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Summary of Project Information (SPI)
Project number9874
Project namePeru Orient Express Hotel
SectorResort Hotel (Including Lodges)
DepartmentGbl Ind, Manufact, Agribus & Services
Company namePERU OE.H. S.A.
Environmental categoryB
Date disclosedMarch 28, 2000
Previous EventsInvested: August 13, 2001
Signed: April 25, 2001
Approved: August 15, 2000

- Technical Partner and/or Major Shareholders

Peru OEH S.A. (POEH) is a 50:50 joint venture between Peru Hotels S.A., a subsidiary of Peru Real Estate S.A. (itself a subsidiary of Peruval, an investment and financial services group), which is also involved in a few other hotel projects in Peru; and Orient Express Hotels Ltd. (OEH), an operator of luxury boutique hotels throughout the world as well as trains and cruises. Orient Express is, in turn, owned by Sea Containers Ltd.

Peru Hotels S.A. operates prestigious hotels formerly belonging to a government agency, ENTUR PERU, purchased during the public bidding of state-owned companies. Peru Real Estate S.A. owns 60% of Peru Hotel S.A. In addition to its hotel operations, this company owns 60% of Peru Desarrollo Inmobiliario. This is a subsidiary focusing on the master development of vacational homes in Lima’s coastline. It also develops shopping malls and high-scale housing buildings. The company’s shares are listed on the Lima Stock Exchange and, at the same time, the company has a Level I ADR program in the over-the-counter market in New York. Peruval is a company that provides securities intermediation, stock market and economic research, corporate finance, securities placement and distribution services, project finance and new companies start-ups, as well as other financial services.

OEH is an international provider of services for the tourism industry, with a portfolio that includes 18 hotels, 4 luxury trains and a cruiseship in the Far East. OEH acquired its first property, the Hotel Cipriani in Venice in 1976. Today, the company operates 18 deluxe hotels in four continents. These hotel properties share outstanding historic and architectural characteristics. The company also invested outside of the hotel industry by acquiring the Venice-Simplon–Orient Express train in 1982. Today it owns 4 luxury trains and a cruise ship in the Far East. OEH is a subsidiary of Sea Containers Ltd., a corporation with $2.5 billion in assets, and sales of over $1.3 billion during 1999.

- Project Cost Including proposed IFC investment

The total project cost is estimated at $22.5 million. IFC is considering an investment comprised of an A Loan of up to $6 million and a C Loan of $4 million.

- Location of project and Description of site

The proposed project includes:

- Refurbishing an existing 3-star 32 room Machu Picchu Sanctuary Lodge in Machu Picchu;
- Refurbishing an existing 123-room, 5-star Monasterio Hotel in Cusco;
- Converting a building adjacent to the Monasterio Hotel (las Nazarenas Convent) to a 58 suite, 5-star hotel;
- the purchase and installation of the furniture, fixtures, and equipment (FF&E);
- the purchase and installation of required environmental and fire and safety features; and
- the allocation of funds for pre-opening costs, interest during construction, working capital, and contingency costs.

- Description of Company and Purpose of Project

Conceptually the project makes sense for the type of tourism attracted to this area: cultural enthusiasts and others interested in seeing the ruins of Machu Picchu and the city of Cusco. Orient Express Hotels is an excellent operator fit. The challenge is to raise the standards of the physical product and service quality and adjust the marketing strategy to such an extent that room rates and revenues are sufficiently enhanced to justify the additional investment. IFC's involvement in the proposed project will provide long-term financing necessary for projects of this type, at a reasonable cost. Funding with long-term maturities necessary for hotel/real estate projects is currently unavailable in Peru. In addition, IFC's Environmental Unit will assist the company with its substantial environmental and cultural heritage obligations. The proposed hotel development is expected to contribute to Peru's tourism infrastructure by providing international standard accommodations and food and beverage to an increasing amount of visitors in the area. The project is expected to generate an additional 200 jobs directly, and also substantial indirect employment though the broader multiplier effects of the investment on the regional economy, with other sectors of the economy such as restaurants, agriculture and tour guiding benefiting from this. Tax revenues for the government will also increase. Additionally, the company will upgrade its human capital by imparting professional training to its employees as well as the latest management techniques used by Orient Express in its world renowned hotels. IFC's investment is expected to consolidate the privatization process in Peru, set physical standards for future hotel investments and increase foreign exchange earnings. In addition, the fact that this project is restoring a historic monument (Nazarenas Convent) is an important part of the project.

- Environmental Category and Issues

This is a Category B project. The following potential environmental, health and safety, and social impacts of the project were analyzed:

- impacts on cultural heritage;
- land acquisition process and arrangements;
- liquid effluent treatment and solid waste disposal;
- handling of hazardous waste; fire protection and life safety;
- health and safety; and environmental management systems.

For all sites, Peru OEH will have permits from the Insituto Nacional de Cultura (INC) before starting refurbishment or construction. The INC is the government agency responsible for the protection and management of cultural properties. This satisfies the objectives and procedures of the IFC’s policy on cultural properties. UNESCO is concerned about the Machu Picchu Historical Sanctuary because of growing visitor numbers and associated development. UNESCO’s World Heritage Center recently reviewed the status of the Machu Picchu Sanctuary Hotel Lodge. Both the company and IFC informed the World Heritage Center of the planned refurbishment.
The sponsor will install a new effluent treatment system at the Machu Picchu Sanctuary Lodge to meet IFC standards. Effluent at the Monasterio and the new Nazarenas hotels will be treated by the Cusco wastewater treatment system. The Cusco municipality can accept and treat the effluent, as it can solid and construction waste from all three projects.
Corrective Action Plans developed by the fire safety engineer to bring the Monasterio and Machu Picchu properties into compliance with IFC fire and life safety guidelines will have been accepted and scheduled by the company prior to first disbursement; furthermore, Peru OEH agrees to follow the engineer's recommendations for fire and life safety on the Nazarenas property. All buildings will meet Peruvian standards for earthquake risk.

IFC concludes that the proposed project will meet the applicable World Bank Group environmental and social policies and the environmental, health and safety guidelines upon successful implementation of the measures listed in the Environmental and Social Action Plans.

The is from the InfoShop.

Host country location of environmental documents1) Cusco: Biblioteca Municipal de la ciudad del Cusco. Calle Santa Catalina No.333.
2) Aguas Calientes: estacion de ferrocarril del pueblo de Aguas Calientes en el km. 110 , en el Boletin de Informes de la mencionada estacion.

Date SPI sent to InfoShop March 31, 2000

“This Summary of Project Information is prepared and distributed to the public in advance of consideration of the proposed transaction by the Corporation’s Board of Directors. It is provided for the purpose of enhancing the transparency of IFC’s 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
Fax: (202) 974-4384

Environmental documents for this project are available at http://www.ifc.org/projects and from the World Bank InfoShop (http://www.worldbank.org/html/pic/aboutinfo.html).

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