Hwagain is now a medium-sized, integrated bamboo and scrap wood based pulp and paper producer. In 2008, Hwagain diversified into tissue papers. The Company plans to shift its focus from printing and writing papers to tissues, and significantly build up its tissue production. Mr. Ning Jun, aged 50, is the Chairman of Hwagain and the Sponsor for the Project. He is responsible for the strategic planning and overall management of the Company. Mr. Ning has more than 15 years experience in pulp and paper, and is well regarded in the local business community as a competent, credible entrepreneur. Under his leadership, the Company evolved from a small sugar plant into an integrated pulp and paper producer with good reputation in southern China.

The total cost of the Project is estimated at$245 million. The proposed IFC investment is a $15-25 million equity investment.

20.06 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	20.06

* These investment figures are indicative

The Proposed Project will be implemented by Hwagain in Ganzhou City of Jiangxi Province, China. The Production facility is located in an industrial park developed by the local government.

(1) Rural growth and employment: The Project supports the expansion of a successful pulp and paper company in the frontier regions of China. The Company procures bamboo from around 6,000 rural households in frontier Guangxi and Jiangxi regions. As a result of its expansion, the Company will have a significant impact and extensive rural reach by procuring from additional 6,000 rural households, and creating business opportunities for MSMEs, such as traders of bamboo, truck owners, distributors, etc. (2) Sustainability: Pulp and paper sector is reported to account for a significant portion of water pollution in China and the sector places a huge demand for global wood resources. IFC will be supporting a Company with a keen desire to contribute to sustainable development by: (a) contributing to proper management of forest (bamboo) resources; (b) efficient manufacturing, and (c) adopting and ensuring workplace safety and pollution control.

1) Long-term partnership: Hwagain aspires to be becoming a leader in China tissue paper segment, and it has significant expansion plans to take advantage of the policy-driven consolidation wave in the sector. However Hwagain aims to improve its capital structure by using more longer term financing for its expansion plans but such long-term financing is limited in China. IFC can play a key role in providing an appropriate mix of long-term debt and equity funding, enabling the Company to have a stable financial structure. (2) Leadership in Sustainability: Since 1950s, IFC has invested around US$3 billion in forestry/forest product projects around the world. With the global experience and expertise in the forest product sector, IFC can help improve the client's environmental profile, reduce the production waste, strengthen the corporate governance, and build the stronger relationships with the local community. In particular, IFC can help the Company to move forward the certification of its raw material sources (chain of custody) and advance implementation of sustainable forest management, processes/practices by recommending consultants or through advisory supports. (3) Stamp of approval/Resource Mobilization: IFC's presence as a knowledgeable partner and patient investor to an enterprise in the frontier provinces of China is seen by the Company to (i) assure stakeholders that the Company meets and strives to exceed standards on environmental and social sustainability and governance; and (ii) to improve the Company's access to private equity capital. IFC introduced China Merchant Investment as a potential equity partner to the Company, and China Merchant Investment is keen to work closely with IFC on the transaction.

This is a Category B project according to IFC’s Environmental and Social Review Procedures. The Project will result in a limited number of environmental and social (E&S) impacts which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. Key environmental, health and safety, human resources and social issues that were reviewed included: environmental and social management system (ESMS); contractor and supply chain management; community engagement; labor and working conditions; occupational health and safety; water and energy use and efficiency; greenhouse gas emissions; air emissions, and water and solid waste discharge; community health and safety; land acquisition; and biodiversity preservation and sustainable forestry management.