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Domtar Signs MOU With Province of Saskatchewan
Montreal, Quebec, Canada, 12 September 2007 -– Domtar announced today that it has reached an understanding with the province of Saskatchewan on a plan that could result in the redevelopment of the Prince Albert facility into a northern bleached softwood kraft (NBSK) pulp mill producing 100% FSC certified softwood pulp for the North American and offshore markets. The annual production capacity of the redeveloped mill is expected to be approximately 328,000 metric tons.

“This is an important step towards the redevelopment of the Prince Albert operation into a world-class facility,” said Raymond Royer, president and chief executive officer of Domtar Corporation. “This, of course, can only be achieved if the business case demonstrates that the mill will be a first quartile operation with a Canadian dollar close to par with its U.S. counterpart,” Royer added.

The plan provides for an arrangement for a green energy expansion of the pulp mill, which would include the sale of excess energy produced to SaskPower, the launch of an FSC certification process on the related Forest Management Area lands, and the eventual construction of a new wood chip and sorting facility located near to the mill. There are no provisions in the plan to restart the paper machine and related sheeters.

The understanding also includes the intended acquisition by the Crown Investment Corporation of Saskatchewan (CIC) of a significant portion of Domtar’s equity interest in the Wapawekka sawmill, which will be substantially expanded. The CIC also plans to acquire all of Domtar’s interest in the former Big River sawmill, which it will target for redevelopment.

This milestone lays the foundation for a transaction that is subject to a number of critical conditions. These requirements include the conclusion of various engineering and feasibility analyses and studies, the development of a modern and competitive operational design for the pulp mill, consultations with First Nations, the negotiation and signing of definitive agreements with all parties involved, and approvals from the Domtar Corporation Board and various regulatory bodies.

Domtar will continue to work closely in the interim with the province of Saskatchewan and its Crown Investment Corporation (CIC), as well as with union leaders and First Nations representatives towards the successful completion of this project. “We are confident that all parties will collaborate diligently and constructively to execute this plan,” Royer said.

Domtar Corporation (NYSE/TSX: UFS) is the largest integrated producer of uncoated freesheet paper and one of the largest manufacturers of papergrade market pulp in North America. The company designs, manufactures, markets and distributes a wide range of business, commercial printing, publication, technical, and specialty papers, as well as its full line of environmentally and socially responsible papers. Domtar owns and operates Domtar Distribution Group, an extensive network of strategically-located paper distribution facilities. Domtar also produces lumber and other specialty and industrial wood products. The company employs nearly 14,000 people. To learn more, visit www.domtar.com

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