The EBRD is considering a €35 million senior unsecured, amortising loan to Metsä Tissue Oyj, to finance Energy Efficiency capex as a part of the operational restructuring and consolidation of Metsa’s Polish operations (€25 million) and follow-on capex to its Russian operations (€10 million).
The Company intends to upgrade the Krapkowice mill and provide brand-new ultra energy-efficient equipment setting up new standards not only for the pulp & paper sector in Poland, but also for all other paper companies in Europe.
The Project will
(i) replace the old and inefficient paper machine
(ii) close down the CHP plant and use natural gas boilers for the heating requirements
(iii) increase the production capacity by 5% by the end 2013.
As a result significant Energy Efficiency and environmental benefits (lower CO2/SO2 emissions, water and wood consumption under BAT) will be realised.
The transition impact of the project is expected to arise from demonstration of successful operational restructuring and support of energy efficiency investments in the corporate sector.
The Project will provide for replicable production organisation and demonstration of the best available energy efficiency improvements. The improvement for the new paper machine will meet and exceed relevant benchmarks within the EU.
Metsa Tissue Oyj, a company based in Finland, one of the leading European suppliers of tissue and cooking paper with sales of EUR 1 billion, member of the Metsa Group with €5.3 billion sales and 12,500 employees, owned by Metsaliitto Cooperative.
Senior debt of €35 million.
The project has been categorised B in accordance with the EBRD Environmental and Social Policy (2008). The production of tissue paper mainly from recycled paper without significant use of chemicals and tissue converting is associated with limited adverse environmental and social impacts, which can be readily identified and assessed. The Environmental and Social Due Diligence, consisting of an Environmental Analysis of the planned expansion programme and an Environmental Audit of the existing facilities, has been undertaken by the Bank based on reports prepared by independent environmental consultants and information provided by the Company. The investigations showed that the project site is located within a historic industrial site in the outskirts of the town of Krapkowice at a distance from residential areas and other sensitive areas. There are no nature parks or other protected areas close to the mill site. The planned investments will significantly reduce the Krapkowice mill’s environmental impacts from the current level while enabling the tissue production to be increased by approximately 30,000 t/a. Specifically, the proposed modernisation programme will improve energy and resource efficiency, reduce air emissions (SO2, CO2, NO, dust) and consumption of water and electricity and ensure the Krapkowice plant will achieve compliance with EU Best Available Techniques for pulp and paper manufacturing. The inefficient and old-technology based Konstancin plant will be shut down and the entire production relocated to the Krapkowice mill.
As part of the investment programme, the Company will introduce two natural gas turbines that will allow for shutting down the current coal fired power plant, reducing the plants CO2 emissions by 35,000 tonnes per year. The gas turbines will have negligible air emissions of sulphur oxides and dust and meet European Union emission standards. The new tissue paper machines’ energy consumption will be below EU BAT resulting in significant energy savings and further CO2 reduction. The project will increase the utilisation of recycled paper, which has positive effect on the waste management in Poland. The Krapkowice mill effluents are purified in a dedicated wastewater treatment plant operated by an external company. No harmful chemicals are used at the mill, and the raw materials consist of virgin elementary chlorine free pulp made of certified wood raw material and recycled paper only. Although the tissue paper production capacity will increase from the present level the effluent volume and pollution load will decrease by about 30% from the current level due to introduction of new tissue machines with low water consumption compliant with EU BAT. The specific wastewater discharges will be reduced to around 6 m3 per tonne of product, far below the EU BAT standard of 10 m3 per tonne of product. The old and inefficient tissue machines will be shut down allowing the Krapkowice mill performance overall to achieve EU BAT.
The closure of Konstancin mill resulted in a retrenchment of 119 staff. The redundancies were negotiated with the Trade Union (TU) based on an existing Collective Bargaining Agreement that covered all employees. As a result of these negotiations all employees received an additional 2 months’ worth of severance pay, in addition to the nationally mandated 1-3 months’ worth of severance pay, based on the number of years worked for the company. While the scope for impact avoidance or minimisation was limited in this case of plant-wide closure, the Company found alternative solutions for a small number of blue collar workers, some of whose contracts were extended for 6 additional months or were provided with other positions in the company. Dismissed workers received training and coaching through an outplacement agency, including individual consultations to discuss employment opportunities elsewhere, entrepreneurial skills and CV-writing workshops, as well as support for searching for jobs online. The workers were provided with the technology to support their job search (e.g. copy machines, computers and internet) for 3 months. The Bank’s due diligence concluded that the retrenchment process was carried out in line with or beyond EBRD requirements and the Polish Labour Code.
An Environmental and Social Action Plan (ESAP) has been developed to address the environmental and social mitigation and management measures so as to ensure the Company maintains its compliance with European Union environmental standards based on the use of BAT for tissue manufacturing and recycled paper processing. The Company is monitoring and reporting its environmental, health and safety performance in accordance with Polish regulatory requirements and Metsa Group’s corporate sustainability reporting standards. The Company will provide the Bank with an annual environmental and social reports (AESR), including updates on the ESAP implementation. The Bank will evaluate the Project’s environmental and social performance in accordance with the ESAP and Bank’s PRs including compliance with EU environmental standards based on the use of BAT through reviewing the Client reporting and undertaking periodic monitoring visits.
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