International Paper completes deal with Brazil's VCP

Feb. 1, 2007 - International Paper said that it has completed its previously announced exchange of Brazilian pulp and paper assets with Votorantim Celulose e Papel S.A. (VCP).

As outlined in the agreement between the two companies signed in September 2006, IP exchanged its in-progress pulp mill project (with approximately $1.15 billion in pre-funded project costs) and about 100,000 hectares (ha) of surrounding forestlands in Tres Lagoas, state of Mato Grosso do Sul, Brazil, for VCP's Luiz Antonio uncoated paper and pulp mill and approximately 55,000 ha of forestlands located in the state of Sao Paulo, Brazil.

Going forward, VCP will complete the 1 million-metric-tonne pulp mill in Tres Lagoas, and International Paper will build a 200,000-metric-tonne uncoated paper machine on a site adjacent to the mill, with an option to build a second similar machine in the future. The two parties have also negotiated a long-term supply agreement whereby VCP will provide pulp, utilities and other services to International Paper's Tres Lagoas operations at market prices.

"This investment complements our global strategy, improving our competitive position, while adding value to shareowners. The project is immediately earnings accretive, with greater than cost of capital returns, and doubles the EBITDA of our Latin American business," said John Faraci, International Paper chairman and chief executive officer.

"The Luiz Antonio mill is a globally cost-competitive paper mill, and its addition to our portfolio, along with our plans for the paper operations in Tres Lagoas, significantly expands our uncoated freesheet capacity in Latin America while providing growth opportunities in the region," Faraci added.

SOURCE: International Paper

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