May, 24th, 2007
Ruukki Group Plc has agreed on the possibility to expand the mill investments in Kostroma, Russia-a share issue is being planned
Ruukki Group Plc announced that it had registered investment agreements concerning a sawmill and a chemi-mechanical market pulp factory (BCTMP, bleached chemi thermo mechanical pulp) mill in the investment project register of the Kostroma region. Ruukki Group has reached an agreement with the administration of the Kostroma region concerning the expansion of the BCTMP mill investment agreement with a new agreement which must still be registered in the Kostroma region's administration.
Pursuant to the earlier investment agreement that was registered in February 2007, Ruukki Group has the opportunity to invest in a BCTMP mill with an annual production capacity of 300,000-500,000 tons. Pursuant to the expanded investment agreement now concluded, Ruukki Group can either invest in a chemical pulp mill (BKP, bleached kraft pulp) with an annual production capacity of 800,000 tons, or alternatively in the BCTMP mill agreed earlier.
The joint use of wood of the 800,000 ton BKP mill that Ruukki Group is now planning and the conifer sawmill, which will have an annual production capacity of 300,000 cubic meters, will, if realized, reach over four million cubic meters of wood for industrial use per year. In order to make this possible, it has been agreed that the annual harvesting rights included in the investment agreements can be raised from the previous 2.5-3.1 million cubic meters to a total of 6.0 million cubic meters per year. This increase in total harvesting rights also gives an opportunity to expand the sawmill capacity clearly in excess of the planned 300,000 cubic meters.
About half of the output of the BKP mill is planned to be long-fiber bleached conifer pulp (BSKP, bleached softwood kraft pulp), and half short-fiber bleached deciduous pulp (BHKP, bleached hardwood kraft pulp).
Ruukki Group has had Pöyry Forest Industry Consulting Ltd conduct a feasibility study on both alternatives. The preliminary estimates of this study show that the production costs of a BKP mill would be on a competitive level when compared with, e.g., new chemical pulp mills operating with low production costs in South America.
Based on current information and calculations, Ruukki Group estimates the total investments for the BKP mill and sawmill, and for the necessary harvesting and transport machinery, to be approximately EUR 1.1 billion, as opposed to the estimated total investments of EUR 0.5 billion for the BCTMP mill investment previously announced. Therefore, the total investment is to a significant extent dependant upon the technical setup and the annual production capacity of the pulp mill. If the pulp mill is decided to be established as a BKP mill, then the mill investment will be significantly affected, e.g., by the price development of special steels during the implementation period of the investment.
The extension of the investment agreement is not expected to change the schedule of the investment projects considerably. The sawmill is expected to start production at the end of 2008, and the pulp mill at the end of 2010. The planned location for the pulp mill and sawmill is about 500 km north-east of Moscow in the city of Manturovo, on the Unzha River, in the Kostroma region.
In addition, the final implementation of the investments is dependent, e.g., on obtaining environmental and other official permits in Russia and on other factors. At this time, no assurance can be given that such permits will be obtained or that favorable decisions will be made by the relevant authorities.
Ruukki Group has set a target that equity financing would constitute 20-40% of the total financing for the Kostroma project. In order to finance the planned investments in Russia, Ruukki Group intends to arrange a share issue in the near future with a value of EUR 200-250 million. A considerable portion of the issue will be directed to international institutional investors that do not have previous holdings in Ruukki Group; however, the existing shareholders of the company will also have the opportunity to participate in the issue.
Ruukki Group has appointed Evli Bank Plc, Corporate Finance to prepare the carrying out of a possible share issue. Ruukki Group has also started negotiations on debt finance in order to finance the remaining share of the investment.
Ruukki Group arranges a press briefing on this issue on 24 May 2007 at 1:00 p.m. This event will be held at World Trade Center, Aleksanterinkatu 17, 00100 Helsinki. The press material will be published in Ruukki Group Plc's web page when the press briefing starts at 1:00 p.m.
About Ruukki Group
Ruukki Group is an entrepreneurial development company that operates through the companies it owns all over Finland in various field including house building, sawmill and furniture business and care services. Ruukki Group Plc's share (RUG1V) is listed on the Helsinki Exchange in the OMX Nordic Exchange's small cap category.
Chief Executive Officer
Ruukki Group Plc
Telephone +358 400 501 780
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