Whether used for making sweaters or hygiene products, wood-based textile fibers have the advantage of being biodegradable, with a lower greenhouse gas footprint than synthetic fibers. Their production, which uses dissolving wood pulp, requires less water than cotton, and because they do not shed microplastics into water, they can later be recycled.
IFC and IDB Invest co-led a $1.1 billion financing package to LD Celulose S.A., a joint venture between Lenzing AG and Duratex S.A., to build one of the largest dissolving wood pulp plants in the world, in Minas Gerais State, Brazil. Finnvera, a Finnish export credit agency, and seven commercial banks participated in the financing.
The project supports the construction of a greenfield dissolving wood pulp plant with the capacity to produce 500,000 tons per annum, the installation of a 144 megawatt cogeneration plant, and the sustainable management of 70,000 hectares of eucalyptus plantations. The first batch of dissolving wood pulp is expected to be produced in the first quarter of 2022.
Brazil is among the most competitive pulp producing countries in the world. This transaction will strengthen the competitiveness of the pulp industry in Brazil through the construction of one of the most energy and cost-efficient mills in the world, with the plant feeding 40 percent of excess bioelectricity generated on site as green energy into the public grid. The project will also increase diversification within the pulp sector, as most of the existing production capacity in Brazil is directed towards paper grade pulp. This transaction will increase dissolving wood pulp production in the country, as there are currently only two dissolving wood pulp producers in operation and one other mill under construction.
At a time of high unemployment and low investment activity in Brazil, the project is one of the largest transactions in the country and in Latin America. LD Celulose will hire 8,000 workers during construction and 1,000 workers once operational. This will create a pipeline of robust investments that can accelerate the Brazilian economy’s recovery from COVID-19.
The financing will increase sustainability standards for Brazil’s pulp industry and the plantation forestry sectors through LD Celulose’s adoption of IFC’s Environmental and Social Performance Standards. IFC played a key role implementing measures to preserve water quality in the Araguari River, strengthening LD Celulose’s social capabilities, and ensuring that adequate human resources policies and procedures are in place to mitigate risks associated with the influx of a large workforce during construction.
This landmark transaction has high recognition, winning several well-renowned awards, including “Loan of the Year: Latin America” and “Infrastructure Financing of the Year: Brazil” by LatinFinance.