Södra and Statkraft join forces on renewable energy initiatives in Sweden

VÄXJÖ, Sweden, Aug. 27, 2009 (Press Release) - The Swedish forestry and timber product company Södra and the Norwegian energy company Statkraft have signed an agreement of intent on renewable energy valued at up to SEK 10 billion (Euro 1 billion). The agreement initiates a range of investment projects and cooperation agreements in the energy sector.

"This is a partnership which will allow us to proceed even more quickly with the development of the renewable energy solutions that consumers are calling for. It covers the expansion of wind power activities and supplies of district heating, biofuels and electricity. Through a wide-ranging collaboration with Europe's largest producer of sustainably generated power, Södra gains a partner who has the same ambitions as we have", said Leif Brodén, President and CEO of Södra.

"The agreement with Södra is a strategic one for Statkraft because it allows us to develop our activities in a number of areas in cooperation with a strong industrial company. Södra has been focusing for many years on eco-friendly energy and has resources and expertise in this area which complement our own. Through the cooperation, Statkraft will also be reinforcing its position as Sweden's leading provider of renewable energy", said Jørgen Kildahl, Executive VP at Statkraft.

Wind power

Statkraft will become a major partner for Södra through the establishment of a new jointly-owned business for the long-term development and expansion of wind power on Södra's properties. The investments are to be made in Södra's existing wind power company, Södra Vindkraft AB, in which Statkraft is acquiring a 90 percent holding. Overall, this comprises a project portfolio with a potential of some 300 wind power installations, corresponding to an annual production of 1.6 TWh, with the option of further expansion. The project timing is in a variety of different phases in terms of when specific project plans are to be implemented. Completion of the entire portfolio is a multi-year process which is dependent on licensing issues.

The option for Södra's members, in conjunction with Södra Vindkraft, to develop new wind power projects on their own properties is reinforced as a result of increased ambitions concerning project volumes. The same is true of the potential for Södra members to invest directly in wind farms.

District heating

An agreement of intent has been signed with the aim of constructing one of Western Sweden's largest infrastructure projects in the form of the country's longest waste heat pipe from Väröbacka to Kungsbacka. Södra Cell's plant at Värö will supply energy in the form of waste heat via a district heating conduit to Statkraft's district heating grid at Kungsbacka. From an environmental perspective, this is clearly a sound way to generate energy for a district heating grid. It makes use of energy that would otherwise be lost and thereby saves on both consumption of limited resources and emissions. It is estimated the construction will take two years and will create significant opportunities for reinforcing Statkraft's position in the district heating market. It will also further strengthen Södra Cell's competitiveness.

Initially, the project will involve Värö supplying the equivalent of 135 GWh per year of power.

Biofuels

At the same time, the partners have signed an agreement for the supply of biofuel from Södra to Statkraft's district heating plants in Sweden.
Electricity supplies
A decision in principle has also been taken concerning electricity supplies, energy servicing and load balancing from Statkraft to all of Södra's works in Norway, i.e. the paper pulp companies of Södra Cell Tofte AS in Tofte and Södra Cell Folla AS at Follafoss and all of the Gapro wood-products units in Norway. Södra's staff in Norway also have the opportunity to purchase electricity from Statkraft at the going market rate.

In total, the agreement between Södra and Statkraft comprises possible investments of more than SEK 10 billion (Euro 1 billion), and is expected to be definitively signed in the fourth quarter of 2009.