Sveza is owned by Severstal Holding, a conglomerate active in steel production, automotive manufacturing, transportation, forestry, insurance, and banking. The largest company in the holding is Severstal Metallurgical Plant (Severstal), a publicly traded steel producer located in Cherepovets. Severstal and Severstal Holding are controlled by Alexei Mordashov, one of the most influential businessmen in Russia. In 2003, Mr. Mordashov was named one of the best managers in Business Week’s list of 25 most prominent European businessmen and is also a member of the Union of Industrials and Entrepreneurs of Russia.

The total project cost is estimated at $80 million. Proposed IFC investment is a $40 million A loan for IFC’s own account.

40.50 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	40.50
Equity

* These investment figures are indicative

Sveza’s existing mills include Fanplit (Kostroma, Kostroma Oblast), Novator (Veliky Ustjug, Vologda Oblast) and Ust Izhora (St. Petersburg, Leningrad Oblast). The Fanplit mill includes two sites, the original mill in the middle of Kostroma, and a new site in an industrial suburb. The Novator plant is located in the industrial area of Veliky Ustiug, in close proximity to good raw material base. The Ust Izhora plant is located in the suburbs of St. Petersburg and close to the Port of St. Petersburg, providing a benefit for export operations.

Russia’s forestry sector has strong potential for growth as Russia’s timber resources represent almost 25% of the global resources and is the single largest national forest resource in the world. One of the fastest growing segments of the Russian forestry sector is plywood production. Because of abundant raw material resources and competitive production costs, increasing share of global production will over time be shifting to Russia. By helping the country’s largest birch plywood producer modernize its plants and expanding its harvesting operations, this project will have a direct contribution to the efficiency improvements of the sector in Russia IFC has a strong role in this project as this would be the first time IFC would be engaging in a project in the fast growing Russian plywood sector together with a locally owned company. Through IFC, Sveza will be able to attract financing with much longer tenors than is currently available in the market, which will allow the company to finance its long-term investment program without having to utilize expensive short-term funding for this purpose. IFC will require the company to start IAS audits on its operations annually which will increase transparency and corporate governance in the company. IFC’s environmental due diligence and supervision requirements will help Sveza become a more efficient and environmentally sustainable producer in the market, which will further enhance its position in the global markets in the future. Sveza will be required to implement integrated environmental and health and safety management systems (certified to ISO 14001 and OHSAS 18001 standards) in all of their mills over time, which will provide a clear management framework for dealing with issues and ensuring continued improvement in practices and conditions.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because the specific environmental and social impacts that may result can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental/social information submitted by the project sponsor, and field visits by IFC staff to representative operations of Sveza. This new investment will be a corporate loan, and the key issues reviewed during appraisal included the following: implementation of environmental management systems; application of sustainable forestry management and harvesting techniques; air emissions; liquid effluent handling; solid and hazardous waste handling and disposal; use of formaldehyde in resins; fire protection and emergency response; and general worker health and safety, including exposure to dust and vapors.
Location of environmental documents in locally affected community
The environmental documents will be made available at the following locations: A translation of the ERS is on file locally: 2/3 Klary Tsetkin Str. Moscow, 127299 Russian Federation The ERS has also been published in local newspapers in St. Petersburg, Kostroma and Veliky Ustiug. The ERS is also available at the IFC Country Office in Moscow: 36, bld. 1. Bolshaya Molchanovka Street, Moscow, 121 069 Russian Federation