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March 11, 2016

European Commission agrees state aid for Metsä giant bio-product pulp mill

European Commission agrees state aid for Metsä giant bio-product pulp mill

The European Commission has concluded that Finnish investment aid for the Metsä Fibre bio-product pulp mill in Äänekoski, Finland is compatible with EU state aid rules.

The mill will manufacture softwood pulp for the paper industry, and also use by-products, largely left over from the pulping process, to generate and sell renewable electricity.

Finland plans to grant €32.1 million to the mill to partially cover an investment in state-of-the-art renewable energy and energy efficiency measures at the Äänekoski mill. The total investment costs of the mill are €1.2 billion. The project also benefits from a loan by the European Investment Bank (EIB) of up to €275 million, of which €75 million is guaranteed by the European Fund for Strategic Investments and was approved in June 2015.

The combined measures will allow the mill to operate without burning the heavy fuel oil usually used by pulp mills and to use less energy per unit of output compared to similar plants. The plant will be fully self-sufficient in terms of energy, and also feed renewable electricity into the Finnish grid. Furthermore, the project is expected to create 6000 jobs during the construction phase and sustain another estimated 2500 jobs in the forestry sector in the longer term.

The Commission assessed the measure under its 2014 Guidelines on State Aid for Environmental Protection and Energy. Under the rules Member States can grant state aid for renewable energy and energy efficiency purposes, subject to certain conditions. The Commission found that the Metsä project will significantly increase electricity production from renewable sources in Finland as well as achieve significant energy savings. Its analysis also showed that the aid does not lead to overcompensation and that the aid amount did not exceed the allowable compensation for the cost of the investment in renewable energy and energy efficiency.

The Commission therefore concluded that the project will contribute to the EU Energy Union goals without unduly distorting competition and that the support from Finland is compatible with EU state aid rules.

The bioproduct mill planned by Metsä Fibre will cost about Euro 12 billion, and it would be the forest industry's largest investment ever in Finland. The mill's pulp production capacity is 1.3 million tonnes per year. The goal is to build the mill in the existing pulp mill area and it would replace the mill currently operating in the area. The bioproduct mill could be operational in 2017.





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