Eurasian Development Bank Commences Financing of Large Industrial Project in Siberia

A new facility for producing MDF boards will be constructed in Tomsk.

Moscow, 28 April. Today the Eurasian Development Bank signed financial agreements on a syndicated loan for the project titled Construction of a Modern Wood Processing Plant Based on High-Tech Equipment for the Manufacture of Medium Density Fibre (MDF)Boards in Tomsk Oblast. The first tranche will be disbursed on 30 April 2008.

This syndicated loan is managed by the Eurasian Development Bank and structured jointly with Nomos-Bank of Moscow using leasing and direct debt financing schemes and the services of the export credit agency Hermes (Germany).

A total of $270 million will be invested. EDB will provide a loan of $95 million for ten years. EDB will finance the construction of the facility and purchase equipment for LPK Partner-Tomsk. More than ten companies participate in the project.

The project is unique to the CIS in that:

• the proposed facility will become the most advanced MDF board plant ever constructed, due to the state-of-the-art, innovative technology of Dieffenbacher (Germany), the world’s leading manufacturer of MDF board lines; and
• EDB structured the project using modern project financing methods and the services of more than ten renowned consulting firms, including Yaakko Pöyry Group (Finland).

Due to EDB’s financial resources and high rating, despite the global financial crisis, the borrower is granted long grace periods in respect of both the principal and interest of all the credit products provided under the project. Repayment will be commenced after the facility reaches its design capacity.

The plant will launch production in the end of 2009, and reach its full production capacity (three-shift operation) in May-June 2010.

The plant will have an annual capacity of 264,000 m3 of MDF boards. The product will feature excellent quality and comply with international standards, which will be assured by a state-of-the-art production line. MDF boards will be manufactured from low-grade wood and chips, but their performance and environmental characteristics will be very close to those of natural wood. The lack of safe and quality products of this type on the market puts the plant in an advantageous competitive position, which will ensure high profitability.

MDF boards are the main material for the manufacture of furniture, including de luxe sets, and are widely used as finishing material in construction (floor coating, wall panels, doors, etc.).

This project is fully in line with EDB’s mission and strategy, and will promote the overall development and integration, since up to 30% of finished products will be supplied to Kazakhstan and other Central Asian countries. As importantly, the project will have a positive impact on small-scale construction and furniture production in Russia and satisfy the growing domestic demand for MDF boards, thus contributing to the country’s sustainable economic development. The project is also viewed as highly important in the context of economic diversification and implementation of Russia’s Affordable Housing National Project.

The project will allow over 500 new jobs to be created, and the plant will pay nearly $200 million in taxes until 2021.