UPM Annual Report 2022

BUSINESSES

UPM

BEYOND FOSSILS

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2022

UPM PASO DE LOS TOROS WORLD-CLASS PULP MILL

PROJECT HIGHLIGHTS IN 2022 • The construction works at the mill site were completed in December and the project entered the final phase, focusing on the finalisation of the electrical, instrumental and automation works and commissioning • The commissioning phase will run until the start-up of the mill in Q1 2023 • The pulp terminal in the port of Montevideo was completed and inaugurated, with port operations commencing in Q4 2022 • At its most intensive phase, more than 7,000 people worked at the various construction sites at the same time • Work related to road infrastructure improvement in central and western Uruguay continued • Work on the Central Railway by the Uruguayan government continued; the overall rail project is expected to be finalised in Q2 2023 • The state-of-the-art eucalyptus tree nursery in Sarandí del Yí began operations in Q1 2022 • The first forestry research centre specialising in eucalyptus plantations in Uruguay was inaugurated in Q2 2022 (right) • Preparing commercial readiness continued in all main markets Uruguay’s native forests are all protected. The country is located within a temperate climate zone so there are no rain forests. The Forestry Act sets strict rules for plan tation design and structure. This includes location, tree types and identifying suitable forestry soils for plantation development, as well as safe zones around roads, native forests and waterways. Forestry has created important em ployment and entrepreneurial opportu nities in rural areas. External contrac tors are responsible for all planting and logistics operations. UPM’s forestry value chain employs some 7,000 people directly. Forestry involves a higher proportion of female workers than traditional agricul tural activities – in the tree nurseries, around 50% of the workers are women. UPM has three nurseries to provide over 40 million eucalyptus seedlings for plan tations per year.

In 2022, the UPM Paso de los Toros pulp mill project in Uruguay progressed smoothly towards completion. The new mill will grow the UPM Pulp capacity by more than 50%.

CASE

NEW FORESTRY RESEARCH CENTRE IN URUGUAY

The time-consuming work needed to breed the best seedlings to create the high est-quality trees requires considerable re search and development expertise. UPM’s first forestry research centre specialising in eucalyptus plantations began operations in Paysandú, Uruguay in 2022. At the centre, we can enhance the applied research that we have been conducting in Uruguay for over 30 years. The centre’s research work is mainly focused on developing genetic materials with high productivity, optimal wood quality and tolerance to the pests and diseases that can affect plantations. The new centre contains state-of-the-art laboratories and equipment, as well as specific greenhouses and nurseries for various research and development purposes. Around 60 employees, including agron omists and experts in genetic improvement, health, forestry research and wood quality, work at the research centre. We have been promoting the research projects of post-graduate students in Uruguay for a number of years. With this centre, we can offer better facilities and opportunities to students and professors to develop their projects.

Our new pulp mill will be a significant step for UPM’s future earnings and shareholder value. When operational, the UPM Paso de los Toros pulp mill, together with forestry, wood and pulp logistics and other related ac tivities, will create around 10,000 new per manent jobs, of which 4,000 will be directly employed by UPM and its subcontractors. The mill is estimated to increase Uruguay’s gross national product by about 2%. Sustainable plantation management Our eucalyptus plantations in Uruguay have established a new renewable raw material base for growing global fibre needs. Euca

years with no effect on food production or natural forests. Our biodiversity pro gramme has been implemented at plan tations since the early 1990s, and since 2020, we have used three key indicators to measure our impact on biodiversity: 1. Developing the nature conservation area network 2. Maintaining and enhancing endemic and threatened species populations in conservation areas 3. Controlling and decreasing the invasion of exotic woody species populations in conservation areas

lyptus availability for the mill is secured through plantations owned or leased by UPM, as well as through wood sourcing agreements with private partners. Our plantation areas in Uruguay cover 504,773 hectares of land owned, leased or managed by UPM. All UPM’s plantations are certified under the FSC™ and PEFC certification schemes or in the process of being certified, if the site is new. Sustainably managed plantations are highly productive, acting as a carbon sink while taking care of biodiversity. We have created permanent carbon storage for 55 million tonnes of CO 2 -equivalent in 30

PROJECT IN SHORT • Annual production capacity of 2.1 million tonnes of eucalyptus pulp • Total investment estimate of USD 3.47 billion • Investments in pulp terminal in the port of Montevideo and local facilities in Paso de los Toros • Expected cash cost level of USD 280 per delivered tonne of pulp • Competitive wood supply, best available techniques and efficient logistics • Highest safety and sustainability standards • Scheduled start-up by the end of Q1 2023

www.upmpasodelostoros.com

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022