Helsinki, Finland, 26 March 2012 -- Stora Enso 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 tons per year, state-of-the-art paperboard machine and pulp capacity of 900,000 metric tons per year, including necessary energy plant and auxiliary facilities.
In a unique set-up, the board and pulp mills will be self-sufficiently integrated with wood supply from 120,000 hectares of self-managed eucalyptus plantations. The ultimate target is to expand the paperboard capacity to 900,000 metric tons 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 toward 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” said Jouko Karvinen, Stora Enso CEO.
“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,” said Mats Nordlander, Stora Enso executive vice president for Renewable Packaging.
The investment is subject to regulatory approvals, the signing of final documentation, and other customary conditions.
The fibre-based liquid packaging board segment is one of Stora Enso’s strategic focus areas and this investment is consistent with the Group’s announced strategic guidelines. Through this investment, Stora Enso seeks to benefit from the forecast future growth in demand for fiber-based packaging solutions for food in China, which is forecast by several researchers to grow at a compound annual rate of more than 10% during the next 10 years. This investment also will enable Stora Enso to provide excellent service with cost-competitive, locally produced, high quality liquid packaging boards on a regional basis for its global key customers that are already well established in China.
The United Nations Development Programme (UNDP) conducted an environmental and social impact assessment (ESIA) of the project for Stora Enso in 2006, and at Stora Enso’s request made an additional, integrated ESIA summary report, which will be reviewed independently and published in 2012. The studies give a supporting view for the board and pulp mill project. When the project began, Stora Enso established a Community Development Fund to provide financial support for development of education and infrastructure in local villages, and in 2011 the Group revised its stakeholder engagement and community development plans. Stora Enso will co-operate with local authorities, universities, organizations, and villagers to find long-term sustainable solutions for development.
Stora Enso has been establishing plantations in Guangxi since 2002. The Group 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. The Group’s other operations in China include a 245,000 metric tons per year coated fine paper mill in Suzhou, a 170,000 metric tons per year 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 Stora Enso employees in China is currently about 4500.