The project is sponsored by GDS China (“GDS”), an IFC investee company. IFC invested in GDS (Project ID: 25336) in December 2006. GDS is a first mover in the business continuity/disaster recovery (BC/DR) service market in China, offering different levels of consulting and outsourcing services from basic data recovery support to zero data loss and remote backup services.

Currently, GDS owns 40% of EDC, with the rest owned by SBCVC (30%) and management team (30%). SBCVC is an IFC investee fund (Project ID: 24835) which focuses on early stage investments in the telecommunications, media and technology sector in China. This funding round is led by SBCVC and IFC who will each invest $10 million. Suzhou Ventures Group (SVG) will invest $5 million.

The total project cost is estimated at $180 million. IFC is considering an investment of up to $20 million, in the form of equity, warrants and/or debt.

20.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	20.0

* These investment figures are indicative

The first phase of the project will consist of the construction and operation of five datacenters, namely Chengdu, Suzhou, Shanghai, Beijing, and Chongqing. Each of the datacenter will be built in existing industrial parks which have been specifically zoned by the government and have been in operations for some years. The datacenters have been zoned by the Chinese government.

Information technology is an increasingly significant component that underlies the foundation for growth for infrastructure in developing countries. This holds true particularly for China, where growth is fueled by efficient deployment of information technology. Datacenter operations are critical to ensure the security and stability of IT services for all businesses. This is becoming an increasingly necessary component of IT solutions in China as businesses (particularly in the Financial Services Industry) deal with increasingly sensitive and critical information; and firms in China finalize the centralization of their IT production systems, thus making IT services particularly vulnerable to business interruption stemming from threats of any nature, from power outages to natural disasters.

An investment in this nascent and underinvested industry will greatly support the company’s ability to develop and grow in the domestic datacenter sector, specifically in secondary areas. While much emphasis has been put into developing sophisticated IT solutions for companies in China, only recently (especially after the devastating earthquake in Sichuan) has the importance of data security, backup, and consolidation been stressed in the business community.

The project will have significant developmental impact by:

- bringing higher standards of datacenter infrastructure and service to local, national, and even international companies, thus facilitating the implementation of efficient IT solutions and best practices,
- supporting a new and independent Chinese company in rolling out operations in frontier regions in China, including Sichuan, Shaanxi and Liaoning, thereby providing quality, cost effective, and secure datacenter facilities for local businesses whose operations may be vastly improved,
- demonstrating to other domestic players as it is the first company to provide quality services and infrastructure that are compliant with international standards, and
- providing world-class infrastructure and connectivity to specific geographic areas to enable companies that need IT services to operate, especially given that IT infrastructure penetration is not uniform in developing countries such as China.

IFC’s expected development contribution will include:

Implement best-practice greener datacenters: IT systems require significant power and cooling to operate. A centralized and consolidated BC/DR infrastructure lends itself to the design and implementation of a standardized improvement plan in the carbon footprint of datacenters. The Project is one of a selection of pilot projects to support the construction of new and the upgrade of existing datacenters to reflect the best energy-efficient practices by
commissioning learning exercises to be conducted via a donor-financed consultancy, such as disseminating lessons learned from one country or region to another;
providing support in finance and donor-funded advisory services for improved carbon footprint of datacenters.

Deepening the relationship with a business partner extending operations in the IT value chain: IFC will support an existing partner (GDS) to reach wider in the IT value chain in China. IFC has been a valued partner to GDS since the Company’s inception in 2006. IFC is now supporting GDS’ strategy of creating a separate company, EDC, to focus exclusively on datacenter operations and extending services to a growing number of enterprises that require more reliable and international-standard datacenter services for their datacenter needs. IFC will also help EDC reach into underserved and underinvested frontier regions such as Sichuan, Shaanxi and Liaoning.

SME development: EDC will work closely with local and regional enterprises whose businesses demand timely BC/DR services and datacenter capacity. The growth of the Chinese IT industry translates directly to the growth of other industries that rely on IT, such as the financial and manufacturing sectors. EDC will provide a platform for different market participants such as IT companies and infrastructure service providers to seek synergy and leverage knowledge resources to enhance a region’s economic base. In addition, EDC will allow SMEs to access professional datacenters and connectivity without significant upfront capital expenditure.

Institute good corporate governance: IFC is needed to ensure that related-party transactions among group companies (GDS and EDC) are carried out on an arm’s length basis in order to fully capture synergies.

Share knowledge and experience of World Bank/IFC: IFC could potentially broaden its partnership with EDC to include the high technology parks in which EDC operates. The team met with leaders of the high technology parks and received requests to share knowledge about IFC/WBG’s previous joint experience in technology parks, especially in emerging countries such as Jordan and Turkey. The technology parks interviewed (Chengdu, Suzhou) are extremely eager to continue this dialog with IFC.

The key environmental and social issues associated with this project are the management of environmental, health and safety issues; compliance with national, local, and IFC standards on land acquisition, construction, and management of hazardous materials (e.g., fuel oil and sewage); fair, safe and healthy working conditions; energy management; and corporate social responsibility efforts. The nature of EDC’s operations is such that no major adverse environmental or social impacts are expected to result from the project, and that it will be possible to avoid or mitigate any limited adverse impacts that might result. As a result, it has been classified as a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects.

The principal Performance Standards (PSs) to be applied to this investment are PS1: Social and Environmental Assessment and Management Systems; PS2: Labor and Working Conditions; and PS3: Pollution Prevention and Abatement. A condition of IFC’s investment will be that EDC’s operations shall ensure that all relevant social and environmental risks and impacts, including issues covered in all IFC PSs, are considered and managed as appropriate. Specific information about how potential environmental and social impacts will be addressed by EDC is summarized in the Environmental and Social Review Summary (ESRS) for the project.