Varkaus mill remains open

Stora Enso announced on 19 August 2009 that it planned to close down the Varkaus mill site in Finland permanently by the end of 2010 unless there were a robust recovery in the supply and demand balance for office paper that would allow clearly profitable operation. Since then, the supply and demand balance and pricing of office paper have improved. Stora Enso is therefore able to keep the pulp mill and fine paper mill in production as long as financially viable and there is competitive fibre available for the Group in the long term. The operations of the sawmill and, as announced earlier, the biofuel joint venture
with Neste Oil, NSE Biofuels Oy, and its demonstration plant will also continue.

At the same time, the situation in newsprint has dramatically deteriorated. Because of the overcapacity in newsprint and directory paper, and resulting weak earnings, Stora Enso plans permanently to close down newsprint production at Varkaus with combined annual capacity of 290 000 tonnes, by the end of the third quarter of 2010. The proposed closure would affect about 200 people out of 512 people employed at Stora Enso's Varkaus Mill. The plan will not substantially affect the amount of renewable energy production at Varkaus.

The European newsprint market is structurally oversupplied, with 18% excess capacity expected in 2010. Consequently, newsprint sales prices have fallen significantly. In the longer term, newsprint demand in Europe is expected to continue to decline, as has already been happening in North America for some time. In addition, newsprint production at Varkaus relies on less-competitive fresh fibre, and Varkaus is far away from most of its customers.

The restructuring actions in Wood Products, including the recent closure of Tolkkinen sawmill and the divestment of Kotka sawmill announced today, are improving the customer and business portfolio for the remaining Wood Products units, including Varkaus sawmill, which will continue to operate.

As before, Stora Enso will support redeployment of those affected by the plans through efficiently offering jobs internally and eligibility for outplacement services. The Group works closely with local employment and economic development centres to find new job opportunities for people affected. Stora Enso will also support financially those who would like to start their own business. The early
efforts taken with other stakeholders in Varkaus and at national level have been of great importance and will help in finding positive solutions.