UPM’s Agrement with the Government of Uruguay to establish a competitive operating platform for a new pulp mill


Hughes & Hughes advised on the project

UPM and the Government of Uruguay have signed an investment agreement, which outlines the local prerequisites for a potential pulp mill investment. The agreement details the roles, commitments and time-line for both parties as well as the relevant items to be agreed prior to the final investment decision.

The agreement defines the requirements for the operating environment of a world-class pulp mill project. The site of the mill would be close to the city of Paso de los Toros, in the department of Durazno in central Uruguay.

A long-term industrial operation requires stable and predictable operational environment. This will be supported by several measures in the areas of regional development, environment, forestry and land planning as well as labour and energy conditions.

The Government will develop the rail and road network by tendering the construction and long-term maintenance of the network. The total investment by the Government has been reported to be approximately USD 1 billion. This investment is necessary to enable the establishment of efficient logistic infrastructure in the Uruguayan inland. The Government will also promote concession for a terminal specializing in pulp in the Montevideo port with rail access in order to secure reliable and competitive outlet to export markets.

Once the permitting requirements are fulfilled, the Government will grant the mill a free trade zone status, which is necessary to ensure competitiveness on international markets.

UPM will carry out an engineering study and permitting process for a pulp mill with an annual capacity of about 2 million tonnes of eucalyptus market pulp. The preliminary estimate for a pulp mill investment on site is approximately EUR 2 billion.

In addition, a successful project requires off-site investments in plantation land and forestry, road network and nursery capacity, harvesting and transport equipment, rolling stock for the rail, export facilities and human development.

Hughes & Hughes advised UPM-Kymmene Corporation with Haroldo Espalter (Picture) Héctor Ferreira, Mariana Estradé, Tania Cavallo, Mercedes Barros and Clara Villaamil.

Involved fees earner: Haroldo Espalter – Hughes & Hughes Abogados; Héctor Ferreira – Hughes & Hughes Abogados; Mariana Estrade – Hughes & Hughes Abogados; Tania Cavallo – Hughes & Hughes Abogados; Mercedes Barros – Hughes & Hughes Abogados; Clara Villaamil – Hughes & Hughes Abogados;

Law Firms: Hughes & Hughes Abogados;

Clients: UPM-Kymmene Oyj;

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Author: Ambrogio Visconti.