Horizon Pulp and Paper II

completed

Summary Of Project Information (SPI)Project NameESTONIA: Horizon Pulp and Paper 2     RegionEuropeSectorProject No009193Projected Board DateJanuary 4, 1999Company NameHorizon Pulp & PaperTechnical Partner and/or Major Shareholders The Tolaram Group (83% of the share capital)- a family owned global group headquartered in Singapore. The Group has been active in the Baltics since 1994 and became one of the most active investors in the region. Project Cost Including proposed IFC investment The total project cost is estimated at US$27.7 million with IFC''s investment of up to US$10 million, including an IFC senior loan of up to US$5 million and a C loan of up to US$5 million.Location of project and Description of site The project is located in Kehra, Estonia, 40 km east of Tallinn at the facilities of the old pulp and paper mill. Description of Company and Purpose of Project The project includes the second phase of IFC investment in rehabilitation and modernization of Horizon Pulp and Paper, the only producer of an unbleached pulp and paper in Estonia. The initial IFC investment of US$6 million, approved in 1996 was used to fund rehabilitation of assets acquired by the Tolaram Group from a bankrupt Kehra paper mill through a privatization process and investments in a new tissue converting facility. The second phase of investment includes: 1) further improvements of the old kraft paper mill aimed at increasing capacity and efficiency, improving cost competitiveness and environmental standards and ensuring the continued and safe operation of the plant; and 2) strengthening of the existing tissue converting facility by installation of a synchro line for tissue production. IFC has taken a very active role in developing the project concept and the investment strategy of Horizon. IFC''s involvement will also help the Company to obtain better access to financing sources, by providing comfort for other banks and financial investors. The Project will have a strong positive developmental impact. It will promote the development of a higher value added, export oriented industry based on the local raw material, which makes a significant contribution towards sustainable development of Estonian economy. The Company utilizes the most significant natural resource of Estonia -timber. Because of the high capital intensity, future development of the Estonian paper and related industries is unlikely without injection of outside capital and transfer of know-how. The project will also contribute to the regional development of Estonia, where employment is heavily concentrated in the capital and the unemployment rate is high in small towns and in the countryside. The Company re-hired close to 500 former employees of bankrupt Kehra Paper mill and continues to be the main employer in the area. In addition to securing the existing employment, the new project will increase direct and indirect employment in Kehra by up to 100 employees. The project will also have a significant positive environmental impact by further improving environmental standards of the existing kraft mill and ensuring that it continues to meet World Bank policies and guidelines and national environmental standards. Environmental Category and Issues This is a category B project according to IFC''s environmental review procedure. Key environmental, occupational health and safety issues which were reviewed for this project include: forest management and harvesting practices and their sustainability, air, water and solid waste emissions and management, handling of hazardous materials, fire protection and emergency response and general worker health and safety. IFC''s Environmental Division visited Horizon and reviewed environmental information submitted by the Company. Estonia has developed a comprehensive framework for sustainable management and use of its forests resulting in a growing forest area and increasing wood production available for industrial use. The Company has made good progress in controlling air emissions. The planned upgrading of the recovery boiler and fiber line will further reduce the air emissions and ensure continuing compliance with the World Bank and Estonian environmental standards. Wastewater is treated in an activated sludge treatment plant, producing effluent which is well within Bank Group guidelines. Solid wastes are landfilled in a municipal facility near the plant. Installation of the lime kiln will eliminate the current practice of landfilling of lime-sludge, and the bark boiler investment will allow burning of the bark to produce energy and reduce the load on the landfill considerably. Fire protection facilities in some parts of the old plant need significant improvement, and the Sponsor will undertake a review of fire protection needs and develop a plan for installation of needed equipment to meet the World Bank and national fire safety standards. Occupational health and safety conditions are generally good and appropriate training programs are in place. The is from the InfoShop.Date SPI sent to InfoShop      December 3, 1998“This Summary of Project Information is prepared and distributed to the public in advance of consideration of the proposed transaction by the Corporation’s Board of Directors. It is provided for the purpose of enhancing the transparency of IFC’s activities and should not be construed as presuming the outcome of IFC Board consideration.”For Additional Information contact: Corporate Relations Unit -telephone: (202) 473-7711facsimile: (202) 974-4384Environmental documents for this project are available at http://www.ifc.org and from the World Bank InfoShop (http://www.worldbank.org/html/pic/aboutinfo.html).