UPM and Sveza Group to sign the joint venture agreement

Archive 25.4.2008 0:00 EEST

(UPM, Helsinki, April 25, 2008 at 12:00) – Cooperation between Finnish forest industry group UPM and Russian Sveza Group proceeds as planned. The companies have today signed an agreement to form a joint venture company. The target is to build a state-of-the-art forest industry facility in the Vologda region of Northwest Russia. The letter of intent on the project was signed on December 19, 2007.

Each party will hold 50 percent of the share capital of the new company, OOO Borea. Mr Andrey Kashubski, Managing Director of Sveza Group will act as the first Chairman of the Board in the new company. The chairmanship will rotate between the companies. The start-up of the company operations is still subject to approvals by the relevant competition authorities, including the EU Commission.

The planned industrial complex would include a modern pulp mill, a sawmill and an OSB building panels mill in the community of Sheksna, in the southern part of Vologda. The planned capacity of the pulp mill would be 800,000 metric tonnes, the sawmill 300,000 cubic meters and the OSB mill 450,000 cubic meters.

The joint venture will continue with the feasibility study and permitting process of the project. Ensuring sufficient logging rights on financially sound conditions is the essential precondition for future investment decisions. In addition, the Russian Federation should confirm financing of the infrastructure projects in the region.

The parties estimate that the prerequisites for the first investment decisions in mechanical forest industry are available in the autumn of 2008 at the earliest. Providing the project proceeds as planned, decisions on the pulp mill investment will be considered earliest in 2009. The estimated start up of the mill would be in 2012.

The total investment in the facilities would exceed EUR 1.0 billion. When fully operational, the new Borea mills in Sheksna will employ approximately 650 persons, while the indirect employment benefit in the region will be thousands of jobs.

For further information please contact:
Mr Tapio Korpeinen, Senior Vice President, Strategy, UPM, tel. +358 40 730 0090
Mr Andrey Kashubski, Managing Director, Sveza, tel. +7 495 783 0035

SVEZA in brief
Sveza Holdings Limited is a holding company active in the forestry sector in Russia. Sveza is a business controlled by Aleksei Mordashov as a personal investment, fully independent of steel and other businesses. Sveza is one of the leading forestry companies in Russia. It includes five manufacturing sites: Ust-Izhora plywood mill, Kostroma plywood mill “Fanplit”, Velikiy Ustyug plywood mill “Novator”, Perm plywood mill and Manturovo plywood mill “Fankom”. The Sveza Group's sales in 2007 were RUB 11,445 million (approximately EUR 330 million) and it employs approximately 7,350 persons. www.sveza.com

UPM in brief
UPM is one of the world’s leading forest products groups. The Group's sales in 2007 were EUR 10 billion, and it has about 26,000 employees. UPM's main products include printing papers, label materials and wood products. The company has production units in 14 countries and its main market areas are Europe and North America. UPM's shares are listed on stock exchange in Helsinki, and the company has an ADR programme on the OTC market in the United States. www.upm-kymmene.com

In Russia, UPM currently has a plywood and veneer mills and sawmill in Novgorod Region, a large-scale logging enterprise in Leningrad Region as well as trade representations in Moscow and in St. Petersburg. UPM employs over 1,100 people in Russia.