21499 - AP Paper Mills

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Summary of Proposed Investment

Project Number

21499

Company Name

INTERNATIONAL PAPER APPM LIMITED

Date SPI Disclosed

Feb 17, 2004

Country

India

Industry

Agribusiness and Forestry

Projected Board Date

May 1, 2004

Status

Completed

Sector

Paper for Printing and Writing

Department

Regional Industry - MAS Asia & Pac

Environmental Category

B - Limited

Previous Events

Approved : Jul 6, 2004
Signed : Jul 20, 2004
Invested : Aug 10, 2005

Project Description

The Andhra Pradesh Paper Mills limited (APPM, or the company), with sales of about 157,000 MT per annum of paper, is the fourth largest integrated pulp and paper manufacturer in India. The company was established in 1920 and is listed on the Mumbai and Hyderbad Stock Exchanges. In October 2000, APPM acquired 71% stake in Coastal Papers Ltd. (CP) with a capacity of 55,000 MT p.a. of printing and writing paper from straw pulp and packaging paper from waste paper and newsprint. With the proposed project, it will focus on shifting CP’s production to printing and writing paper based on pulp transferred from APPM. The proposed project consists of:

- enhancement of pulp capacity
- improvement of the product mix
- increase in production capacity and efficiency
- improvement of environmental management systems and
- increase in the existing farm forestry program.

The project also includes the restructuring of part of the company’s existing short-term debt and the recent completion of the company’s privatization through the purchase of the remaining government shares.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	35.0
Equity	5.0

Development Impact

This is a category B project according to IFC''s environmental and social review procedure. Environmental and social issues which were reviewed as part of the appraisal of this investment included: implementation of an Environmental Management System to cover all operations; compliance with air emissions, wastewater effluents and solid waste handling requirements; worker health and safety; implementation of social programs; and compliance of forest harvesting operations with IFC policy and guidelines. The review found that all operations will be managed in compliance with the World Bank Group policies and guidelines. In particular, fiber supply for the plants is provided by an extensive network of small-holders, producing substantial social development benefits for the region.
Location of environmental documents In locally affected community
The Environmental Review Summary will be disclosed in the following locations:

For the APPM Facility:
District Collector’s Office, Kakinada, E.G.District
Sub Collector’s Office, Rajahmundry,E.G. District
Municipal Corporation Office, Rajahmundry, E.G. District
Office of the Zilla Parishad, Kakinada, E.G. district
Mandal Revenue Office (Urban), Rajahmundry, E.G. District
The Andhra Pradesh Paper Mills Ltd., Rajahmundry, E.G. District\

For the Coastal Paper Facility:
District Collector’s Office, Kakinada, E.G. District
Sub Collector’s Office, Rajahmundry, E.G. District
Office of the Zilla Parishad, Kakinada, E.G. District
Mandal Revenue Office, Kadiam, E.G. District
Gram Panchayat Office, MR Palem, Kadiam Mandal E.G.District
Coastal Papers, MR Palem, Kadiam Mandal, E.G. District

Development Impact:
Farm Forestry:
IFC’s Industry, Environment and Social Specialists have visited APPM’s farm forestry nurseries and plantations. Since 1989, APPM has distributed quality seedlings to more than 14,000 farmers to cover a total plantation land of more than 27,000 hectares. The company maintains twelve nurseries and employs 50 to 100 workers per nursery. The total target seedling production for FY03 is 35 million. Approximately 70,000 person days of labor are required for this, which will generate about Rs 4.2 million in wages for local laborers. APPM also provides technical know-how to farmers from low cost planting to post harvest stage, through establishment of demonstration plots, audio, video and printed literature, and personal interactions with the farmers. With this project, APPM’s requirement for wood resources is expected to increase by over 33%, and the company will further increase its farm forestry program.

Environment:
IFC’s Industry and Environmental Specialists have visited APPM’s plants and have identified significant environmental benefits of the Project. In the Coastal Paper unit of the company, the existing 10,500 MT p.a. rice straw pulping section that is heavily polluting, will be closed down. This will be replaced by pulp from the new Pulp Mill at APPM.
The Project will also help to achieve better pollution controls in the APPM plant. The new Pulp Mill will bring down absorbable organohalogens (AOX) in the effluent discharge from present levels of 2kg per MT of pulp to 0.5 kg per MT, and reduce APPM’s water consumption and odoriferous emissions to comply with the World Bank guidelines. This will build on the company’s existing “green” platform and allow it to continue to pursue its commitment to the environment.

Employment:
APPM will provide direct employment to about 3,200 people, out of which 480 employees will work in the proposed Pulp Mill. Additionally, with the increased wood fiber requirements as a result of the Project, APPM’s farm forestry operations are expected to support over 25,200 farmers and cover over 50,000 hectares of land by 2007.

IFC Role
Long term funding: IFC will provide long term debt, which is generally not available and without which, it would not be possible to complete the financial plan. In so doing, IFC will play an important role in stabilizing the company’s debt profile, ensuring a proper match of cash from operations with debt service requirements. APPM believes that IFC’s involvement as a lead financier will help attract other local banks for lending long term in the current market scenario. IFC will also inject additional equity in the company, which will provide needed support to the company’s financial plan.
Promoting sustainability: IFC’s environmental requirements for forest management will mitigate potential environmental problems and lead to sustainable forestry operations. IFC is expected to assist the company to comply with the new World Bank Group’s Forest Strategy and Policy. The company’s farm forestry operations offer a good example of development at the local farm level. The closure of a straw pulp process will stop high pollution levels.

Contacts

For Inquiries About the Project, Contact

Mr. Sudhir Bhansali, Executive Vice President
The Andhra Pradesh Paper Mills Limited
501-509, V Floor, Swapnalok Complex
92/93, Sarolini Devi Road
Secuderabad-500 003 India
Phone: 91-040-27813715
Fax: 91-040-27813717

APPM Facility Contact:
Mr. PK Suri, Executive Vice-President (Operations)
The Andhra Pradesh Paper Mills Ltd.,
Rajahmundry 533 105 (A.P) – India
Phone Nos : 91-0883-2471831-38
(Dir): 91-0883-2461878/2444064
Fax: 91-0883-2461764
E mail:pksuri@andhrapaper.com

Coastal Papers Facility Contact:
Mr. YV Chowdary, General Manager (Works)
Coastal Papers
(A Division of APPM Ltd.)
Industrial Area, M.R. Palem - 533 126
Kadiam Mandalam,
East Godavari District
Andhra Pradesh (India)
Phone Nos: 91-0883-2454651
(Dir) : 2454848
Fax : 2453538
Email : yvc@coastal-papers.com

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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