Kronospan Belarus Particleboard/MFC project

Location:

Belarus

Project number:

42919

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

26 Jul 2011

Status:

Repaying

PSD disclosed:

24 Jun 2011

Translated version of this PSD: Russian

Project Description

The EBRD has financed three phases of the Project as follows:
 
Phase 1 (2011). The EBRD provided a loan of EUR 50 million to Kronospan FLLC, Belarus, to finance construction of a plant in Smorgon, Belarus, with a production capacity of 400,000 m3 of particleboard and 10 million m2 of melamine faced particleboard per annum. EBRD funding was used to finance capital expenditures.
 
Phase 2 (2012). The EBRD provided a loan of EUR 40 million to Kronospan FLLC, Belarus, to finance construction of an MDF and laminate flooring plant in Smorgon, Belarus, with an annual MDF production capacity of up to 224,000 m3.; part of the MDF output to be used for further production of up to 5 million m2 p.a. of melamine faced MDF and up to 5 million m2 p.a. of laminate flooring.
 
Phase 3 (2014). The EBRD provided a loan of EUR 50 million to Kronospan FLLC, Belarus, to finance the expansion of the production capacity of particleboard (from 400,000 m3 to 750,000 m3 per annum) and melamine faced particleboard (from 10 million m2 to 40 million m2 per annum) at Kronospan’s plant in Smorgon, Belarus.

Transition Impact

Demonstration effect – large foreign direct investment in Belarus: the Loan will support an international market leader in wood processing, establishing a local production facility, which will be setting new industry standards in terms of technology, knowledge and skills. As a result of the Project being implemented the market for particleboard will be further developed and will promote further investments in the wood processing industry in Belarus. The MDF project will complement Kronospan’s particleboard investment in Belarus.
 
Impact on suppliers and customers: the Project will increase the role of private sector players in the wood processing industry. It will encourage further private investments in the industry and gradual transition towards the market based behavior of both suppliers and clients (incl. furniture manufacturing and construction companies) in the country. Kronospan will construct the first plant in the Republic of Belarus to produce a varied range of MDF products. For domestic customers it will be a reliable source of supply. The location in Smorgon will make it possible to have a strong export position, which will give opportunities to supply a wide customer base.
 
Setting up high environmental standards: Kronospan is an international market leader, who will introduce leading environmental standards to the wood processing sector in Belarus. Throughout the prior relationship with the EBRD, Kronospan has demonstrated sound approach to managing environmental issues associated with its production and products. Kronospan introduces modern technology with high standards of energy and resource efficiency and environmental performance based on the use of Best Available Techniques. Moreover, Kronospan is promoting sustainable forest management and have acquired chain-of-custody certification under Forest Stewardship Council standards for most of their operations.
 
Market Expansion: The proposed expansion will involve increased demand for wood as raw materials for the plant. Under the Phase 1 and 2, one of the transition impact objectives is to facilitate good forestry practices among the suppliers by sourcing wood from Forestry Stewardship Council (FSC). Therefore, the project could further expand the scope in terms of increasing the number of local wood suppliers that will comply with sustainable forest management practices.

 

The Client

Kronospan FLLC is a wholly-owned Belarusian subsidiary of Kronospan Holdings East Limited, Cyprus.
 
Kronospan is one of the market leaders in the wood-based panel sector. It manufactures wood-based panel products at 34 sites in 27 countries, including Poland, Czech Republic, Slovakia, Bulgaria, Romania, Hungary, Croatia, Serbia, Russia, Belarus and Ukraine. It currently employs over 14,000 people and has revenues in excess of EUR 4.5bn a year.

EBRD Finance

Phase 1 (2011).  A senior loan of EUR 50 million.
Phase 2 (2012).  A senior loan of EUR 40 million.
Phase 3 (2014).  A senior loan of EUR 50 million.
 
EBRD financing was complemented by Kronospan’s own funding.

Project Cost

Phase 1 (2011).  EUR 120 million.
Phase 2 (2012).  EUR 102 million.
Phase 3 (2014).  EUR 90 million.

Environmental Impact


All three sub-projects were categorised as B level in accordance with the EBRD Environmental and Social Policy (2008). The plant’s production facilities are located on a brownfield site previously owned by a machinery producing plant ‘SAZ’, in Smorgon, north-west of Belarus.  The Projects are associated with a limited number of environmental and social issues that can be readily identified and are site specific. The distance to the closest permanent residential area is approximately 0.5 km. The nearest nature protection area of regional importance is about 3km away, and there are no historical sites or other sites requiring special consideration for environmental protection in the immediate vicinity of the site.
The Bank carried out Environmental and Social Due Diligence (ESDD) via site visits, meeting relevant authorities and   documents review, including of those related to the local permitting, cumulative impacts, and monitoring of the original projects’ E&S performance. Upon completion of the ESDD, the ESAP was prepared and updated for each new stage in the investment programme.
 
The technology and design of the PB and MDF production lines are similar to Kronospan’s existing PB and MDF plants in Poland and Russia, and introduce Best Available Techniques (BAT), including a closed loop water system, air emissions control including bag filters and cyclones. Bark and other wood wastes are used as a fuel for the plants heating and steam generation requirements to substitute the use of natural gas.
 
The potential adverse future environmental and social issues associated with wood board production are related to air emissions (dust, formaldehyde and other VOCs), use of hazardous substances, wood waste management, high energy use and associated CO2 emissions, as well as occupational health and safety, explosion/fire risks and impacts on neighboring community. These can be mitigated through project design, introduction of modern production technology and appropriate management and mitigation measures, which are fixed in the ESAP.
The plant consumes a significant amount of wood as raw material and the main potential indirect environmental and social impacts are associated with the wood supply. A substantial part of that consists of low grade round wood, and the Company also seeks to use saw dust and sawmill residues available from local wood processing plants. Kronospan also operates own wood harvesting company that provides services to the state forestry enterprises using its own fleet of harvesters and forwarders and applying Scandinavian method that avoids clear-cuttings of forest. To mitigate the potential adverse impact of the wood procurement and to ensure the wood supplied is of legal and sustainable origin, the Company is required to purchase wood from responsible sources and give preference to certified wood when available. Kronospan’s Smorgon plant has already been subject to the external FSC audits, and obtained the FSC Chain-of-Custody and Controlled Wood certification in 2014.
 
The Company will provide the Bank with an annual environmental and social report (AESR), including updates on the ESAP implementation. The Bank will evaluate the Project’s environmental and social performance in accordance with the ESAP and Bank’s PRs including compliance with Belarusian and EU environmental standards based on the use of BAT through reviewing the Client reporting and undertaking periodic monitoring visits.

Technical Cooperation

None.

Company Contact

Kronospan Contact: Chris Ryan  / Oliver Vaughan
Tel: + 44 1691 775 257/343
Email: c.ryan@kronospan.co.uk / o.vaughan@kronospan.co.uk
Website: www.kronospan-worldwide.com

 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP 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. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.