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Stora Enso to Restructure Its Forest Ownership In Finland & the USA

Press release from the issuing company

HELSINKI, Finland, May 16 - Stora Enso today announced that Stora Enso's Board has approved a plan to restructure the ownership of its forestlands in Finland and the USA through two separate transactions. These steps are consistent with the Group's strategy of freeing up capital and increasing its financial flexibility in order to develop its core businesses. The total amount of forestland involved is about 730,000 hectares with a total book value of approximately EUR 500 million. In addition to what will be restructured, Stora Enso owns forestland in Sweden, Portugal and Canada that will not be affected by the present restructuring. In Sweden various options to release capital tied up in forests will be investigated. The ownership in Sweden amounts to 1.9 million hectares with a book value of about EUR 700 million. This forestland provides about one quarter of Stora Enso's wood requirements in Sweden and securing this supply is an important prerequisite, making any transaction involving these holdings more difficult. The total book value of Stora Enso's forest holdings in Finland, the USA and Sweden is about EUR 1.3 billion and the market value about EUR 2.5 billion. Stora Enso's strategy is to ensure access to the most competitive fibre from socially and environmentally sound sources. Stora Enso does not expect the proposed transactions to affect its continued access to these sources of fibre. Annual procurement from its own forests meets about 6% of Stora Enso's total annual wood requirements in Finland and about 10% of Stora Enso North America's annual wood procurement in the USA. Finland Stora Enso plans to transfer its Finnish forestland holdings of approximately 600 000 hectares and related business into a new company to be named Tornator Oy in July 2002. Stora Enso will retain minority ownership in Tornator Oy, and sell the remaining shares to institutional investors by the end of 2002. The book value of these assets is approximately EUR 400 million and the market value over EUR 500 million. The average sales price of larger areas of forestland in the Nordic countries has varied in recent transactions from approximately EUR 800 to 1 000 per hectare. Tornator will own and manage the former Stora Enso forestland, sell cutting rights and offer forest management services. Stora Enso and Tornator plan to enter into a wood procurement agreement according to which Tornator will supply about 1.5 million m3 of timber annually to Stora Enso. Tornator will have about 50 salaried employees and about 180 forest workers who will be transferred or recruited from Stora Enso as existing employees. Negotiations with employees will start immediately. The mill sites and some zoning areas, together totalling approximately 4 000 hectares with a book value of EUR 32 million, will continue to belong to Stora Enso after the divestment. Stora Enso Metsa (Forest), the current existing wood procurement organisation in Finland, will remain responsible for Stora Enso's wood procurement and the wood supply for the Group's Finnish mills. Mandatum & Co and Morgan Stanley have been appointed as financial advisors for the Finnish transaction. United States Stora Enso North America is offering for sale about 130 000 hectares of forestland in the states of Wisconsin, Michigan and Minnesota in the USA. It is planning to divest these assets directly to investors in a transaction that is anticipated to be finalised later this year. The book value of these assets is approximately EUR 100 million. In negotiations concerning the sale of the land, Stora Enso North America will seek a fibre supply agreement from potential buyers. About 95% of the land to be sold is in the state of Wisconsin, where the forestlands are enrolled under the Managed Forest Law (MFL). When the sale is finalised, the MFL commitment will be transferred to the new owner. With this transfer, a majority of the land will remain open for hunting and fishing. The Forest Resources unit will continue to be responsible for Stora Enso North America's wood supply for all US mills. UBS Warburg has been engaged as the financial advisor for the company for this process. Financial effect Divestment of the Finnish and US forests will strengthen Stora Enso's balance sheet and reduce the debt/equity ratio by 0.08 (0.53 at the year end). The debt/equity target is to remain at or below 0.80. The capital employed will be reduced by some EUR 500 million and the return on capital employed (ROCE) will increase by 0.2 percentage points compared with 10.8% for 2001, the target being 13% over the cycle. The financial effects have been calculated on the current book and market values. The proceeds from the transaction are subject to capital gains tax in accordance with local legislation.