The Project Sponsor is DLI of Columbus, Ohio, USA, a wholly-owned subsidiary of DLZ Corporation. DLZ, founded in 1951, is a privately-held well-respected full service architectural, engineering and environmental consulting firm with annual revenues of approximately $80 million. DLZ provides water resources, wastewater, architectural, facilities, transportation and environmental engineering analysis, design and project management functions to clients in the US and more than 20 countries around the world. Its largest clients include the US Army Corps of Engineers, US Department of Agriculture, various state and municipal departments of natural resources, transportation, water and environmental quality, and a wide array of private companies including Bethlehem Steel. In 1979, DLZ was purchased by Mr. Vikram Rajadhyaksha, who currently owns 67% of the company. The remaining shareholders are: employees (25%), Mr. P.V. Rajadhyaksha, brother of Vikram (7%), and Janet, wife of Vikram, and Dr. Kasturi Rajadhyaksha, mother of Vikram (1%). DLI was formed in 1984 to expand the business into the international market. DLI is the 100% owner of DLHPPL and Ascent.

The total value of the contract between INCaF and the two project companies, DLHPPL and Ascent, will likely fall in the range of $4.2 million to $5.0 million depending on the final negotiated price and final contracted quantity of CERs. The total project cost is estimated at $45 million (the proposed IFC investment is an A Loan up to $16 million).

The BH I project is located on Lake Arthur Hill Reservoir in the Upper Pravara River Basin in Maharashtra state. The nearest town, Ghoti, is 36 km away from the project site. BH I was constructed in 1986 by the Government of Maharashtra Irrigation Department, and rehabilitated by the Sponsor upon acquisition in 1996. The BH II project is located 10 km downstream of BH I on the Pravara River in Maharashtra state. BH II was constructed in 1999 and operated until today by the Government of Maharashtra Irrigation Department. Upon acquisition of BH II, the Sponsor will rehabilitate and refurbish the project site. Birsingphur project is located in the Umaria District, about 180 km northeast of the city of Jabalpur in the eastern part of the State of Madhya Pradesh. The project is located within the fence of the Sanjay Gandhi Thermal Power Station, an 840 MW coal-fired power plant owned and operated by the Madhya Pradesh State Electricity Board. The sponsor is finalizing construction of the Birsingphur plant and will start commercial operations shortly. The three greenfield mini-hydro plants will be located in the state of Himachal Pradesh. All are located in the mid-range Himalaya mountains at elevations of around 2,000 meters. The climate is of the tropical monsoon nature, with a maximum summer temperature of around 30 degrees celsius and a minimum winter temperature below freezing. The exact location of each project is: - Sechi: located on Sechi khad (stream), a tributary of the Sutlej river, near the village of Samej in the district of Shimla; - Melan: located on Melan khad, also a tributary of the Sutlej river, in the Kinnaur district; and, - Panwi: located on the Panwi khad, also a tributary of the Sutlej river, very close to the Melan khad, in the Kinnaur district. Access roads to the Sechi and Panwi sites are via a state road and a bridge from a national highway, respectively. Access to Melan is currently very limited; however, a bridge is being constructed by the Himachal Pradesh government which will provide adequate access to the project site.

IFC’s goal is to encourage emerging market private sector participation in the carbon market by providing value-added services to support projects’ long-term sustainability. As a global investor and advisor committed to developing a sustainable private sector in emerging markets, IFC is well positioned to assist project sponsors with participation in the rapidly growing market for 'carbon credits'. Using its experience, IFC is collaborating with private sector entities to design, launch and manage, as appropriate, products and services that promote the private sector’s participation in the market. IFC’s experience and knowledge in evaluating and financing private sector projects in developing countries is being leveraged to structure contracts that minimize the risk associated with delivery of CERs from projects. The sale of CERs from its small hydro project provides DLI with the additional revenue needed to improve the financial return of the Project and capital to invest in similar projects elsewhere in India. The Project will have substantial developmental impacts that include: - the generation of incremental electricity through the utilization of a clean, emission-free natural resource; - the reduction in un-served electricity that will enhance the competitiveness of India’s economy through addition of low cost hydro-electricity generation; - the diversification of the India’s electricity generation sources and the reduction of the country’s dependence on imported fossil fuels; - the demonstration to other potential private investors that the business model for small hydros is viable, which will help accelerate private participation in renewable energy development and enhance the prospects of the realization of a competitive power market in India; and - the creation of about 200 locally sourced jobs during the construction phase, with permanent operational jobs thereafter. The DLI Small Hydro project is a good candidate for IFC support for a number of reasons. The Project is being undertaken by a medium-sized sponsor committed to the development of renewable power projects in India. The Sponsor is one of the few private power producers in the country that has successfully entered into and is operating in India. The development of the energy sector in India is vital to its continued economic growth, and private investors are essential given the poor financial situation of the state electricity boards. In addition, IFC will be co-lending with two local Indian banks, supporting their involvement in the project finance and renewable energy sectors, and supporting the growth of local capital markets.

This is a Category C project according to IFC’s environmental and social review procedures because this transaction does not cause any impact beyond the existing proposal for an IFC investment in this company. IFC’s investment in this project was already classified as Category B and an Environmental Review Summary was released by IFC on its website and by the Sponsor locally in India in June 2005. The recommendations of the ERS and any CAP agreed prior to commitment with IFC under the investment project would be applicable in the case of this carbon finance deal as well.

The review of this Project consisted of appraising technical, environmental and social information submitted by the project Sponsor; and visits to the two existing facilities in Maharashtra (Bhandardara I and II), to the Birsinghpur plant (currently under construction) in Madhya Pradesh, and to the three greenfield sites (Melan, Panwi and Sechi) in Himachal Pradesh. The following potential environment, health and safety and social aspect of the project (s) were analyzed:

- corporate environmental, social, and health and safety management systems;
- national and local government permitting requirements;
- dam safety (relevant to Bhandardara only);
- potential impacts on downstream users;
- land acquisition, compensation and physical and/or economic resettlement;
- community consultation and disclosure;
- site access during construction and operation;
- community health and safety during both construction and operation;
- provision of housing, hygiene facilities, water, and power (including fuel storage) during construction and operation;
- hazardous materials management;
- fire and life safety and emergency response;
- minimization, recycling and disposal of solid and hazardous wastes during construction and operation;
- biodiversity conservation;
- corporate social responsibility efforts, including HIV/AIDS awareness; and,
- timely reporting on environmental and social performance to IFC.
Location of environmental documents in locally affected community
The Environmental Review Summary (ERS) for IFC’s investment in this Project was released in June 2005 and was categorized as Category B for that purpose. The recommendations of the ERS or any possible CAP agreed prior to commitment with IFC under the investment project would be applicable in this transaction as well. The ERS was made available at the following locations: At Bhandardara, in the state of Maharashtra at the Bhandardara Power House No. I: Dodson-Lindblom Hydro Power Private Limited Bhandardara Power House, No. 1, Bhandardara Taluka: Akole District: Ahmednagar Pin Code: 422 604 India Contact Person: Mr. S.B. Desai, Plant Manager Telephone: +91-024-2425-7026 At Birsingphur, in the state of Madhya Pradesh: Ascent Hydro Projects Limited Near SGTPS, Village Mangthar PO Birsingphur District Umaria Madhya Pradesh – 484 552 India Contact Person: Mr. Anil Ranade, Engineering Manager Telephone: +91-076-5526-2860 At Jeori, in the state of Himachal Pradesh: DLI Power (India) Private Limited Duni House, Village Tayawal PO Jeori, Teh: Rampur Bushahr District: Shimla Himachal Pradesh India Contact Person: Mr. Balbir Chand, Project Manager Telephone: +91-094-1803-3995