MercoPress. South Atlantic News Agency

Second pulp mill project in Uruguay could be taken over by Portugal

Layout of the ENCE project at Conchillas - Colonia next to the River Plate

Spain’s pulp and paper manufacturer Ence is ready to accept 400 million US dollars from its Portuguese competitor Portucel to keep the pulp mill project in Uruguay alive. Portucel would take a considerable share of the mill, forested land and would join Ence in a strategic alliance according to reports in the Spanish financial newspaper Expansion.

Last January Ence, which is heavily indebted announced that it was considering strategic alternatives for its major overseas project: a one billion Euro pulp mill in Colonia, next to the River Plate and with a production capacity of a million tons. At the time Ence officials said they would take two months to consider several options that had been presented.

According to Ence sources quoted by Expansion the several offers ranged from 300 to 400 million US dollars, based on the assets offered, -- with or without forested land to supply the mill. Among the corporations mentioned at the time were precisely, Portucel, Stora Enso from Finland, Brazil’s Botarantin and Japan’s Nippon Paper.

However the most interesting approach was from Portucel which also has its own pulp mill project in Uruguay, plus agreeing to a strategic alliance with Ence to develop joint projects in the Iberia peninsula. Exapnsion says that if Ence manages to sell the whole Uruguay project it would mean a significant financial relief which would allow the corporation to cancel its major debts and concentrate on the Iberia “strategic alliance”.

Ence has a syndicated credit line of 1.225 billion Euros linked to the Uruguay project of which 350 million are from Spain and which the company rescheduled last February. According to the 2008 balance sheet ENCE’s debt at the time stood at 453 million Euros, and by selling the Uruguay project it could cancel 70% of its financial commitments.

Ence sales in 2008 reached 676 million Euros with a 4.7 million Euros profit. By divesting from the Uruguay project the corporation could distribute earnings among shareholders.

The pulp project in Colonia according to the original chronogram was scheduled to be ready for production sometime in late 2010 and will have an annual pulp capacity of a million tons plus a million MW/hour of renewable electrical energy with the trees biomass. Another asset of the project is its strategic location, on the River Plate and with good access to US, EU and Asian markets.