Ilim-2014

Ilim Group had finalized its business plan details from the conceptual basis created in October 2007. The company had carefully studied market opportunities, and created a bold new business plan, that generates higher returns than previous variants. The plan was named «Ilim-2014» because it maps the significant growth and effective improvement of the company through 2014. The board of directors formally adopted this plan in July 2008.

According to Ilim-2014 project, the company will invest approximate 2 billion dollars over the next 7 years.

The investment program is directed at the creation of new high value products — white papers and corrugated packaging; the building of the Group’s new plants and modernization of pulp and paper Mills in Arkhangelsk and Irkutsk Region, the improvement of work and life conditions of Ilim employees as well as reduction of environmental impact.

Whisin five years one of every four sheets of office paper used in Russia will be manufactured by Ilim Group. Its five corrugated plants will provide a quarter of the packaging market needs in European part of Russia. New capacity of high quality pulp, produced in Eastern Siberia, will satisfied growing needs of Chinese market. This will be the most significant and large-scale investment program in the Russian pulp and paper industry for the past 25 years.

In parallel with modernization projects, the company will be streamling its management and organizational structure, implementating integrated leading edge management systems.

In 2014 customers, employees and shareholders will value Ilim one of the best pulp and paper company in the world. Local communities will appreciate company’s responsible role in transport and social infrastructure development in regions where Ilim operates.

Projects by business units

Ilim West

In Arkhangelsk Region Ilim plans significant expansion of its corrugated materials and paper production facilities. The company is planning to install new world class equipment for the production of finished products in Koryazhma. It will provide the import and containerboard and fluting products needed for the growing needs of corrugated box producers in Russia, both Ilim’s own and also independent companies. Koryazhma will also be adding modern machines to produce high quality office paper and both coated and uncoated commercial printing papers. All those products will be aimed at the Russian market.

Investments for Ilim West: around 700 mln dollars.

Main projects: installation of paper machine with sheeters, and a coater, rebuild paper machine 5 to fluting production, rebuild paper machine 6 for quality increase, rebuild of paper machine 1 for kraftliner and fluting productivity increase, surety and quality increase of paper machine 2 and board machine 3 and 4, NSSC plant.

Infrastructure projects: new woodyard, new bark and sludge boiler, rebuild of recovery boilers and caustic plant.

Output increase — 150 thousand tons (+15%) up to 1 150 thousand tons.

Ilim East

As a leading supplier of softwood market pulp to China, the company is intend to optimize its production facilities in Ust-Ilimsk and significantly expand and modernize the Mill in Bratsk. «Ilim-2014» program increases pulp supplies to China market, and also introduces new quality and service.

The Mill in Bratsk will be transformed to a modern low-cost pulp producer that can be successfully compete on the world markets during many years in future. The main project here is an all new modern world class pulp line construction with annual capacity of 650 thousand tons of high quality pulp. In fact, it will be the first construction of an all new pulp plant, for the first time in 25 years in Russia.

Project implementation will let the company to significantly improve its positions on Chinese market, will increase production effectiveness and reduce environmental impact, as well as provide the platform for the substantial growth in future which could include installation of a new paper machine.

Ust-Ilimsk Mill investments are connected with improvement of ecological indicators, products quality and production effectiveness, as well as debottleneck BKP capacity and new harvesting technology.

ILIM-2014 project approach makes the production of pulp competitive in long-term perspective and opens the possibilities for manufacturing of higher value added products. The priorities are to modernize product quality, processes and reduce manufacturing costs and ecological emissions. At the same time secure sustainable competitive through new technology equipment and investment in forest operations.

Investments for Ilim East: around $1 bln.

Main projects Ilim East: pulp line 2 softwood fiberline, new recovery boiler, bark boiler & steam line, concentrator, new woodyard.

By 2013 Ilim East will increase production of bleached softwood and hardwood pulp up to 1 600 thousand tons an increase of 216 thousand tons (+15%).

Ilim Corrugated Box Business

Integrated manufacturing of industrial packaging with high added value to be consumed by domestic market is one of the three strategic business lines of Ilim Group. The five-year development plan for this line involves construction of four corrugated box plants with a total capacity exceeding 560 mln. m2 per year, to be located in the European part of Russia. The company plans to become a leading corrugated packaging supplier and produce one of every four corrugated boxes in Russia.

One of the key strategic advantages of Ilim Group corrugated products business is the availability of its own raw materials ensuring uninterrupted supply of containerboard for further processing, and providing an opportunity to optimize the quality and design of products at all production stages. Moreover, the experience in the domestic corrugated packaging market, human and financial resources of Ilim Group, combined with International Paper’s global competencies, will create a solid base for dynamic growth of the company’s corrugated business.

Investments for Ilim Corrugated Box Business: around 160 mln dollars.

Forestry

Ilim Group is implementing a comprehensive Forest Strategy. It includes the purchase and deployment of latest technology logging, road construction and wood transportation equipment.

This investment is certainly one of the most focused and significant investments in Russia’s forests, and it’s main objectives is to reduce harvesting and transportation costs, while raising forest productivity and improving safety and working conditions for Ilim Group forest employees.

Forest investment program of Ilim Group will upgrade the Company’s harvesting operations with several hundred units of logging, transportation, road construction and auxiliary equipment units, thus allowing for more than 80% of all wood to be harvested in a highly efficient manner.

As the result of an international tendering process Ilim recently selected John Deere as the supplier for the initial package of high technology harvesting and handling equipment. Equipment deliveries to Ilim Group’s Koryazhma and Siberian regions will begin this summer and extend into 2009.

Later Ilim Group has signed a contract with a world leading producer of specialized forest equipment SISU Auto for the delivery of 91 timber trucks combinations to Ilim Group logging companies. Tracks deliveries for Ust-Ilimsk logging companies of Ilim in Irkutsk Region will be done during autumn 2008.

Investments for forestry: over 310 mln. dollars.