A US$ 60 million loan to Kondopoga Pulp and Paper Mill, located in the Karelian Republic, for the modernisation and expansion of news print and pulp production, including environmental enhancements.
Project objectives: The project will increase Kondopoga's news print production capacity, and will allow the company to reduce its production and use of sulphite pulp, replacing it with the production of more environmentally friendly thermo-mechanical pulp.
For the first time, Kondopoga - one of Karelia's leading private companies - will obtain long-term finance for its future growth and sustainable development. As a result, it will also develop efficiencies and management information practices necessary to improve its competitiveness.
Kondopoga is a joint-stock company and the largest Russian producer and exporter of news print. Following the completion of the project, total production capacity of the mill will increase to 700,000 tonnes per year. Approximately 75 per cent of production is exported to markets located in Asia and Europe. Domestic clients of JSC Kondopoga include a number of major Russian publishing houses.
The US$ 60 million loan will comprise an "A" loan portion of US$ 40 million (ECU 30.8 million) for the Bank's account and a "B" loan portion of US$ 20 million (ECU 15.4 million) for the account of participating commercial banks.
The total cost of the investment programme is about US$ 272 million (ECU 209 million).
The project was screened B/1, requiring an environmental analysis and an environmental audit, which were completed to the satisfaction of the Bank by independent pulp and paper and forestry consultants.
An Environmental Management Action Plan (EMAP) has been developed as a result of the appraisal process to improve the environmental performance of the company. This will include improving air emissions, waste management, and waste-water effluent quality. In addition to approximately US$ 3.3 million which the company has already spent on environmental improvements in 1995-96, the EMAP details an additional US$ 15 million that the company will spend to improve its environmental performance from 1997 to 2002. The replacement of the bisulphite pulp mill with a modern thermo-mechanical pulping system will further improve the environmental performance of the company.
The assessment by the independent consultants shows that the operation of the mill at present volumes, or the increased volumes after the PM10/TMP project, will not have a negative impact on the sustainability of the wood resources or nature protection in Karelia or elsewhere in Russia. However, reflecting on end-consumer concerns and in consultation with Russian and international organisations and donors, the EBRD has identified the need to launch a technical assistance programme to address the more widespread environmental issues associated with its forestry sector operations in Russia on a regional basis and with a private sector focus. This technical assistance programme would comprise three components: (i) the preparation of a strategic environmental assessment of the forestry sector in the Karelian region; (ii) the development of a code of practice for environmentally sound/sustainable forestry practice and introduction of a certification scheme; and (iii) technology transfer to help key wood suppliers to become certified suppliers.
Donor funding for this programme is being pursued through the Project Preparation Committee (PPC) established under the Environmental Action Plan for Europe.
See the environmental impact summary.
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