Kronospan Smorgon Cluster

Location:

Belarus

Project number:

50752

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

24 Jul 2019

Status:

Signed

PSD disclosed:

19 Jun 2019

Translated version of this PSD: Russian

Project Description

Long-term senior loan of up to €124.2 million to Kronospan FLLC, a foreign limited liability company domiciled in Belarus, to finance the capacity expansion programme and infrastructure upgrade at its plant in Smorgon, the creation of a furniture production cluster and a multifunctional training and exhibition complex at the site in Smorgon, as well as to restructure the Company's balance sheet. 

Kronospan FLLC is an existing client of the EBRD. The existing loan to the Borrower was provided in 2011-2014.

Project Objectives

The proposed facility will support the investment programme carried out by Kronospan at its oriented strand board (OSB) plant in Mogilev. The proceeds from the EBRD loan will be allocated towards capital expenditure focusing on the capacity increase in its OSB manufacturing facility, the purchase of railway wagons to facilitate transportation of its products in the region, and the development of the plant's infrastructure. The Project will enable Kronospan Mogilev to increase its production capacity, start exporting into the new markets, and to expand its training programmes for workers to improve their skills.

The proposed facility will also support the investment programme carried out by Kronospan at its particleboard and MDF plant in Smorgon. The proceeds from the EBRD loan will be allocated towards capital expenditure focusing on the capacity increase in its particleboard manufacturing facility, the development of the plant's infrastructure, the creation of a furniture production cluster and a multifunctional training and exhibition complex at the site in Smorgon. The Project will enable the Kronospan Smorgon to increase its production capacity and to expand its training programmes for workers to improve their skills.

Transition Impact

The transition impact of the proposed project will be derived from:

1). Export to the new markets: Kronospan Mogilev is planning to expand its OSB export into new geographies, such as North America, Latin America and Asia.

2). Employees' training to acquire or improve skills required in the wood working industry. The Project would enable the enhancement of skills in Belarus to Kronospan's international levels in different areas through centralised training facilities, thus further developing the standards in the wood industry.

Client Information

KRONOSPAN OSB FLLC

Kronospan OSB FLLC (Kronospan Mogilev) and Kronospan FLLC (Kronospan Smorgon) are leading producer of wood-based panels in Belarus, subsidiaries of Kronospan Holdings East LTD, Cyprus.

Kronospan is the market leader in the wood-based panel sector. It manufactures wood-based panel products at over 40 sites and has 16 distribution centres in 30 countries, including Austria, UK, Germany, Luxembourg, Italy, Spain, France, Denmark, Latvia, Poland, Czech Republic, Slovakia, Bulgaria, Romania, Hungary, Croatia, Serbia, Russia, Belarus, Ukraine, USA and China.

EBRD Finance Summary

EUR 45,000,000.00

The EBRD is organising a financing package of €208.8 million out of which up to €40 million will be syndicated to commercial banks.

Total Project Cost

EUR 45,000,000.00

1). EBRD A-loan: Capex of EUR 85m, consisting of €40m Capex at Kronospan Smorgon and €45m at Kronospan Mogilev.

2). EBRD A-loan: refinancing of existing EBRD debt of €83.8m, consisting of €44.2m at Kronospan Smorgon and EUR 39.6m at Kronospan Mogilev.

3). EBRD B-loan: refinancing of investment payables of €40m at Kronospan Smorgon.

Environmental and Social Summary

Categorised B (ESP 2014). Due diligence is on-going and while the while the site visits have been undertaken and the main Smorgon plant has been thoroughly reviewed, there are some outstanding questions regarding the Novaya Gozha impregnation plant that require to be closed prior to finalising the due diligence.  Due diligence has confirmed that the key environmental and social impacts and risks associated with the capacity increase of particleboard production line, additional infrastructure and new furniture cluster and a multifunctional training and exhibition complex to be built adjacent to the plant include, among others, wood supply sustainability, air emissions, fire and explosion safety, waste management as well as permitting process and stakeholder engagement. The local environmental impact assessment was reviewed and an independent consultant was retained to carry out a BAT Assessment of the whole plant in line with EU BREF for Wood Based Panels and an E&S Assessment of the new project. A review of this independent review is being finalised and the PSD will be updated on completion.  The current projects' ESAP implementation shows satisfactory progress. Based on the final results of ESDD, the ESAP will be updated and amended, and agreed with the borrower.

Technical Cooperation

None.

Company Contact Information

Natalia Pokinska
n.pokinska@kronospan.com.ua
+380 3344 43 600
+380 3344 43 619
www.kronospan-worldwide.com
Kronospan UA LLC 20 Lutska Street 45400 Novovolynsk Volyn Region Ukraine

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