Billion-euro pulp mill a step closer to reality

A Latvian government task force and Finland's Metsaliitto have reached a tentative agreement about the terms for construction of a pulp mill in Latvia, representatives of both parties confirmed recently.

Latvian Agriculture Minister Martins Roze said the ministry had three weeks to prepare the required materials for the government to make a final decision on the pulp mill, which will be one of the largest foreign investments in Latvia's timber sector.

The pulp mill, which is planned to have an annual capacity of 600,000 tons or pulp, will be built near the town of Jekabpils and is expected to become operational by 2007, according to current plans.

The government still has to agree on real estate and corporate income-tax breaks for the company. Roze said it might turn out that the investor wouldn't need the 80-percent discount on corporate income tax for 20 years, as was allowed in a preliminary deal.

Any agreement is also subject to the results of an environmental assessment currently being carried out.

Investors also have to produce a report about the likely effects of the project on Latvia's economy.

In January the government decided to withdraw from the pulp project, having agreed to sell its 33 percent stake for no less than its face value of 66,000 lats (105,000 euros).

At the time, the government cited the projected size of investments required by the project as the main reason for pulling out, though Deputy Prime Miniser Ainars Slesers stressed that running companies wasn't the state's core task.

Investors, including Metsaliito, hailed the decision.

Apart from tax discounts, Metsaliitto wants the Latvian state to have a clear forest development policy, a guaranteed supply of trees on state land and a supply of raw materials for the building of the mill.

"We have to know for sure what will be Latvia's benefits from the project," said Deputy Prime Minister Ainars Slesers

Metsaliitto, one of Europe's largest timber processors, plans to invest nearly a billion euros in the pulp mill.

Metsaliitto's group vice president for strategic planning, Eero Kytola, confirmed to BNS that the pulp mill would be run by the subsidiary Metsa Botnia, which is 53 percent owned by Metsaliitto and 47 percent owned by the processor UPM Kymenne.

The Baltic Pulp Company, the local firm formed for the project, has said that the project will not have any detrimental environmental effects.

But independent experts on a task force set up by the Riga City Council have disputed that report.

That assessment has been disputed by independent experts from the task force of the Riga City Council, who said the Baltic Pulp report was full of mistakes and even false facts.