TALLINN - The European Bank for Reconstruction and Development last week approved a 20 million euro funding package for Estonian Cell, a 165 million euro pulp factory that represents one of the largest investment projects in the country and will significantly boost national exports.
The final agreement between the EBRD and Estonian Cell's owners - Norway's Larvik Cell and Austria's Einzel - should be signed over the next month-and-a-half, but according to preliminary information, the bank will acquire one-third of Estonian Cell's stock.
The rest of the funding for the project will be provided through a syndicated loan arranged by HypoVereinsbank.
The EBRD's decision was the final roadblock to launching the pulp factory project, as Estonian Cell had already received the necessary approval from Estonian officials, including a 99-year lease for a 80-hectare plot in the town of Kunda (northern Estonian) where the factory will be built.
Germany's RWE Industrie-Loesungen will be the main construction contractor, while the main equipment supplier will be Austria's Andritz. The first phase of the construction will last for 18 months, and the paper mill itself is expected to be operative from spring 2006.
It is expected that all of the mill's output will be exported, delivered via the port of Kunda, which currently serves as the outlet for Kunda's cement factory.
Production-wise, the mill will use bleached chemi-thermo mechanical pulp technology. Annual output will comprise some 140,000 tons of aspen pulp, which will be used for high quality paper, millboard and cardboard production.
Estonia's Greens, of course, have followed the development of Estonian Cell closely. The Estonian Fund for Nature filed a complaint at the Johvi administrative court in February 2003, accusing the pulp mill of not having sufficient provisions for environmental safety.
The complaint resulted in a three-party out-of-court settlement in March 2003, according to which the Greens called back the complaint, and Estonian Cell agreed to verify the origin of incoming wood and certify that 50 percent of production with Forest Stewardship Council certificates.
Estonian Cell also agreed to launch a program for the improvement of waste water processing and waste reduction within three years.
The Greens' demands were included in the new production license issued to Estonian Cell by the Kunda authorities.
Marek Strandberg, chairman of the council of the Estonian Fund for Nature, said that the Kunda Bay area would be regularly monitored in accordance with the out-of-court agreement.
"If the ecosystem of the bay exacerbates, the pulp mill will have to stop its work and upgrade the necessary equipment," said Strandberg.
Competition between industrial enterprises based around the Baltic Sea coast will acquire a new dimension after EU enlargement, said Strandberg. In his opinion, Swedish and Danish industries that under EU law pressure have heavily invested in the environmental safety of their facilities at the expense of other investments are likely to demand equal treatment for companies in the new member states. This will force Estonian producers to pay more attention - and money - to protecting nature.
Last year the Latvian government shelved a $900 million pulp mill on the basis that the Finnish investors could not provide assurances that the project would not harm the environment of western Latvia, where the plant was supposed to be built.
