The proposed project would support Metsä-Botnia efforts in expanding its operations in Russia by providing partial financing for the construction and start-up of a new greenfield sawmill in Podporozhie, Leningrad oblast, Russia. The mill would produce sawn wood, mostly for the sponsor’s existing export markets.
The transition impact potential of this transaction derives from:
(i) the project being one of the few foreign direct investments in the sawmill sector in the region and therefore its expected positive role in promoting technological, environmental, forest management and corporate governance standards for the industry
(ii) enhancing competition within the industry in terms of efficiency, product quality and delivery and with respect to forest reforms in support for the planned pulp mill
(ii) demonstration effect by sending a signal to the market that a leading international player is now changing its strategy from only importing raw logs to outsourcing processing facilities to Russia and that the sawmills, and eventually pulp mills, in Russia may yield attractive financial returns.
OOO Svir Timber, a limited liability company incorporated in the Russian Federation for the purpose of implementing the project, which is 100% owned by Metsä-Botnia – one of Europe’s largest pulp producers owned by two major Finnish forest product groups Metsaliitto and UPM.
EBRD senior loan for EUR 22.5 million.
EUR 55 million.
Oy Metsä-Botnia Ab has strong environmental commitments and is implementing high corporate environmental, health and safety and social standards, which are being implemented at their facilities worldwide. Oy Metsä-Botnia Ab is proactively promoting transparency and energy and resource efficiency. The new sawmill will adhere to all Oy Metsä-Botnia Ab’s corporate policies and standards and will develop environmental management system so as to be integrated into Oy Metsä-Botnia Ab sawmills' corporate wide ISO 14001 certification.
Screening categories and rationale for classification
The construction and operation of a new, medium-size saw mill is typically associated with limited direct environmental, health and safety issues, which can be readily identified and assessed as well as efficiently mitigated with modern technology and project design. The project site is not in the immediate vicinity of environmentally sensitive or residential areas. Therefore, the EBRD has classified the project B/0, requiring an Environmental Analysis of the proposed development.
Information reviewed during the environmental appraisal
The Environmental Analysis has been prepared in accordance with the EBRD's requirements by Oy Metsä-Botnia Ab’s internal experts. Information contained in the report is based on technical-economic assessment of the investment (TEO) prepared by a Russian consultant company in accordance with the requirements of the Russian law, an environmental site assessment, a field survey of the project area and its surroundings, laboratory investigations as well as discussions with local authorities and co-operation partners.
Key environmental issues and mitigation
The environmental investigations showed that all potential risks will be diligently managed. The Project has been structured to meet Russian environmental, health and safety requirements and EU environmental standards and that the environmental, health and safety impacts during the construction and the operation of the sawmill will be negligible and efficiently mitigated.
The Sawmill will introduce state-of the art technology and adverse impacts have been mitigated by taking environmental protection measures into consideration in the project design and in construction planning and work practises. The Sawmill will utilise bark and sawmill residues for heat production and will have no significant air emissions. The amount of dust formed in the sawmill process is small due to the use of fresh wood as raw material. In addition, the sawmill machinery will have built-in dust cyclones and filters to further reduce potential dust emissions. No preservatives or other wood treatment chemicals will be used. The sawmill process itself does not use any water, but a considerable amount of water will be used during summer months for sprinkling of the stored logs to maintain the timber quality. This wastewater, which contains both dissolved and suspended substances originating from the wood will be collected and directed to a filtration system. The Company will also produce small amount of sanitary wastewater that will be discharged to the Sawmill’s own biological waste water treatment system. Noise abatement measures taken into consideration in the mill design ensure the noise levels will not exceed permissible levels at the perimeter of the mill site. The Company will implement ISO 14001 Environmental Management System for its operations. These measures will ensure that the environmental issues will be professionally managed to prevent or minimise impacts on staff and local population as well as on the environment.
The Sawmill will use approximately 420,000 cubic metres of wood per annum. The wood procurement will be managed by Oy Metsä-Botnia Ab’s procurement division, Thomesto Oy and its operating subsidiaries in Russia. Thomesto has certified environmental and quality management system, ISO 14001 and ISO 9001, and PEFC (Programme for the Endorsement of Forest Certification) certified chain of custody management system for its wood procurement. The negative impacts of wood procurement on the environment are mitigated by the use of approved wood suppliers only. Thomesto only purchases wood from reliable business partners who carry out logging operations in accordance with local legislation and who guarantee not to deliver wood from conservation areas or areas designated for protection. The acceptability of the wood suppliers and reliability of the wood origin data are supervised with Geographical Information System (GIS) and audited by the Thomesto’s supplier and field audits on a regular basis. Thus the project will promote legal timber, application of sustainable forest management standards through market mechanisms and practical implementation of PEFC standards in Russia.
Disclosure of information and consultation
In accordance with Russian law, the project has been subject of formal public disclosure and public consultation prior to obtaining the construction permit. The Company has 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 Company is committed to continue working in a close relationship with the local community. In the context of EBRD’s potential participation in the project, the Company has released locally this summary of the relevant environmental issues associated with the project and the mitigation measures.
The Company will systematically monitor and report its environmental and health and safety impacts in line with Oy Metsä-Botnia AB’s corporate standards for internal and external reporting to ensure it complies with Russian and EU environmental standards. The EBRD will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual environmental reports (AERs) prepared for the project.
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