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10 Sep 2003 PanAsia Paper invests in China
Construction of the mill will begin during the fourth quarter of 2003. The mill is expected to reach full production during the third quarter of 2005 with a rated capacity of 330,000 tonnes per year. The newsprint produced at the mill will contain 100 per cent recycled fiber. Investments amount to about US$ 300 million, corresponding to less than US$ 1,000 per tonnes.
PanAsia Paper's share of the equity amounts to around US$ 70 million and will be financed from PanAsia Papers's own cash flow without any need for capital injection from its owners.
The Greater Beijing area is a very interesting region for the project in itself, with around 100 million people and an expected growth somewhat higher than for China as a whole. The project in Hebei has strong support both from local and central authorities.
-PanAsia Paper has been a success from the very beginning, says Norske Skog's President and CEO, Jan Reinås. This venture is quite in accordance with our strategy and gives us an even stronger position in the world's most interesting growth market. The project has low investment cost, and we are convinced it will add value to our shareholders.
PanAsia Paper has today a 25 per cent market share in non-Japan Asia, and markets paper that was delivered from a number of different companies just a few years ago. It has contributed strongly to a much-needed consolidation in the region. PanAsia Paper has already a strong position in China through the newsprint mill Shanghai PanAsia Potential, and this position will be further enhanced by the Hebei mill.
China has seen a rapid growth in newsprint demand in recent years. According to the Pulp and Paper Products Council demand has risen from 1.15 million tonnes in 1998 to nearly 1.8 million tonnes in 2002. Market outlook estimates an annual growth of almost 8 per cent until 2010.
The Hebei project will be consolidated as a subsidiary in PanAsia Paper's accounts, and with proportional consolidation in Norske Skog's accounts. The impact on
Norske Skog's balance sheet will be limited, as total assets will increase by around NOK 1.1 billion. Based on the current balance sheet, net gearing is estimated to increase by 0.04.
Further information is to be found on Norske Skog's web site www.norske-skog.com Oxenøen, 10 September, 2003
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