UPM and Sveza Group Team up to Prepare a Modern Pulp Mill Project

Helsinki, Finland, 19 December 2007 -- Finnish forest industry group UPM and Russian Sveza Group have signed a letter of intent to form a joint venture company, and to make a final investment decision after finalising the feasibility study on a state-of-the-art forest industry facility in the Vologda region of northwest Russia. Each party would hold 50% of the joint venture’s share capital.

The planned industrial complex includes a modern pulp mill, a sawmill, and an OSB building panels mill in the community of Sheksna, in the southern part of Vologda. The planned capacity of the pulp mill would be 800,000 metric tons, the sawmill 300,000 cubic meters, and the OSB mill 450,000 cubic meters.

"This wide-scale project is really a national one and has a tremendous impact on the development of the Russian economy as a whole and the Vologda region in particular. It will help to utilize the Russian forest resources more efficiently based on the latest technology," claimed Alexey Mordashov, the owner of Sveza. "When implementing the project we are planning to use the economic development institutions, e.g. Vnesheconom bank and the Investment Fund. As the investors of the project we, together with UPM, are expecting to get support from the state," Mordashov said.

"Russia plays an important part in UPM's global growth strategy. Since 2004, UPM has actively investigated new openings in Russia," said UPM's president and CEO Jussi Pesonen. "This project provides us with an exciting opportunity to expand our existing Russian operations further. UPM has the competencies and skills to construct world-class mills using the latest technology and environmental know-how."

The total investment in the facilities would exceed EUR 1.0 billion. When fully operational, the new Sheksna mills would employ approximately 650 persons, while the indirect employment benefit in the region would total thousands of jobs.

Sheksna is located in the southern part of Vologda, a region of abundant forest resources. The Vologda forests have a growing stock of close to 1 billion cubic meters of sustainable capacity. Sheksna enjoys good logistics, with access to the Volga-Baltic waterway and the northern railroad extending from St.Petersburg to Perm. The products of the Sheksna mills would be mainly intended for domestic Russian markets.

Sveza in Brief

Sveza Group is a business controlled by Aleksei Mordashov as a personal investment, fully independent of steel and other businesses. Sveza is one of the leading forestry companies in Russia. It includes five manufacturing sites: Ust-Izhora plywood mill, Kostroma plywood mill “Fanplit,” Velikiy Ustyug plywood mill “Novator,” Perm plywood mill, and Manturovo plywood mill “Fankom.” Its Web site is www.sveza.ru.

UPM in Brief

UPM is one of the world’s leading forest products groups. The Group's sales in 2006 were EUR 10 billion. It has about 28,000 employees. UPM's main products include printing papers, label materials, and wood products. The company has production units in 14 countries and its main market areas are Europe and North America. UPM's shares are listed on the OMX Nordic Exchange Helsinki. The company's shares are also traded under an ADR programme on the OTC market in the United States. Its Web site is www.upm-kymmene.com.