Latvia to trade forest for pulp

  • 2000-09-21
  • Jorgen Johansson

RIGA - Two foreign wood products companies, Sodra Cell from Sweden and Finland's Metsaliitto, have closed a deal with the Latvian government on a $900 million investment in a pulp factory outside Jekabpils.

The Latvian government will not put any money in the joint stock project company, which has been named A/S Baltic Pulp. Instead, it has agreed to supply wood in exchange for an undisclosed number of shares.

Arvids Ozols, head of the government's work group in the A/S Baltic Pulp project, refused to say how much forest land Latvia will provide.

"I am not going to count up any numbers or give any hectares," Ozols said.

Eric Lagerwall, managing director for Oy Metsaliit-to International Ltd. said the amount of hectares contributed by the Latvian government could vary depending on how much stock it receives.

"We are talking about 150,000 to 200,000 hectares (370,500 to 494,000 acres) of forest, but I would guess it will be closer to 150,000 hectares," Lagerwall said.

Liga Upite, senior officer in the information and statistics unit at the Agriculture Ministry, said Latvia has 2,877,000 hectares of forest, of which the state owns 1,448,000 hectares.

This means Latvia will, according to Lagerwall's estimate, give up 10.4 percent to 13.8 percent of its total forest, to ensure the production of pulp in the planned plant.

Magnus Fagerlind, administrative director for Sodra Cell, said this (theA/S Baltic Pulp project) is the biggest event in Latvia since World War II.

It is planned that the factory will produce 600,000 tons of pulp annually. If nothing hampers the project, which first took form in 1994 - 95, the plant could be operational by 2005.

"The site for this project has been carefully considered," Fagerlind said. "It's about finding the shortest transport distance as possible."

To turn wood to pulp, the plant will boil the wood in high temperatures to free the fibers in the wood. For this, water will be taken from the Daugava River. The water, which turns into steam, is then transformed into electricity in steam turbines.

Fagerlind spoke of a similar plant in Sweden which provides some of the electricity for a small town in its vicinity. This could also be done at Jekabpils, he said.

"There is also a lot of heat generated, which could go through pipes and heat up the town," Fagerlind said. "It is possible to supply electricity for 5,000 to 10,000 single family houses."

Fagerlind is not worried there won't be a market for Latvian pulp once the plant is ready. He said there's an agreement between Sodra Cell and Metsaliitto saying the latter will take 50 percent of the plant's output.

"The rest will go on the European market, which is growing by 3 percent to 4 percent every year," Fagerlind said.

When asked what will happen to the local sawmills already operating in the Jekabpils area, Ozols said they will coexist with the pulp factory.

"There are many big sawmills there already, and we will work together," Ozols said.

Lagerwall said the plant will employ 350 to 400 people, while in total some 7,000 to 10,000 people would be involved in the project.

"We are talking about maintenance, repairs, transport and several other details," Lagerwall said.