According to State Forest Management Center (RMK) CEO Mikk Marran, the aim of the agreement is to advance the development of Estonia's largest wood biorefinery, planned for Lüganuse Municipality in Ida-Viru County.

"VKG has been planning a wood bioproducts plant for years. This February, they were the only party to express interest in implementing the zoning plan initiated on state land in Lüganuse Municipality. In March, they won RMK's pulpwood tender. Today, we confirmed the agreed terms for establishing the superficies right, which will be formalized through a notarized contract at the earliest opportunity," Marran said.

According to Ahti Asmann, chairman of the board at Viru Keemia Grupp (VKG), securing agreements on land use, zoning and a long-term contract were the minimum requirements to move forward with the project and begin talks with potential investors.

"Five years of preliminary work has now led to the first domestic result — resolving the land issue. This agreement to settle the land matter through a superficies right is one of many steps toward a final investment decision, and each step on this path is significant," Asmann stated.

Minister of Energy and Environment Andres Sutt (Reform) said the plant would reduce the export of unprocessed wood and create long-awaited capabilities within Estonia. "Estonia's wood industry is undoubtedly world-class when it comes to mechanical processing. Now we are moving into the ranks of countries that can extract maximum value even from lower-grade timber," Sutt noted.

In the memorandum of understanding, RMK and VKG affirmed their intent to proceed with the granting of the superficies right, a prerequisite for constructing the plant. Once the notarized agreement is signed, VKG Fiber will receive the right to use the 170-hectare site for 99 years, allowing the company to proceed with greater confidence.

VKG Fiber is required to obtain a construction permit for the plant within five years and an occupancy permit within nine years. Upon completion of the plant, VKG Fiber must purchase 700,000 cubic meters of pulpwood annually from RMK — 360,000 cubic meters of softwood pulpwood and 340,000 cubic meters of birch pulpwood. The parties hope to finalize the pulpwood sales agreement by early June.

Core conditions

Under the agreement between RMK and VKG Fiber, VKG Fiber will pay RMK an annual fee of €100 per hectare until a construction permit is issued, amounting to approximately €17,000 per year. During the development period, RMK retains the right to manage the forest within the area covered by the special zoning plan.

Once the construction permit is issued, the fee will increase to €312 per hectare, or approximately €53,000 per year.

Starting from the beginning of the construction period, RMK has the right to adjust the annual superficies fee at the start of each calendar year based on the previous year's change in the consumer price index, but by no more than 3.75 percent annually.

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