Tiryaki Equity

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The EBRD is considering a US$ 25 million subscription to newly issued common shares of Tiryaki, a leading Turkish corporate in trading of agricultural commodities operating in Turkey and in the surrounding region. The proceeds of the investment will be used to support the Company’s continued growth (i.e. related working capital needs) and fixed asset investments around Turkey, including licensed warehousing facilities. The EBRD’s investment will further enhance the Company’s capital structure, underpinning the company’s continued growth. Upon the implementation of the project, Tiryaki will be the first major Turkish player to operate licensed warehouses. The project would raise warehousing standards, setting an example to follow for other companies in Turkey and surrounding countries. When approved by the EBRD’s Board of Directors, specific transition impact objectives will be drawn primarily from the following areas: Market expansion and Strengthening backward linkages. The investment in logistical infrastructure is pivotal to the development of the primary agriculture in Turkey and CIS region. In this context, the capital injection to be operated by EBRD in addition to the US$ 50m loan being currently secured from a number of banks, will allow Tiryaki to invest further in logistical infrastructure and specifically in licensed warehouses (“LW”), which would have a positive impact on farmers and allow them to realise better prices and terms for their produce and to disengage low value added middle men through provision of access to alternative source of financing (e.g. warehouse receipts) Demonstration effects through transfer of new behaviours and activities. Through the planned investment, Tiryaki will be the first major Turkish player to operate licensed warehouses which should upgrade warehousing standards in Turkey and push competitors to follow in Turkey and surrounding countries. Furthermore such first move may accelerate the policy dialogue mechanism that was supposed to start between the stakeholders of the system, TOBB, TMO and The Ministry of Science and Technology. Tiryaki, based in Gaziantep (South-East of Turkey) and operating in a key segment of the agri-business value chain, has been identified as a strategic prospective client for the Bank. The Company exports to more than 40 countries and is sourcing raw materials from more than 20 countries. The Company is majority owned by the Tiryakioğlu family while Gulf Growth Agro Fund of Investcorp, a private equity fund, holds a minority stake. Up to US$ 25 million of equity investment. US$ 25 million. Screening categories and rationale for classification Categorised B in accordance with the EBRD’s E&S Policy 2008: due diligence of company operations was undertaken in 2011 by EBRD specialists has confirmed that E&S impacts at the company's fixed assets are site specific and any residual risks have been addressed by way of an agreed action plan. Additional E&S risks in the supply chain are to be reviewed and assessed by the company as a result of EBRD’s involvement with the company. Information reviewed Due diligence comprised a site visit by EBRD specialists, management discussions and document review during August 2011. Due diligence completed in 2011 is considered by EBRD to be sufficiently up to date for this project. Environmental and Social issues Tiryaki is currently implementing a growth strategy and has ambitions to become an international operator in the food commodities sector. The company has evolved since founding in 1960s and company management has stated the ambition to meet international standards with regard to E&S stewardship across all company operations. Management of environmental and social risks has historically been regulatory driven and is partially governed by quality and food safety management systems. Formalisation of an E&S mission statement, policy and management systems certified to international standards is a logical next step in the company’s evolution and will address residual E&S risks identified during due diligence. Such issues include: achieving certification for appropriate E&S management systems; ensuring HR policies are consistent for all employees; reviewing H&S procedures on site; ensuring regulatory compliance is maintained; and taking a more proactive approach management of third party suppliers and contractors. EBRD does not expect this to be a significant challenge for the company when considering the scale of the operational risks and the current organisational capacity of the company. Environmental & social opportunities The company has the opportunity to review E&S management procedures to maximise energy and resource efficiency and to minimise operating impacts. Additional opportunities relate to the company’s involvement in regional climate change impact studies (with the assistance of EBRD) and reduction of labour and sustainability issues in the primary agricultural sector in Turkey and beyond. Summary of Environmental and Social Action Plan An environmental and social action plan has been developed and agreed with the company. The majority of the ESAP items reflect the ambition of the company to meet international standards while also satisfying the requirements of the EBRD’s E&S Policy. Minor capital costs are expected to be associated with the ESAP items and management of associated risks will have the added benefit of minimising the potential for E&S issues to impact business operation in supply chain, logistics and processing. The company has agreed through the ESAP to undertake a benchmarking exercise of existing operations and new facilities (at the appropriate time) against the applicable sections of the IPPC EU BREF note on Food, Drink and Milk Industries (2006) over the next 3-5 years. Furthermore the company is to commission a study into the potential risks associated with climate change, water scarcity and adverse weather conditions in the supply chain, logistics and processing. The ESAP also commits the company to identify and engage with company stakeholder regarding Project impacts and opportunities. None. Ertan Akbulut Treasury and Risk Group Manager PBX: +90 (216) 333 20 00 Fax: +90 (216) 333 20 20 E-mail: ertan.akbulut@tiryaki.net