Graanul Invest

Location:

Regional

Project number:

42202

Business sector:

Power and energy

Notice type:

Private

Environmental category:

B

Target board date:

12 May 2011

Status:

Repaying

PSD disclosed:

21 Mar 2011

Project Description

The EBRD is considering extending a EUR 34.4m senior loan to AS Graanul Invest (“the Borrower”) to finance part of the construction of two biomass fuelled 6.4MWe/15MWt capacity CHP plants. The plants will be constructed in Estonia and Latvia in parallel during 2011-2012. The Bank’s loan will also finance the implementation of energy efficiency investments in the Borrower’s adjacent pellet plants to improve the pellet production’s operational efficiency.

Transition Impact

By financing the Borrower the Bank will promote private ownership thereby driving an increase in privately held renewable energy generation in the Baltic region. The Project will also demonstrate the possibility to generate satisfactory equity returns in biomass fuelled power generation projects in the Baltic States thereby facilitating attraction of new private investors to the sector.

The Client

AS Graanul Invest, a privately owned Estonian based wood pellet production and trading company.

EBRD Finance

A senior corporate loan of € 34.4 million.

Project Cost

€43 million.

Environmental Impact

The Project has been categorised B in accordance with the EBRD Environmental and Social Policy (2008). Environmental and social impacts of the construction and operation of two new small size combined heat and power (CHP) plants and energy efficiency investments at the Company’s existing pellet production plants are mainly positive due to introduction of renewable energy capacity and safer pellet production processes. Potential adverse impacts are efficiently mitigated through introduction of a modern technology, appropriate management and mitigation measures as well as ensuring the forest-based biomass fuel for the CHPs and round wood raw material for the pellet plants is of legal and sustainable origin.

The environmental and social due diligence undertaken by independent consultants consisted of an environmental and social audit of the existing pellet production facilities and operations and an environmental and social analysis of the new CHP plants and proposed energy efficiency investments. The investigations showed that the project is structured to meet the Bank’s Performance Standards. The Company has ISO 9001, 14001 and OHSAS 18001 certifications covering its operations and plants in Estonia and is planning to bring its Latvian and Lithuanian plants under the same corporate management system. The CHPs are designed to meet relevant EU environmental standards including Best Available Techniques (BAT). The CHPs will also significantly reduce air emissions, especially those of dust, from GI’s operations, as well as generate electricity for the company’s own needs and for selling renewable energy to the grid. The renewable electricity will replace grid electricity in Estonia and Latvia from other high carbon sources and the corresponding CO2 emissions are estimated between 65,000 and 100,000 tonnes per year.

The main raw material for pellet production is sawdust, partially also wood chips, wood industry waste (bricks, slabs), bark (as fuel), but also a considerable amount of round fuel wood is used. As the Project will increase the demand for biomass fuel and raw materials for wood pellets, consisting of both wood processing industry residues and low value and small sized round wood, the Company is expanding its raw material base and is now using a diverse range of raw materials and a higher proportion of round wood. The forest resources in Estonia, Latvia and Lithuania are currently under utilised and there is significant potential for additional wood removal from forests within sustainable harvesting levels. To mitigate the adverse impact of the harvesting and wood procurement as well as to ensure the wood supplied to the mill is of legal and sustainable origin, GI is in the process of obtaining FSC Chain of Custody (CoC) and Controlled Wood (CW) certifications for one of its wood pellet factories in Estonia. In the future, GI will expand the FSC certified wood supply management system to cover all of its pellet and biomass energy production and give preference to FSC certified wood when available. The company has recently acquired a forest harvesting company that would supply most of the round wood to its Estonian operations. GI is planning to increase the harvesting company’s logging through investments in modern forestry machinery that enables intermediate fellings and thinnings, allowing it to target a new, low-priced biomass source, which is currently under utilised in Estonia due to lack of harvesting capacity. Round wood from forest thinnings together with the currently used fuel wood provide the most advantageous forest-based biomass energy sources considering forest energy climate impacts.

Environmental and Social Action Plan has been developed to address required corrective actions and improvements at the existing facilities, mitigation measures for the CHPprojects, and setting up sustainable wood supply management system. The Company will also adopt stakeholder engagement plans to be more actively engaged with the communities surrounding its plants and to regularly release information on its operations.

The Company is systematically monitoring and reporting on its environmental, social and health and safety performance under its certified management systems. The EBRD will evaluate the Project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual reports prepared by the Company and conducting periodic supervision visits when deemed appropriate.

Technical Cooperation

A Technical and Energy Efficiency Audit was performed funded by the Bank’s Special Shareholders Fund through the TC Framework for Energy Efficiency for the Corporate Sector. .

Company Contact

Mr. Raul Kirjanen
Chairman of the Board
AS Graanul Invest
Paldiski mnt 93a
10617 Tallinn
Estonia

Tel: +372 669 9870
Mob: +372 509 7555
Fax: +372 669 9871
Email: raul.kirjanen@graanulinvest.com

 

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