24656 - Zeus Ceramica

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Summary of Proposed Investment

Project Number

24656

Company Name

CJSC Zeus Ceramica

Date SPI Disclosed

Dec 6, 2005

Country

Ukraine

Industry

Manufacturing

Projected Board Date

Apr 30, 2006

Status

Completed

Sector

Glazed Ceramic Tiles

Date Revised SPI Disclosed

Mar 10, 2006

Department

Regional Industry MAS LAC & EUR

Environmental Category

B - Limited

Previous Events

Approved : May 31, 2006
Signed : Jun 21, 2006
Invested : Oct 31, 2006

Project Description

The project is the construction of a greenfield ceramic tile plant, CJSC Zeus Ceramica (Zeus or the Company), with a total annual production capacity of 4.3 million square meters of porcelain (ceramic granite) tiles in Slavyansk, Donetsk region in Ukraine. The Project is being implemented in two phases. The first phase (“Phase I”), the construction and installation of the company’s first line with an annual production capacity of 2.0 million square meters, was completed in March 2005. The second phase (“Phase II”), the installation of another line with a capacity of 2.3 million square meters, is expected to be completed in the first quarter of 2007.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	9.0
Equity

Development Impact

The proposed project is expected to have the following development impact:

- Transfer of Know-How: The project will involve transfer of EC’s first-class production methods and manufacturing best practices, including environmental initiatives and patented production technologies;

- Job Creation and Training: The project will create direct jobs during Phases I and II, additional indirect employment and other benefits including extensive training of Ukrainian staff in Italy;

- Improved Quality: The project will contribute to the rise in standards of the ceramic tile industry in Ukraine and expansion of the market by supplying quality tiles at affordable prices;

- Import Substitution and Cost Reduction: The project will promote import substitution, putting price and quality pressure on local producers, from which customers will ultimately benefit;

- Upstream/Downstream Effects: The project will strengthen local upstream (raw materials suppliers) and downstream (distributors, DIY chains) businesses; and

- Demonstration Effect: The project would provide a significant demonstration effect, as its success would encourage other international companies pursuing investment opportunities in Ukraine, as the country''s perceived risk begins to diminish.

IFC’s role in the proposed project is notable in several areas:
- IFC''s proposed investment will enable the company to finance its capital investments with long-term funds on reasonable terms otherwise unavailable to the company;
- IFC will play an important role in structuring the financial plan, advising the company on its relationship with other financial institutions, and evaluating the environmental issues, thus reducing the Project''s risk profile; and
- IFC will play an honest broker role in the relationship between the Italian and Ukrainian shareholders through advising the company on corporate governance issues.

This is a category B project according to IFC''s environmental and social review procedure. Environmental and social issues which may be associated with this type of project, and which will be assessed during project appraisal, include: site selection and land acquisition process including any associated resettlement or economic displacement, sustainable raw material supply, fuel selection and air emission control, wastewater treatment, handling of solid wastes and hazardous materials (including glazes and pigments), energy efficiency, development of environmental and health & safety management programs, and employment creation.
Location of environmental documents In locally affected community
The environmental documents are available at the company’s administrative office at the following address:

7 Goncharnaya St.,
Slavyansk, Donetsk Region,
Ukraine.

Contacts

For Inquiries About the Project, Contact

Alexander Bogoslavsky
General Director, CJSC Zeus Ceramica
5 Svobody St., P.O. Box 89
84100 Slavyansk Donetsk Region
Ukraine

Phone: 38 06262 24893/38854/28106
Fax: 38 06262 29812/22784

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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