RF - VMG Mogilev WC

Location:

Belarus

Project number:

52181

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Approval date:

09 Jun 2020

Status:

Disbursing

PSD disclosed:

10 Jun 2020

As permitted by paragraph 2.6 of Section III of the Access to Information Policy, disclosure of this PSD was deferred in accordance with paragraph 1.4.4 of the Directive on Access to Information.

Project Description

The provision of a secured loan of up to €5 million to VMG Industry FLLC.

This project was approved in the context of the Bank's response to the COVID-19 pandemic. To avoid delays to the delivery of this project, the Bank's President granted a deviation from the ordinary timelines for PSD disclosure, as contemplated by Section V of the Directive on Access to Information. Details of the Bank's response to COVID-19, and this deviation, can be found on our website.

The loan will bridge a liquidity gap due to adverse market conditions related to the COVID-19 crisis. The loan will be used for working capital purposes and will compensate limited availability of medium-term working capital financing from local commercial banks.This project was approved in the context of the Bank's response to the COVID-19 pandemic. 

Project Objectives

The loan will be used for working capital purposes

Transition Impact

ETI score: 63

The goal of this COVID-19 response financing is to preserve the TI gains achieved under the latest project with this client.

The latest operation with VMG Industry FLLC was VMG Mogilev (DTM 49912). The project was approved with ETI of 60 and set the following TI objectives:

 - Competitive: (i) The project supports large operational restructuring of the investee company resulting in significant efficiency gains and greater profitability; and (ii) a significant number of staff will be trained incrementally on a regular basis as a result of the project.

Progress to date: According to the latest TIMS review (January 2020) objectives under Competitive quality remain on track.

- Green: The percentage of the EBRD use of proceeds allocated to the project that qualifies as GET is 14.4% and the company introduces a number of best available technologies to improve energy and resource efficiency and to reduce the company's negative environmental footprint.

Progress to date: According to the latest TIMS review, one of the TI indicators under Green quality has been achieved (introduction of new pollution prevention technology), while the other one (a number of indicators related to pollution emissions) remains on track.

The latest TIMS review for the VMG Mogilev project (DTM 49912) indicates the project remains on track with one indicator already being achieved, thus receiving the PTI score of 63.

Client Information

VMG INDUSTRY FLLC

VMG Industry FLLC ("VMGI") operates an integrated wood processing complex in Mogilev, Belarus, including a particleboard plant, a furniture plant and a layer-glued product plant. VMGI is part of the VMG group of companies, one of the largest Lithuanian groups engaged in wood processing (particleboard and furniture production) and related activities.

EBRD Finance Summary

EUR 5,000,000.00

Senior secured loan of up to  €5 million to VMG Industry FLLC ("VMGI") 

Total Project Cost

EUR 5,000,000.00

Toal Project Cost is  €5 million

Additionality

COVID-19 crisis response: the EBRD financing effectively bridges a liquidity gap due to adverse market conditions. In light of COVID-19 situation and uncertainty over the effects on the economy, current market conditions for new lending are limited.

Environmental and Social Summary

Categorised B (ESP 2019), Low Medium risk based on the Client's capacity and track record to carry out its operations in line with the EBRD PRS. The ESDD for this project was carried out in line with COVID 19 approach and was based on the past ESDD for the previous transaction (DTM 49912) and a review of provided 2019 AESRs with respective ESAPs compliance status.

The ESDD has confirmed that ESH capacities of VMGI are established at a satisfactory level, the particleboard plant is managed in compliance with national laws and in line with E&S management systems and EHS procedures according to industry best practice, including regular internal audits and management reporting. Applied standards and audits cover areas aligned with Bank's PRs, such as air quality, noise emissions, water use and waste water handling, soil and groundwater contamination, chemicals and hazardous materials, business ethics, ILO core labour standards, working conditions, occupational health & safety, fire prevention, etc. VMGI maintains sustainable wood supply policies and practices that are certified for compliance with the FSC Chain-of-Custody (CoC) and Controlled Wood (CW) standards. VMGI is also certified to comply with E0.5 level of residual formaldehyde content in the final furniture products ensuring their safe use indoors, going beyond the E1 level that is accepted as EU best practice and strict international formaldehyde emissions regulations of California Air Resources Board (CARB). BAT Assessments by independent auditors were done for the plants and overall compliance confirmed with additional corrective actions plans outlined.

VMGI demonstrated sufficient progress in implementing the agreed ESAPs. There are adequate traffic safety measures implemented specific to the wood supply operations and on-site transportation of raw materials and final goods, and appropriate training of the drivers on road safety performed on time. There are a number of resource efficiency measures in place, including energy savings from onsite biomass boilers running on wood waste from the processes. Operations of the VMGI particleboard plant are reported to be in line with EU BAT requirements for Wood-based Panels Production, apart from the 2019 exceedances of the dust concentrations from dryers and residual solids in waste water. The issues shall be addressed via developed 2020 corrective plan, installation of own storm water treatment facility by end of this year and following installation of a required by the ESAP Wet Electro-Static Precipitator filter that has been delayed due to the current crisis conditions. The Company's labour practices and working conditions go beyond sector and country standards, as well as their stakeholder engagement practices and community investment programmes, including support of local sports teams, schools, hospitals and tree planting events. The ESDD confirmed that the existing ESAP is adequate and does not need to be updated for this RF transaction. The Bank will continue to monitor the Project and the ESAPs implementation through review of Annual E&S Reports and future site visits as required.

Technical Cooperation and Grant Financing

None

Company Contact Information

Ingrida Mikenaite
ingrida.mikenaite@vmg.eu
+370 46469423
www.mediena.lt
Liepu g. 68, LT-92100 Klaipeda Lithuania

PSD last updated

04 Mar 2021

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

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General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

 

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