International Paper to Form Joint Venture in China

March 23, 2006 - International Paper and Shandong Sun Paper Ltd. have agreed to form a 50:50 joint venture for coated board production in Yanzhou City, Shandong Province. The companies expect to sign the agreement during a visit to Jinan, the capital city of Shandong Province, in early April by International Paper Chairman and CEO John Faraci.

The joint venture includes two coated paperboard machines located in Yanzhou City, as well as construction of a third coated paperboard machine, expected to be completed in late 2007. International Paper's investment in the venture is expected to be approximately $140 million. This amount includes IP's share of the investment in the new paper machine.

"Expanding our coated board production in China through this powerful partnership with Sun Paper is core to our strategy for serving our global packaging customer base," said John Faraci, IP chairman and chief executive officer. "As our key customers expand globally into China and other emerging markets, we will be there to help them grow. This joint venture with Sun Paper enables us to do that."

Mr Li Hong Xin, chairman of Sun Paper said, "Sun Paper will merge its strong sales network in China with advanced technology and management experience from International Paper, to provide world-class products and services to paper products customers in the fast-growing Chinese market."

Tom Gestrich, president IP Asia said, "Both IP and Sun will benefit from this joint venture; Sun Paper's excellent reputation and presence in China complements International Paper's technical expertise and strong global customer base. This joint venture reinforces IP's commitment to growth in China."

The company had announced in August 2005 that it had entered into a memorandum of understanding (MOU) with Sun to form a joint venture to support IP's strategy to grow its global packaging presence and better serve its global customer base. With an agreement now in place, the companies expect to finalize the transaction early in the third quarter of 2006, subject to various closing conditions and governmental approvals.

Coated paperboard is used to produce a variety of consumer packaging products, including high-performance folding cartons for aseptic and tobacco packaging. International Paper currently produces coated board in the U.S., Poland and Russia, and serves customers across the globe.

Headquartered in the United States, International Paper is the world's largest paper and forest products company. Businesses include paper, packaging, and forest products. As one of the largest private forest landowners in the world, the company manages its forests under the principles of the Sustainable Forestry Initiative a (SFI) program, a system that ensures the continual planting, growing and harvesting of trees while protecting wildlife, plants, soil, air and water quality.

Shandong Sun Paper Co. Ltd. is one of the largest paper manufacturing companies in China and is privately owned. It has significant business in premium paper grades such as coated paper and board, communications paper, etc. The company has focused on developing high-end coated board and communications paper in China, and has effectively combined company expansion with environmental protection.

SOURCE: International Paper

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