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UPM finalises pending items with the new Government of Uruguay

Finland-headed forest industry major UPM has disclosed that it is proceeding at full speed with its pulp mill investment project in central Uruguay and has taken several steps forward. UPM and the new Government of Uruguay have signed a Memorandum of Understanding (MoU) on pending items related to UPM’s growth project in Uruguay that will further strengthen the implementation of the pulp mill project and existing operations in Uruguay as well as the local economy.

UPM Paso de los Toros pulp mill construction site in central Uruguay (photo courtesy UPM).

Especially in the context of the COVID-19 pandemic and its potential impacts on Uruguayan society, UPM and the Government of Uruguay recognize the critical importance of ensuring the implementation of the project and realizing its benefits for the Uruguayan economy.

Both parties are fully committed and implementing the existing pulp mill investment agreement signed between UPM and the previous Government of Uruguay in November 2017. Successful implementation of the project involves a large number of aspects from construction work to infrastructure, energy, and regional development. To this effect, UPM and the Government of Uruguay have signed a Memorandum of Understanding (MoU) that refines and finalizes the scope and investments by the parties:

  • Infrastructure: UPM will accelerate the earlier planned US$60 million financing of the road infrastructure development in the Littoral area and Central Uruguay to support the growing wood transportation and high-performance vehicles while improving the road system in the area for all businesses and residents of the area.
  • Electricity network: UPM will invest US$68 million in electrical grid reinforcement that will create a bigger capacity for the grid, enabling UPM to fully utilize and sell the surplus energy of the Paso de los Toros mill in line with the specified project plans and higher energy efficiency performance of the mill. The investment will also further improve the stability and robustness of the electricity grid.

The total framework of UPM investment remains unchanged as announced by UPM in July 2019 in the context of the final investment decision, including the investment frame of US$3 billion and the cash-cost of approximately US$280 per delivered tonne of pulp.

These items will become effective upon signing the related contracts, which is expected to take place in the coming months.

With the finalization of these pending items, both parties confirm their commitment to implement the project as agreed even in the unexpected circumstances prevailing under COVID-19, said Petri Hakanen, Senior Vice President, Uruguay development project, UPM.

UPM also plans to invest in a new nursery in Central part of Uruguay. This planned third eucalyptus nursery would further enhance the plantation growth and competitive wood supply. The planned investment is estimated to be approximately US$25 million and create over 120 new permanent jobs.

Furthermore, UPM has signed a long-term agreement with Kemira corporation regarding Kemira’s capacity expansion at Fray Bentos mill site to supply both Fray Bentos and the new Paso de los Toros mill. This expansion will further improve the efficiency and supply security through increased domestic production of pulp manufacturing supplies.

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