IFC and IDB Invest co-lead US$1.1 billion investment in LD Celulose
International Finance Corporation (IFC), a member of the World Bank Group, and IDB Invest, a member of the IDB Group, are co-leading a US$1.1 billion financing to LD Celulose S.A., a joint venture between Lenzing AG and Duratex S.A., to build one of the largest dissolving wood pulp (DWP) plants in the world, in Minas Gerais State, Brazil. The Finnish export credit agency Finnvera and seven commercial banks are participating in the financing.
Austria-headed Lenzing Group is a world market leader for wood-based cellulosic fibers, and Brazil-based Duratex S.A. is the largest producer of industrialized wood panels in the southern hemisphere. The LD Celulose joint venture, created in 2019, is owned 51 percent by Lenzing and 49 percent by Duratex.
As part of the project, LD Celulose will also sustainably plant and manage approximately 70 000 hectares (ha) of eucalyptus plantations. The plant is being built in the Triângulo Mineiro, between the municipalities of Indianópolis and Araguari in the state of Minas Gerais.
Once operational in 2022, LD Celulose will operate one of the world’s highest productive and energy-efficient DWP mills and will feed the 40 percent of excess bioelectricity generated on-site as green energy into the public grid.
Strengthen Brazil’s forest industry
The investment will strengthen the competitiveness of Brazil’s pulp industry, create jobs, and support the country’s efforts towards climate change mitigation. The financing co-led by IFC and IDB Invest will support LD Celulose’s investment program for 2020-2022, which consists of the construction of a 500 000 tonnes-per-annum dissolving wood pulp (DWP) mill and the installation of a 144 MW cogeneration plant.
DWP is the main raw material used to produce wood-based textile fibers, a biodegradable and more environmentally friendly fiber alternative. The end-products of DWP include textiles and hygiene products, among others.
Brazil is one of the most competitive pulp producing countries in the world, due mainly to its availability of high-quality land, favorable soil and climatic conditions, and high forest productivity. The forestry sector plays an important economic and developmental role in the country, employing about 350 000 people, mainly in rural areas, and accounting for 4.2 percent of the country’s exports.
This investment will help strengthen the competitiveness of the pulp industry in Brazil and support job creation. In addition, LD Celulose’s cogeneration plant will contribute to an increase in the share of sustainable biofuels and renewable energy in the country’s energy mix, enhancing diversification and contributing to the country’s effort to mitigate climate change.
The financing will also increase sustainability standards for the pulp industry and the plantation forestry sector through LD Celulose’s adoption of IFC’s Environmental and Social Performance Standards.
IFC is excited to support this important project that will help improve Brazil´s competitiveness, create new jobs, contribute to climate change mitigation and also increase sustainability standards for the pulp industry and the plantation forestry sector. In addition to supporting our clients with the economic impacts of the pandemic, IFC continues to help develop projects that create a pipeline of robust investments that can accelerate Brazil´s recovery process, said Carlos Leiria Pinto, IFC Brazil Country Manager.
Three-part finance package
The US$1.1 billion loan package is comprised of three parts:
- a US$500 million financing package arranged by IFC;
- a US$500 million financing arranged by IDB Invest, and;
- a US$147 million, 13-year door-to-door loan from financial institutions backed by the Finnish export credit agency Finnvera
The IFC arranged financing includes: (i) a US$200 million, 11-year loan for IFC’s own account; (ii) a US$50 million, 11-year loan through the IFC Managed Co-Lending Portfolio Program (MCPP), a platform that allows institutional investors to participate in IFC’s loan portfolio; and (iii) a US$250 million, 9-year loan syndicated to international commercial banks.
Similarly, the facility arranged by IDB Invest includes: (i) a US$200 million, 11-year loan for IDB Invest’s own account; (ii) a US$50 million, 11-year loan through IDB Invest’s administered China Co-financing Fund for Latin America and the Caribbean; and (iii) a US$250 million 9-year loan syndicated to international commercial banks.
Participating banks in the combined US$500 million syndicated portion jointly arranged by IFC and IDB Invest are Banco Santander, BNP Paribas, Commerzbank Aktiengesellschaft (Filiale Luxemburg), Erste Group Bank AG, HSBC Bank plc, KfW IPEX-Bank GmbH, and Raiffeisen Bank International AG.
With this investment in LD Celulose, IFC’s global committed portfolio in the pulp, paper and forest products sector totals more than US$1.4 billion, including mobilization, in over 27 projects. Of this, over US$800 million is invested in Latin America.
IFC has been investing in Brazil’s private sector since 1957, addressing the country’s most critical development challenges, including those of urbanization, social inclusion, healthcare, educational services, competitiveness and productivity, and management of natural resources.