UPM Annual Report 2020

URUGUAY GROWTH PROJECT PROCEEDED 2020 was an intense year of construction for this pulp mill project. Important steps were achieved across the 16 related construction sites.

We are currently building a new world-class pulp mill near Paso de los Toros in central Uruguay. The USD 2.7 billion investment in a 2.1 million-tonne greenfield eucalyptus pulp mill is a significant step for UPM’s future earnings and shareholder value. We are also investing approximately USD 280 million in building pulp terminal opera tions in the port of Montevideo, and USD 70 million in local infrastructure. The mill is scheduled to begin production in the second half of 2022. 2020 was an intense year of construc tion for this pulp mill project. The project proceeded successfully despite of the excep tional conditions caused by the COVID-19 pandemic (read more on page 42). Project highlights in 2020 • A total of 3,000 people working on 16 related construction sites • Training programmes and awareness raising projects launched in cooperation with Uruguayan organisations, institutions and authorities to strengthen local communities and support residents benefiting from increased opportunities • Mill site preparations, including earth and road works, entrances and gates, office buildings and 12.5 kilometres of fences around the site • Civil construction including the 127 metre chimney and foundations for the production buildings, such as the fibre line, cooling towers, drying plant, recovery boiler, turbines and evaporation plant • Temporary and permanent housing areas for the mill construction workers in the nearby communities • In the port of Montevideo, dredging and filling of the area was completed and construction of a pulp storage facility, tank park and steel structures for pulp loading started • Construction of a state-of-the art eucalyptus tree nursery started in Sarandí del Yí

• Works related to road infrastructure improvement in central and west Uruguay • Agreements made on mill technology with Andritz and chemical supply with Kemira, alongside rail logistic services and other supplier agreements Perfect conditions for plantations Eucalyptus availability for the mill is secured through UPM’s own and leased plantations, as well as through wood sourc ing agreements with private partners. We continued to increase plantation areas in Uruguay in 2020, covering 434,000 hectares of UPM’s own and leased plantations. They will supply the current UPM Fray Bentos mill and the newmill. Conditions for growing eucalyptus are optimal in Uruguay. Eucalyptus’ fast growth rate and rotation time of 10 years make it the preferred plantation tree. Eucalyptus is also one of the most efficient plants in the world in terms of water and nutrients needed to produce a unit of biomass. Plantations are established on former grazing lands. The Forestry Act sets strict rules for plantation design and structure. This includes location, tree types and iden tifying suitable forestry soils for plantation development as well as safe zones around roads, native forests and waterways. Uruguay’s native forests are all pro tected, and they typically grow on riversides and other lowlands. The country is located within a temperate climate zone so there are no rain forests in Uruguay. With a combination of competitive wood supply, scale, best available tech niques and efficient logistics, the mill is expected to reach a highly competitive cash cost level, approximately USD 280 per delivered tonne of pulp. Furthermore, the safety and sustainability performance of the value chain is expected to be on an industry-leading level.

CASE

We are cooperating extensively with local and national authorities, expert organ isations and NGOs to look for ways to mitigate the impacts of the pulp mill con struction in Uruguay. In order to prevent any single location being overwhelmed by the arrival of 6,000 construction workers, UPM has built per manent and temporary housing across four locations. The local areas will later benefit from the 60 permanent houses as well as the infrastructure – such as electricity and sanitation – that has been put in place to build the temporary housing. We are also working with local authorities to improve road safety due to increased traffic. A new bus transportation service has been created for the transfer of workers to and from the construction site. Road safety talks, training and events are being organ ised with NGOs. Concerns over sexual exploitation, which are typically associated with large con struction projects worldwide, have been raised locally. In response to this, we are funding an NGO campaign that is aimed at providing information about the harm these types of illicit activities cause and providing education on how to identify and prevent child and adolescent exploitation. The mill is designed to fully meet strict Uruguayan environmental regulations and international standards for modern mills. UPM will invest in the improvement of local wastewater collection and treatment as well as in the improvement of the new landfill site. UPM also participates in the Rio Negro initiative, providing funding and technical support to keep the local river clean. Environmental performance of the new pulp mill will be reviewed with transparent online monitoring. PURSUING COLLABORATION AND DIALOGUE WITH LOCAL ORGANISATIONS

CASE

We have determined three biodiversity indicators for the company-owned land as part of our global biodiversity programme, which was established in 1998. These indicators are 1) De veloping the nature conservation area network; 2) Maintaining and enhancing endemic and threatened species populations in formal conser vation areas; and 3) Controlling and decreasing invasion of exotic woody species populations in conservation areas. Our plantations in Uruguay are situated on grass lands that were formerly used for cattle grazing. NEW BIODIVERSITY INDICATORS IN URUGUAY

natural forests and unique areas for protecting specific birds and other species are protected. Biological surveys have been conducted in areas owned by UPM since the early 1990s to identify and classify species and native ecosystems to be protected. Currently, the network of formal con servation areas covers around 13,000 hectares. To achieve our long-term biodiversity targets, we plan to increase protected area under defined conservation categories and continue with our long-term monitoring programme. This conserva tion work is being carried out in cooperation with local environmental organisations such as Vida Silvestre and Aves Uruguay.

www.upmpulp.com, www.upmtimber.com www.upmpasodelostoros.com

We do not convert natural forests into plantations. All valuable biodiversity hotspots such as wetlands,

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UPM ANNUAL REPORT 2020

UPM ANNUAL REPORT 2020