Stora Enso MPF - Nebolchi II

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The proposed project is within the framework of the Multi-Project Facility Agreement signed with the client in 2002. It is a follow-on investment in an existing client, OOO Setnovo, located in the village of Nebolchi in the region of Novgorod about 250 km south of St Petersburg. Nebolchi sawmill started operations in 2004. The financing will be used for the modernisation and upgrading of the existing sawmill, which will allow it to manufacture more value-added products. At Nebolchi sawmill the investment will allow all the output to be kiln dried and to add 100 000 m3 per year new on-line planing capacity. The total production capacity of the sawing line will be almost doubled to 220 000 m3 per year. The number of employees is expected to increase by 57. The project is one of the few foreign direct investments in the sawmill sector in the region and is expected to play a positive role in promoting technological, environmental, forest management and corporate governance standards for the industry. This effect will be further enhanced by sending a signal to the market that a leading international player has a strategy to outsource processing to Russia. Stora Enso promotes interactions with suppliers by transferring the necessary skills and technologies to the logging companies operating in the region through extending its wood procurement standards to the local suppliers, creating a long-term sustainable demand for their products and upgrading the regional transport infrastructure. The saw mill project sends a signal to the market that a leading international player is changing its strategy from only importing raw logs to outsourcing processing facilities to Russia. Moreover the expansion of the existing saw mill is part of a longer-term plan to build up a critical mass of wood procurement needed to support a pulp mill operation in Russia. Stora Enso is an integrated paper, packaging and forest products company producing print and fine papers, packaging boards and wood products - areas in which the Group is a global market leader. Stora Enso sales totalled EUR 13.2 billion in 2005. The Group has some 45,000 employees in more than 40 countries in five continents and an annual production capacity of 15.7 million tonnes of paper and board and 7.4 million cubic metres of sawn wood products, including 2.8 million cubic metres of value-added products. Stora Enso is listed on the Helsinki, Stockholm and New York stock exchanges. The EBRD would provide financing up to EUR 29 million in the form of A/B loans syndicated to commercial banks. Total investments EUR 50 million, including EUR 31.5 million capital investments. The Project has been screened MPF. In accordance with the Environmental Procedures agreed for the existing multi-project facility, Stora Enso has submitted to the Bank a Final Environmental Report (FER). The FER summarises the environmental, health and safety (EHS) issues associated with the Project and measures for their mitigation. Stora Enso’s specialists assisted by independent consultants will carry out an environmental impact study in accordance with the Russian permitting requirements in the course of next months. The Bank’s environmental specialists have reviewed the FER and found the submitted information satisfactory, providing evidence that the MPF sub-project has been structured to meet Russian EHS requirements and EU environmental standards and that it will meet the Bank’s environmental requirements. The FER showed that the key additional environmental impact associated with the expansion project is the air emission of dust from the new 14 MW bark boiler, which due to selection of European based technology will meet local and EU environmental standards. The incremental wood raw material will be sourced from Stora Enso’s current wood procurement operations by redirecting to the mill some of the wood that is currently exported. The introduction of wood pelleting line will enable the sawmill to continue utilising 100% of the wood raw material either as products, woodchips sold to pulp mills or as fuel in energy production. The transportation to and from the mill by trucks will increase by up to 50 trucks per day. The Sawmill will investigate ways in which the potential disturbance to the surrounding population as a result of noise and dust caused by the trucks could be mitigated. The Sawmill will continue adhering to Stora Enso's corporate policies and standards for the environment, occupational health and safety and social responsibility, including wood procurement procedures ensuring the wood for its operations will meet internationally recognised standards of sustainable forest management. This provides that the environmental, health and safety impacts of the Sawmill will continue to be negligible and efficiently mitigated. The Sawmill is implementing Stora Enso's corporate EHS policies and standards, including ISO 14001 environmental management system and aiming at integration in the Stora Enso's corporate wide EMAS (EU Environmental Management and Auditing System) certification of sawmills. It is systematically monitoring and reporting its environmental footprint in line with Stora Enso's corporate standards for internal and external reporting to ensure its compliance with Russian and EU environmental standards. Stora Enso’s environmental reporting to date has shown sound management of environmental and social issues. The Sawmill is committed to continue working in a close relationship with the local community. None. Juha Kukkola, Vice-President, Russian production Group, Stora Enso Timber Email: Juha.kukkola@storaenso.com