UPM Annual Report 2019

IMPACTS OF THE NEW PULP MILL

LOCAL VALUE CHAIN

million tonnes of carbon storage at plantations 40

small and medium-size local companies 600

• 400,000 ha of own and leased plantations • Certified plantations • Biodiversity protection

• Natural pastures • Protected areas • Over 700 contract farmers • Efficient water use

• Livelihood of plantation owners • Apartments for 5,000 residents

• Vitality of local communities • UPM Foundation projects • Local entrepreneurship • Training opportunities

RAW MATERIALS

LOGISTICS

A NEW ERA IN URUGUAY

RESPONSIBLE OPERATIONS

• In July UPM announced that it will invest USD 2.7 billion in a eucalyptus pulp mill near Paso de los Toros in central Uruguay • The production capacity will be 2.1 million tonnes of eucalyptus pulp • The new pulp mill is scheduled to start up in the second half of 2022 • UPM will also invest approximately USD 280 million in port operations in Montevideo and USD 70 million in local investments outside the mill fence, including a new residential area in the town • When in operation, the mill will generate more than 110 MW of surplus renewable electricity

permanent jobs, of which 4,000 direct jobs at UPM and contractors 10,000

200 million

of eucalyptus pulp 2.1 million t

USD

in wages and salaries

Mitigating the impacts of

UPM is embarking on a truly transformative investment by building a new pulp mill in Uruguay.

• Water emissions • Emissions to air

• Waste • Noise • Traffic

GLOBAL SUPPLY CHAIN

increase in Uruguayan GDP once the mill is operating 2%

households in Asia using pulp-based products 128 million • Sustainable packaging material • Increasing e-commerce • Safe and recyclable food packaging • Need for hygiene products

LOCAL INFRA- STRUCTURE

MONTEVIDEO PORT

The mill is designed to fully meet strict Uruguayan environmental regulations as well as international standards and recommendations for modern mills, including the use of the latest, proven best available techniques (BAT). The mill's environmental performance will be verified with comprehensive and transparent monitoring. Furthermore, the safety and sustainability performance of the value chain from plantations to customer delivery is expected to be on an industry-leading level.

Significant step for UPM Pulp and UPM’s future earnings The mill is expected to be one of the most competitive pulp mills in the world, in terms of both costs, and the safety and environmental performance of its value chain. Competitive and sustainable wood supply, scale, best available techniques at the mill and efficient logistics are the key enablers for a successful pulp mill project. For UPM, the investment represents a step change in future earnings. The low-cost position of the mill provides for attractive returns on investment in various market scenarios. The project has been carefully prepared to ensure long-term competitiveness and to minimise risks both in the project phase and during continuous operations. The investment represents a step change in the scale of UPM’s pulp business. UPM’s pulp production capacity will increase by more than 50%. The growth will take place in the attractive and fast-growing eucalyptus pulp segment. UPMPulp will become one of the most competitive suppliers of premium pulp in the world. State-of-the-art mill design The pulp mill has been designed as an efficient single-line operation. The machines, materials, automation levels and standards enable a high operating rate and maintainability as well as high energy output, ensuring excellent safety, leading environmental performance and low operating costs during the long lifecycle of the mill.

• USD 170 million in taxes and social security payments • USD 7 million free trade zone fixed fee • USD 1.1 billion in exports • Opportunities for employment, entrepreneurship and education • Increase in UPM sales, capacity and profit

CHEMICAL PULP

END USES Hygiene | Tissue | Packaging | Specialty | Printing | Electricity

Competitive wood supply and efficient logistics

UPM’s pulp capacity mt/a

The eucalyptus availability for the mill is secured through plantations owned or leased by UPM as well as through wood- sourcing agreements with private partners. The plantations that UPM owns or leases in Uruguay cover 400,000 hectares. They will supply the UPMFray Bentos mill and the newmill. An efficient logistics chain will be secured by the agreed road improvements, extensive railway modernisation and port terminal construction. The Public-Private Partnership agreement between the government and the construction

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printing and writing paper. Products made from pulp can be used to replace products made from non-renewable materials like plastics.

company for the construction of the central railway was signed inMay 2019, and the financing of the construction consortium was finalised in October. UPMwill build a deep-sea pulp terminal inMontevideo port. Direct rail access from the mill to a new deep-sea port terminal creates an efficient supply chain to world markets. The Montevideo deep-sea port also enables synergies in ocean logistics with UPM’s existing Uruguayan operations.

Pulp for sustainable products for consumers around the world Demand for pulp continues to grow driven by increased urbanisation and the growing purchasing power of the middle class, especially in developing economies. The growth will be strongest especially in China and the rest of the Asia-Pacific region. Pulp will be used for tissue papers, hygiene products, packaging board, labels and other specialty papers as well as

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Spearheads for growth on page 20

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Eucalyptus Northern hardwood Northern softwood

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OUR BUSINESSES

OUR BUSINESSES

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS