Belisce Project Summary Of Project Information (SPI)       Project Name    Croatia - Belisce Paper Manufacturing              Region    Europe I        Sector       Project No008297   Projected Board DateMarch 19, 1998   Company NameBelisce d.d.   Technical Partner and/or Major Shareholders    	Belisce was privatized and converted into a joint stock company in 1993.  Privredna Banka Zagreb (PBZ) owns a 30% stake in Belisce and is the largest shareholder.  PBZ is still a government-owned bank and the largest in Croatia.  About 50% of the shares are held by former and current employees and the remaining 18% are owned by the Croatian government through the national privatization and pension funds.  PBZ is in effect the Sponsor of the project as it will provide a project funds guarantee.    Project Cost Including Proposed IFC Investment    	The project cost is estimated at DM74.7 million (US$42.2 million equivalent).  IFCs investment would comprise: (i) an equity investment of up to DM11 million (US$6.2 million equivalent), (ii) a senior A loan of DM25 million (US$14.1 million equivalent) for IFCs own account and (iii) a senior B loan of DM25 million (US$14.1 million equivalent) for the account of participants.    Location of Project and Description of Site    	Belisce is located next to the Drava River near the Hungarian border in the northeastern part of Croatia.    Description of Company and Purpose of Project    	Belisce d.d.s paper manufacturing facility was damaged during the war in 1991/92.  The project would rebuild and modernize the production facility and bring it into compliance with World Bank environmental guidelines.  The Company has been in the wood processing business since 1884, of which the last 36 years were in the production and sales of packaging paper and corrugated products.  Belisce has consistently performed well and is a key employer and source of revenue in its region of Croatia.  This project is essential for the survival of the Company which employs about 2,300 workers.    	The Balkan war and break-up of Yugoslavia have damaged the manufacturing plant and reduced the market for the Companys products.  Furthermore, the Companys machinery and equipment are outdated since no significant new investments have been made in the past decade.  In order to take advantage of the improving economic climate Belisce will have to modernize the plant and restructure existing debt.  IFC has been asked to provide the financing because local sources of long term financing are difficult to obtain at reasonable rates.  The estimated financial and economic rates of return for the project are high because of the nature of the planned investments, where a shift of product mix and elimination of bottlenecks through high-priority replacements, upgrades and reconstruction will allow Belisce to better utilize existing capacity.  The project is also expected to generate significant foreign exchange earnings since about two-thirds of Belisces sales are from exports.  Furthermore, the project would enable Belisce to recycle waste paper and invest significantly in environmental control equipment, thereby bringing Belisce into compliance with World Bank environmental guidelines.    Environmental Category and Issues    	This is a category B project according to IFCs environmental review procedure.  Sources of air emissions include the gas-fired power plant and the black liquor evaporation boiler, and these are fitted with appropriate control technology to control emissions.  The Sponsor is carrying out further investigations on air emission quality and will address any deficiencies in air emission controls and meet the World Bank Group guidelines.  The industrial effluents from the plant, as well as sanitary wastes, are currently treated before discharge to the Drava River.  This investment will ensure that the effluents discharged will comply with local requirements and World Bank guidelines. Solid wastes are appropriately disposed or recycled as products or fuel. The Company has established occupational health and safety programs to comply with governmental standards and World Bank Group guidelines, and hazardous materials are properly handled and stored.  Belisces wood had been supplied largely from thinning of existing sustainably managed forests in Croatia.  Belisce is increasing its use of waste paper to replace some of the forest production.  There is no physical relocation nor resettlement involved in the project, and no anticipation of any downsizing of the workforce as part of this investment.    The  is  from the Public Information Center.       Date SPI sent to InfoShop     February 18, 1998      This Summary of Project Information is prepared and distributed to the public in advance of consideration of the proposed transaction by the Corporations Board of Directors.  It is provided for the purpose of enhancing the transparency of IFCs activities and should not be construed as presuming the outcome of IFC Board consideration.    For Additional Information contact:  Corporate Relations Unit -   telephone: (202) 473-7711   facsimile: (202) 974-4384  Environmental documents for this project are available at http://www.ifc.org and from the World Bank InfoShop (http://www.worldbank.org/html/pic/aboutinfo.html).