The project is sponsored by Pilkington plc and AIG Emerging Europe Infrastructure Fund L.P. (AIG EEIF). Pilkington and AIG EEIF each hold 50% of the share capital of the project company.

Employing 23,600 people globally, Pilkington is a leading worldwide producer of float glass products, automotive glass products and specialty glass. Established in 1826, it is a publicly traded company on the London Stock Exchange since 1970.

AIG EEIF is a private equity fund with $550 million capital to invest in selected green-field projects, companies undergoing post-privatization restructuring and privatization in Eastern and Southern European countries including the Russian Federation.

The revised total project cost is estimated at EUR254 million of which capital cost is EUR220 million. IFC’s Original Loan was EUR42.5 million A loan for IFC’s own account. Co-financing was provided by EBRD for EUR57.5 million. In respect of the project cost overrun, it is proposed that IFC will finance a further EUR17 million by way of a long-term loan, in parallel with a loan for EUR23 million from EBRD.

21.56 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	21.56
Equity

* These investment figures are indicative

The plant is built in the Ramenskii District, 35 kilometers south east of Moscow. The site is located in rural area along the rail line. A new access to the main road to Moscow was constructed as part of the project.

The project would have a substantial impact on the development of the industry and the local economy. Pilkington will raise production and quality standards in the Russian glass industry and offer consumers more choice at affordable prices. Furthermore, with its strong history of demonstrated transition impact in other countries of operations, Pilkington will play a positive role in setting corporate governance, business, and environmental management standards (i.e. energy savings from establishing building standards that promote installation of thermal insulating glass), as well as by providing reference points for other firms, and local and regional regulatory agencies.

A recent due diligence review found that the company has a well-developed labor policy that provides terms of employment and working conditions, including the freedom to create unions (was not a requirement of the Safeguard Policies), in accordance with Russian law. Also, the new facility was designed according to the latest principles and included best-available-technology for emission control, an access road that avoids residential areas, and frequent public information and discussion meetings in cooperation with the local authorities.

- IFC's proposed investment will support the company in financing its capital investments overrun with long-term funds on reasonable terms.
- IFC played an important role in structuring the financial plan and evaluating the environmental issues, thus reducing the project's risk profile.
- In view of the perceived macro-economic and political risks of investing in Russia, IFC’s presence in this transaction will give additional comfort to a foreign player entering the Russian market.

This project was originally approved in January 2003 based on a review in accordance with the Safeguard Policies, and is now under commissioning in accordance with the original plans. This investment, to provide additional financing for the original project to cover cost over-runs has been categorized as a C project based on the following.

The relevant Performance Standards for the investment are as follows:

PS1: Social and Environmental Assessment and Management Systems, which has been dealt with through the review of the original project and Pilkington’s corporate management systems;

PS2: Labor and Working conditions, which was dealt with through the visits to and review of other Pilkington operations and Pilkington Russia’s implementation of similar or better conditions at the new facility, including the freedom to create unions (was not a requirement of the Safeguard Policies);

PS3: Pollution Prevention and Abatement, which has been dealt with through the design of the new facility according to the latest principles and with a reference to new targets to be met according to EU IPPC implementation schedules; and

PS4: Community Health, Safety and Security. The project include best-available-technique for emission control, a distance to residential areas, an access road that avoids residential areas, and frequent public information and discussion meetings in cooperation with the local authorities.

PS5-8: The project has been screened and found not to have issues covered under these Performance Standards.

The above is documented in the ERS, and its attachment, as released on September 15, 2003 to the IFC Infoshop site and through a recent supervision visit to ensure it is fully implemented in accordance with the original plans, and consistent with the new Performance Standards.

Reference ERS #11660
[http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/c88a400c5f95d4f785256dac006939ba?opendocument]