23817 - Orion

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Summary of Proposed Investment

Project Number

23817

Company Name

UPM S.A.

Date SPI Disclosed

Apr 20, 2005

Country

Uruguay

Industry

Agribusiness and Forestry

Projected Board Date

Nov 14, 2006

Status

Active

Sector

Pulp Mills

Department

Regional Industry MAS LAC & EUR

Environmental Category

A - Significant

Previous Events

Approved : Nov 21, 2006
Signed : Nov 29, 2006
Invested : Apr 23, 2007

Project Description

The project comprises the construction of a greenfield bleached eucalyptus kraft pulp (BEKP) mill with annual capacity of one million tons in Fray Bentos (Uruguay) by Europe’s second largest pulp producer, OY Metsa Botnia AB (Botnia, or the sponsor) from Finland. Uruguay is one of very few locations in the world where already existing plantations can supply the raw material for a new pulp mill of this scale. Wood for the mill will be procured from existing plantations owned by the sponsors and from third parties within Uruguay and Argentina.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	70.0
Equity

Development Impact

The project will benefit Uruguay by more fully processing Eucalyptus logs into BEKP leading to value-added exports. The project will have a catalytic impact creating linkages within the community through the creation of a new large employer in the area and the resulting increased need for products and services by the workers and their families which will be supplied by local businesses. The project will lead to increased incomes to companies and private individuals in the area of the mill and areas handling the wood supply. Since the mill will procure majority of its wood locally, companies that have invested in plantations will have a long term outlet for their product. The project’s competitive advantages include low cost wood, availability of raw material, state-of-the-art technology, scale, and experienced sponsor. The project was reviewed by the Helsinki Consulting Group’s Environment Department together with three Uruguayan experts, two economists and a sociologist. The impact of the project was measured during construction and during operation and key impacts include:

- significant boost to the economy and employment of Fray Bentos
- increase in GDP of Uruguay
- increase in the awareness of forest certification in Uruguay
- diversification of Exports and Increased Export Revenues
- increase in Foreign Direct Investment which has been low to date

This investment would be the largest foreign investment in Uruguay’s history and is estimated to create direct employment for over 5,000 people by 2007 and is calculated to increase the GDP of the Fray Bentos region by 50% and the GDP of Uruguay by 1.5%.

IFC’s role in the project includes the following:

- political risk mitigation
- relationship building with an important player in the pulp and paper sector
- provision of long-term financing.

This is an Environmental and Social Review Category A project. The following environmental, social, health and safety impacts of the project were analysed: the quality and impact of air emissions and effluents, including cumulative and downstream impacts; the source and sustainability of raw material supplies; social impacts; public disclosure and consultation; and compliance with IFC policies on involuntary resettlement, international waterways, forestry, natural habitats, and cultural property.

Location of environmental documents In locally affected community
Evironmental documentation wil be made available at the following locations:
Biblioteca Municipal;
Terminal de Omnibus,
Fray Bentos and Oficina de Turismo,
18 de Julio frente a Plaza Constitutucion,
Fray Bentos

Contacts

For Inquiries About the Project, Contact

Timo Karinen
Vice President, Business Development
OY Metsa-Botnia AB
Revontulentie 6
FIN-02100 Espoo
Finland

This Summary of Project Information (SPI) is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC's activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC's Disclosure of Information Policy that went into effect September 1998.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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