The alliance between UPM-Kymmene and APRIL
UPM-Kymmene and APRIL had major plans about vast co-operation (see History below). Finally this did not turn out the way it was supposed to.
Companies, however, continue co-operating, through purchases of pulp and funding.
In August 2000 UPM-Kymmene bought APRIL's share of the Changshu fine paper mill in China, resulting the sole owner of the mill. Simultaneously, the companies agreed that APRIL's Riau pulp mill, RAPP, would provide Changshu mill with 200 000 tonnes of pulp annually for the next six and a half years. This makes UPM-Kymmene the biggest customer of RAPP. RAPP uses pulp from clearcut rainforests. By buying pulp from RAPP, UPM-Kymmene is part of the rainforest destruction in Indonesia.
In January 2002 the companies are negotiating about extending the USD 121 million loan UPM-Kymmene granted for APRIL in 1999. Originally, the loan was due Dec. 31, 2001.
History
In September 1997 UPM-Kymmene and APRIL announced their alliance of producing
and marketing fine paper products.
Two new companies were established for the alliance. UPM-Kymmene Fine Paper consists of UPM-Kymmene's paper mills, Kymi in Finland and Nordland Papier in Germany. APRIL Fine Paper consists of paper mills in Riau, Indonesia and Changshu, China. According to the alliance agreement these two companies are to swap their shares so that UPM-Kymmene will have 30 % of APRIL Fine Paper and APRIL 30 % of UPM-Kymmene Fine Paper. The transaction of shares was to take place after the start-up of APRIL's paper machines. The original estimated date was in the last quarter of 1999.
In March 1998 the alliance was expanded. UPM-Kymmene arranged loans for APRIL and bought 49 % of APRIL's factories in China. These assets, USD 235 million, were used to cover the debts caused by constructing APRIL's mills in China and Sumatra. The funding of Chinese factories was assured later same year, when UPM-Kymmene and APRIL agreed of loan of USD 250 million with international banks. Part of this was to cover the loan from UPM-Kymmene to APRIL (USD 175,2 million) in March. The rest was to make the funding of mill construction certain. Thus UPM-Kymmene acquired right to change its share of the Chinese factory for 30 % of the pulp mill in Riau.
This arrangement was due to the serious economical problems of APRIL. After the collapse of Indonesian rupiah in the first part of 1998, APRIL had over USD ### worth of short-term loans and the total of %%% loans. The original start-up plan for the mills was in serious trouble. UPM-Kymmene has later admitted that the alliance will not be implemented on schedule due to the slow completion of the mills. In September 1999 the failure of the original, extensive alliance was published. Co-operation between UPM-Kymmene and APRIL will still continue in form of e.g. marketing and paper manufacturing and UPM-Kymmene still has opportunity to acquire share of Riau's pulp mill. The pulp from APRIL's mills in Riau in used in Chinese mills owned by UPM-Kymmene and APRIL together.