Kronospan UA

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The proposed project is to refurbish an existing factory building and to install two production lines for the production of wood-based particleboard in Novovolynsk., Western Ukraine. The procceds of the Bank’s loan will be used to fund the capital expenditures associated with the proposed project. The project will increase the competition in the wood-based panels sector. This will lead to higher quality products and better value for money for customers. The entry of a strong sponsor into the sector in Ukraine will also raise environmental standards which are expected to extend increasingly to the supply chain. This will have a positive impact on the forestry practices in Ukraine. Kronospan UA (the “Company”), a limited liability company wholly owned by Kronospan Holdings East Limited, Cyprus, which is part of the Kronospan group of enterprises, the leading global producer of wood based panels. EUR 60 million loan to the .Company. A portion of the loan will be syndicated to commercial banks. EUR 100 million. Screening categories and rationale for classification The construction and operation of a new particleboard production facility is typically associated with limited direct environmental, health and safety issues, which can be readily identified and assessed as well as efficiently mitigated with modern technology and project design. The project is located on a site formerly occupied by a textile factory within an industrial zone and surrounded by other industrial properties. The distance to the closest permanent residential area, the village of Panasivka with 264 inhabitants, is approximately 300 m. There are no schools, protected areas, sources of drinking water, historical sites or other sites requiring special consideration for environmental protection in the vicinity of the site. For the above reasons, the EBRD has classified the project B/1, requiring an Environmental Analysis and an environmental investigation of the site. Information reviewed during the environmental appraisal The Environmental Analysis has been prepared on the basis of the technical-economic assessment of the investment (TEO) and assessment of impacts on the environment (OVOS) prepared in accordance with the requirements of the Ukrainian law and additional information provided by Kronospan. An assessment of the planned facility’s compliance with the Best Available Techniques (BAT) used in European Union was undertaken by Kronospan's internal experts. Key environmental issues and mitigation The information provided has shown that the Project has been structured to meet Ukrainian environmental, health and safety (EHS) requirements and EU environmental standards, including BAT, and that the direct environmental, health and safety impacts during the construction and the operation of the new particleboard plant will be limited and efficiently mitigated. The manufacturing process will consist primarily of new equipment incorporating some existing items having undergone refurbishment and modernisation. The key process components will be state-of-the-art technology representing high standards of resource and energy efficiency and incorporating environmental protection components. Environmental protection measures have been incorporated in the project design. Modern ventilation system will remove dust and glue vapours directly from the emission sources ensuring good indoor air quality and working conditions. Dust and formaldehyde emissions to the atmosphere will be below BAT emissions standards for particleboard manufacturing. All industrial and cooling water will be circulated in closed loops. No industrial wastewater will be discharged and fresh water is only used for making up the evaporation losses. Rain and storm water is collected to sedimentation tanks on the site. Bark and other wood wastes are used as a fuel for the plants heating and steam generation in addition to natural gas. Noise abatement has been taken into consideration in the project design and the plant layout. Placement of office buildings closest to the village of Panasivka is expected to keep the noise impact within allowable limits. Transportation to and from the plant will be carried out by both rail and road. The project will consider the potential disturbances on Panasivka due to noise and the volume of cargo traffic. The particleboard products will be of classification E1, which can be safely used without causing elevated concentrations of formaldehyde in indoor air. Wood procurement The plant will use up to 1 million m3 per year of round wood. A substantial part of that will consist of low grade round wood, which have little or no commercial value and which is currently mainly disposed of. In addition, a much saw dust and sawmill residues as available within a feasible transportation distance from the mill will be used to substitute the amount of round wood needed. Kronospan will establish a wood residue collection and recovery system based on container system and has estimated that within 4 years from the start-up of the mill up to 50% of wood raw material will consist of wood residues from other wood processing plants. To mitigate the adverse impact of the wood procurement and to ensure the wood is of legal and sustainable origin, Kronospan is committed, as required by the EBRD, to adopt and implement wood procurement procedures that are based on principles of sustainable forestry, ensuring that: Most of Kronospan’s plants in Central and Eastern Europe have FSC chain-of-custody certification and are promoting legal timber and practical implementation of sustainable forest management among its wood suppliers. Kronospan is committed to introducing these principles at the Ukrainian plant and to support FSC programme in Ukraine as well as to acquire FSC certification when certified wood on competitive market terms will be available. Given the underdeveloped state of forest certification in Ukraine, Kronospan has agreed to adopt and implement a step-wise “sustainable wood procurement plan” to ensure the Company will meet the above sustainable wood supply requirements within an acceptable timeframe. Disclosure of information and consultation The project has been subject of formal public disclosure and public consultation prior to obtaining the construction permit in accordance with Ukrainian law in 2004-2005. In the context of EBRD’s potential participation in the project, the Company has released locally this summary describing the relevant environmental issues associated with the project and the mitigation measures. Monitoring The Company will systematically monitor and report its environmental and health and safety impacts to ensure compliance with Ukrainian and EU environmental standards, including BAT. 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. The Bank’s representatives will also conduct periodic site supervision visits when deemed appropriate. None. Nataliya Pokinska General Director Kronospan UA LLC 20, Lutska Street Novovolynsk Ukraine, 45400 E-mail: n.pokinska@kronospan.com.ua