Siniat Romania: building a sustainable future
When Siniat Romania, part of the Belgian industrial group Etex, wanted to grow its plasterboard business in South-East Europe it realised that it had an opportunity not only to meet demand in the region but also to make a major contribution to sustainability in Romania.
In 2011, after industrial group Etex took over Lafarge’s plasterboard business in Europe, it was eager to build on its acquisition. “We wanted to strengthen our industrial footprint in South-East Europe, in order to serve the increasing demand for construction and building materials in the region over the long term,” explains Marc-André Fritsche, managing director of Siniat Romania, a regional business unit of Etex.
Etex selected Romania as the focus for its expansion because the country is the biggest market in South-East-Europe, is centrally located and has good transport links to other countries in the region: Siniat’s existing plant in Bucharest served 11 countries. However, this plant was not easily expandable so Siniat started looking for alternatives. “We thought a site in the South West – rather than the South East where Bucharest is – would give us a broader reach and help to reduce transport costs and therefore better serve our customers in South-East-Europe,” says Fritsche.
Transport costs are a critical issue for construction materials given their weight: production is usually located within 1,000 km of the customer. Similarly, building materials have to be produced close to sources of raw materials, such as the gypsum used to make plasterboard.
Romania joined the European Union (EU) on 1 January 2007 and was therefore committed to implement EU laws. One of these laws stipulates that coal-fired power stations must invest in desulphurisation to reduce emissions and acid rain. Desulphurisation technology cleans the sulphur dioxide in flue emissions from burning coal using ground limestone. As a by-product, flue gas desulphurisation (FGD) gypsum is produced.
FDG gypsum has been used for plasterboard production elsewhere in Europe and around the world for years as power plants have introduced desulphurisation technology. “The sudden availability of FDG gypsum in Romania as a result of the introduction of desulphurisation opened up a huge opportunity to make use of a waste product, transform the sustainability of our operations and seize an attractive business opportunity,” says Fritsche.
Benefits for all
The Romanian power plant targeted for desulphurisation was in Turceni, in the South-West of the country, which proved to be ideal for Siniat in terms of access to South-East-Europe. Moreover, because FDG gypsum is a by-product of desulphurisation at the power plant, Siniat knew that it would be considerably cheaper than natural gypsum, which is relatively expensive to mine and bulky to transport.
“What was most exciting about the opportunity in Turceni was the potential to create a plasterboard plant that delivered a truly sustainable future – for the company, local people, the environment and the country,” says Fritsche. The plasterboard product produced using FGD gypsum is visually identical to plasterboards made from natural gypsum and is not marketed as a distinct product, although there are some benefits such as increased board hardness. However, the sustainability benefits of using FGD gypsum are enormous.
Firstly, there is no need to quarry natural gypsum and harm the natural environment. Secondly, as the plasterboard plant can be built next to the power plant, there is minimal transport to the factory, reducing the use of trucks and their emissions. In addition, plasterboards are produced using recycled paper, further improving Siniat’s sustainability. Moreover, because Siniat was designing the plant from scratch it was possible to incorporate technology so that waste plasterboards – and even plasterboard construction waste – can be recycled and used in plasterboard production.
“There are also broader sustainability benefits from locating the plant in this part of Romania, which is rural and poor compared to the rest of the country,” says Fritsche. “Our investment contributes to the community by providing 80 jobs directly and many jobs indirectly at service companies in areas such as warehousing, transportation and fitting. We have also invested in new roads to facilitate the plant that should attract other new business to the region.”
“A commitment to quality and competitive pricing is not incompatible with Siniat’s focus on sustainability.” - Marc-André Fritsche, managing director of Siniat Romania
Siniat recognises that its customers in Romania and other countries in the region place a low priority on sustainability. “Quality and price drive purchasing decisions because many areas in the region are poor and concerns about the environment are generally an issue that becomes more important as countries become more affluent,” says Fritsche. ‘’We are focused on meeting customers’ needs, so we ensure that our quality and price meet their expectations.”
However, Fritsche says that a commitment to quality and competitive pricing is not incompatible with Siniat’s focus on sustainability. “The great thing about our plant at Turceni is that it enables us to provide a quality product at competitive cost while achieving our sustainability objectives,” he notes. “Mining gypsum is bad for the environment but is also costly, both in terms of royalties and restoring the site when the mine is exhausted. So focusing on sustainability makes good business sense while reflecting our beliefs as a company. We are trying to re-shape the market because we believe it is the right thing to do.”
Deepening a relationship
The majority of the cost associated with building Siniat’s new plasterboard plant – the largest in Romania with an annual production capacity of 27 million m² of plasterboard – and associated infrastructure in Turceni was funded from internal resources. However, the company also sought a EUR 18 million loan.
“Our criteria were straightforward,” says Alina Mocanu, CFO at the company. “The cost of funding had to be attractive, we needed the flexibility to manage drawing from the loan at our convenience as the project progressed rather than at the bank’s convenience; and we wanted to secure access to other banking products that would be helpful to the group, such as derivatives for hedging.”
ING had a longstanding relationship with Siniat’s parent company Etex in its home market and had begun to work with the company locally as well but it was by no means certain that it would win the new business. “We ran a tender process because we wanted to ensure we were meeting our objectives,” notes Mocanu. “Negotiations were lengthy and complex because of the importance of this investment in Turceni to the group.”
In the end, ING Romania was selected because of its ability to meet Siniat’s financing needs. “We also felt that ING understood our business model and sector having worked with us locally and at group level,” says Mocanu. “Our requirements – and the term sheet – evolved slightly during the negotiation period as a result of internal changes and ING was flexible and able to accommodate these changes. It was a pleasure to work with them.”