Mondi Syktyvkar

Location:

Russia

Project number:

42021

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

10 Nov 2010

Status:

Complete

PSD disclosed:

24 Sep 2010

Translated version of this PSD: Russian

Project Description

The Bank’s financing will be used to finance capital expenditures on forestry operations and alternative energy production.

Transition Impact

Transition impact will come from

  • Expansion of market - 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 Mondi Syktyvkar (MSY) and therefore will have the incentives to work towards achieving compliance with sustainable forest management practices and get certified by Forest Stewardship Council (FSC). MSY will increase use of sub-contractors in its logging operations and transfer skills in sustainable forest management practices based on FSC as well as in use of modern logging equipment.
  • Setting standards of business practices: Reduction of energy and carbon footprint through the utilisation of renewable energy sources. The project includes the conversion of an existing recovery boiler (fired by spent liquor from the pulping process) to a biomass boiler in order to maximise utilisation of internal and external biomass waste resources and minimise the use of natural gas. In this respect, Mondi introduces new standards of resource management and implementation of Best Available Technology (BAT) waste-to-energy technologies which have a very low level of penetration in the sector in Russia.

Furthermore, the company is actively pursuing carbon financing mechanisms to support the development of such projects and invested resources into the development and submission of Joint Implementation (JI) project documentation related to its current investments despite uncertainties with approval of Kyoto projects in Russia. The biomass boiler project is expected to lead to a significant reduction of greenhouse gas emissions from the plant estimated to be in excess of 40,000 ton CO2 per annum. As part of the Project, the Bank will also actively work with MSY to identify further energy efficiency opportunities, such as related to the upgrade of existing energy infrastructure, to bring the company further in line with international best practice in terms of carbon emissions benchmarks for the pulp and paper industry.

The Project will have a demonstration effect by

(i) use of modern technology and machinery in forestry operations and forest roads construction;

(ii) establishment of higher environmental standards in the Russian forestry sector, and

(iii) extending FSC practises across its sub-contractors and external wood suppliers to achieve 100% FSC certified wood supply chain.

The Client

The recipient of the Bank’s financing will be OJSC “Mondi Syktyvkar”, a Russian subsidiary of Mondi Group, a leading international paper and packaging group.

EBRD Finance

The EBRD will provide a corporate loan in RUB equivalent of EUR 40 million.

Project Cost

Total project cost will be approximately EUR 50 million.

Environmental Impact

The Project has been categorised B in accordance with the EBRD Environmental and Social Policy 2008. The environmental and social impacts associated with increasing the efficiency and sustainability of forestry operations and installing an additional biomass boiler are site-specific and readily mitigated. None of the investments will lead to an expansion of MSY's current operations or logging areas. In forestry, the focus of the proposed project is on improving efficiency and environmental performance of the current operations within the areas controlled by the client. The new forest roads and harvesting equipment will be part of MSY's on-going logging operations, which are certified to FSC standards of sustainable forest management, which set internationally recognised benchmarks for sustainable forestry management and are fully compatible with the Bank’s Performance Requirements. The forest road construction will be carried out in compliance with FSC standards and sustainability guidelines for road construction and maintenance, which amongst other, requires planning road routes so as to avoid disturbing valuable or fragile ecological areas. The majority of MSY’s external wood suppliers are also FSC certified, and overall around 80% of the MSY’s wood supply is FSC certified at present. MSY is targeting at 100% FSC certified wood supply by 2013. The conversion of an existing recovery boiler made redundant by the recent investment programme to a biomass boiler will have environmental benefits, providing maximal utilisation of internal and external biomass waste resources, reducing the need for solid waste land-fill and minimising the use of natural gas.

The Mondi Group has comprehensive environmental, health, safety and social (EHSS) policies, and was ranked as the global sustainability leader in pulp and paper industry sector by WWF and other NGOs in a recent comparison of pulp and paper companies’ sustainability performance. MSY has fully adopted Mondi Groups corporate management systems and is continuously improving its operations to implement them in practice. The Environmental Social Due Diligence showed that MSY has in place appropriate environmental and social management systems for sustainable operations in compliance with the Bank’s Performance Requirements (PRs). After the completion of the major modernisation programme, the pulp and paper mill is in compliance with Russian regulatory requirements and EU environmental standards and Best Available Techniques for pulp and paper manufacturing. The efficiency improvements achieved as a result of the modernisation programme have significantly reduced the environmental impact of the plant, leading to a 50% reduction in water consumption per tonne of pulp and a 25% reduction in CO2 emission on a like-for-like production basis (or 5% reduction allowing for the increase in output).

MSY works closely with the local communities and NGOs and carries out a three-yearly multi-stakeholder Socio-Economic Assessments (SEAT) in partnership with a local NGO and overseen by external consultants. A report on stakeholders’ views is published, along with a management response. The latest SEAT assessment was completed in 2009 and it highlighted employee concerns about redundancies and the need for better communication with stakeholders. MSY has responded positively to the identified issues and is addressing them. The next SEAT review will be carried out in 2012.

Environmental and Social Action Plan (ESAP) has been developed to ensure the project will comply with the Bank’s PRs, including a commitment to ongoing FSC certification of MSY forestry operations, achieving 100% FSC certified wood supply by 2013, construction of the biomass boiler to EU BAT standards and improving the Company’s stakeholder engagement in accordance with SEAT findings and good international practice. The Bank will monitor the implementation of the ESAP as well as MSY and the project’s environmental and social performance through periodic client reporting, site visits and external assessments, including SEAT reviews and FSC audits.

Technical Cooperation

None.

Company Contact

OJSC Mondi Syktyvkar
Website: www.mondigroup.com/

Business opportunities

For business opportunities or procurement, contact the client company.

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