Helsinki, Finland, 16 March 2007 -- Stora Enso has signed an agreement with Neste Oil to join forces to develop technology for producing new-generation biofuels from wood residues to replace fossil fuels in transportation and thus cut greenhouse gases. The first step will be to design and build a demonstration plant at Stora Enso's Varkaus mill in Finland. The demonstration plant, which will be owned on a 50/50 basis by the parties, is expected to start up in 2008.

Stora Enso is pioneering in developing its business in the new direction of producing biofuels for transportation. This will enable it to use its broad know-how and long experience in wood-based industries and wood sourcing in a new way to create business opportunities. Expertise from Stora Enso, Neste Oil, and VTT (the Technical Research Centre of Finland) will be used to implement the development phase and commercialize wood-based biofuel production. Stora Enso and Neste Oil see the growing biofuel market in Europe as a promising and sustainable business opportunity meeting the increasing demand for premium-quality products made from a wide variety of feedstocks.

The EUR 14 million demonstration plant will be integrated into the energy infrastructure of the Varkaus mill, where the gas produced will equal the energy needed to heat 4300 homes and cut carbon dioxide emissions significantly.

Full-scale commercial production

Following the development phase, the joint venture will build a full-scale commercial production plant at one of Stora Enso's mills, once the technical solutions are ready and the joint venture partners have gained enough experience from the demonstration plant. This facility will be owned on a 50/50 basis between the joint venture partners. In the joint venture, Stora Enso will be responsible for supplying the wood biomass and utilising the heat generated at its pulp and paper mill. Stora Enso's wood biomass is supplied from forests according to ecological preconditions. Neste Oil will be responsible for final refining and marketing of the biofuels produced.

Responsibility through cutting greenhouse gases

The European Union has set a target of replacing 5.75% (18 million metric tons) of the fossil fuels consumed by transportation with biofuels by 2010 and 10% by 2020. This would mean replacing 30 million metric tons of fossil fuels and would require significant increases in biofuel production. Emissions from biofuels are considered to be carbon-neutral because the carbon dioxide is recycled through the atmosphere and stored by growing forests as part of the natural carbon cycle, whereas combustion of fossil fuels introduces "new" sources of carbon dioxide into the atmosphere.

This new enterprise supports Stora Enso's sustainability policies and the Group's efforts to mitigate climate change. Stora Enso is focused on reducing greenhouse gases by improving energy efficiency, increasing usage of biofuels and other renewable energy sources, and maximizing the use of combined heat and power in energy production.

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Neste Oil Corporation is a refining and marketing company focused on advanced, clean traffic fuels, with a strategy that prioritises growing its refining and premium-quality biodiesel businesses. Neste Oil's refineries are located in Porvoo and Naantali in Finland, and have a total refining capacity of approximately 250,000 barrels per day. The company employs around 4700 people. Neste Oil is listed on the Helsinki Stock Exchange. For further information, see www.nesteoil.com

Stora Enso's Varkaus mill produces fine paper, directory paper, newsprint, coreboard, and sawn timber on three paper machines and one board machine with a total annual capacity of about 620,000 metric tons of paper and board, and 345,000 cubic meters of sawn wood products. The mill's annual wood consumption is approximately 2.3 million cubic meters. The mill employs about 980 people.