24564 - OOO Vladpivo Ltd

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Summary of Proposed Investment

Project Number

24564

Company Name

Far East Brewing

Date SPI Disclosed

Oct 25, 2005

Country

Russian Federation

Industry

Agribusiness and Forestry

Projected Board Date

Dec 3, 2005

Status

Completed

Sector

Breweries

Date Revised SPI Disclosed

Dec 2, 2005

Department

Gbl Ind, Manufact, Agribus & Services

Environmental Category

B - Limited

Previous Events

Approved : Dec 20, 2005
Signed : Dec 22, 2005
Invested : Jun 9, 2006

Project Description

OJSC Pivoindustria Primoriva (PIP or the company) is the only brewery located in the Russian Far East capital city of Vladivostok. Its nearest competitors are located 750 Kilometers away in Khabarovsk. The project, which will be implemented in two phases, involves a $58 million investment program for the following:

- acquisition of PIP by the Sponsors;
- upgrading of PIP’s facilities and expand its current production capacity to 1.5 million Hectoliters (“HL”) p.a—from the present 720,000 HL—by 2008;
- settlement of $14 million in old debt; and
- provision of the necessary working capital.

The project also includes plans to improve product quality, revive existing brands and develop new brands for PIP.

The project will enable PIP to become the leading brewer in Vladivostok city and the surrounding Primorye krai markets, serving a population of 2.2 million people.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	14.68
Equity	5.31

Development Impact

The project is among the first of IFC’s investments in the real sector in Vladivostok. The Project will support the resuscitation of a strategic private enterprise in the Russian Far East, one of Russia’s poorest regions. Upon completion of the Project, PIP will have state of the art beer production equipment that is on par with international standards. The Project will result in the production of high quality beer produced in accordance with international standards of food safety.

There are around 10,000 people in the Trudovoye village where PIP is the largest employer. The other employers in the vicinity have around 200 employees. The company employs 526 employees who were on the verge of losing their jobs due to failure of its previous management. The project will preserve the following:

- employment at the brewery;
- provide higher paying jobs;
- create jobs as employment at the brewery is expected to increase slightly at project completion; and
- support and expand the scope of local companies along the beer supply chain through more remunerative prices and improved access to markets.

The project will also result in higher incremental tax revenue to the government. Finally, the project will be a catalyst for international companies to enter the market, further positively impacting this underdeveloped region in Russia.

IFC’s involvement in the project will:

- support local companies while improving transparency and corporate governance;
- preserve, create and improve employment opportunities;
- stimulate foreign direct investment in the Russian Far East which has generally lagged the other regions of the Russian Federation;
- support the development of small and medium enterprises; and
- enable private sector investment in the region.

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.
Location of environmental documents In locally affected community
Environmental documentation will be made available at the following location:

Gorky State Library
Nekrasov Street, 59, Vladivostok

Contacts

For Inquiries About the Project, Contact

Mr. Nicholas Henderson-Stewart
Address: 32A Khoroshevskoe Shosse (Building 22),
3D Entrance, 4th Floor, Office 401, 404
Tel: 7095 788 5213

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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