UPM to build US$2.7bn pulp mill in Uruguay

Finnish paper mill firm UPM will build a second pulp mill in Uruguay, investing US$2.7bn just in the plant. Authorities said this was the biggest private investment in the country’s history.

UPM’s decision came after three years of negotiations. To facilitate the deal, the government promised infrastructure works near Paso de los Toros (Tacuarembó department), where the mill will be built.

One big project under this agreement is the US$1bn Central Railway PPP, awarded last year to consortium Grupo Vía Central, for which works began in May. It entails a 274km rail line between Paso de los Toros and Montevideo and is expected to be finished by 2021.

A second project linked to the mill is a new port concession in Montevideo, in which UPM was the sole bidder for a 50-year operation contract for a deep sea terminal. The firm will invest US$280mn, according to a press release.

The mill will also have its own electricity generator, producing “more than 110MW surplus of renewable electricity providing a stable source of revenue and strengthening Uruguay’s energy balance,” UPM said.

Further, UPM will finance improvements to Paso de los Toros’ wastewater treatment plant and the rehabilitation of a local landfill, providing US$70mn.

During a conference call following the announcement, UPM CEO Jussi Pesonen said the new mill, with capacity of 2.7Mtn, will be one of the most modern in the world.

The first pulp mill UPM built in Uruguay, Fray Bentos, demanded US$1.2bn and began operations on November 2007, according to a 2017 report from the presidency.

Startup for the second plant is expected for the second half of 2022.

UPM said the mill and related investments would boost Uruguay’s GDP by about 2% and the annual value of exports by around 12%.

Last week, economy minister Danilo Astori confirmed as much, saying GDP projection for 2020 rises to 2.6% (versus a 0.6% estimate for this year) when including the UPM investments.

After UPM’s statement, the presidency’s office said the decision “reinforces Uruguay’s international image regarding its legal security, institutional stability, seriousness, responsibility and reliability to bring in foreign investments.”

Presidential candidate Luis Lacalle, from the opposition, however, criticized the negotiation process, although he is in favor of the project. He told Radio Carve that the government should have made less concessions, and that if elected later this year, his administration will renegotiate the deal.