IFC will invest alongside Softbank China Venture Capital (“SBCVC”) Fund III. IFC has invested in its predecessor fund, Fund II. Shuoren will be the third investment with SBCVC. SBCVC Fund III is a closed-end Cayman Islands exempt limited partnership, which invests in early stage Chinese companies in the telecom, media and technology sectors.

The total project cost is estimated at US$50 million. IFC is considering an investment of up to $8 million, in the form of equity, warrants and/or debt.

8.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	5.0
Equity	3.0

* These investment figures are indicative

The first project has been implemented in the Qinghuangdao plant of Capital Steel, followed by projects in Nanjing and Zhangjiagang. The additional projects planned will be in existing steel factories throughout the country, particularly in the south and southwestern provinces, where humidity and pollution are high year round.

Energy efficiency improvements are important for both climate change and sustainable growth. Both in China and other countries, better management of natural resources and decreased pollution will be necessary to alleviate the strains of continued economic and population growth. Energy management companies are emerging as rapidly increasing critical supporters of energy efficiency technology, particularly in China. Since 1996, when the World Bank-supported China’s Energy Conservation Project, which helped found three pilot EMCs, over 100 EMC companies have emerged. As large industrial companies typically do not have the in-house technological, managerial or financial capacity devoted for the development of energy efficiency technologies, the services provided by EMC companies are recognized as a unique value proposition and viable standalone businesses. However, EMCs face a host of challenges themselves, and in particular have difficulty obtaining financing due to lack of familiarity with their business model. An investment in Shuoren will greatly support the Company’s ability to develop and grow in the domestic energy efficiency sector, primarily focusing on steel but also expanding to other sectors. Efforts to reduce the energy consumption driven by China’s growth, especially with growing environmental pressures and the global financial crisis are continuing and increasingly being stressed by the national government and international community. The Project will have significant developmental impact by: Contributing to the development of the clean technology sector in China; Enabling turnkey solutions for clients who benefit from the introduction of energy efficiency technology to decrease upfront capital costs required to implement projects that reduce energy use and mitigate environmental impacts; and Assisting the government of China in achieving its energy reduction goals in the short and long term, which is an important part of global initiatives to mitigate climate change impacts.

Promote clean technology and energy management services: IFC’s support will be critical to the development of Shuoren’s business and technology, and to providing additional demonstration that more efficient use of resources is an important and viable area of investment. This support extends to Shuoren’s capabilities in innovation, as IFC will help the Company expand to broader set of industries and markets in other regions in China beyond its initial target market in steel manufacturing. Access to financing in illiquid capital markets: Local financing channels are typically not familiar with the EMC business model, which results in limited access to finance for otherwise viable projects. IFC is able to provide critical early-stage equity financing for EMC companies such as Shuoren, which are not able to obtain it elsewhere. Institute good corporate governance: IFC will assist Shuoren in instituting best-practice corporate governance, including help with recruitment of at least one independent Board member.

Environmental benefits result from Shuoren''s activities through reductions in energy usage and carbon emissions, as well as from the partnership between Shuoren and the World Resources Institute for carbon tracking across various industries in China.

Where Shuoren conducts operations and has control over outsourced manufacturing, it will be required to manage all relevant environmental, health and safety risks according to IFC Performance Standards for the duration of IFC''s investment.

The level of these risks is low, so the project is classified as Category C according to IFC''s environmental and social review procedure.