Oslo, Norway, 21 December 2007 -- Norske Skog will, in cooperation with the Norwegian forest owners, establish a joint venture to develop and produce wood-based biofuel. A prototype facility for biodiesel will be built in connection with Norske Skog Follum at Hønefoss.

"I consider this a very exciting and future-oriented project which will open up new opportunities for Norske Skog," says chief executive Christian Rynning-Tønnesen.

The new the company will be jointly owned by Norske Skog (60%) and the forest owner cooperatives (40%), and will be established with equity of NOK 30 million.

"We have processing industry competence and a good infrastructure at Norske Skog Follum. In addition, the mill has a central location with good access to wood," says Rynning-Tønnesen.

Norske Skog aims to establish full-scale biodiesel production. Such a plant will require 1-1.5 million cubic meters of wood per year and will produce 65,000 - 100,000 metric tons of biodiesel, corresponding to 4%-6% of Norway's overall consumption of diesel in the transport sector. The long-term objective is to develop a global enterprise in biodiesel production and sale.

The investment in a prototype for biodiesel production at Follum is estimated at NOK 100-200 million. Further capitalization will be decided at a later date.

The agreement is subject to approval by the board of directors of the companies involved.