RusForest AB announced on June 4 that it has engaged AS Hekotek, a mechanical engineering company, to build a wood pellet production facility at the Company’s LDK-3 sawmill in Arkhangelsk.

RusForest has completed a review of its Arkhangelsk assets and has identified the region as a core focus for the Group.  Following the recent divestment of the Shenkursk sawmill, the remaining assets in the region include the LDK-3 sawmill with annual sawnwood capacity of 120,000 cubic meters and forestry leases with annual allowable cut (“AAC”) of 958,800 cubic meters. 

The Arkhangelsk region is suffering from financial difficulties in the pulp sector, and RusForest sawmill residual revenues are at risk. In order to address this situation, RusForest has engaged Hekotek to build a wood pellet production facility with up to 100,000 tons of annual capacity. The pellet facility will allow RusForest to monetize its sawmill by-products by exporting wood pellets to Europe.

Total investment for the pellet plant is estimated to be approximately EUR 10 million before value added tax (“VAT”), with approximately 70 percent expected to be financed by local bank facilities. The investment will benefit from the Company’s previous EUR 1.6 million deposit made to Hekotek in 2008.