SUMMARY OF PROPOSED INVESTMENT
(SPI)
Disclaimer
This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’
consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this do cument
should not be construed as presuming the outcome of the Board decision. Board d ates are estimates only.
Project Identification:
Country:
Project Name:
India
WEG Industries (India) Pvt. Ltd.
Region:
ASIA
Company Name:
WEG S.A.
Project Business Sector:
Project Status:
M-BA - Electrical Machinery, Equipment and Components
Active
(Electric Lighting, Motors, Batteri es, Insulated Wires and
Cables, Fiber Optic Cable, Carbon and Graphite Products,
etc.)
Project No.:
29053
Environment Category:
B - Limited
Parent Project Identification:
Parent ID:
Parent Short Name:
Parent Relationship:
No Relationship
Document Status:
Date Disclosed
Date Revised SPI Disclosed
(if appropriate)
Enter Projected Board Date
[or internal management
date]
Date of Clearance by client
for factual accuracy
Description of the Project:
WEG Industries (India) Pvt. Ltd. (WII) is constructing a greenfield plant near Hosur, Tamil Nadu St ate,
India, to produce high voltage motors and generators. Production is expected to be ramped-up by the end
of 2011 and in its initial years of operation, the plant is expected to produce an average of about 250
motors and generators per year (the Project). Sales will be largely in India, although there will also be
exports from India to neighboring countries. These motors and generators are large, technologically
sophisticated and are typically used in infrastructure (small, electric generation stations and water pumping
stations), agriculture (irrigation), as well as mining and industry.
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Project Sponsor and Major Shareholders of Project Company:
WII is fully-owned by WEG S.A. (WEG). WEG was founded in 1961 in Jaraguá do Sul, state of Santa
Catarina, Brazil, where it is still headquartered. WEG engineers and manufactures capital goods, in
particular it specializes in electric motors, generators, transformers and electronic and electromechanical
components for industrial and other automation systems. While WEG has exported throughout the world
since its earliest days, the company is in a phase of investing in production capacity outside Brazil, of
which WII is an important step. In 2009, WEG reported BRL 4.2 billion in net sales (approximate ly US$
2.1 billion). WEG S.A. is listed on the Sao Paulo stock exchange, whereby approximately 65% of the
company’s shares are with the founders and their families (Voigt, Silva, and Werninghaus) and the balance
of shares is more widely held.
Total Project Cost and Amount and Nature of IFC’s Investment:
The total project cost is estimated at approximately US$ 95 million, of which half is attributable to
production machinery, approximately one-quarter for civil works and leasehold. The balance of onequarter is working capital, information technology, and pre-operational expenses. IFC has been asked to
provide a loan of approximately US$ 25 million. While WII will have some working capital facilities from
local institutions, most of the balance of the project cost is funded by WEG S.A.
Location of Project and Description of Site :
The site lies within the boundaries of the SIPCOT Industrial Complex, Phase II at Hosur, where the WII
is building a 33,000 m2 facility. The plant is located approximately 40 kms south of Bangaluru
(Bangalore) on National Highway 7 linking Bangalore and Chennai. In addition to the site, WII has a
project office in Hosur and WEG’s sales company in India maintains an office in Bangalore.
Expected Development Impact of the Project:
Improved Product Availability and Quality.
The Indian market is undersupplied with locally-manufactured, high voltage motors and generators that
are state-of-the-art technologically. The importance of manufacturing this equipment locally derives not
only from transportation cost savings but also because this equipment is built -to-order to very detailed
specifications, bringing to the client benefits from the ease and accuracy of information exch ange with a
local manufacturing facility and improved delivery times.
Infrastructure Development.
Infrastructure, including power generation is a bottleneck to economic development in India. WEG will
increase its capacity to sell turbines for small-scale, run-of-the-river generation projects that tend to
serve areas that are off-grid. Further, another important segment which requires high voltage motors are
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the producers of basic infrastructure building blocks: cement and steel plants. WEG also is building on
its track record in India of supplying motors for the pumping stations that make up important,
government-sponsored irrigation projects.
Employment.
The Project will generate at least 250 direct jobs and is estimated to generate a multiple of this in the
supply chain of WII and contractors for corporate and industrial services including maintenance,
security, transportation providers, etc.
IFC’s Expected Additionality:
Long-term Capital.
As a start-up company in India, WII does not yet have the standing in the local market to borrow longterm. Further, the Company is contemplating a rupee-denominated loan. IFC is in a position to structure
a long-term loan to the project company and, if desired, extend the facility as a rupee-denominated one.
Partnership.
WEG is operating in a business where its most significant peers are headquartered in developed
countries, but have evolved into global players. IFC is supporting the Project at a critical stage of the
globalization of WEG. The plant in Hosur will be the first greenfield plant for WEG outside the
Americas, but over the years to come is not likely to be the last investment by WEG in production
capacity in a developing country abroad. IFC has the global reach and long track record in emerging
markets that positions it well to assist WEG as it continues its globalization.
Review of Environmental, Health and Safety Standards.
Due diligence by IFC consists of a review of the environmental, health and occupational safety standards
being developed for the new factory. The involvement of IFC will support the Company's goal to
implement world-class systems and standards.
Environmental and Social Issues B - Limited :
This is a Category B project according to IFC’s Procedure for Environmental and Social Review of
projects because a limited number of environmental and social impacts may result that can be avoided or
mitigated by adhering to generally recognized performance standards and guidelines.
Key risks and issues related to this project include: adequate social and environmental assessment of the
impacts of the Project during both construction and operations; the Company’s capacity to manage its
social, environmental, health and safety performance, and engage with local communities in accordance
with local requirements and IFC Performance Standards and applicable EHS Guidelines; assurance of fair,
safe and healthy working conditions during construction and operations; utilization of equipment and
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operational practices that maximizes conservation of energy, water and process materials including
recycling and reuse initiatives; management of air emissions, wastewater treatment and discharge, and
solid and other waste disposal; handling and management of hazardous materials and hazardous wastes;
management of the impacts of the influx of construction labor, the impacts of operations on local ambient
air quality, and impacts on transport infrastructure during construction and operations; and, with regard to
site selection, management of land acquisition, physical/economic displacement and compensation as
required.
For inquiries and comments about the project contact :
Mr. Laurence Beltrão Gomes
Financial Director
Av. Prefeito Waldemar Grubba, 3300
89256-900 – Jaraguá do Sul – SC
Telephone: +55 47 3276-7917
Fax: +55 47-3276-4011
e-mail : laurence@weg.net
Local access of project documentation:
http://www.weg.net
For inquiries and comments about IFC:
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
Comment:
Approval Status:
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