City Group Company K.S.C., previously the Transport and Warehousing Group Company K.S.C., is a listed Kuwaiti company established in 1977. In 2002 CGC became the first privately owned and operated public transport company in Kuwait under the Citybus brand. It has since become Kuwait’s second largest bus operator operating more than 500 buses. In addition to bus transport, which accounted for 75% of consolidated turnover in 2009, CGC owns two subsidiaries: Boodai Aviation Group, a travel agency, and TWG Real Estate Group, offering cold and dry warehousing services.

CGC’s major shareholders are: Combined Building Materials Company (36.1%), Abdulaziz and Jassem Commercial Company (34.5%) and Boodai Projects Company (21.7%), all affiliates of the Boodai Group of companies, one of the leading Kuwaiti business groups with interests in the airline, media, cement and trading sectors. The balance of 7.7% represents free float on the Kuwait Stock exchange.

The proposed IFC investment is a $30 million, corporate facility to CGC for IFC’s own account to partially finance the recapitalization and planned expansions of current and future acquisition projects. The currently identified investment program for CMTC is approximately $40 million.

30.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	30.0
Equity

* These investment figures are indicative

The proposed financing is a corporate loan to City Group Company K.S.C., a company registered and headquartered in Kuwait. The company’s operations are located in the Sulaibiya Industrial area on the outskirts of Kuwait City.

CGC’s investment capacity and operating know-how is expected to greatly benefit the investee companies.

In the specific case of Jordan, CMTC’s fleet renewal and expansion project, funded largely by CGC, is expected to improve Amman’s underdeveloped public transportation system. It is also expected to help reduce traffic congestion and user travel time as CMTC’s increased presence will not only offer a comfortable alternative to individual or shared car use but also displace, replace and restrict the operations of minibuses.

Investments in the public transportation system such as the contemplated investments in Jordan and Lebanon in combination with a transfer of know-how is also expected to lead to higher bus frequencies, a better reliability and the use of more modern buses.

The project is also expected to positively affect the direct users of the public transportation system as well as the non-users due to the resulting easing of road congestion. Municipalities are also expected to benefit from lower roadway investment costs. The enhanced service levels are also expected to have a strong impact on the urban poor who traditionally live far away from their place of employment and rely on public transportation.

The success of the project, addressing the region’s significant need for an efficient and reliable public transport service, and IFC’s participation is expected to encourage other governments and municipalities to create a public private framework to bring quality public transportation services to their citizens with limited use of public funds. At the same time it is also expected to encourage formal private sector participants and international investors.

By providing the loan to a Kuwaiti company IFC is also playing a counter-cyclical role at a time when Gulf banks, traditional lenders to Gulf based corporations, are hesitant to fund regional investments.

IFC will also improve the environmental standards of both CGC and CMTC, as a result of the inclusion of IFC’s environmental performance standards and the monitoring of their compliance at the Kuwaiti and Jordanian company levels. This would make CGC the first Kuwaiti company to apply IFC’s environmental and social performance standards to its domestic operations.

As a result of its due diligence, IFC has concluded that: (i) the potential adverse environmental and social impacts presented by the Project are few in number and can be readily addressed through mitigation measures and use of appropriate design and engineering criteria. Therefore, this is a Social and Environmental Category B Project. Key issues and mitigation measures are summarized as follows:
In Kuwait, CGC has recently introduced technical control measures to optimize fuel and oil consumption. These measures will be extended to the operations in Jordan as well. The quality of diesel currently used in vehicles in both Kuwait and Jordan, creates complication in mitigating air emissions standards, particularly with its high sulfur content. CGC will develop plans to reduce air emissions progressively and will become compliant within a defined timeframe with IFC.
CGC is in the process of renovating its facilities in Kuwait in line with the internationally agreed engineering standards in terms of life and fire safety, spill prevention, water conservation, effluent treatment, etc. The new facility in Jordan will be equally in line with internationally agreed standards. IFC will closely monitor the developments in both countries.
CGC operates under ISO 9001 Quality Management System Standard as an indication of its commitment for provision of safe and high quality services. The standardization will be extended to the operations in Jordan. In both countries, the Company targets implementation of Environmental, Health and Safety management systems as well, with commitment to continuous improvement, in line with international standards of ISO 14001 and OHSAS 18001.
IFC’s presence will ensure that CGC’s operations in Kuwait and Jordan will comply with the good practice environmental and social standards. IFC will closely monitor the performance through Annual Monitoring Reports submitted by the Company and through regular supervision site visits.