Indonesia 2011 - Financing the paper recycling industry

Indonesia 2011 - Financing the paper recycling industry

Indonesia has one of the highest deforestation rates in the world and is now the world’s third largest greenhouse gas emitter . With a loan of USD 10m, PROPARCO supports the paper recycling company FAJARPAPER's in financing the construction of an incinerator that will treat its waste and generate 10% of the steam required for its manufacturing cycle. The new equipment will reduce the company’s energy dependence and will, more generally, help combat climate change.

Project start-up: 2011
Financing: $10m senior loan
Partner: FAJARPAPER

Context
Indonesia’s current impressive growth is tending to go hand in hand with massive deforestation. Indonesia is the world's 3rd largest CO 2 emitter. FAJARPAPER is one of the leaders in Indonesia's industrial paper sector. Its stong environmental and social commitment makes it stand out from its competitors, with a growth model based on respecting the environment and its employees. Its model contributes to the fight against climate change as it only uses recycled paper instead of paper pulp, which is a source of deforestation. The company has a wastewater treatment system that allows it to recycle 80% of the water used in the manufacturing cycle. It also has two cogeneration systems and an incinerator, which allow it to meet its energy needs.
Project objective
By taking part in FAJARPAPER's funding round, PROPARCO is supporting the paper recycling sector in a country devastated by deforestation. It is also allowing it to finance an energy efficiency project: incineration generates steam which is used during the manufacturing process, thus saving energy.

Project description
FAJARPAPER's manufactures different categories of paper which are mainly destined for the mass market, an engine for current and future growth in Indonesia. The company, which makes 90% of its sales locally, has set out on an expansion phase by upgrading to a capacity of 1.25m tons as of 2012, compared to 1m in 2010. PROPARCO has supported FAJARPAPER's strategy by allocating it a $10m senior loan with an 8-year maturity to finance the acquisition and construction of a new incinerator.