OOO KRONOSPAN / OOO KRONOHIM

Location:

Russia

Project number:

27154

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Target board date:

16 Dec 2003

Status:

Completed

PSD disclosed:

23 Oct 2003

Project Description

The proposed project consists of the construction of a medium-density fibreboard (MDF) production facility near the town of Egorievesk, Moscow region, by Kronospan OOO, the Russian subsidiary of Kronospan Holdings Ltd. The production facility will consist of two MDF lines and a Resin plant, producing Standard MDF as well as other added-value products.
Total Project costs are estimated at € 180 million and will be financed by a € 90 million syndicated loan facility, with the balance of € 90 million to be contributed by the shareholder.

Transition Impact

The transition impact potential of the project is derived primarily from the positive influence of a reputable foreign strategic investor on the restructuring and modernisation of the Russian wood-based panel industry. Kronospan is the first foreign investor to start MDF manufacturing operations in Russia while domestic production is in its very early phase of development. Strengthening competition within the sector as well as setting product quality, technological and business standards are the main potential contributions to this process.
Strengthening of market interactions and linkages in other related sub-sectors is another potential transition merit of the transaction. Upstream, the Company will provide market outlets for the residues of local sawmills and furniture companies. Downstream, by securing a high-quality supply of MDF and processed MDF products at better terms than the current imports, the Project will assist the development of the domestic furniture and construction industries.

The Client

Kronospan is the global leader in the manufacture of MDF & laminate flooring and operates plants across Western and Eastern Europe. The company has been investing in Central and Eastern Europe since 1989. EBRD has provided financing to several Kronospan projects in the Bank's Countries of Operation.

EBRD Finance

€ 90 million syndicated facility, with the Bank's participation of up to € 45 million.

Project Cost

€ 180 million

Environmental Impact

The project has been classified B/0, requiring an environmental analysis. The environmental due diligence is under way. The production of MDF and chipboard is associated with some environmental, health and safety issues, including air emissions of dust and glue vapours and consumption of a significant amount of wood as raw material. In greenfield projects like this, process related issues can typically be mitigated by taking environmental protection measures into consideration in project design. A modern MDF plant typically represents high energy and resource efficiency. A substantial part of the raw material will consist of low-quality and small diameter logs from round-wood thinning and sawmill residues. Residual wood waste can be utilised as a fuel in energy production. The Plant will adhere to wood procurement procedures that are based on internationally recognised standards of sustainable forest management.
Kronospan is known to the Bank through previous operations in Poland and Romania, during which it has shown high awareness of the relevance of environmental issues in wood product markets.
This section will be amended as soon as the environmental due diligence has been completed.
Summary of Environmental Issues and Mitigation Measures
The Project involves the construction and operation of a new Medium Density Fibreboard (MDF) production facility with two production lines with a total production capacity of 315,000 m3/year and a resin plant in Egorievsk, Moscow region. The plant will introduce state of the art technology with high standards of energy and resource efficiency and of environmental performance that will meet Russian and EU environmental requirements. The construction planning adheres to international standards and work practices, which are closely supervised. The environmental impacts have been assessed to be insignificant and efficiently mitigated.
Screening categories and rationale for classification 
Mechanical wood processing, such as MDF production, is associated with a limited number of environmental issues, which in new plants like this can be easily mitigated with modern technology, project design and construction planning and work practises. The project site is on industrial land in a sparsely populated area. The project is unlikely to be associated with significant environmental impacts. The environmental issues associated with the project can be readily identified, assessed and mitigated. For the above mentioned reasons the project was screened B/0, requiring an Environmental Analysis.
Information reviewed during the environmental appraisal
The environmental appraisal has been based on the review of the technical-economic assessment of the investment (TEO) prepared in accordance with the requirements of the Russian law and additional information provided by Kronospan. EBRD's environmental specialist also conducted an environmental due diligence visit to the project site.
Project site 
The new plant is located in sparsely populated outskirts of town Egorievsk. According to the land use plan of Egorievsk the area is designated for industrial use. The site was previously used for agriculture and no forest land will be occupied. There are no natural parks, protected areas or other known environmentally sensitive areas within the range of potential impact from the facility. The nearest permanent residential area is a village in 300 m distance from the office building and in approx. 500 m distance from the production building. Soil analysis conducted as part of the geological study did not show any contamination with radioactive substances, heavy metals or hydrocarbons.
Resource utilisation
The plant will consume approximately 480,000 tonnes of wood per annum. This consists of unbarked coniferous and deciduous industrial wood as well as of waste wood from timber processing companies (shavings, trimmings, chips). A substantial part of the round wood raw material will consist of low grade wood, which has no other commercial use. The utilisation rate of the wood as either raw material or fuel is 100%.
Water consumption is up to 900 000 m3/year. Process water will be taken from underground wells on the project site and to a lesser extent from a small river nearby. The amount of water taken from the river will have no impact on the river's ecosystems.
The plant will purchase electricity from the national grid and produce heat and steam with boilers using natural gas and wood waste as fuels. Light fuel oil serves as reserve fuel for gas.
Air emissions
Dust (particulate) emission is the most significant atmospheric pollutant from the plant. Adequate air emission reduction control including cyclones, bag/cloth filters and wet scrubbers, has been included in the project design to ensure the emissions will comply with allowable limits. The total annual dust emission has been assessed to be approx. 72 t/a. The emissions of SO2 will be negligible due to the use of natural gas and wood waste as the main fuels. The emissions of NOx and CO2 from the plant have been estimated at 6 t/a and 33.5 t/a, respectively, and will be within allowable limits. Air emissions of nitrogen dioxide and formaldehyde will also meet regulatory limit values and EU standards.
EIA study included an emission dispersion modelling, which showed that the operation of the new MDF plant will have negligible impact on the ambient air quality in the impacted area and that concentrations of all pollutants will stay below regulatory limits.
Wastewater discharges 
The plant will introduce a dry method for MDF production. Industrial water serves for filling water loop for washing wood chips, the water scrubber behind the drier, cooling loops and for steam production. All industrial wastewater will be circulated and only a limited amount of wastewater is generated. It will be discharged together with the domestic wastewater into the municipal sewage network and the municipal waste water treatment plant, which has adequate capacity to treat these effluents. Rain and storm water will be collected, purified in sedimentation tanks, oil separators and active carbon filters and then discharged to the nearby river.
Chemical and oil storage
The chemical and oil storage tanks will contain double shielded walls and secondary containment to prevent leakages into soil.
Waste management
The solid waste management will be done according to the following principles:
All wastes will be sorted and recycled when possible;
Bark, residual wood chips and saw dust will be used as fuel;
Waste packaging materials will be collected and recycled;
Ash from the boiler will be recycled to be used in soil improvement;
Municipal waste will be transported to the community's dumping site.
Transport
Transportation to and from the plant will be carried out by both rail and road. The increase of road and rail traffic has been assessed to be such a negligible magnitude that it will not cause significant disturbance to the surroundings.
Noise abatement
Noise abatement has been taken into consideration in the project design and the plant layout. Equipment with significant noise will be installed in noise suppressing enclosures. Placement of the noisiest equipment in the opposite side of the production building from the nearby village and a soil bank constructed between the plant and the village ensures that noise levels at the perimeter of the plant will be within allowable limits (45 dB at night time).
Occupational health and safety
The plant will adhere to Kronospan's corporate occupational health and safety standards that are in use in Kronospan's other plants, including those located in EU countries. All equipment will have in-built ventilation system that will remove dust and solvent and formaldehyde containing glue vapours directly from the emission sources ensuring good indoor air quality and healthy working conditions.
Fire protection measures
Due to the presence of dry wood dust in the process the fire safety precautions have been carefully taken into consideration in the project design. Fire detectors will be installed at all process equipment where fire hazard is present. Sprinkler systems will be installed in all production buildings. Staff will be trained in fire prevention and fire-fighting.
Wood supply / procurement
Kronospan is committed to adopt and implement wood procurement procedures that are based on principles of sustainable forestry, ensuring that:
the wood does not originate from statutory protected forests, forest areas included in nature conservation programmes or sites which have been notified by the authorities to be excluded from felling; the origin of the wood is monitored; suppliers operate according to the principles of sustainable development, in compliance with the legislation currently in force and under the supervision of state authorities; and the biodiversity and the functions of the forest ecosystem are maintained in accordance with internationally and nationally approved principles.
Kronospan has recently acquired FSC chain-of-custody certification for a number of its plants in central and eastern Europe and is committed to promote sustainable forest management in accordance with FSC certification standards also in Russia.

Technical Cooperation

None.

Company Contact

Markus Habegger, Project Manager
OOO Kronospan
Egorievskiy Raion, Pos, Noviy D. 21, RU-140341 Moscovskaja Oblast, Russia
Tel.: 007.096.4048500
Fax: 007.96.4067449
Mobile: 0049.172.3084689
Email: skraclova@kronospan.cz
Nick Matveieff, Finance Director
Kronospan Holdings Limited
2 Andrea Zakou Street, Office 102, CY 2404 Engomi, Nicosia, Cyprus
Tel.: 00357.22.590031
Fax.: 00357.22.590156
Mobile: 0044.7836.535057
email: n.matveieff@kronospan.co.uk
 

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