Tembec Sells Partial Stake in JV to Birla

April 14, 2008 - Tembec said that it has sold part of its interest in AV Nackawic Inc. and AV Cell Inc. to Aditya Birla Group (Birla). The AV Nackawic and AV Cell pulp mills are a joint venture partnership between Tembec and Birila.

According to Tembec, it has sold to Birla 20% out of the 25% equity interest it held in the issued and outstanding shares in the capital stock of both AV Nackawic and AV Cell for approximately CAD $9 million, leaving Tembec with a 5% interest in each of the entities.

In addition, Tembec sold to Birla, at face value, a loan it previously made to AV Cell in the principal amount of CAD $6.75 million. Tembec said it has received all accrued and unpaid interest on such loan at closing.

"This transaction makes sense to Tembec as we have decided to focus our resources on strengthening the company's balance sheet and to focus our efforts on our core business units," said James Lopez, president and CEO of Tembec. "Our commercial activity with Aditya Birla has expanded to include a significant long-term supply agreement from one of our wholly-owned pulp mills."

AV Nackawic
St. Anne Nackawic pulp mill (now known as AV Nackawic, Inc.) is located in New Brunswick, Canada and produces Paper Grade Wood Pulp. A project to convert the millís output into Dissolving Grade Pulp is underway, with initial production scheduled for early 2008. Pulp from the mill is exported to Birila's mills in India, Thailand, Indonesia and China. The mill currently produces 800 tpd of paper grade hardwood pulp, and will be converted to produce 600 tpd dissolving grade.

AV Cell
The AV Cell pulp mill is located in Atholville, New Brunswick, Canada produces 1,25,000 tpy of dissolving grade chemical pulp to Birila's plants in India, Thailand, Indonesia and China.

SOURCE: Tembec Inc.

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