In the Republic of Karelia for realization of large investment project of Segezha and Kondopoga pulp and paper mill needed an uninterrupted supply of raw materials

During his working visit to Karelia on the 4th of December, 2018, Chairman of the Board, President of Segezha Group Mikhail Shamolin took part in a working meeting of the government of the Republic of Karelia. At the meeting, chaired by the head of the Republic of Karelia Arthur Parfenchikov, the issue of privatization of the stake of PJSC “LHC “Karelesprom”owned by the Republic of Karelia was considered.

As explained by the head of Karelia, the government asked the leadership of JSC “Kondopoga” to provide one of the largest enterprises of the pulp and paper mill the opportunity to purchase the necessary raw material base. The plant in Kondopoga did not have its own logging sites. Currently, despite the stabilization of production, “Kondopozhsky PPM” is in a state of bankruptcy. After completion of the rehabilitation procedure, the plant intends to implement the modernization program. Potential investors have already been found for this. However, for investment, it is necessary to guarantee that the plant will be provided with the necessary amount of raw materials constantly.

The leadership of the Republic, who planned to auction off the state (over 50%) stake in PJSC “LHK Karellesprom”, was invited to dialogue Segezha Group – the timber industry holding company uniting in the Republic of Karelia JSC “Segezha pulp and paper plant”, LLC “Segezhskaya Upakovka”, JSC “Segezhskiy LDK”, a major logging enterprise and owning 43.88% of the shares of Karellesprom. Segezha Group was interested in buying the state stake in PJSC “lhk Karellesprom”, and also invited the government of Karelia to auction off a package, equal to that owned by the holding company.

Segezha Group President Mikhail Shamolin added that Segezha Group is entering a large-scale investment project to increase capacity, primarily through the construction of a new pulp production: “we are talking about the restructuring of 80 percent of Segezha pulp and paper mill capacity using the most modern technologies. The amount for this reconstruction, according to the first estimate, is in the range of 45-50 billion rubles. We are ready to invest this amount. But it is especially important for us to provide the plant with raw materials so that the cost of our products is competitive.”

During the negotiations, the government of Karelia proceeded from the need to provide the necessary raw material base for the two largest pulp and paper mills of Karelia-Kondopozhsky and Segezhsky, to support the investment plans of the development of both companies. As noted by the head of Karelia, the Government of the Republic will have a stake, the size of which will influence the final decision in the event of a dispute in matters relating to the financial and economic activities of “karelesprom”. The sale of shares will bring additional income to the budget of the Republic.