plans will be in place since the development stage. These are expected to be in line with international practices and IFC Performance Standards

d) Stamp of Approval / Demonstration Effect: IFC''s participation in this transaction will send a positive signal to other potential developers and lenders involved in the hydro power sector in China, regarding the sustainability of the sector and the ability to raise long term financing for other projects with similar characteristics and fundamentals.

e) Risk Mitigation: The Sponsor values IFC''s presence as a well recognized multilateral who can help mitigate political and regulatory risks

f) An implicit stamp of approval in corporate governance and knowledge of best practices in management, particularly prior to an IPO.

While the majority of the Sponsor’s existing projects -- as well as the seven projects that will receive IFC loan proceeds -- are small-scale hydropower projects located on small streams in upper catchments, medium-scale projects on larger rivers may be potentially acquired or developed by the Sponsor in future. These will be in rural areas potentially inhabited by ethnic minorities who may become adversely impacted by project activities, and some project locations may also be in proximity to biologically sensitive areas where potentially significant adverse environmental impacts may result from the Sponsor’s projects. Based on the above, this Investment is classified as Category A according to IFC’s E&S Review Procedures.

Please refer to the related Environmental and Social Review Summary (ESRS) document for this project.

Please refer to the Environmental and Social Action Plan (ESAP) tab in the related Environmental and Social Review Summary (ESRS) document for this project.