Stora Enso (OMX: STE1RV) plans to build an integrated consumer board and pulp mill in Beihai, Guangxi, Southern China. The company has long viewed such investment in China on the basis of its own eucalyptus plantations. The mill site will initially include a 450 000 paperboard machine and pulp capacity of 900 000 tonnes per year. The company targets to double paperboard capacity at a later time.
The investment will be managed in a joint venture of Stora Enso (85%) and state-owned Guangxi Forestry Group (15%). Construction is expected to start once certain preconditions are met, such as regulatory approvals and signing of final documentations, with current estimates for H2 2012. Production is scheduled to start at the end of 2014.
The company said the investment helps Stora to move towards 13% ROCE target. The project will be financed 60/40 debt and equity. There is some debate regarding planting eucalyptuses, as the trees tend to leave the soil quite unwelcoming to any other plant. The United Nations Development Programme conducted an Environmental and Social Impact Assessment of the project in 2006 and Stora Enso has asked for an additional summary report to be published in 2012.
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