Koskitukki Russia

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The proposed project aims to achieve the successful development of a new sawmill and a birch veneer and plywood manufacturing facility, which will produce high quality products for the domestic and export markets. The proposed project will be implemented in 2 phases. In Phase 1 the project envisages construction of a sawmill, and in Phase 2 – construction of a veneer and plywood plant. The plant will have a maximum capacity of 20,000 cubic meters of timber, 5,100 cubic meters of veneer and 30,000 cubic meters of plywood. The proposed investment will have a positive impact in terms of promoting world class technological and corporate governance standards as well as providing potential foreign investors with a model for developing similar projects. OOO Koskisilva - a new company established in the town of Sheksna, Vologda region, by Koskitukki Oy (Finland), one of the world leaders in birch timber, veneer and plywood manufacturing. Equity investment: EUR 1.2 million in Phase 1. Loan: EUR 12 million guaranteed by Sponsor with specified events carved out, in Phase 2. Total project cost is EUR 38 million. Screening category and rationale for classification The construction and operation of a new, small-size sawmill and a medium-size plywood facility is typically associated with limited direct environmental, health and safety issues, which can be efficiently mitigated with modern technology, project design, construction planning and work practices. The project site is not in the immediate vicinity of environmentally sensitive or residential areas. For the above reasons, the EBRD has classified the project B/0, requiring an Environmental Analysis of the proposed development. Information reviewed during the environmental appraisal The Environmental Analysis has been prepared by the environmental experts of Koskitukki Oy in accordance with the requirements of the EBRD. Information is based on the planning principles and documents of the Sheksna wood industry project and on the discussions with local authorities and co-operational partners. Key environmental issues and mitigation The environmental investigations showed that the project has been structured to meet Russian environmental, health and safety (EHS) requirements and EU environmental standards and that any adverse EHS impacts will be negligible and efficiently mitigated. Birch plywood is glued with phenol resins, which after hardening in the process are harmless to the environment. No other chemicals, preservatives or wood treatment chemicals will be used. Principles of applying the best available techniques (BAT) will be – where applicable - obeyed in all practises in the construction and operation of the wood industry complex. The Company will implement ISO 14001 Environmental Management System for its operations. These measures will ensure that the environmental issues will be professionally managed to prevent or minimise impacts on staff and local population as well as on the environment. The amount of dust formed in production process is small due to the use of fresh wood as raw material. In addition, the sawmill machinery will have built-in dust cyclones and filters to further reduce potential dust emissions. Energy will be provided by own boiler, where natural gas will be combusted resulting in negligible air emissions. Later, a wood burning boiler plant will utilise bark and sawmill residues for heat production. The wood industry complex itself does not use any water. However, a considerable amount of water, about 300,000 m3/a, will be used during summer months for sprinkling of the stored logs to maintain the timber quality. This wastewater containing both dissolved and suspended substances originating from the wood will be collected and directed to a sewage disposal plant. In the veneer and plywood production process logs are preheated by warm water in large log basins during which some dissolving components move from wood to water. The amount of this waste water is about 100.000 m3 per annum and it will be pre-treated in the Company’s sewage disposal plant before pumping to the municipal wastewater treatment plant. The Company will also produce small amount (1,000 m3/a) of domestic wastewater that will also be discharged to the municipal wastewater treatment plant. Wood waste, such as bark, chips and sawdust will be utilized as raw material for paper or particle board industry or as fuel in the energy industry. The utilization degree of the wood as raw material or fuel is 100 %. The amounts of solid waste to be disposed of are modest. Noise abatement measures taken into consideration in the project design ensure the noise levels will not exceed permissible level, 50 dB(A), in the distance of 100 meter from the border of the industrial site. Fire protection and safety will be solved through the technology used in wood processing and abidance of fire safety rules. All the transport entering or working on the plant’s territory will be equipped with spark blow out or other spark killers. Wood procurement The wood industry complex will use approximately 170.000 cubic metres of wood per annum. The wood will be procured by LLC Koskidrev (OOO Koskidrev), 100 % owned by the Koskitukki Oy, in accordance with the Environmental Policy of Koskitukki Oy’s wood procurement. Koskitukki Oy’s activities and wood procurement system have had PEFC chain-of-custody certification since 2000. Koskitukki Oy has wide experience, 15 years, in working with the Russia’s wood suppliers and about 75 % of the supplied volume to be used comes from suppliers already familiar to Koskitukki Oy. All stages of Koskitukki Oy’s wood procurement activities are governed by a quality and environmental management system based on ISO 9001 and 14001 standards. To ensure the wood is of legal and sustainable origin and that the negative impacts of wood procurement on the environment are mitigated, Koskisilva will use approved wood suppliers only. The criteria for selecting acceptable suppliers include that they should, for example, The acceptability of the suppliers is audited by field audits on a regular basis. The results of the audits and the descriptions of the reliability of the suppliers are documented. Disclosure of information and consultation In accordance with Russian law, the project will be a subject of formal public disclosure and public consultation prior to obtaining the construction permit. Two separate hearings of the affected parties will be arranged. The first hearing will be arranged at Sheksna in the beginning of year 2006 after the project plan has been approved by the local authorities. The Company is committed to continue working in a close relationship with the local community. In the context of EBRD’s potential participation in the project, the Company has released locally a summary of the relevant environmental issues associated with the project and the mitigation measures. Monitoring The wood industry complex will systematically monitor and report its environmental and health and safety impacts in line with Koskitukki Oy’s corporate standards for internal and external reporting to ensure it complies with Russian and EU environmental standards. The EBRD 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 by Koskitukki Oy. None. Kari Koskinen Koskitukki Oy Tel: + 358 20 553 4257 Email: kari.koskinen@koskisen.fi