20609 - OPET Petrolculuk

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Summary of Proposed Investment

Project Number

20609

Company Name

OPET PETROLCULUK AS

Date SPI Disclosed

Sep 22, 2003

Country

Turkiye

Industry

Manufacturing

Projected Board Date

Oct 23, 2003

Status

Completed

Sector

Other Petroleum and Coal Products

Department

Regional Industry MAS MCT

Environmental Category

B - Limited

Previous Events

Approved : Feb 5, 2004
Signed : Apr 6, 2004
Invested : Jul 30, 2004

Project Description

Opet Petrolcülük A.S. (Opet or the company) is a retail distributor of petroleum products in Turkey, owned 50% by the Koç Group of Turkey and 50% by Opet’s founding shareholders, the Ozturk family. The project is aimed at strengthening the company’s position in the Turkish petroleum products distribution industry and enhancing its competitiveness in advance of further liberalization. The project is comprised of :

- the construction of a greenfield marine terminal and tank storage facility which will increase the company’s oil products storage capacity from 320,000 m3 to 766,000 m3; and,

- expansion of the company’s existing retail distribution network, with new stations primarily located in the larger cities of Turkey.

The distribution expansion network will enhance the company’s brand recognition in the lucrative Istanbul, Izmir and other larger retail markets. In addition, the project will enable Opet to import larger parcels of products, store in-house, reduce transportation costs and improve the reliability of supply, while simultaneously supporting growth in its fuel distribution business. Opet hopes to take advantage of its strategic location at the mouth of the Black Sea to offer bunkering facilities for Caspian oil products. The intense sea traffic in the region will also give Opet the opportunity to purchase low-cost petroleum products.

Sponsor / Cost / Location

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

Development Impact

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical, environmental and social information submitted by Opet as well as visits to the proposed terminal site on the Sea of Marmara and the existing Opet terminal in Ismit. The following potential environment, health, safety and social impacts of the projects were analyzed.

- Site selection and land acquisition;
- Compliance of the marine terminal and storage facilities with IFC, international, and Turkish environmental,
health and safety (EHS) requirements; and
- Labor and community issues.
Location of environmental documents In locally affected community
The Opet environmental documents will be posted in the following places for local disclosure:
- at the corporate headquarters in Istanbul; and
- at the site of the proposed terminal.

Development Impact:

The proposed project will have a number of beneficial impacts, including:
- enhancing the long-term viability of a Turkish company which operates in a cyclical industry; Opet will gain economies of scale, improve its operating efficiencies, and raise standards resulting in potentially lower fuel prices to consumers when the market liberalizes;
- increasing competition in the automotive LPG and retail petroleum and products sectors;
- enhancing existing retail distribution offerings and providing cleaner roadside facilities to consumers in the Istanbul and Marmara regions;
- enhancing investor confidence in working with a strong Turkish company;
- putting the company in a position to take advantage of the market liberalization anticipated under the New Petroleum Law;
- allowing oil products to be stored and distributed in compliance with EU quality standards;
- allowing Opet to demonstrate its commitment to sustainable business practices;
- allowing Opet to continue to be one of the more significant tax paying entities in Turkey.

IFC Role:

The IFC investment will enable the company to lower its funding cost and secure funding of longer maturities, thus stabilizing its cash flow through periods of cyclicality. Current market conditions in Turkey do not indicate that alternative sources of long-term finance will be available anytime soon. Under these conditions only larger multinational players such as BP and Shell have access to finance for the upgrading and modernization of their distribution networks. IFC has a key role to play in the mobilization of long-term capital under the IFC B Loan program and in assisting parallel lenders such as FMO and DEG. The proposed B Loan aims to provide reasonably priced long-term financing, which is important not only for ensuring profitability in an increasingly competitive domestic distribution market, but also for positioning the company to take advantage of changes in the market expected under the New Petroleum Law. IFC has provided in depth advice on marketing and technical issues pertaining to the proposed Marmara marine terminal, as well as an important role in ensuring proper environmental compliance. Finance facilities provided to the project will also help remove the need for petroleum product distributors in the Thrace region to transport supplies over the two Bosphorous bridges by tanker.

Contacts

For Inquiries About the Project, Contact

Mr. Yavuz Erkut, General Manager,
OPET Petrolculuk A.S.
Bulgurlu Mah, Sarigazi Cad. 47
81190 Uskudar
Istanbul, Turkey

This Summary of Project Information (SPI) 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. The following SPI 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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