Hebeda Sawmill, Latvia - Vika Wood Ltd.

completed

- 2 - April 12, 1996International Finance CorporationA Member of the World Bank GroupInternational Finance CorporationA Member of the World Bank GroupEnvironmental Review Summary (ERS)Project Name Latvia and Estonia - Hebeda SawmillsRegion EuropeSector ManufacturingProject No. 007307 1. A joint-venture between Finnish and Swedish companies are proposing to build and operate two new sawmills. One will be located near the city of Voru in southeastern Estonia, and the other in the northwestern part of Latvia. In Latvia, the mill site is in a forested area adjacent a railroad line, and has been leased from the land owner for 99 years. An option to purchase the land has been entered into, and may be exercised once local legislation allows foreign companies to own land. In Estonia, the mill site is occupied by an old building that was used in sorting and storing potatoes. The site has been acquired through a mixture of purchases and leases with options to purchase. Both plants will have a capacity of 50,000 m3 of kiln-dried sawnwood per year. This is a category B project under IFC’s environmental review procedures because a limited number of specific impacts may occur which can be avoided or mitigated by adhering to generally recognized environmental performance standards, guidelines, or design criteria.2. Environmental, health and safety issues that were of primary concern during IFC’s environmental review of this investment included: wood supply, air emissions, solid waste disposal, and employee exposure to noise, dust, and dangerous equipment. The following summarizes the findings of the Environment Division during the environmental review. Primary sources of information included feasibility studies prepared by Jaakko Poyry, and a site visit during appraisal by staff from IFC’s Technical and Environment Department.3. Latvia and Estonia have large, well-managed and under-utilized forest resources. In both countries, sustainable harvest could be much higher than what the government currently has established as the annual allowable cut. State forestry officials in both countries are still following the Soviet forest management system in which thinning requirements are not included in the calculated annual allowable cut. In Latvia, about 49% of the total land area is forested, of which 33% is now in private ownership. Although forest management in Latvia is covered by a series of regulations, the rate of privatization has produced many new landowners with marginal experience in forest management. The State Forest Service in Latvia will need to develop an effective supervisory system. In Estonia, about 47% of the total land area is forested, of which 40% is now in private ownership. Under Estonian forest management requirements, forest owners are obligated to reforest clearings within 5 years of cutting. Otherwise, the local authorities have the right to reforest the area at the owner’s expense. 5. In both sawmills small boilers (less than 5 MW) will provide hot water for kiln drying and heating. Cyclones will be installed on the boilers in both plants to reduce particulate emissions to Swedish emission limits (250 mg/Nm3). The project area for each mill is remote from human settlement, and adverse impacts on air quality or noise are not expected to be significant.6. Bark and dry chips would be used as the main fuel supply for the boilers in both plants. Sawdust will be sold to a pellet mill in Estonia and to the fiberboard industry in Latvia. All other wood waste will be chipped and exported to the pulp industry in Sweden and Finland.7. Particulates in the workplace are controlled by the installation of cyclone systems. Ear protection devices will be required to be worn by all employees in areas of high noise. Because the technology is new to the industry in these two countries, local staff will require training which will integrate safe working practices.8. Based on the findings of its environmental review, IFC’s Environment Division has determined that the proposed facilities will be operated in compliance with local laws and regulations and World Bank environmental guidelines. The wood supply is expected to be produced from forest stands in the respective project areas. The project sponsor will be required to submit an annual monitoring report to IFC to verify ongoing environmental compliance. IFC will also monitor closely the development of the reforestation policies and programs in Latvia during project implementation.