Kronospan OSB project

Location:

Russia

Project number:

41983

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

26 Jul 2011

Status:

Complete

PSD disclosed:

24 Jun 2011

Translated version of this PSD: Russian

Project Description

The EBRD is considering to provide a long-term corporate loan to Kronospan to finance construction of a new manufacturing line for Oriented Strand Board (“OSB”) at the company’s manufacturing facility in Egorievsk, Moscow region, in order to broaden its product range in Russia and to meet growing consumer demand.

Transition Impact

The transition impact potential of the transaction derives from the following sources:

  • Demonstration effect - introduction of new products: the Project will support an international market leader in establishing an OSB production facility – the first of its kind in Russia where OSB has never been produced before. As a result of the Project being implemented, the market for OSB will be further developed and the local investments in OSB will be pursued at some stage.
  • Market expansion - backward linkages: as the Project will increase the demand for low value and small sized wood, a wider range of local wood suppliers may become eligible for supplying Kronospan Russia and therefore will have the incentives to work towards achieving compliance with sustainable forest management practices.
  • Setting standards in Energy Efficiency Practices: by financing a dedicated bark furnace and by supporting the Client reviewing the scope for further opportunities, the Bank through the Project will facilitate the introduction of best practice in terms of energy generation and use within Kronospan Russia. This can results in a significant replication potential within the sector in Russia which still lags behind in terms of optimisation of energy and biomass resources.

The Client

OOO Kronospan - a fully-owned subsidiary of Kronospan Holdings East Ltd Cyprus, which holds CIS assets of Kronospan group. The Kronospan group of companies is a world leader in wood-based panel manufacturing.

EBRD Finance

The Bank will provide a long-term EUR 120 million corporate loan to OOO Kronospan.

The Bank is aiming at syndicating up to EUR 40 million of the Loan amount to commercial banks.

Project Cost

Total estimated cost of the OSB plant is EUR 163.1 million.

Environmental Impact

Categorised B in accordance with the EBRD Environmental and Social Policy (2008). Potential adverse future environmental and social impacts of the construction and operation of a new OSB line with the capacity of 300,000 m3/a to be extended to500,000 m3/a within an existing industrial complex with particleboard, MDF and resin production are site-specific and readily mitigated through introduction of modern production technology and appropriate management and mitigation measures as well as ensuring the wood raw material for the OSB production is of legal and sustainable origin.

An environmental and social review of the Company’s existing MDF, particleboard and resin production facilities and operations was undertaken based on the Company’s regular reporting on its environmental and social performance and site visit conducted by ESD specialist. The review showed that the Company is currently in full compliance with the environmental and social provisions of EBRD financing agreements and Performance Requirements (PRs). The production facilities are operating in accordance with the design parameters and the environmental impacts are within allowable limits. The Company is actively engaged with the community and is regularly releasing information on its operations. The Company has diligently implemented sustainable wood procurement procedures required by the Bank and obtained FSC Chain-of-Custody (CoC) and Controlled Wood (CW) certifications for its wood supply management system in June 2010.

Environmental and social due diligence assessing the incremental environmental and social impacts arising from the construction and operation of the new OSB line has concluded that the OSB line will fully meet relevant EU environmental standards and good international practice, including Best Available Techniques (BAT). The direct environmental and social impacts during the construction and the operation of the OSB line will be limited and efficiently mitigated with BAT and design solutions. The air emissions, including those of dust and formaldehyde, will meet EU and international BAT emission standards and the ambient concentrations of these pollutants at the perimeter of the mill are expected to remain several times below the Russian limit values. All industrial and cooling water will be circulated in closed loops and no industrial wastewater will be generated. Bark and other wood wastes will be used as fuel in biomass boiler providing heat and steam to substitute the use of natural gas. The OSB products will be E1 classified in accordance with international standards for free formaldehyde content in the final products, ensuring that the OSB boards can be safely used without causing elevated concentrations of formaldehyde in indoor air.

The OSB plant will use up to 1.1 million m3 per year of round wood and the total wood consumption of the particleboard, MDF and OSB production lines will be 3.7 million m3/a. The Company does not hold any leased forest areas and is fully relying on external wood supplies. To mitigate the adverse impact of the wood procurement and to ensure the wood supplied to the mill is of legal and sustainable origin, the Company will control and manage its external wood suppliers in accordance with FSC CoC and CW criteria and is committed to give preference to FSC certified wood when available.

The Company has assigned an external environmental consultant to prepare technical-economic assessment of the investment (TEO) and assessment of impacts on the environment (OVOS) in compliance with Russian permitting requirements, according to which the project will be subject to formal public disclosure and public hearings.

The Company is systematically monitoring and reporting its environmental, social and health and safety impacts to ascertain compliance with Russian and international environmental standards, including BAT for the industry sector. The EBRD will evaluate the project's compliance with the applicable environmental and social requirements and the Bank’s PRs during the lifetime of the project through annual reporting by the Company and periodic supervision visits.

Technical Cooperation

None.

Company Contact

Kronospan Contact : Sabine Smith

Tel: + 44 1691 775 306
Email: s.smith@kronospan.co.uk
Website: www.kronospan-worldwide.com

Business opportunities

For business opportunities or procurement, contact the client company.

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Email: procurement@ebrd.com

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