Stora Enso to Build World-Class EUR 1.6 Billion Board and Pulp Mill in China

Stora Enso, Helsinki, Finland, this week reported that it plans to build plantation-based integrated board and pulp mills at Beihai city in Guangxi, southern China. The mill site will initially include a 450 000 metric tpy, state-of-the-art paperboard machine and pulp capacity of 900 000 metric tpy, including necessary energy plant and auxiliary facilities. In a unique set-up, the board and pulp mills will be self-sufficient.

The company's ultimate target is to expand the paperboard capacity to 900 000 metric tpy at a later stage. The operations will be managed by an equity joint-venture company established by Stora Enso (85%) and the Guangxi Forestry Group (15%), a state-owned company under the Guangxi provincial government. The joint venture will serve the fast-growing market for liquid packaging board and other premium consumer board grades.

The project investment will be approximately EUR 1.6 billion. Construction at the industrial site will commence when specific preconditions have been fulfilled, which is expected to be in the second half of 2012. Production is scheduled to start in the fourth quarter of 2014. The investment will significantly support Stora Enso moving towards its 13% ROCE target.

The project will be financed through a combination of debt and equity on an approximately 60/40 basis. The debt financing is expected to be a mix of export credit agency, multilateral, and commercial bank debt.

"Today we are taking another significant step in transforming Stora Enso into a global renewable materials company. We already have a globally leading position in renewable fiber-based packaging boards. We will now invest in a world-class integrated mill based on locally grown renewable materials for the benefit of local Chinese consumers in the fastest-growing market. Everything we do will be based on best-in-class technologies, environmental standards, and sustainability practices, together with the local partners and communities," Stora Enso CEO Jouko Karvinen said.

"Generating sustainable returns from any business requires a unique offering to the customers, be it product or process benefits, in a cost-efficient way, or something that is very difficult for the competitors to copy, like integrating the operation from the plantations to the technically advanced product. This is exactly why we have chosen to differentiate ourselves through a range of specialized world-class board products and end-to-end integration—with the most cost-efficient solution for the Chinese market and at a globally competitive total cost," Stora Enso EVP for Renewable Packaging Mats Nordlander noted.

The investment is subject to regulatory approvals, the signing of final documentation, and other customary conditions precedent.

Stora Enso has been establishing plantations in Guangxi since 2002. The company currently holds approximately 90 000 hectares, and is to establish sustainable eucalyptus plantations with an effective fiber base of 120 000 hectares to support the new pulp mill in Guangxi. Its other operations in China include a 245,000 metric tpy coated fine paper mill in Suzhou, a 170,000 metric tpy uncoated magazine paper mill at Dawang, two core factories, five sales offices, and the newly acquired majority shareholding in Inpac International, a packaging company with production operations in China and India, and service operations in Korea. The total number of employees in China is currently about 4 500.

TAPPI
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