S.C. MDF SEBES FRATI S.A.

Location:

Romania

Project number:

34974

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Approval date:

22 Jun 2004

Status:

Complete

PSD disclosed:

27 May 2004

Project Description

The proposed project is to support Kronospan Holdings Limited’s (Kronospan) acquisition of S.C. MDF Sebes Frati S.A., a medium density fibreboard and resin plant, and S.C. Sepal S.A., a particleboard plant, in Sebes, Romania from Gruppo Frati SpA (Frati), an Italian wood-based panel producer.  The project includes financial restructuring of the two acquisitions, debottlenecking of the existing facilities and investment in a new particleboard line with an annual design capacity of 500,000 m3.

Transition Impact

The transition impact potential of the project is derived from the positive influence of a reputable foreign strategic investor on the restructuring and modernisation of the Romanian wood-based panel industry. Strengthening competition within the sector will stimulate domestic market participants towards more efficient utilisation of resources, innovative production processes and increased customer orientation according to international best practice.
The project is also likely to contribute to strengthening of market interactions and linkages in other related sub-sectors. Significant local sourcing will have beneficial linkages with the local forestry sector, including best practice wood procurement. Downstream, the project will assist the development of the domestic furniture and construction industries by securing a high quality supply of particleboard and MDF products at better terms than current imports.  
 

The Client

Kronospan is one of the largest international groups that dominate the wood-based panel production and related businesses in Europe.  The Krono Group was founded in 1897 by the Kaindl family in Austria.  The group companies operate in 11 different European countries having a 14% market share in the EU and a 46% share in Central and Eastern Europe in the particleboard market.

EBRD Finance

€ 135 million loan to be provided in an A/B loan structure. The A loan will be € 70 million and the remainder will be syndicated.  

Project Cost

€ 250 million.

Environmental Impact

Environmental Review Summary
Description of the project
The Project involves the acquisition of existing particleboard, medium density fibreboard (MDF) and a urea-formaldehyde resin production facilities in the town of Sebes, Romania. The Bank’s financing will be used for acquisition and financial restructuring. As part of the Project, Kronospan is planning to finance a debottlenecking programme of € 5 million to enhance the operation of the facilities and to expand the particleboard production with a second production line of 500,000 m3/year in 2006.
Screening categories and rationale for classification
Mechanical wood processing, such as particleboard and MDF production, is associated with a limited number of environmental issues, which can be readily identified. In modern plants like this, adverse impacts can be easily mitigated with best available technology, project design and work practises. The facilities are located on industrial area in the outskirt of town Sebes. The site is surrounded by other industrial properties, a road and agricultural land. The distance to the closest permanent residential properties is approximately 200 m. There are no known environmentally valuable or sensitive areas in the vicinity of the site. The project is unlikely to be associated with significant environmental issues. For the above mentioned reasons the project was screened B/1, requiring an Environmental Audit and Environmental Analysis.
Project site
Part of the site is old industrial property, on which a Romanian wood processing plant had operated since 1960’s. The rest of the site is previous agricultural land designated for industrial purposes. Prior to starting the construction of the current facilities in 1998, geological and hydrological site investigations of the site were carried out. The soil and the groundwater sample analysis did not identify any potential contamination. No significant accidents or spills of harmful substances have occurred during the construction or operation of the current facilities.
Current facilities
The current production facilities have been designed to meet EU environmental standards and include state of the art technology with high standards of energy and resource efficiency and of environmental performance. The designs incorporate measures for minimising air emissions, water consumption, wastewater discharge, noise and waste quantities. The facilities include efficient wood dust recovery and recycling system and in-built ventilation system that removes dust and solvent and formaldehyde containing glue vapours directly from the emission sources ensuring good indoor air quality and healthy working conditions. The environmental monitoring reports showed that the environmental impacts have been insignificant and efficiently mitigated.
Resource utilisation 
The facilities currently consume approximately 750,000 tonnes of wood per annum. A substantial part of the wood raw material is wood residues (shavings, trimmings, chips) from local sawmills and timber processing companies. The round wood used consists mainly of low grade industrial wood, which have little or no commercial value and which is currently mainly disposed of. The utilisation level of the wood as either raw material or fuel is 100%. When the plant has reached full capacity operation including the new chipboard production line, the wood consumption will be up to 1,500,000 tonnes/year. Most of the incremental wood raw material will consist of wood residues from local wood processing plants.
Water is supplied from Sebes` municipal drinking water network. The water consumption is up to 1.5 million m3/year.  The annual energy consumption includes 150,000 MWh electricity and 25 million m3 of natural gas for heating and steam production.
Air emissions
The urea-formaldehyde resin plant has been designed to meet EU Integrated Pollution Prevention and Control directive’s Best Available Technology guidelines for Large Volume Organic Chemical Industry. The plant includes a state-of-the-art emission control system with after burner and continuous monitoring, which ensures that formaldehyde emissions are kept within allowable level of 20 mg/m3 measured as Total Organic Carbon.
To minimise the emissions and to recover wood dust, 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 emissions of SO2 and CO2 will be low due to the use of natural gas and wood waste as the main fuels. Limit values for air emissions of nitrogen dioxide (NOX) will also be met.
Wastewater discharges
The facilities have closed process water cycle and no industrial wastewater is discharged. Rain and storm water and the drainage water from watering the wood storage during summer months is collected, purified in sedimentation tanks and evaporated. Minor amount of domestic wastewater is discharged to the municipal sewage network and treated in the municipal waste water treatment plant which has adequate capacity to treat these effluents.
Chemical and oil storage
The chemical storage and methanol storage tanks adhere to European safety standards. Storage tanks for liquid chemicals have secondary containment.
Noise abatement 
Noise abatement has been taken into consideration in the project design and the plant layout. Equipment with significant noise are installed in noise suppressing enclosures. The noise levels are within allowable limits.
Waste management
The solid waste management is organised in accordance with the following principles:
  • All wastes are sorted and recycled when possible;
  • Bark, residual wood chips and saw dust is be used as fuel;
  • Waste packaging materials is collected and recycled, or used as a fuel;
  • Sludge from stormwater sedimentation tanks is be burned in wood waste boilers;
  • Ash from the boiler is be recycled for soil improvement or disposed of in the municipal landfill;
  • Household waste collection is outsourced to a municipal waste management company.
 
Transport
Transportation to and from the plant is carried out by both rail and road. The road traffic is not causing significant disturbance to the surroundings. The increase of railway transport is negligible.
Fire protection measures
Fire fighting systems are in place in all production buildings. Staff is trained in fire prevention and fire-fighting.
Future Developments
Kronospan is planning a debottlenecking programme of EUR 5 million to enhance the operation of the facilities is planned for the near future. It includes a number of minor modifications to the existing facilities that will improve product quality, enhance efficiency and enable an increase of production capacity. The production volume increase will not be significant and the facilities will continue performing within the limit values of the current environmental permit and in accordance with EU standards.
The expansion of the particleboard production is scheduled for 2006. It involves installation of a second production line with a capacity of 500,000 m3/year and utilising best available technology. The new line is assessed not to result in significant environmental impacts. The total environmental impact of the plant will remain in compliance with Romanian environmental requirements and EU standards. Kronospan is committed to carry out the project in accordance with Romanian and EU environmental standards and will prepare environmental impact studies of the new particleboard line in accordance with the Romanian environmental and permitting requirements.
Kronospan is committed to adopt and implement ISO 9001 Quality management System and an environmental management system in accordance with ISO 14001.
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 will acquire FSC chain-of-custody certification and is committed to promote sustainable forest management in accordance with FSC certification standards among its wood suppliers.
Occupational health and safety
The facilities 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 necessary measures will be implemented to achieve healthy working conditions. Kronospan is committed to adopt and implement Occupational Health and Safety management system in accordance with OHSAS 18001 certification standards.
Community issues
The facility is located in the outskirts of the town of Sebes, which has traditions in wood processing trade. The facility offers jobs for local residents. The need for workforce will slightly increase after the expansion of the particleboard line.
In accordance with its corporate policies, Kronospan is committed to operate as good corporate citizen and maintain open dialogue and close relationship with the surrounding community and local population. Kronospan Romania has established a website and will keep the community informed via the website and other forms of communication.
Monitoring 
The Bank will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing annual environmental reports (AERs) prepared for the project covering: (i) ongoing performance of project-specific environmental, health and safety activities as reflected in the results of periodic and quantitative sampling and measuring programmes, (ii) the status of implementation of environmental mitigation and improvement measures. The Bank’s representatives will also conduct periodic site supervision visits when deemed appropriate.

Technical Cooperation

None.

Company Contact

Nick Matveieff
e-mail: n.matveieff@kronospan.co.uk,
tel: 44 1691 773 361
fax: + 44 1691 773 008
 

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