Finnish forest industry group Ruukki said in a statement on Monday it would interrupt preparations to build a sawmill and a pulp mill in the Kostroma region in Russia.
Ruukki Group Plc's Russian subsidiary has received information from the Kostroma region of Russian Federation according to which the priority investor status applications made by the Russian subsidiary
for sawmill and pulp mill investments have not been supported by the Kostroma region.
Ruukki Group's strategic aim is to concentrate on wood processing within the Northern coniferous wood zone. Group business operations will be focused on mechanical wood processing, and furthermore on pulp business. The target is to reach revenue of over EUR one billion by the first half of the 2010 decade, and the Group EBIT percentage should be in excess of the average profitability within the same industry.
Besides the planned and partially implemented investments in the Kostroma region, Ruukki Group has investigated business and investment opportunities in the other areas in Russian Federation. These investigations and negotiations thereby will be continued and strengthened with a target of finalising an integrated industrial entity, whose scale is expected to be equal to that of the
Kostroma plans. Main focus of this work is within the European part of Russia
bordered by the Ural mountain range.
Based on the decisions made by the Kostroma region there no longer are any prerequisites to continue with the planning of and carrying out of the investments, the company said. Ruukki Group has decided to abort all the preparations and implementation of the Kostroma investment projects. Furthermore, the company has decided to initiate legal assessment and related processes on the decisions and actions by the Kostroma Oblast and the negligences of its obligations. The primary target of Ruukki Group is to get compensation for damages based on the breach of agreements.
"For Ruukki Group's growth strategy directed towards Russia the situation
evolved now is regrettable. However, this does not prevent us from implementing
the planned investment elsewhere - there seem to be many potential parties
interested in receiving investments. According to our view, the policy
definition by Kostroma region cannot be generalised to be the will of the
Russian Federation. This settlement will, unfortunately, have effect on the
development of international investments into Russia. It seems fully
incomprehensible that first the Russian Federation announces its interest to
have major forest industry investments into its territory, but after we have
made official agreements based on that announcement the counterparty, as
assessed afterwards, factually already after two months breaks away from the
agreements," said Matti Vikkula, CEO of Ruukki Group Plc.
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