€190 million in loans for wood processor Kronospan

By Richard Wallis

The European Bank for Reconstruction and Development (EBRD) has signed two separate long-term loans today, which will provide up to €190 million for the construction by Kronospan – a privately held global leader in the wood-based panels market – of new production facilities in Russia and Belarus.

Both plants are designed to use low quality wood that is currently treated as industrial waste, and the projects will encourage sustainable forest management.

The two projects are part of an EBRD strategy to develop the forest products sector, based on sustainable forest management principles in the two countries, which both have vast but under-utilised forest resources.

Kronospan’s planned €200 million facility will be the first in Belarus to produce oriented strand board (OSB), and will have a production capacity of up to 500,000 m3 of OSB a year. OSB is an exceptionally strong wood-based panel used in the building sector.

This is the third Kronospan plant funded by the EBRD in Belarus, and it will be built in the Mogilev Special Economic Zone near the Russian border to facilitate exports. The EBRD is providing an eight-year loan of up to €100 million to fund this project in Belarus.

For the Russian project, the EBRD will be the lender of record for the full amount of €90 million, half of which has been syndicated to Raiffeisen Bank International AG under an A/B loan structure.

It will be the first foreign direct investment in the forestry sector in Russia’s Bashkortostan Republic.

Kronospan is investing €195 million in the Bashkortostan plant, which will be able to produce up to 500,000 m3 of particleboard a year. Particleboard is mainly used in the manufacture of household and office furniture. All required infrastructure for the plant will be provided by the Republic of Bashkortostan.

The EBRD earlier financed the construction of Kronospan’s Russian OSB plant, which is about to start production as the country’s first large domestic producer of this reinforced material.

Both the Belarus and Bashkortostan facilities will, for part of their production processes, use low-quality and small-sized wood that is left in the forests after final felling, or is harvested during regular thinning, in accordance with sustainable forest management practices.

There is currently no commercial use for this kind of wood due to the absence of local production facilities that could utilise it as a raw material.

In addition, Kronospan will provide incentives to encourage local wood suppliers to adopt sustainable forest management practices and obtain FSC (Forest Stewardship Council) Chain of Custody and Controlled Wood certifications for managing the wood supply chain.

The goal is to ensure that the wood that suppliers sell is of legal origin and that it has been harvested in a sustainable way.