23981 - OOO Kronospan Particleboard

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Summary of Proposed Investment

Project Number

23981

Company Name

OOO KRONOSPAN

Date SPI Disclosed

Dec 23, 2004

Country

Russian Federation

Industry

Agribusiness and Forestry

Projected Board Date

Jan 25, 2005

Status

Completed

Sector

Wood Panels and Engineered Wood Products

Date Revised SPI Disclosed

Feb 4, 2005

Department

Regional Industry MAS LAC & EUR

Environmental Category

B - Limited

Previous Events

Approved : Feb 17, 2005
Signed : Apr 7, 2005
Invested : Apr 22, 2005

Project Description

OOO Kronospan PB would be a limited liability company incorporated in the Russian Federation.

The proposed investment program is to set up: - an up to 650,000 cubic meters per year particle board line, and
- melamine saturation and facing lines.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	92.87
Equity

Development Impact

The project will help meet domestic demand growth for quality particleboard for the furniture and construction industry through high quality domestic production. The project will substitute for imports of raw and melamine coated particleboard. The project would employ nearly 200 people.

The investment will make a significant contribution to furthering the development of the Russian wood based panels and furniture value chain. The Russian particleboard industry is characterized by small and low quality plants who are generally unable to invest capital in new equipment to produce the required quality panels. The project company will receive world-class technological and management know-how from Kronospan.

Kronospan’s presence is a unique opportunity for local logging companies to invest in more modern equipment to increase harvesting productivity to supply round wood to the company. Local forestry operations are currently characterized by high wastage with obsolete and inefficient equipment and production methods.

IFC will provide much-needed long term funding, currently not available in the Russian Federation. IFC would be sharing the project risk with the company in Russia in a capital intensive industry in which long term funding is crucial for the success of its operations.

Kronospan’s operating mills are designed and operated with clean production in mind. The project would comply with WBG and EU environmental benchmarks and policies. Kronospan plans to achieve certification for sustainable forest management in the areas under its management and control, and has already agreed to a Corrective Action Plan with IFC under the existing loan agreement. IFC will continue to work closely with the company on further strengthening environmental aspects of its operations, particularly in regard to its forestry operations.

This is a Category B project according to IFC''s Procedure for Environmental and Social Review of Projects, because a limited number of specific environmental and/or social impacts may result, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

Since there is no material change in the environment and social impacts which were disclosed under the OOO Kronospan Project (Project #21562), please refer to the ERS of 2/17/2004 for further information.

Location of environmental documents In locally affected community
The environmental documents are available in the company''s offices at the following address:OOO Kronospan Limited, Egorievskiy Raion, Pos, Noviy D. 21, RU-140341 Moscovskaja Oblast, Russian Federation

And in the main office of the Ministry of the Natural Resources of the Moscow Region.

Contacts

For Inquiries About the Project, Contact

Mr. Nick Matveieff, Kronospan Holdings Limited2 Andrea Zakou Street, Office 102CY 2404 Engomi, Nocosia,
CyprusPhone.: +357.22.590031
Fax.: +357.22.590156
Mobile: +44.7836.535057
email: n.matveieff@kronospan.co.ukMr. Markus Habegger,
OOO Kronospan
Egorievskiy Raion, Pos, Noviy D. 21,
RU-140341
Moscovskaja Oblast, Russia
Phone.: +7.096.4048500
Fax: +7.96.4067449
Mobile: +49.172.3084689
Email: skraclova@kronospan.cz

This Summary of Project Information (SPI) is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC's activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC's Disclosure of Information Policy that went into effect September 1998.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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