SHIZUISHAN, NINGXIA AUTONOMOUS REGION, CHINA, JUNE 7, 2000 –-
In its first deal in China's northwestern region, the International Finance Corporation signed agreements with Elkem Carbon China (ECC) to invest US$14 million to establish a new world-class carbon-based products business to make ECA (electrically calcined anthracite) and SEP (Sødeberg Electrode Paste) for the aluminum and ferroalloy industries.
The project is the largest single foreign investment to date in Ningxia. The Chinese Government has given new priority to the development of the northwestern region, which has lagged behind the coastal areas in terms of economic development. The carbon project is an important example of the role that foreign investment can play.
The investment will build on significant competitive advantages, including an abundant local supply of raw material, excellent knowledge of an up-to-date and environmentally friendly technology, and a well-developed marketing network in Asia.
ECC, which purchased assets from a state-owned enterprise (SOE) that was no longer in operation, will expand and upgrade annual capacity to 55,000 tons. The total investment is $23 million.
ECC's main sponsor is Elkem ASA of Norway, which will own 79.3 percent of the new company. Elkem ASA is one of the world's leading suppliers of metals and materials such as ferroalloys, silicon metal, aluminum, and microsilica. It has companies and production facilities in Europe and north and south America, in addition to a comprehensive network of sales offices and agents.
IFC's financing consists of an equity investment of $1.7 million, or 20.7 percent of the company's registered capital, and a loan of $12.3 million. Part of IFC's debt financing will include a syndicated loan for the account of Den norske Bank, which will provide $6 million. IFC's involvement was critical in obtaining long-term financing, which is not available in China for this kind of project.
IFC Chief of Mission in Beijing, Davin Mackenzie, noted at the signing that IFC's major objectives in China include support for successful SOE transformations, assisting interior provinces to attract foreign investors, and promoting the establishment of world-class private companies in remote areas.
IFC also arranged substantial technical assistance funded by the government of Norway to conduct an environmental assessment.
The project will set an example for the industry through the use of modern, efficient, less-polluting technology. IFC provided advice to Elkem ASA and the Chinese authorities to successfully implement a social plan by which more than 200 workers of the former SOE will be hired by ECC and the remainder will receive a compensation package. In addition, families that were living on the plant premises under unhealthy conditions have been voluntarily relocated to better housing.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people's lives. It fosters economic growth by financing private sector investments, mobilizing capital in the international financial markets and providing technical assistance and advice to governments and businesses.
