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IFC Supports Coal Conversion into Clean Energy, Addresses China’s Energy Security Needs


Washington, August 2, 2006 — The International Finance Corporation, the private sector arm of the World Bank Group, today signed a financing package for China’s Xinao Group to support the conversion of coal into an environmentally friendly fuel that can be used for household cooking and heating or replace diesel as a fuel for transportation and power generation.

The coal-to-liquids technology used by the Xinao Group will help to improve indoor air quality by replacing the burning of raw coal and wood in stoves – a common practice among hundreds of millions of China’s poor and one that is responsible for hundreds of thousands of deaths each year.

IFC is investing in a Xinao subsidiary by buying shares worth up to $10 million and granting a $40 million loan for the plant that will convert coal into dimethyl ether (DME), a fuel significantly cleaner than coal. The project will be one of the world’s largest producers of DME from coal and will address China’s energy security concerns by promoting development of a fuel based on the country’s abundant domestic coal reserves.

“This project will help develop new sources to meet China’s energy demand and will do so in an environmentally friendly way,” said Lars Thunell, IFC’s Executive Vice President. “Replacing coal with a clean fuel for household cooking and heating has clear health benefits.”

Over 1 billion Chinese suffer from harmful emissions due to the burning of solid fuels in their homes. More than 1 million die every year from air pollution and more than 60 percent of these deaths are the result of indoor smog.

Xinao asked IFC to arrange the full debt package needed for this complex project, which, in addition to IFC’s financing, includes a loan of up to $140 million from commercial banks. Xinao will build petrochemical facilities with a total production capacity of 600,000 tons per annum (tpa) of methanol from coal, which will then be used to produce about 400,000 tpa of DME. The project utilizes China’s abundant and relatively low-cost coal reserves in Inner Mongolia, one of the poorest and most underdeveloped provinces in China.

The burning of DME from coal in cooking applications emits up to 40 percent less carbon dioxide (CO2) than the direct burning of coal. DME production also helps to reduce global warming as it does not produce black carbon, which contributes two to three thousand times more to the problem than CO2.

“IFC is pleased to be able to support Xinao, a private sector company, to take the lead in implementing this innovative solution to China’s energy challenges,” said IFC’s Thunell. “As the private sector plays a larger role in China’s economy, it is important that leading private companies adopt sustainable business strategies"

IFC helped to evaluate and quantify the environmental and social aspects of the project and Xinao relied on IFC’s due diligence to confirm the technical and commercial viability of the project.

“We have benefited enormously from IFC’s expertise in the petrochemical sector and have incorporated many of their recommendations into the project concept and configuration,” said Mr. Wang Yusuo, Xinao’s Chairman. “With this project, Xinao is developing a clean energy source that has been identified by the Chinese government as a strategically important alternative to polluting fuel such as coal or diesel.”

Earlier this year, IFC and Xinao Gas partnered with banks and equipment suppliers to catalyze about $150 million in energy-efficient equipment financing in China and achieve 5 to 10 million metric tons of CO2-equivalent greenhouse gas emission reductions through the China Utility-based Energy Efficiency Finance Program. In 2004, IFC provided a $25 million loan package to help Xinao Gas expand its gas distribution network, and invested $10 million in Xinao Gas’ equity.

About IFC
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.

The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit


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