New pulp mill to turn trees to jobs

RIGA - The Latvian Minister of Agriculture, Aigars Kalvitis, announced that the Latvian government will participate with two Scandinavian companies in forming a joint venture named Baltic Pulp. The Finnish company Metsalitto Group and the Swedish company Sodra Group has joined the Latvian Ministry of Agriculture in forming the pulp manufacturing company.

Kalvitis said that the Latvian Ministry of Agriculture, Metsalitto and Sodra have signed a shareholder agreement for the conception of Baltic Pulp and have elected a board for the project.

"The Baltic Pulp venture will be represented by two people of each party participating in the pulp mill project," Kalvitis said, "and in the agreement signed, Metsalitto will buy 34 percent of the Baltic Pulp shares. Sodra and the Latvian government will own 33 percent each."

The capital for the project is estimated at $16.72 million and each member of the company will cover their share of capital payments according to the percentage they own of Baltic Pulp shares. Kalvitis said that when production begins in roughly two years, the total capital invested could reach $1 billion.

The exact site needs to be found, environmental studies need to be done and finally permits for building the pulp mill need to be finalized before building can proceed.

Kalvitis is working out a way so the pulp mill project can be granted economic free zoning.

"A similar project in Germany is being planned, and this project will receive large subsidies from the German government," Kalvitis said. "Baltic Pulp will need the granting of economic free zoning if the company is to compete successfully in the international pulp market."

The pulp mill will be constructed just outside the eastern Latvian town of Jekabpils, an area synonymous with high unemployment. Kalvitis said the pulp mill will inject approximately 600 to 700 jobs directly at the mill with the possibility of more jobs indirectly involved for a town that desperately needs more employment in the region. The Minister of Agriculture thinks that production and sale of pulp will contribute a 3 percent rise in gross domestic product growth to the Latvian economy.

The Latvian government has ensured that Latvia can provide all the timber needed for production of pulp at the mill. The timber used in production, said Kalvitis, should not exceed 10 percent of Latvia's state-owned forests. The raw forest resources that Latvia can offer to the project are one of the reasons the Scandinavian companies are interested in investing money into the project. Kalvitis explained that the pulp mill will also be able to make use of other Latvian timber industries waste, such as their off-cuts for the production of pulp.

Erik Lagerwall, the executive director of Metsalitto, said the positive support the Latvian government has given to the project is the reason behind their choice of constructing the pulp mill in Latvia. Lagerwall said half the pulp produced at the mill will be sold directly to Finland for paper production. This sale of the finished pulp product and Sodra being the world's largest producer of whitened pulp products gives Kalvitis extreme optimism that the Baltic Pulp venture will be a great success.

Kalvitis believes the production of 600,000 tons of pulp annually by the mill and the introduction of the jobs to the Jekabpils area is a big bonus for the Latvian economy. Construction could be finished and production at the mill could begin as early as 2005.