The Project involves the construction of an integrated industrial plant that will produce 450,000 ton per year of dissolving wood pulp (“DWP”) to be exported and used to manufacture textiles and non-woven fabrics (“the Project”). The Project will be carried out by LD Celulose S.A., a joint venture owned by the Austrian group Lenzing Aktiengesellschaft and the Brazilian group Duratex S.A. (together, the “Sponsors”). The Project will be located near the cities of Uberlândia and Araguari in the state of Minas Gerais, Brazil. The Project includes the construction of a power co-generation plant that will produce 132MW of electricity per year, of which 63.5 MW will be consumed at the pulp mill and the rest will be available for sale to the market. The construction phase is planned to start in early April 2020 and last for 28 months.

The preliminary categorization is Category A as the Project is expected to include business activities with potential significant adverse environmental or social risks and/or impacts that are diverse, irreversible, or unprecedented. These include the construction and operation of a large, greenfield industrial manufacturing plant and associated facilities such as transmission line, water intake/effluent outflow pipelines, as well as ancillary eucalyptus plantation forests to provide inputs to the plant.

The key negative environmental, social, occupational health and safety risks and impacts associated with the construction phase of the Project are related to: i) influx of temporary workers; ii) increase in traffic on local roadways generated by construction vehicles; iii) atmospheric and dust emissions; iv) generation of noise; v) generation of wastewater and solid wastes; viii) generation/handling of hazardous waste; and ix) potential deficit in capacity of local municipalities to absorb and manage the additional pressure on social and physical infrastructure. Those expected during the operations phase include: i) potential impacts to modified and/or natural habitat for establishment of (additional,/if needed) plantation forests; ii) generation of atmospheric, water and solid waste emissions; iii) increase in traffic on local roadways generated by vehicles transporting timber and supplies; iv) expectations from the communities in terms of employment generation, and from municipalities for support by the company; and v) potential need to upgrade urban planning to guide the induction of urban sprawl associated with the new plant and municipal capacity to manage a rapidly changing socioeconomic environment as a result.

The Sponsors have commissioned an Environmental and Social Impact Assessment (ESIA), and the Project has secured a preliminary environmental license (LP), issued by the state of Minas Gerais environmental regulator SEMAD (Secretaria de Meio Ambiente e Desenvolvimento Sustentavel). IFC does not guarantee the quality of the document.

An environmental and social appraisal of the Project will be carried out, and an Environmental and Social Review Summary (ESRS), containing and Environmental & Social Action Plan (ESAP), will be prepared and published on IFC’s website ahead of project consideration for approval.