New long term power supply agreement for Norske Skog Skogn

Norske Skog has signed a long-term contract with Statkraft for supply of power for the paper mill at Skogn in Mid-Norway. The contract secures the continued operations at the mill, which needed a new long term power supply contract by the beginning of 2011. 

"We are very pleased with the agreement. Norske Skog Skogn is important to Norske Skog and for the forestry industry in Mid-Norway. This will help securing the workplaces at Skogn," says President and CEO of Norske Skog Sven Ombudstvedt.

The new contract with Statkraft secures yearly supply of 0.8 TWh of electricity per year until December 31, 2022. The agreement takes effect on January 1, 2011. In addition to Norske Skog, the agreement is negotiated in cooperation with Finnfjord AS, which will secure power supply for its smelter at Finnsnes in Northern Norway.

Most of Skogn's existing power contracts expire at the end of 2010, but a volume of 0.3 TWh will be available in 2011 in addition to the power being delivered from Statkraft under the new contract. This secures almost full coverage of electricity to Skogn in 2011. Purchasing of power in the spot market is expensive and unpredictable, and is not an alternative to a new, long-term agreement. Because of price differences between the energy market regions in Norway, it is not possible to use power sources from other parts of the country. Norske Skog is into negotiations with Nord-Trøndelag E-verk (NTE) in order to meet Skogn's total electricity volume with a new long term contract.

Norske Skog Skogn is one of the most environmentally friendly and efficient paper mills in Europe. A strong Norwegian currency and demanding market conditions throughout the industry means the mill needs access to stable and secure power supply at acceptable prices to maintain operations.

Statkraft and NTE can choose to take advantage of a new government guarantee scheme for energy intensive industry, which was passed by Stortinget (The Norwegian Parliament) on December 17 this year. The scheme, which involves finance guarantees by the Norwegian Guarantee Institute for Export Credits (GIEK), reduces risk for the power suppliers. The scheme is not yet approved by EFTA Surveillance Authority (ESA).

"The Norwegian government has worked to get the guarantee scheme in place. It is important for Norske Skog and Norwegian industry in general, and we appreciate these efforts," says Ombudstvedt.

Norske Skog Skogn employs 500 people. Production started in 1966. The mill produces newsprint, with UK as the biggest single market.  

Oxenøen, December 23, 2010

Norske Skog
Communications and public affairs

This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)