Control over pulp mill could fall into different hands

  • 2003-07-24
  • From wire reports
HELSINKI - A project for building a massive pulp mill in Latvia may pass into the hands of the Finnish paper giant Metsa-Botnia since the Latvian government has refused to invest in the facility, the Finnish business daily Kauppalehti reported.
The concern Metsaliitto, which has been the engine behind the Baltic Pulp project for years, hopes Metsa-Botnia, which is controlled by Finnish companies UPM-Kymmene and M-real, will take over the multi-hundred-million-dollar investment project.
Metsaliitto's stake directly in Metsa-Botnia is only 6 percent, while M-real, also part of the Metsaliitto concern, has a 47 percent holding in it, as does UPM-Kymmene.
In the initial phase of the project Metsaliitto, the Latvian state and Sweden's Sodra were equal partners in the Baltic Pulp project, but Sodra and the Latvian state both eventually pulled out.
The project has been beset by bureaucratic and environmental activist delays. This week a government working-group decided that before giving its final approval it wanted guarantees that, in addition to the pulp mill, a paper factory would also be built in western Latvia where the mill is to be built.
The government set out its demands in a memo to Metsaliito, which the firm answered in the negative.
It was unclear how much of a new impetus a switch in investor control would bring to Baltic Pulp.
UPM-Kymmene, which is Finland's second largest producer of paper, has been struggling with a freefall in profits due to a slump in global demand for paper products.
UPM-Kymmene operated at only 87 percent of total capacity in the first half of 2003, reported Agence France Presse.
"Massive downtime has been taken to adjust production to demand," chief executive Juha Niemelae conceded when releasing the group's quarterly results on July 17. The company reported a 53 percent drop in net profit from a year ago to 133 million euros.
Metsaliitto and the Latvian government have agreed that an official decision on whether to build the mill or freeze the project will be made in the first quarter of next year.
The council of Metsa-Botnia has not yet made a decision to acquire the Baltic Pulp stake. If the firm opts for making the investment, Baltic Pulp will become a 100 percent subsidiary of Metsa-Botnia.
Metsaliitto earlier said the Latvian pulp mill would cost approximately 900 million euros. The facility's planned capacity will be 600,000 tons a year.
The mill may be launched in 2007 at the earliest.