1 The story of the Bitkovs in Russia
2 Transition from Soviet to market economyDuring Soviet times, all commercial distribution channels were controlled by the State. As a result of perestroika, these channels were lost. Many factories no longer had difficulties accessing supply and distribution channels and could not sell their final product. Igor and Irina Bitkov at that time worked in the forestry Industry and found a way to fill the gap, providing raw materials to the forestry companies and selling their final product. To do this, they set up their first company: LesMarket in Novodvinsk, Arkhangelsk Region (northern Russia) 2
3 Acquisition of two paper plantsKFOB 1996, Leningrad Region NCBK 1999, Kaliningrad Region In the USSR, factories worked according to guidelines and orders issued in Moscow After the collapse of the USSR, the factories had to adapt to the rules of the marketplace, but the “Red Directors” were ill equipped to do that. The Bitkovs bought two factories following their bankruptcy, one in Leningrad Region (KFOB), the other in Kaliningrad Region (NCBK) 3
4 Establishment of North West Timber Company“Providing the Prosperity of our Fatherland, we Create new Russian Quality” In 1997, the Bitkovs re-branded their company as North West Timber Company (NWTC) and developed a reputation at home and abroad as a successful company focused on production of high-quality papers using the latest technologies
5 Reconstruction of the old factoriesThe Bitkovs invested in the re- building of the factories they acquired They immediately created jobs for people in the local communities hard hit by the recession of the 1990s They invested in the skills of the workers They introduced environmentally friendly production The Bitkovs had correctly identified a gap in the market and their business grew rapidly. 5
6 Tasks of NWTC’s management teamBased in St Petersburg, the management team had the following functions: Development of long-term strategies Market analysis Project management Recruitment of industry professionals Investigation and introduction of the most modern technologies Financial organization Industrial lobbying Infrastructure lobbying (gas, energy, transport) Environmental and social responsibility 6
7 Investing in new technologiesNCBK, Kaliningrad Region Shown here is a newspaper photo of the inauguration of Paper Machine No. 8 with Alexander Melnikov, Mayor of Neman Irina Bitkova, NWTC Chairwoman Vladimir Yegorov, Governor of Kaliningrad Region 7
8 Installation of new equipmentThe investment in new equipment significantly reduced pollution at NCBK 8
9 Modernization project at ???9
10 Forest industry experience and credit historyNWTC acquired an excellent credit history starting in 1999 In 2002, Sberbank granted the Bitkovs the status of VIP Customers By 2004 NWTC had demonstrated its ability to manage forestry projects and modernize factories Sberbank is the oldest and largest state bank in Russia
11 Long-term strategic plan for international market expansionNWTC signed an agreement with the Canadian company Sandwell International Inc in 2003??? to upgrade its paper mills The picture to the right was taken at NCBK 3rd from the Left, Igor Bitkov, NWTC Director, and 5th from the left, Gordon Brian, Sandwell Engineering Inc Chairman Sandwell International Inc - world leader in engineering solutions for the Pulp and Paper Industry
12 Sandwell International’s feasibility studyIntroducing the technology for international expansion Sandwell International Inc, together with marketing specialists, prepared a feasibility study to introduce world-class technology at NWTC to allow the company to sell its production on international markets The year plan developed targets for developing new production for both Russian and international customers
13 Sandwell International’s plan for NWTCThe plan had the following aims: Building a paper recycling factory. Construction of new factories to produce a range of final product (notebooks, different formats of sheet paper, albums, etc.). Implement -TCF- Total Chlorine Free technology. Building paper mill 3 to produce high quality paper 13
14 $450 million credit line for implementation of long-term strategic planA General Agreement was signed in 2004 with Sberbank for US$450 million Sberbank’s Leonid Schatz: "With this general agreement, Sberbank’s five years of cooperation with NWTC has ended... All loans were paid on time...Sberbank has found that all the capital has been invested in the growth of factories ... Based on these five years of NWTC's credit history, Sberbank has decided to move to a new level of cooperation " Signed on March, 2004 in the Grand Hotel Europe, St Petersburg 14
15 Signing of General Agreement with SberbankThe following people participated in the signing ceremony 1. Lubov Sobershaeva, Representative of President Putín for the North West. She said that the government supports the industry in order to implement high technologies and to achieve the social and ecological development. The projects, such as that of NWTC benefit not just the factories but Russia as a whole 2. Leonid Schats, Sberbank Chairman for the North West 3. Irina Bitkova, NWTC Chairwoman. 4. Igor Bitkov, NWTC Director 5. Vladimir Yegorov, Governor of Kaliningrad Region. He spoke about the continuous development of NCBK in recent years, as well as the introduction of the most modern technologies. He stressed the environmental and social responsibility shown by the company and noted that this project is unique in the region. 6. Michail Dedov, Vice Governor in the Leningrad Region branch of the Ministry of Natural Resources. He said that KFOB is one of the plants that gives the most benefits to the region. He described seeing how KFOB went from bankruptcy to became one of the largest producers of exercise books in Russia. He also talked about how impressed he was by KFOB’s social investment activities that aimed at both its workers and the local communities as a whole. 15
16 Governor’s support for development of NCBKVladimir Yegorov (sitting opposite President Putin) was elected Governor of Kaliningrad Region, (After all governors in Russia were appointed by the President) Governor Yegorov supported different development projects in Kaliningrad Region, including NWTC’s investment at Neman Neman (circled in red) is a “mono” town dependent for employment on one plant. When the Bitkovs acquired NCBK, unemployment in the town was 97%
17 People close to President Putin who influenced the Bitkovs’ caseLeonid Shats Sberbank Chairman for the North West Appointed by Andrei Kazmin Andrei Kazmin Sberbank Chairman, Russia until 2007 Appointed by President Putin 17
18 NWTC’s strategic alliance with Kadant LamortKFOB RECYCLING PLANT, LENINGRAD OBLAST To modernize the factories, strategic alliances were made with renowned companies worldwide KADANT LAMORT is a French company specializing in pulp and recycled paper. NWTC hired KADANT LAMORT to design and manufacture all equipment necessary to build a recycling plant equipped with the latest technology (tinted paper recycling) 18
19 Installation of Kadant Lamort equipmentRecycling Plant 2005, Kamennogorsk, Leningrad Region Delivery of equipment from leading international supplier to the paper and pulp industry, Kadant Lamort The total project cost exceeded €10 million ($13 million), NWTC financed the upgrade out of cash flow and via a loan from Russia Sberbank 19
20 Implementation of the Strategic Plan - KFOB2005 RECYCLING PLANT Kamennogorsk, Leningrad Region Reconstruction work completed in new recycling plant 20
21 Assessment of the investment in Kadant Lamort equipmentKADANT LAMORT INSPECTIONS KFOB was inspected by Bruno Lamort de Gay from Kadant Lamort, By the Director, of the French Foreign Ministry, Florals Zuber The General Secretary of Pulp and Paper Mechanical Engineering of France, Paul Carpatye They concluded that KFOB was unique in using the most modern technology available and that the investment by NWTC was having positive environmental consequences 21
22 Cooperation with Kadant LamortInauguration of new paper mill, 16 November, 2005 Pictured from left to right: 1. Irina Bitkova, Chairwoman of NWTC. 2. Mikhail Dedov, Vice Governor, Leningrad Oblast 3. Leonid Shats, Chairman of Sberbank for the North West
23 Bielomatik Implementation of the Strategic Plan - BielomatikA German company that is an international leader in the production of processed paper and high-quality end products The installation of its equipment led to NWTC to becoming the largest Russian producer of finished paper products, such as notebooks, bond paper sheets, albums etc.
24 Recognition of successRECYCLING PLANT RECOGNITION FOR QUALITY MANAGEMENT AND END PRODUCT KFOB, ARKHANGELSK REGION, 2005 Valery Serdukov, Governor of Arkhangelsk Region presents Irina Bitkov with an award to mark KFOB winning a regional competition for quality in the category “industrial organizations”
25 New Pulp factory TCF - GL&VAgreement between NWTC and GL&V (Canada) leading to the installation of the first mill in Russia to use the latest technology to achieve bleaching totally free of chlorine (TCF) GL&V Pulp and Paper Group is a leading specialist provider to the global pulp industry NWTC headquarters, St Petersburg, 2004 Igor Bitkov with ??? of GL&V 25
26 Gazprombank loan for equipment purchase from GL&VPROJECT FINANCING 2005 Loan of US $22,385,000.- for machinery purchased from GL&V EDC credit granted by Gazprombank for seven years, ending in 2012 NWTC never fell behind in payments but Gazprombank called in the loan in 2008
27 Start of construction of TCF plant at NCBKNWTC was the first company to introduce TCF production in the Russian pulp and paper industry At NCBK, the new plant led to significant reduction of chlorine levels in the Neman river separating Kaliningrad Region from Lithuania Bilateral relations between Kaliningrad Region and Lithuania improved as a result Yuri Shalimov, Deputy Governor of the Kaliningrad Region and leader of the Regional United Russia Party, Irina Bitkova and the Russian Patriarch Kirill at the ceremony to bless the start of construction of the TCF paper mill at NCBK (2005). The plant opened in 2007
28 International regulations that served as the basis for NWTC’s environmental policyBase Regulations: BAT (Best Available Technology) HELCOM EU Standards Russian Regulations Kyoto Protocol Public Opinion In larger projects NWTC took into account public opinion. For example: The environmental impact of the "Reconstruction of the NPPM Pulp Production" project was approved in June 2005 after public consultations in Neiman. Debates at different levels: Municipality, Regional and Federal ENVIRONMENTAL ORGANISATIONS Pre and post project consultations were held with environmental organizations: Greenpeace Lithuanian officials (border country) WTTC - Germany ECO Protection WWF
29 NWTC meets international environmental standardsRecognition by PriceWaterhouseCoopers for the fulfillment of GRI standards in three consecutive years Ecological Accountability reports: Ecological reports submitted by NWTC were in line with the guidelines the GRI -Global Reporting Initiative
30 NWTC’s environmental awardsFor the implementation of the various ecological projects NWTC was awarded the National Ecological Prize founded by the National Ecology Council of Russia and Foundation Vernadsky VI, for its compliance with GRI standards and was recognized as the best-performing company of its kind in Russia According to the magazine "Wood Industry" and the agency "Lesprom Industry Consulting" NWTC was in the top 15 fastest-growing companies in North-West Russia
31 NWTC’s contribution to the local communityFor the community of Neiman, the NCBK plant was the center of its life since the community was formed around the factory. NWTC placed strong emphasis on implementing social programmes: Annual program of activities costing $380,000 Salary levels: in the Russian pulp & aper Industry, NWTC had the highest wage rates. equiparete them with EU salaries Medical Services for employees: medical posts were established with different specialties: General Practitioner, Dentist, Gynaecologist. NWTC had an equipped physiotherapy room. With these facilities and other programmes such as vaccination and personalized diets, from 2004 to 2005 NWTC reduced the absenteeism rate by 30%.
32 Social Responsibility policies NWTC and its impact on the community4. Improvement of industrial and labor safety: 100% of the staff received training to maintain job security. Every year all employees were handed two pairs of overalls, one for winter and one for summer, including safety shoes. With these measures it became possible to lower the accidents rate at the two NWTC plants. 5. Improvement of hygiene and sanitary conditions. 6. Social guarantees for all employees included: Facilities to work and to be trained If people downsizing is not dismissed early retirement age or single mothers Or people not socially protected The lower working days and 40 hours / week Transportation service for workers The best workers are recognized with awards and honors
33 Construction of factory No. 3 at NemanNEW FACTORY TO PRODUCE PAPER # 3 NCBK A new facility to produce high quality paper in Kaliningrad Region
34 Installation of new equipmentNEW FACTORY No. 3 NCBK German machinery in use in the new plant Voith was responsible for its installation and staff training
35 Blessing of new factory No. 3 by Patriarch Cyril in 200635
36 Inauguration of NCBK, Kaliningrad Region, 2006Shown in the picture from right to left: 1. Vladimir Yegorov, Board Member of NWTC and former Governor of Kaliningrad Region 2. Igor Bitkov, Director of NWTC 3. Irina Bitkova, Chairwoman of NWTC 4. Vitaly Shipov, Deputy Minister of Development of Regions of Russia 5. Grigoriy Boos, Governor of Kaliningrad Region. The inauguration was attended by representatives of VTB, Sberbank and Gazprombank. In the background are bundles of high-quality paper packed ready for delivery.