$1 Million in Backing for Sustainable Mexican Charcoal

$1 Million in Backing for Sustainable Mexican Charcoal

The World Resources Institute announced today the successful completion by an international group of investors of an innovative $1 million financial package for Noram de Mexico, SA de CV, Mexico's primary producer of high-quality charcoal from sustainably managed forests.

"This deal shows that investing in sustainable enterprises makes good business sense. We're hopeful that it will open up more financial resources to Latin American businesses who are following good environmental practices," said Luiz Ros, director of New Ventures, a project of WRI's business and environment division. "More and more investors are looking for deals like this to satisfy their values and their financial interests."

Noram de Mexico is one of only three companies worldwide that sells sustainably produced hardwood charcoal certified by the Forest Stewardship Council. The company won first prize at last year's New Ventures Investor Forum, an annual WRI gathering which attracts hundreds of venture capitalists, investment bankers, and entrepreneurs in Latin America.

"The real prize for us was the chance to meet international investors and lenders at the forum," said Carl Ludvik, Noram's president. "It enabled us to work out the basics of a $1 million financing plan, including increasing our capital base by 30%, and securing a long-term loan to restructure short-term debt which will give us time to build up our resources."

The Investors

Noram's financing package comes from U.S. and Latin American investors. Environmental Enterprises, a Washington-based venture capital firm established with support from major US foundations, increased its equity holdings in Noram and restructured an existing $125,000 loan. The EcoEnterprises Fund, a recently formed venture capital firm established in San Jose, Costa Rica by The Nature Conservancy and the Multilateral Investment Fund of the Inter-American Development Bank, provided $200,000 in equity and long-term financing.

The Andean Finance Corporation (CAF - Corporación Andina de Fomento), a regional economic development bank that expanded its membership to include Mexico and other non-Andean countries, provided a seven-year, $400,000 working capital loan. The balance of the $1 million package was covered by long-term temporary shareholder advance.

About Noram

Noram was established in 1995 by Gilberto Rosas and Carl Ludvik, who recognized that the 12 million acres of pine and scrub oak forests in the Mexican state of Durango is a valuable source of oak for making charcoal. As the oak trees there are short and not well formed, they were more valuable as charcoal rather than as timber. Oak makes a dense charcoal, which burns longer, hotter and cleaner, as opposed to a compressed briquette composite.

The company, managed by the father/daughter team of Carl and Allison Ludvik and an experienced forestry engineer, Jose Garcia, decided that its Sierra Madre Charcoal would come from sustainably managed forests. It set out to obtain formal certification of sustainable forest management from Smartwood under the Forest Stewardship Council's (FSC) international certification program.

Noram has promoted and sponsored FSC certification of more than a million acres of forestlands owned by 10 Mexican indigenous community cooperatives, called ejidos. Now, other community cooperatives, forest products companies, environmental entities and the state government continue to expand the FSC certification program in Durango.

By year-end, an additional five ejido lands and three large private properties in Durango's forests will be certified by the Forest Stewardship Council.

Until now, Noram has remained largely a self-financed business, which nearly went under when their charcoal factory burned in 1998. Today, half their charcoal production comes from certified wood provided by the ejidos, about 2,000 tons, which can be expanded many times over. Although no accurate records exist, Noram estimates that Mexico consumes 200,000 tons of charcoal annually. Europe consumes another 200,000 tons while the U.S.A. consumes about 900,000 tons annually.

Noram has concentrated on building a nation-wide marketing base in Mexico, where the carne asada -- a Mexican barbecue -- has traditionally been the preferred way of entertaining. The company began exporting certified charcoal to Europe three years ago. By September, it will introduce its Sierra Madre brand to U.S. buyers during the Forest Stewardship Council's Certified Forest Products International Conference and Product Showcase in Atlanta, GA.

"We now have a solid base in Mexico and the FSC certification that our charcoal is produced from sustainably managed forests is giving us a definite advantage in Europe," said Allison Ludvik, a former vice president of the National Westminster Bank. "However, the U.S. market is the more difficult one to enter and the new financing we have secured will hopefully help us crack it."

Noram's success will be showcased during the annual New Ventures Investors Forum to be held Oct. 4-5, 2001 in Angra dos Reis, Brazil. New Ventures is part of WRI's environment and business program, which harnesses the power, and resources of business to find profitable solutions to environmental challenges.



GreenBiz Essentials: Sustainable Forestry