28503 - Kronospan CEE-RS

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Summary of Proposed Investment

Project Number

28503

Company Name

KRONOSPAN SRB DOO LAPOVO (VAROSICA)

Date SPI Disclosed

Feb 25, 2010

Country

Serbia

Industry

Agribusiness and Forestry

Projected Board Date

Mar 29, 2010

Status

Completed

Sector

Wood Panels and Engineered Wood Products

Department

Regional Industry MAS LAC & EUR

Environmental Category

B - Limited

Previous Events

Approved : Jun 21, 2010
Signed : Jun 25, 2010
Invested : Aug 31, 2010

Project Description

Kronospan Serbia has finished construction of a particleboard plant in Lapovo to better serve the markets of Serbia and the Balkan countries. Planned plant capacity is 380,000 m3 of particleboard and 11 million m2 of melamine facing per annum. The project was financed by Kronospan and HVB, Germany. Production was to commence in Spring 2009, but the project was delayed due to difficulties with land acquisition, regulatory permissions and a decision to increase capacity to better realize economies of scale. It is expected that the full scale production will start in 2010.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	29.50
Equity

Development Impact

Climate Change Mitigation: Climate change benefits include a corporate commitment by Kronospan to produce panel products from waste-wood chips, forest residues and pulpwood, and to stimulate growth of forests through sustainable forest management practices. Kronospan Serbia aims to source 50% of raw material inputs from wood chips and saw dust.

Employment: The Project will generate approximately 200 additional jobs in the relatively undeveloped rural area.

Benefits to Local SMEs: High volume production of value added products will benefit the local furniture manufacturers and construction industry through lower prices and higher product quality.
Increased Linkages: The Project is expected to increase the sourcing of raw materials and wood from local suppliers, thereby enhancing the income of the people involved in the upstream production as well as the planting and harvesting of forests.

Import Substitution: Domestic wood panels’ manufacturers in Serbia are unable to meet local demand. Increased local supply of particleboard is expected to substitute imports and lower board prices in the country and contribute to the competitiveness of exports and the local downstream construction and furniture industries.

Strong Demonstration Effect: The success of the project during the ongoing financial crisis is likely to have demonstration effect for similar investments by other global and regional companies. This is likely to encourage FDI, boosting confidence in the economy and the environment for private sector investment.

This project is a Category B project according to IFC’s environmental and social review procedure. Such category was assigned due to limited potential environmental and social adverse impacts, which can be duly minimized or eliminated. The key environmental and social issue associated with emissions, and the pollution prevention measures at this Kronospan plant follow the tight principles adhered to at all Kronospan facilities. These principles are established at a corporate level and are then implemented in all Kronospan facilities, either from the very start of production when new facilities are constructed (as this facility) or later through action plan upgrades when existing facilities are acquired.

Contacts

For Inquiries About the Project, Contact

Nick Matveieff, CFO
+44 7836 535057

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Telephone: 202-473-3800
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Local Access of Project Documentation

The full Environmental Impact Assessment has been disclosed locally as part of the approval process. This disclosure took place in Lapovo, which is located close to the site, and started on July 27, 2009 after the EIA had been reviewed by the local authorities and found acceptable for further processing and approval, subject to broad acceptance during the disclosure process.

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. 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 Policy on Disclosure of Information that went into effect April 30, 2006.

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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