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Stora Enso Insists Mills Must Be Closed

Jan. 17, 2008 (Press Release) - Stora Enso has concluded the co-determination negotiations at Summa, Kemijarvi and Anjala Mills, and the Helsinki Headquarters. The reasons for the capacity and resource cuts announced on 25 October 2007 have unfortunately not changed - excess capacity in standard and improved newsprint and uncoated magazine paper, and dramatic cost increases, especially for imported wood. Stora Enso must therefore take action to safeguard its cost and competitive position, and thereby the future of the Group.

As a result of the negotiations, the total number of personnel will be reduced by 985, compared with the initial planned reduction of 1,100 as announced in October. Approximately 170 of these 985 have a fixed-term contract, approximately 255 are taking retirement, and the announced retraining and employment support is intended to assist the remaining approximately 560 people affected.

Kemijarvi Pulp Mill will be permanently closed down to safeguard the supply of domestic pulpwood to the mills at Veitsiluoto and Oulu and reduce imports of excessively expensive wood. Closure of Kemijarvi Pulp Mill will reduce long-fibre pulp production by 250;000 tonnes, pulpwood consumption by 1.4 million cubic metres and electricity consumption by 140 GWh per year. Kemijarvi Mill will be permanently closed down by the end April 2008 with 214 job losses.

Summa Mill in Kymenlaakso is being closed down because of persistent losses in recent years and poor long-term profitability prospects. Despite tremendous efforts by its employees, the mill cannot compete in today's and tomorrow's markets using expensive virgin wood fibre, much of which is imported. Closure of Summa Mill will reduce Stora Enso's annual capacity by 270,000 tonnes of standard and improved newsprint and 80000 tonnes of uncoated magazine paper. Pulpwood consumption will be reduced by 1 million cubic metres, releasing the pulpwood from domestic sources for use at other Stora Enso mills. Electricity consumption will be reduced by 1,000 GWh per year. Summa Mill will be permanently closed down at the end of January 2008 with 450 job losses.

Paper machine (PM) 1 at Anjala Mill, with annual capacity 120,000 tonnes of book paper, will be permanently shut down in November 2008, as already announced, with 170 job losses. There will also be 122 job losses in services for the Kymenlaakso area and 29 at the Helsinki Headquarters.

"Our announced plans to close down the mills at Summa and Kemijarvi have received a lot of attention. Nevertheless, following the co-determination negotiations, we remain convinced that we must continue on essentially the course defined in our plans announced on 25 October, as our views on the amount of domestic wood available to Stora Enso and the markets for these papers have not changed. We must safeguard the future of the whole Group and Stora Enso Finland," said Stora Enso CEO Jouko Karvinen.

"In close co-operation with national and local organisations, we are starting to identify economically viable solutions to minimise the impact of our decisions. Since the measures we must take will have very serious consequences for so many people, I now implore all stakeholders to join us in rapidly establishing new businesses at the sites affected and motivating employees who can move to seek alternative employment elsewhere with Company support. It is time to find solutions that safeguard the futures of Stora Enso in Finland and the employees at the affected sites. We have had several expressions of interest that support our stated strategy, and I would be happy to see more. We need to find those solutions as fast as we ever can, so we have hired Ernst & Young to help us.

"In early November we announced a EUR 5 million voluntary support package to help the personnel affected to find new employment. We are today doubling that amount. The additional EUR 5 million will be focussed entirely on offering financial support for employees participating in retraining so they can obtain employment in new businesses created at the affected locations.

"We want to find uses for the properties at Summa and Kemijarvi that will establish economically viable businesses which will create new employment without competing with Stora Enso for critical pulpwood supplies or product markets. Some of the initiatives under discussion are based on the use of Eastern Lapland forest resources and support Stora Enso's pulpwood procurement policy as well," concluded Jouko Karvinen

Kotka Mill is not part of Stora Enso's core strategy, so the Company is actively negotiating to find a new owner that will continue production of laminated paper and special coated magazine paper.

Norrsundet Pulp Mill in Sweden is planned to be permanently closed down at the end of 2008. The conclusions of the ongoing negotiations with the personnel and the labour unions are expected later this coming spring.

SOURCE: Stora Enso




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