45824 - GWFP TTC Bien Hoa Loan

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Summary of Investment Information

Project Number

45824

Company Name

THANH THANH CONG BIEN HOA JOINT STOCK COMPANY

Date SPI Disclosed

Nov 30, 2022

Country

Viet Nam

Region

East Asia and the Pacific

Projected Board Date

Jan 16, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Aug 6, 2023

Department

CM4A1 - Regional Industry - MAS Asia & Pac/Agribusiness and Forestry - ASIA

Industry

Agribusiness and Forestry

Previous Events

Approved : Sep 21, 2010
Signed : May 12, 2023
Invested : Aug 4, 2023

Sector

Sugar and Confectionery

Project Description

The proposed IFC investment is a 1-year US$20 million funded participation under a risk-sharing facility of up to US$40 million uncommitted secured revolving trade finance facility with Sumitomo Mitsui Banking Corporation (“SMBC” or the “Bank”) for Thanh Thanh Cong - Bien Hoa Joint Stock Company (“TTC Sugar” or the “Company”). The facility is renewable annually for additional two years.

The facility will be solely dedicated to finance (i) the Company’s import of raw sugar; (ii) storage in the approved domestic warehouse(s) with a Collateral Management Agreement (“CMA”); and (iii) sales to domestic and international customers (collectively, the “Project”). It will be processed under the Global Warehouse Finance Program (“GWFP”) with delegated authority from IFC’s Board of Directors.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	50.0
Loan	150.0
Equity

Development Impact

On a project level, the Project will benefit stakeholders along the sugar value chain. By improving access to finance for beneficiaries in Vietnam’s sugar value chain, the Project will enable the Company, distributors, and retailers to sustain operations and employment. At the same time, domestic and regional consumers’ access to sugar products would be ensured. On a market level, the Project will strengthen the competitiveness of Vietnam’s agribusiness sector, which is an important driver of the economy. Collateralized warehouse financing is relatively new in Vietnam; this facility will improve the Company’s sustainability procurement practices on importing goods, which enables the Company to expand its import capacity. The Project is also expected to have demonstration effects on other agribusiness players that will use similar facilities as well as local commercial banks that replicate this new type of financing.

IFC will provide a commodity-backed trade finance facility which is still nascent in Vietnam. IFC’s engagement will allow (i) SMBC to double the size of the proposed facility which is exceeding its own exposure limit in the country; and (ii) the Company to expand its capacity of importing raw materials to improve supply chain efficiency. This facility would be the first commodity-backed finance loan for the Company.

E&S Category Rationale / Risks and Mitigation

The proposed IFC investment is a 1-year US$20 million funded participation under a risk-sharing facility of up to US$40 million uncommitted secured revolving trade finance facility with SMBC to finance TTC Sugar's imports of raw sugar mainly from Australia and Brazil, and also entails the storage of the imported sugar in approved warehouses in Vietnam. IFC will not have a contractual relationship with the Company and SMBC will process/monitor individual trade transactions. The Company sources raw sugar predominantly through its trading arm, Global Mind Agriculture Pte. Ltd. ('GMA'). GMA handles purchases with its own suppliers and then resells to TTC Sugar. The key potential E&S risks and issues associated with this Project relate mainly to (i) E&S risks in sugar primary production, including harmful child and forced labor, significant OHS risks, and risks of significant conversion of natural and/or critical habitat in origins; and (ii) warehouses' EHS risks in Vietnam, such as fire and workers' occupational health and safety. The Project has been categorized as FI-2 based on IFC's 2012 Policy on Environmental and Social Sustainability. The E&S risks and impacts associated with this Project are generally limited and can be addressed through the mitigation measures as described below. The applicable E&S performance requirements for the Project include the IFC Exclusion List, applicable national legal and regulatory requirements, and applicable IFC Performance Standards (PS2 and PS6 supply chain requirements).

For this Project, IFC will work with and require TTC Sugar to maintain the proper system and capacity in place to manage the E&S risks associated with the supply chains and the warehouse operations supported by the Project consistent with IFC requirements. TTC Sugar has an overarching group-level Environmental, Social, and Governance ('ESG') policy which is aligned with Vietnamese laws and regulations and has been implemented in all its subsidiaries. However, TTC Sugar has not developed a Supplier Code of Conduct for its raw materials sourcing operations consistent with IFC PS2/PS6 supply chain-related requirements. TTC Sugar will therefore be required to adopt such a Code and implement a robust and recordable process for the traceability and E&S risk screening of its suppliers. This may require independent verification in ‘high-risk' origins, which is not the case for this investment.

Task Title & Description	Anticipated Completion Date
Nominate officers	01/15/2023
TTC Sugar will further strengthen its corporate ESG policy framework, as part of its corporate E&S Management System (“ESMS”), by adopting a Supplier Code of Conduct consistent with IFC’s supply chain requirements defined in IFC PS1, 2, and 6. The updated policy framework, including the Supplier Code, will be posted at TTC Sugar warehouse operations and will be communicated to TTC Sugar partners and suppliers.	01/15/2023
TTC Sugar will develop (as part of the group-level ESMS) a procurement procedure that defines (i) a process for evaluating E&S risks within the primary supply chain; (ii) mapping and risk screening of suppliers and source of raw material inputs; (iii) assessment of suppliers E&S management system and capacity to avoid and/or manage risks; and (iv) process for periodic reviews of suppliers/source of product based on supply risk assessment. The implementation of this Code and management procedures will be done through the group-level ESG function and its trading arm (GMA). Budgetary support and training should be provided to relevant staff after the procedure is developed.	06/30/2023
TTC Sugar will develop and implement the warehouse’s EHS procedures, including a work permit system, for the storage of raw sugar. Training on these instructions will be provided to warehouse managers and workers.	06/30/2023
TTC Sugar will include the sugar storage warehouse in its environmental monitoring (e.g., humidity, temperature, pressure, VOCs, PM10, etc.) in compliance with General EHS Guidelines.	06/30/2023
TTC Sugar will review fire risks in the warehouse to improve the LFS system as needed and update the relevant procedures and instructions in accordance with WBG EHS guidelines and GIIP.	06/30/2023
TTC Sugar will develop its transport and traffic safety requirements and procedures and requires that all third-party transport/trucking service providers to the warehouse demonstrate compliance with these requirements and procedures.	06/30/2023

Contacts

For Inquiries About the Project, Contact

Thanh Thanh Cong - Bien Hoa Joint Stock Company
Ms. Dinh Thi Ngoc Thao
Head of Treasury Department
+84 90 3398320
fin.dep-mgr@ttcsugar.com.vn
1st Floor, Betrimex Building, 62 Tran Huy Lieu Street, Ward 11, Phu Nhuan District, Ho Chi Minh City
ttcsugar.com.vn/Default.aspx

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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