UPM-Kymmene - Company Announcement

UPM signs agreement on restructuring of Botnia ownership

UPM-Kymmene Corporation   Stock Exchange Release  22 October 2009  at 08:30     

UPM, Metsäliitto Cooperative, M-real Corporation, and Oy Metsä-Botnia Ab        
(Botnia) have today signed an agreement according to which Metsäliitto's and    
Botnia's share of the Fray Bentos pulp mill and the eucalyptus plantation       
forestry company Forestal Oriental in Uruguay will be transferred to UPM. The   
companies signed a letter of intent concerning the restructuring on 15 July     
2009.                                                                           

The enterprise value of the Fray Bentos pulp mill and Forestal Oriental totals  
approximately EUR 1.6 billion and the enterprise value of Botnia without the    
Uruguayan operations and shareholding in Pohjolan Voima Oy is approximately EUR 
1.9 billion. UPM will finance the purchase consideration by selling an          
approximately 30% share in Botnia. In addition, UPM will take over the debt of  
the Uruguayan operations.                                                       

Moreover, UPM will acquire 1.2% of the energy company Pohjolan Voima Oy from    
Botnia for EUR 66 million.                                                      

Following the transaction, Metsäliitto's holding in Botnia will be approximately
50%, M-real's approximately 33%, and UPM's approximately 17%. UPM will have 91% 
ownership in the Fray Bentos pulp mill and 100% in Forestal Oriental.           

Completion of the transaction is subject to, among others, required regulatory  
approvals and agreements with lenders. These are expected to be finalised, at   
the latest, during the first quarter of 2010. Botnia will remain to be in charge
of the operations of the Fray Bentos pulp mill and Forestal Oriental until the  
transaction is effective.                                                       

Impact of the transaction on UPM's financials and operations                    

UPM's interest-bearing net debt has been estimated to increase by approximately 
EUR 350 million. The transaction is expected to have a minor impact on the      
gearing ratio. The net cash effect of the transaction on UPM will be an outflow 
of approximately EUR 90 million. The transaction is expected to have a positive 
impact on UPM's results in 2010.                                                

In the balance sheet in the interim report for January-June, on 30 June 2009,   
UPM has regrouped the 30% transferable share of Botnia's book value as assets   
held for sale. Consequently, from July 2009, UPM will not include the share of  
the transferable Botnia operations in the share of results of associated        
companies. Post transaction, UPM will record its 17% ownership in Botnia among  
its financial assets.                                                           "Following the deal, UPM will become a significant pulp producer. Our pulp      
production capacity will increase from 2.1 million tonnes to 3.2 million tonnes 
a year, with approximately one third being eucalyptus pulp. The share of        
plantation-based hardwood pulp in UPM's production will increase significantly, 
and the ownership of the Uruguayan plantation operations will increase our      
self-sufficiency in fibres," says Tapio Korpeinen, President of UPM's Energy and
pulp Business Group.                                                            

On the basis of the 17% holding in Botnia, UPM has a 400,000-tonne share of the 
pulp production capacity of Botnia's Finnish mills. In addition, Botnia acts as 
a sales channel for UPM's market pulp.                                          

For more information, please contact:                                           
Mr Tapio Korpeinen, President, Energy and pulp Business Group, UPM, tel. +358 40
730 0090                                                                        
Mr Jyrki Salo, Executive Vice President and CFO, UPM, tel. +358 204 15 0011     

UPM, Corporate Communications                                                   
Media Desk, tel. +358 40 588 3284                                               
communications@upm-kymmene.com                                                  


UPM's vision is to be the front-runner of the new forest industry. Our          
competitiveness is based on cost leadership, change readiness and leading       
innovation. Our products are made of renewable raw materials and are recyclable.
UPM consists of three Business Groups: Energy and pulp, Paper, and Engineered   
materials. The Group employs around 24,000 people and has production facilities 
in 14 countries. In 2008, UPM's sales amounted to EUR 9.5 billion. UPM's shares 
are listed on the Helsinki stock exchange. www.upm-kymmene.com                  

UPM's pulp business area                                                        
UPM operates three modern pulp mills in Finland: Kaukas (capacity 740,000       
tonnes), Kymi (540,000 tonnes) and Pietarsaari (800,000 tonnes). The annual pulp
production capacity of the three mills totals 2.1 million tonnes. The Pulp      
business area employs around 1,150 people, and sales in 2008 were EUR 944       
million.                                                                        

Once the transaction enters into effect, UPM's annual pulp production capacity  
will increase from 2.1 million tonnes to 3.2 million tonnes, with approximately 
a third of this consisting of eucalyptus pulp produced at the Fray Bentos mill. 
The share of plantation based softwood pulp in UPM's production will increase   
significantly.                                                                  

Fray Bentos pulp mill                                                           
Construction of the pulp mill in Uruguay began in 2005 and production started in
November 2007. The total investment in the mill came to 1.2 billion US dollars. 
The annual capacity of the pulp mill is 1.1 million tonnes of eucalyptus pulp   
for which the mill uses 3.5 million cubic metres of eucalyptus wood. The pulp   
mill has around 200 direct employees.                                           
Prior to the transaction, UPM accounted for about the half of the mill's pulp   
capacity. UPM uses Fray Bentos pulp mainly in its paper mills in China and      
Central Europe.                                                                 
The pulp mill in Fray Bentos is among the most modern ones in the world.        
Designed with the latest technologies available, the mill operates in compliance
with the strictest standards set by the European Union and Uruguayan            
legislation. For further information and pictures, visit www.botnia.com         

Forestal Oriental                                                               
Forestal Oriental, which specialises in eucalyptus plantations, owns around     
180,000 hectares of land in Uruguay, of which around 60% is cultivated          
plantation land. The company has around 360 employees and roughly 2,400         
contractors. Forestal Oriental operates a modern nursery, which produces around 
15 million eucalyptus seedlings per year. The company's plantations are         
FSC-certified.                                                                  
Forestal Oriental was founded in 1990, when Shell and UPM predecessor company   
Kymmene started to investigate the possibility of cultivating eucalyptus in     
Uruguay. Planting started in the late 1990s and wood harvesting in 1997. For    
further information and pictures, see www.forestaloriental.com.uy 

UPM-Kymmene Corporation                                                         
Pirkko Harrela                                                                  
Executive Vice President, Corporate Communications                              

UPM, Corporate Communications                                                   
Media Desk, tel. +358 40 588 3284                                               
communications@upm-kymmene.com                                                  


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