Project number:


Business sector:

Manufacturing and Services

Notice type:


Environmental category:


Approval date:

01 Apr 2003



PSD disclosed:

29 Oct 2002

Project Description

The proposed project would finance the construction and start-up of a new greenfield sawmill in Pestovo, Novgorod oblast, Russia. The mill would produce sawn white wood, mostly for the sponsor’s existing export markets.
The project aims to (i) produce sawn white wood in Russia which will be exported and sold through UPM’s existing sales network (ii) offer significant synergy opportunities to the sponsor, notably in raw material procurement.

Transition Impact

The transition impact comes from (i) demonstration effect associated with a substantial investment by a reputable foreign sponsor in an important sector at an early stage of its consolidation and restructuring; (ii) the potential skills/technology transfers, including quality, environmental, health and safety standards (ISO/OHSAS) to other regional logging, wood processing and packaging companies; and (iii) strengthening competition and market interaction in the sawmill sector and also through linkages with other related industries.

The Client

A new greenfield sawmill plant to be established in Pestovo, Russia. The project will be majority owned by UPM-Kymmene (“UPM” or the “Sponsor”). Based in Finland, UPM is one of the world’s largest forest products companies.

EBRD Finance

EBRD loan for €15 million, with an 8-year term including a 2-year grace period.

Project Cost

€47 million (€42 million in capital expenditure and €5 million in working capital).

Environmental Impact

Screened B/0. An Environmental Analysis has been prepared in accordance with the EBRD's requirements by UPM-Kymmene's environmental specialists on the basis of investigations conducted by independent consultants. The investigations included an environmental assessment that was carried out as part of a technical-economic assessment of the project (TEO) in accordance with the requirements of the Russian law; an environmental site assessment; a field survey of the project area and its surroundings and laboratory investigations. The Environmental Analysis showed that the Project has been structured to meet Russian environment, health and safety (EHS) requirements and EU environmental standards, that environmental protection measures have been fully incorporated in the project design and that the construction and the operation of the Sawmill will follow up internationally defined criteria for environmental protection and workers' health & safety.
Due to the nature of sawmill operations, the main impacts on the environment arise from wood procurement. The sawmill will implement UPM's wood procurement procedures that are based on internationally recognised standards of sustainable forest management and mitigate potential negative impacts of wood procurement on the environment by using approved wood suppliers only. The selected suppliers are required to:
  • comply with all the applicable laws, acts and legal requirements
  • have a right to sell the wood material
  • know the origin of the wood and give the required information to UPM, and
  • obey the principles of sustainable development.
The acceptability of the suppliers is controlled by field audits on a regular basis. The results of the supplier audits and the descriptions of the reliability of the suppliers are documented by UPM-Kymmene.
UPM-Kymmene has documented operational guidelines for the operational quality, environment, health and safety. The sawmill will introduce best available technology and adhere to all UPM-Kymmene's corporate policies and standards. It will develop quality and environmental management system in accordance with ISO -standards in order to be integrated in UPM Kymmene sawmills' corporate wide certification. The sawmill will systematically monitor and report its environmental and health and safety impacts in line with UPM-Kymmene's operational standards for internal and external reporting.
In accordance with Russian law, the project has been subject of formal public disclosure and public consultation prior to obtaining the construction permit. UPM-Kymmene have held discussions with local authorities and two public consultation meetings nearby the project site, in which the public expressed its general support to the project. The sawmill is committed to continue working in a close relationship with the local community.

Technical Cooperation


Company Contact


Business opportunities

For business opportunities or procurement, contact the client company.

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General enquiries

EBRD project enquiries not related to procurement:
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