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St. Petersburg International Economic Forum: Review of investment agreements and key ideas

At the St. Petersburg International Economic Forum, held on June 16-18, businessmen and regional officials discussed a number of timber projects.

- Segezha Group may build a plywood mill in the Vologda region
- The group will also invest 5 billion rubles within five years in the development of Vyatka plywood mill and regional logging capacities
- In March 2016, Segezha Group launched a factory capable to produce 90 million paper sacks and will invest 3 billion rubles in stages II-III to bring the production up to 200 million sacks
- Sveza Novator will increase production of large-format plywood by 55,000 m3, the cost of the project is 5 billion rubles
- Barlinek (Poland) may build a mill for the production of plywood, parquet board and pellets in the Kostroma region

The forum hosted a roundtable that brought together representatives of government and large timber companies. In Russian Timber Journal, a bi-weekly report of WhatWood agency, you will find detailed description of investment agreements signed at the forum as well as 20 key quotes of the speakers, some of which are presented below:

Viktor Evtukhov, State Secretary, Deputy Minister of industry and trade of the Russian Federation

We intend to increase the minimum investment [for the status of priority investment project] up to 850 million rubles. To strengthen control over the implementation of projects, the regional authorities and the investor will from now on sign investment agreements stipulating responsibilities, including the creation of jobs and minimal product output. The investor will be able to use forest resources only after investing 25% of the claimed funds into the project. Recently we had to make a lot of decisions to exclude projects from the list.

Ivan Valentik, Head of the Federal Forestry Agency

After the World War II in Finland, public investments into intensive reforestation have led to a rise in the volume of timber allowed for cutting. Today we are trying to implement this model — of course, taking into account regional aspects. We took the path of establishing regional standards of forest management. I would like to inform you that we are almost ready to approve pilot logging standards in the Dvina-Vychegda area. This forest area, which occupies part of the territory of the Arkhangelsk region and the Komi Republic, was chosen because of its proximity to the largest woodworking enterprises.

Klaus Peller, CEO, Mondi Syktyvkar

We are moving into the packaging area more and more. We see significant growth there, 5–6% on an annual basis even now. We believe that this will continue. The hygienic sector also has strong growth, in particular in Russia, and I see potential in such product grades which the country is currently importing, and I hope some others will follow our strategy: the focus on the local market and not only exports.

Sergei Pomelov, President, Chairman of the Board, Segezha Group

We run into a very high value of money in Russian banks. Today we have much easier negotiations with a syndicate of international banks, providing cheaper funding. This is a completely absurd situation. If there is no government support in infrastructure, no progress can be expected. This is very important: when you put all these factors in the financial model, you understand that it doesn’t work, that payback period of global projects is as long as 12 years, because the industry is capital intensive. When you come with these figures to the shareholder, you get the obvious answer.

Russian Timber Journal is an English-language publication containing investment news, timber market trends, featured articles, key ideas of the top industry events, as well as prices for logs, lumber, pellets, and wood-based panels.

Until 12 September, 2016, special price is available for the journal: annual subscription fee amounts to EUR 390. In order to subscribe at a special price, please send a mail at kb@whatwood.ru by 12 September.

All RTJ subscribers receive on demand the full journal archive: almost five years of key information on the global timber industry which will be always at hand while taking managerial decisions.

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