Finland's UPM and the Government of Uruguay have signed an investment agreement, which outlines the local prerequisites for a potential pulp mill investment. The agreement details the roles, commitments and time-line for both parties as well as the relevant items to be agreed prior to the final investment decision, reported the Finnish company in a release on Tuesday.
The agreement defines the requirements for the operating environment of a world-class pulp mill project. The site of the mill would be close to the city of Paso de los Toros, in the department of Durazno in central Uruguay.
A long-term industrial operation requires stable and predictable operational environment. This will be supported by several measures in the areas of regional development, environment, forestry and land planning as well as labor and energy conditions.
According to the report Uruguay will develop the rail and road network by tendering the construction and long-term maintenance of the network. The total investment by the Government has been reported to be approximately USD 1 billion. This investment is necessary to enable the establishment of efficient logistic infrastructure in the Uruguayan inland. The Government will also promote concession for a terminal specializing in pulp in the Montevideo port with rail access in order to secure reliable and competitive outlet to export markets.
Once the permitting requirements are fulfilled, the Government will grant the mill a free trade zone status, which is necessary to ensure competitiveness on international markets.
UPM will carry out an engineering study and permitting process for a pulp mill with an annual capacity of about 2 million tons of eucalyptus market pulp. The preliminary estimate for a pulp mill investment on site is approximately EUR 2 billion.
In addition, a successful project requires off-site investments in plantation land and forestry, road network and nursery capacity, harvesting and transport equipment, rolling stock for the rail, export facilities and human development.
Robust infrastructure is elemental for industrial development. The Government of Uruguay is stating their serious intent with this agreement and timeline. The agreement sets the foundation for UPM's planning of a state-of-the-art pulp mill investment, says Jaakko Sarantola, UPM's Senior Vice President, Uruguay Development.
UPM's current operations in Uruguay include the Fray Bentos pulp mill, the UPM Forestal Oriental forestry and wood sourcing company with its two nurseries, as well as the UPM Foundation. UPM Forestal Oriental manages about 250,000 hectares of plantable land including own and Fomento partner producers' land. All of UPM's forest plantations are certified.
The Fray Bentos pulp mill started operations in 2007 and remains one of the world's most modern and efficient pulp mills. Its annual production capacity is 1.3 million tons of eucalyptus pulp. Besides pulp, the Fray Bentos mill is a significant biomass-based energy producer, accounting 8% of Uruguay's total energy production. The mill's wood raw material comes from sustainably managed local plantations.