Bank Sankt-Peterburg to credit troubled Kondopoga pulpmill and suggests mill conversion

Petrozavodsk, February 05. Karelia governor Aleksandr Hudilainen announced that Bank Sankt-Peterburg was chosen as investor for troubled Kondopoga pulpmill.

“We will be crediting the pulpmill, but we are not going to enter this business”, bank’s press service told WhatWood.

“Quite a good way out of the deadlock is appearing. An investor came who is willing to undertake mill’s liabilities to other banks. Within two weeks, the whole financial model will be developed. Next time we’ll meet with the representatives of the largest banks that credited Kondopoga pulpmill to discuss the matter of debt transition to Bank Sankt-Peterburg”, Hudilainen said.

The mill closure is out of question, governor added. Instead, the bank suggests full upgrade of the mill and gradual conversion to other forest products, probably pulp, within three or four years, as newsprint demand is gradually falling.

Today, only one papermaking machine out of seven operates at the enterprise. In early February, the management is going to launch two more machines.

The bank was presented among five possible investors at the board meeting on January 24. Karelian government suggested attracting business structures belonging to Albert Laritskiy, while the Board supported the option to merge with Volga newsprint mill, another giant of the industry. This option was also supported by the leaders of Karelian trade unions. Volga’s head of PR department Andrey Solovyov in an interview to WhatWood said then that the company “is not yet commenting” on the possible merger.

In December 2012, the mill’s management signed a regulation to lay off 2,400 workers (40% of total headcount) on indefinite leave. They are paid two thirds of regular wages.

WhatWood made a detailed report on the mill’s position last October. Back then, Gubernia Daily newspaper published two photos of a letter allegedly shared among mill workers and signed by Chief Executive Vladimir Bibilov. The letter told the mill is facing hard times.

Kondopoga mill produces newsprint and paperboard. Company’s share on the newsprint market in Russia is estimated at 39%. The mill’s sales declined 4.25% down to 10.07 billion Rubles (€249.7 million) in Q3 2012. Kondopoga managed, however, to curtail net loss threefold to 361.4 million Rubles (€9 million).