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Forest management center: No decision yet on planned pulp mill deal

Meeting of the supervisory board of the RMK. March 2018.
Meeting of the supervisory board of the RMK. March 2018. Source: Anna Aurelia Minev/ERR

The supervisory board of the State Forest Management Centre (RMK) convened on Thursday to discuss whether it would approve the letter of intent that the company's management board seeks to conclude with Est-For Invest, the company planning on building a €1 billion pulp mill in Southern Estonia. They did not, however, reach a final decision.

RMK supervisory board chairman Andres Talijärv told ERR that they definitely did not say "no," however they did not quite agree either, and that more negotiations were in order regarding the planned letter of intent.

"Arguments in favor and against it were such that we didn't quite clarify how clearly we should define the mechanics for the conclusion of the future supply contract," he explained. "When this supply contract is concluded at some point, it must be clear under what conditions this will take place. The current letter of intent does not really do so in detail."

Talijärv believed that the matter will be discussed again sometime this spring, likely in May, at the next supervisory board meeting.

The supervisory board did not discuss the location of the future mill at its Thursday meeting. According to Talijärv, however, the supervisory board has agreed to allow the RMK to sell wood to the pulp mill, and it is only a matter of under what circumstances they would sell, and how the letter of intent will reach the point at which it will form the basis for the supply contract to be concluded.

RMK chief sure that supervisory board supports construction of mill

RMK director Aigar Kallas confirmed to ERR on Thursday that he is a supporter of the planned pulp mill and that, following Thursday's meeting, he is convinced that members of the supervisory board support the project as well.

"It is clear that everyone understands that such an undertaking involves a lot of risks, and that nobody wants to take on such risks without hedging them," he said, adding that not one supervisory board member doubts either that it would be wise to sell wood from state forests to a business who will increase its value added locally.

According to Kallas, the specific concern regarding the letter of intent is exactly under what conditions it will be signed to ensure that everyone has understood it uniformly, it is not in conflict with any laws, and it does not give anyone a competitive advantage.

In response to criticism that such a letter of intent would essentially grant the planned pulp mill unlawful state aid, Kallas said that a letter of intent ins't a contract, but rather a description of plans, which means it cannot possibly be in conflict with any laws.

"But we have consulted with various legal experts who have claimed the same," said the RMK director. "What we need to be particularly attentive about is that once we finally conclude a contract, we do not break a single state aid rule, a single competition rule, or any other rules — that procedurally we conduct everything in connection with this future tender in such a way that everyone can participate. If we have done that, then there is no reason to doubt that we have not acted lawfully, including in terms of state aid."

Attorney: This may constitute state aid

The unlawful state aid issue was discussed at Thursday's meeting as well, reported ETV's "Aktuaalne kaamera."

"It seems as though we managed to hedge the state aid risk, at least with regards to this letter of intent, as a letter of intent does not mean the receipt, sale or delivery of wood," said Talijärv.  Nonetheless, the letter of intent details both volumes and deadlines for wood that the RMK is agreeing to supply to Est-For.

According to Kallas, the letter of intent indicates that the RMK is inviting Est-For Invest and other potential buyers to hold talks in 2019 regarding a total of half a million cubic meters of pulpwood to be delivered over the next five years at market price.

While the sale is open to all bidders, the contract will be signed only by the RMK and Est-For, and according to RASK Law Firm attorney Tarmo Peterson, as this agreement is binding for the RMK, this likely constitutes state aid. EU rules, however, prohibit the state from providing a company with aid that would distort competition and damage trade.

Editor: Aili Vahtla

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