24802 - Eleme Petrochemicals Company Limited

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Summary of Proposed Investment

Project Number

24802

Company Name

INDORAMA ELEME PETROCHEMICALS LIMITED

Date SPI Disclosed

May 16, 2006

Country

Nigeria

Industry

Manufacturing

Projected Board Date

Jun 29, 2006

Status

Completed

Sector

Petrochemical

Department

Gbl Ind, Manufact, Agribus & Services

Environmental Category

B - Limited

Previous Events

Approved : Jul 6, 2006
Signed : Jan 14, 2007
Invested : Mar 14, 2007

Project Description

Eleme Petrochemicals Company Limited (Eleme or the company) was incorporated in 1988 as a 100% subsidiary of the Nigerian National Petroleum Corporation (NNPC) and started operations in 1995. Eleme is one of only two petrochemicals complexes in Nigeria (both of which are state owned). Due to operational problems (inadequate maintenance, lack of spare parts, equipment break-downs etc.) the plant has operated at a very low capacity utilization since its inception.

The project is to assist Indorama International Finance Plc, UK (IIF or the Sponsor) in the privatization purchase of a 75% equity stake in Eleme and in implementing a turnaround capital investment program to return the company to profitability. The proposed transaction has two components:

- Privatization Acquisition Finance (Acquisition): IIF would set up two special purpose vehicles (“SPVs”) to finance the purchase of its shares in Eleme. The first SPV (Offshore SPV) would be the main investment vehicle to own 50.3% of Eleme’s equity capital and the second SPV (Onshore SPV) would own the balance 24.7% of Eleme’s shares. The Onshore SPV would be owned by the Offshore SPV and would also have the Rivers State government as a minority shareholder.

- Turn-around Capital Expenditure (Project): IIF estimates that Eleme will require a capital expenditure of $160 million towards repairs, refurbishment, modernization and working capital in order to restore the plant to full capacity utilization.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	75.0
Equity

Development Impact

With a population of more than 130 million, Nigeria is Africa’s most populous country. The past few years have witnessed steady economic growth in the country, driven primarily by the government’s aggressive social and economic reform agenda, as well as higher oil prices. The proposed project will play an important role in furthering this process. Through the transfer of existing state assets to the private sector and a capital expenditure program to help bring them back into productive use, the project is expected to:

- add value to Nigeria’s natural resources;
- support local upstream and downstream players;
- provide momentum to the privatization agenda;
- facilitate the development of the downstream sector; and
- make available domestically produced polyethylene (PE) and polypropylene (PP) for which the historically strong local demand has been met largely through imports.

Indicators that will be used to monitor the development impact of the project include:

- purchases of Natural Gas Liquids (NGLs) as feedstock;
- PE and PP sales to local companies; and
- number of state-owned companies privatized.

IFC contributions to the proposed project are varied, and include:

Provision and mobilization of long-term financing: IFC’s presence is critical to B Loan participants, who would otherwise not invest in the acquisition. IFC is also playing a key role in supporting the raising of bridge finance for the acquisition and the project, by sharing due-diligence information and acting as a focal point for all lenders.

Developing best practice environmental and social standards: IFC has helped the client:

- establish adequate environmental and social monitoring systems;
- develop a transparent selection mechanism and grievance redress system for the employee selection process; and
- develop a community development program with a dedicated community relations officer.

Advice on structuring: As lead arranger, IFC has led the due-diligence process on behalf of the other lenders and has made significant contributions in designing an investment structure which is fair to all parties.

Fit with WBG Strategy

The WBG’s current strategic priorities in Nigeria, as outlined in the 2005-2009 Country Partnership Strategy, are to

- stimulate private sector growth, particularly in the non-oil economy;
- supporting the privatization program; and
- empowering local communities.

As the proposed project seeks to facilitate otherwise deficient foreign investment in the country’s downstream sector, provides post-privatization support for the first major privatization in the country’s petrochemicals sector, and promotes inclusion by offering shares in the privatized entity to local landowners and employees, it is consistent with this strategy.

This is a Category B project, according to IFC’s procedure for environmental and social review of projects. The review of this project consisted of appraising environmental and social information submitted by the project sponsor and assessing some of Indorama’s operations through site visits conducted by the project team. The following potential environmental, health and safety, and social issues were analyzed:

- environmental and social management systems (ESMS);
- water supply and discharge;
- solid/hazardous waste management;
- contamination of the sites from current or past operations;
- occupational health and safety issues;
- emergency response;
- impacts on nearby communities;
- land acquisition;
- community development;
- communications and consultations with neighboring communities; and
- employee retention.

Further details are provided in the Environment and Social Review Summary available separately with this document.

Contacts

For Inquiries About the Project, Contact

Mr. P. K. Ekka
Eleme Petrochemicals Complex, Eleme, Port Harcourt, Rivers State, Nigeria
Email: pkekka@indorama.com
Tel: 080 52224360

Environmental documents will be made available at the following location:

Office of the Chairman,
Eleme Local Government,
Nchia, Eleme, Rivers State,
Nigeria

For Inquiries and Comments About IFC, Contact

General IFC Inquiries
IFC Corporate Relations
2121 Pennslyvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
E Mail: Webmaster

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. 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 Policy on Disclosure of Information that went into effect April 30, 2006.

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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