Galnaftogaz Expansion Phase II

completed

_x000C_Open Joint Stock Company Concern Galnaftogaz (GNG or the company), an existing IFC client, is the largest independent (not tied to a refinery) operator of gas filling stations in Ukraine. Galnaftogaz’s main business is distribution of petroleum products mainly gasoline and diesel through its network of filling stations and direct sale in the wholesale market. GNG currently operates 15 storage terminals and about 206 stations, including 163 OKKO branded stations. OKKO stations are high throughput and modern format gas stations which offer high quality fuel and a variety of related products and services (convenience store, car wash, auto repair, and fast food services). GNG had sales of $515.9 million and EBITDA of $24.7 million in 2006 and was ranked fourth in Ukraine by number of stations and third by sales volume. GNG requested IFC for financing package of $100 million ($50 million on IFC’s own account and $50 million on account of participant banks) to fund the second phase of its expansion with estimated capital expenditures of $642 million over the next 4 years. The expansion aims to increase the company’s petroleum distribution network to about 358 OKKO stations through acquisitions of 170 stations and construction/upgrading of 188 stations (currently GNG operates 43 unbranded stations most of which will be converted, while the remainder will be sold or closed). Besides the stations, the project involves investments in supporting infrastructure (storage terminals, petroleum trucks, acquisition of land under existing stations, etc.).