In February 2007, Ruukki Group Plc announced that it had registered investment
agreements concerning a sawmill and a chemi-mechanical market pulp factory
(BCTMP, bleached chemi thermo mechanical pulp) mill in the investment project
register of the Kostroma region. Ruukki Group has reached an
agreement with the administration of the Kostroma region concerning the
expansion of the BCTMP mill investment agreement with a new agreement which
must still be registered in the Kostroma region's administration.
Pursuant to the earlier investment agreement that was registered in February
2007, Ruukki Group has the opportunity to invest in a BCTMP mill with an annual
production capacity of 300,000-500,000 tons. Pursuant to the expanded investment
agreement now concluded, Ruukki Group can either invest in a chemical pulp mill
(BKP, bleached kraft pulp) with an annual production capacity of 800,000 tons,
or alternatively in the BCTMP mill agreed earlier.
The joint use of wood of the 800,000 ton BKP mill that Ruukki Group is now
planning and the conifer sawmill, which will have an annual production capacity
of 300,000 cubic meters, will, if realized, reach over four million cubic
meters of
wood for industrial use per year. In order to make this possible, it has been
agreed that the annual harvesting rights included in the investment agreements
can be raised from the previous 2.5-3.1 million cubic meters to a total of 6.0
million cubic meters per year. This increase in total harvesting rights also
gives an opportunity to expand the sawmill capacity clearly in excess of the
planned 300,000 cubic meters.
About half of the output of the BKP mill is planned to be long-fiber bleached
conifer pulp (BSKP, bleached softwood kraft pulp), and half short-fiber bleached
deciduous pulp (BHKP, bleached hardwood kraft pulp).
Ruukki Group has had Pöyry Forest Industry Consulting Ltd conduct a feasibility
study on both alternatives. The preliminary estimates of this study show that
the production costs of a BKP mill would be on a competitive level when compared
with, e.g., new chemical pulp mills operating with low production costs in South
America.
Based on current information and calculations, Ruukki Group estimates the total
investments for the BKP mill and sawmill, and for the necessary harvesting and
transport machinery, to be approximately EUR 1.1 billion, as opposed to the
estimated total investments of EUR 0.5 billion for the BCTMP mill investment
previously announced. Therefore, the total investment is to a significant extent
dependant upon the technical setup and the annual production capacity of the
pulp mill. If the pulp mill is decided to be established as a BKP mill, then the
mill investment will be significantly affected, e.g., by the price development
of special steels during the implementation period of the investment.
The extension of the investment agreement is not expected to change the schedule
of the investment projects considerably. The sawmill is expected to start
production at the end of 2008, and the pulp mill at the end of 2010. The planned
location for the pulp mill and sawmill is about 500 km north-east of Moscow in
the city of Manturovo, on the Unzha River, in the Kostroma region.
In addition, the final implementation of the investments is dependent, e.g., on
obtaining environmental and other official permits in Russia and on other
factors. At this time, no assurance can be given that such permits will be
obtained or that favorable decisions will be made by the relevant authorities.
Ruukki Group has set a target that equity financing would constitute 20-40% of
the total financing for the Kostroma project. In order to finance the planned
investments in Russia, Ruukki Group intends to arrange a share issue in the near
future with a value of EUR 200-250 million. A considerable portion of the issue
will be directed to international institutional investors that do not have
previous holdings in Ruukki Group; however, the existing shareholders of the
company will also have the opportunity to participate in the issue.
Ruukki Group has appointed Evli Bank Plc, Corporate Finance to prepare the
carrying out of a possible share issue. Ruukki Group has also started
negotiations on debt finance in order to finance the remaining share of the
investment.
Ruukki Group arranges a press briefing on this issue on 24 May 2007 at 1:00 p.m.
This event will be held at World Trade Center, Aleksanterinkatu 17, 00100
Helsinki. The press material will be published in Ruukki Group Plc's web page
when the press briefing starts at 1:00 p.m.
RUUKKI GROUP PLC
Antti Kivimaa
Chief Executive Officer
Ruukki Group is an entrepreneurial development company that operates through the
companies it owns all over Finland in various field including house building,
sawmill and furniture business and care services. Ruukki Group Plc's share
(RUG1V) is listed on the Helsinki Exchange in the OMX Nordic Exchange's small
cap category.
For further information, please contact:
Antti Kivimaa
Chief Executive Officer
Ruukki Group Plc
Telephone +358 400 501 780
Ruukki Group Plc has agreed on the possibility to expand the mill investments in Kostroma, Russia—a share issue is being planned
| Source: Afarak Group Plc