Botnia to build a pulp mill in Uruguay

Oy Metsä-Botnia Ab is to build a mill to produce eucalyptus pulp in Uruguay,
South America. Botnia's Board of Directors today decided to go ahead with the
investment, which will cost an estimated USD 1.1 billion. The mill will have a
production capacity of 1 million t/a of bleached eucalyptus pulp. The mill will
be equipped with the best available technology. 

Excavation of the mill site will begin immediately. Construction of the mill
itself will take just over two years, with start-up expected in the third
quarter of 2007. The site for the mill is Fray Bentos, a town in western
Uruguay on the banks of the river Uruguay more than 300 kilometres from the
capital Montevideo. 

When operating at full capacity, the mill will use 3.5 million cubic metres of
wood raw material a year. About 60 per cent of this wood will be supplied from
the plantations of Botnia's subsidiary Compania Forestal Oriental (FOSA), most
of which are situated near Fray Bentos. FOSA is a eucalyptus cultivation
specialist founded in Uruguay in 1990. It currently owns 90,000 hectares of
land, of which around 60 per cent is either planted or suitable for planting.
FOSA's plantations, activities and entire procurement chain have received FSC
certification. 

The remaining 40 per cent of the wood needed will be procured through long-term
contracts with private forest owners, funds, foundations or cooperatives. 

The employment impact of the project will be greatest in 2006, when the project
is expected to provide direct employment for around 4,500 people. Once
completed, the mill will employ about 300 people, and will provide further
jobs, either directly or indirectly, for roughly 8,000 people. Wood procurement
will employ around 2,000 people this year. 

The bleached eucalyptus pulp produced by the mill will be sold largely to the
paper mills of Botnia's owners in Europe and Asia. “This pulp mill investment
is strategically important to our owners' raw material supply. UPM and M-real
already use large quantities of eucalyptus pulp, and their current investments
will increase the need for this pulp. For Botnia this is an important step as
we are extending our operations to the use of a new raw material - eucalyptus”,
says Botnia's President and CEO Erkki Varis. 

The project will be funded mainly through capital investments and loans. In
2003, Botnia founded Botnia S.A., a company in Uruguay whose agreed ownership
is Botnia 82.1%, UPM 12.4% and Metsäliitto 5.5%. Most of the financing (about
60%) will take the form of capital invested by Botnia S.A.'s shareholders with
the rest arranged through external loans raised by Botnia S.A. 

Botnia and the Uruguayan company Otegui Group have signed a preliminary
agreement under which Otegui Group has the right to become a shareholder in
Botnia S.A. with a stake not exceeding nine per cent. The right comes into
effect when the pulp mill starts production and will remain in force for seven
years. 

The pulp mill project is the biggest industrial investment in Uruguay's
history. It will boost Uruguay's gross national product by 1.6 per cent. The
project is also the biggest industrial private sector investment by Finland
abroad. 

The project is headed by Botnia's Timo Piilonen, who was in charge of the
feasibility studies and planning conducted in Uruguay. Botnia S.A.'s President
is Ronald Beare. 

 

UPM Corporation

UPM is one of the world's leading producers of printing papers and the clear
market leader in magazine papers. The Group's turnover in 2004 was nearly EUR
10 billion, and it has 33,400 employees. UPM's main products include printing
papers, converting materials and wood products. The company has production
plants in 16 countries and its main market areas are Europe and North America.
UPM's shares are listed on the Helsinki and New York stock exchanges. Further
information on the company's web pages www.upm-kymmene.com. 

M-real Corporation

M-real Corporation, headquartered in Finland and employing some 16,000 people,
is a European paper and paperboard company, providing premium solutions for
consumer packaging, communications and advertising end-uses. Through its
worldwide sales network, M-real serves its customers who mostly comprise
publishers, printers, paper merchants, offices and well-known consumer product
companies and carton printers. M-real is listed on the Helsinki Stock Exchange.
Its turnover in 2004 was EUR 5.5 billion. 

For more information please contact:
Erkki Varis, President and CEO, Botnia, tel. +358 10 469 4671
Jukka Forsström, Senior Vice President, Botnia, tel. +358 10 469 4674
Heikki Sara, Executive Vice President, Strategic Development, UPM, tel. +358
204 150 040 
Hannu Anttila, President and CEO, M-real, tel. +358 10 469 4343
Pekka Kivelä, Senior Vice President, Group Communications, Metsäliitto, tel.
+358 10 469 4545