IFC approves US$7mn loan for Sunshine Holdings for Daintee acquisition, roof top solar projects

• US$ 5mn for Daintee acquisition and US$ 2mn for roof top solar projects 

The International Finance Corporation (IFC) of the World Bank Group has approved US$ 7 million loan to Sri Lanka’s Sunshine Holdings PLC to support the acquisition of confectionary manufacturing company Daintee and for the expansion of its roof top solar projects.

The Board of Directors of IFC approved the proposed investment on December 10 last year.

Accordingly, Watawala Ceylon Tea Company, a sub-subsidiary of Sunshine Holdings PLC is expected to secure US$ 5 million loan from IFC to acquire Sri Lanka’s market leader in confectionery, Daintee Limited.

Last year, Watawala Tea Ceylon Limited entered into a share sale and purchase agreement with the current shareholders of Daintee Limited to purchase 100 percent shareholding of the company for Rs.1.7 billion.

Consequently, the Sunshine Group announced that it acquired 100 percent shareholding of Daintee Limited during 2QFY21 with a view to further expand its presence, beyond tea, in the local consumer goods sector.

The remaining US$ 2 million is proposed to be utilised for the expansion of roof top solar projects through Sunshine Holdings’ subsidiary Sunshine Energy and its subsidiary company Sky Solar.

Established in 2012, Sunshine Energy has three mini hydropower plants in operation, contributing to 6.65MW of power to the national grid.

In 2017, Sky Solar was incorporated and now manages roof top solar projects with a cumulative capacity of 1MW. 

Sky Solar engages in revenue share arrangements with the roof owner, supports funding and project management with installation and operational maintenance (O&M) conducted by an engineering procurement and construction (EPC) partner JSF Holdings PVT. 

According to IFC, the cost of both projects is estimated at US$ 14.7 million. 

An IFC team is expected to undertake a site visit of these operations to confirm the appraisal findings as identified in this environmental and social review summary (ESRS). “It should be acknowledged that given travel restrictions due to COVID-19, it was not possible to undertake a site visit for this appraisal.

Following the lifting of travel restrictions, IFC will undertake a site visit of these operations to confirm the appraisal findings as identified in this Environmental and Social Review Summary (ESRS), and as needed, will update the ESRS and E&S Action Plan (ESAP) accordingly,” IFC said.

Due to the current COVID-19 pandemic, IFC conducted its virtual appraisal by videoconference and group calls with Watawala Tea Ceylon and Sunshine Energy’s management team last year. However, it wasn’t able to conduct any interviews with Daintee’s EHS/HR teams due to ongoing acquisition of the entity at time of appraisal.

IFC and Sunshine Group are expected to sign the loan agreement shortly.

According to the proposed Environmental & Social Action Plan of the agreement, Sunshine Group is required to undertake an in-depth E&S appraisal of the Daintee factories via third party and a qualified independent consultant.

“Issue of work order to third party consultant would be a condition of disbursement and audit to be completed within six months of disbursement,” IFC noted.

The Group is also required to amend its employment terms and conditions to include a zero-tolerance approach for proven cases of gender-based violence or sexual harassment and shall include a mechanism for receiving complaints that protects the identity of the complainant, investigate the process with a victim centered approach applying remediation in accordance with the HR policies and procedures and prevailing national regulations. 

“This complaints channel should be open to all staff, outsourced and contracted workers,” IFC stated.