VKG Fiber Advances Key Phase in €1.3B Pulp Mill Development; Launches Strategic Partner Search with AFRY Capital

VKG Fiber has made significant progress towards establishing a state-of-the-art 500,000-tonnes-per-annum pulp mill in Estonia. Having secured the necessary land plot and long-term raw material supply, the company has initiated the search for strategic partners supported by AFRY Capital, a leading adviser in the global pulp industry sector.

The proposed mill represents a strategic transformation for VKG towards sustainable, non-fossil-based manufacturing and aims to valorize Estonian pulpwood domestically. Although half of Estonia’s territory is forested, pulpwood is still largely exported as a low-value raw material rather than being enriched into higher-value products domestically.

Designed to be one of the most modern production facilities in Northern Europe, the planned complex will utilize Best Available Techniques (BAT). The mill will:

• Process approximately 2.3 million cubic meters of wood annually.
• Produce 500,000 tpa of bioproducts, including dissolving pulp (for textiles), kraft pulp, and tall oil.
• Generate over 800 GWh of green electricity annually, supplying heat to local district networks and stabilizing the regional grid.
• Operate within responsible forestry guidelines, maintaining long-term raw material availability by committing to a sustainable level of cutting.
• Add €500 million annually in value to the Estonian economy by processing domestic wood locally.
• Create 250 direct jobs and up to 1,000 indirect jobs.

Critical hurdles for the project have been cleared:

• Permitting milestone: Establishment of the spatial plan earlier this year clears the way for detailed design and construction planning.
• Securing long-term raw material supply: VKG Fiber has reached an agreement with RMK, Estonia’s national forestry manager, ensuring a stable and sustainable wood supply for the mill. MOUs for the long-term sale of raw materials are also being signed with private forest owners and Estonian Private Forest Association.
• Land acquisition: A suitable land plot for the mill has been secured, providing the foundation for the project’s next phase.

The project expects to benefit from Estonian Government intention to facilitate large-scale investments in strategic sectors, including wood valorization. Led by the Enterprise and Innovation Foundation (EIS) and the Ministry of Climate, in cooperation with the Ministries of Economic Affairs and Finance, the Government is planning a loan guarantee designed to reduce the risk of high capital value projects and make them bankable.

Ahti Asmann, Chairman of the Management Board of VKG, commented:
“Our progress demonstrates VKG’s commitment to creating long-term value for the economy and the forestry sector in line with Estonian climate goals. This project provides a reliable domestic outlet for forest owners while offering a compelling opportunity for investors to secure an attractive return on investment, expand their product portfolios, and support the transition toward sustainable manufacturing. Initial interactions with potential investors have been encouraging.”

For further information, please contact:

Sten Pisang
VKG Fiber, Member of the Board

Irina Bojenko
Viru Keemia Grupp, PR department

Notes:

VKG Fiber is a wholly owned subsidiary of Viru Keemia Grupp.  With over 1,500 employees, VKG is the largest privately-owned manufacturing group in Estonia. As of year-end Dec 31st 2024, VKG had assets of EUR 740m.  The proposed mill is an important element of VKG’s strategy to transition manufacturing towards sustainable products and away from fossil fuels.

The proposed mill will be situated in the municipality of Lüganuse, in North-East Estonia, where VKG has been active for over 100 years. The mill will be one of the lowest-cost softwood pulp mills in the world. The site is close to the Gulf of Finland and benefits from excellent local infrastructure (road, rail, seaports, and utilities), an abundant and sustainable water supply, and convenient access to substantial forest resources across the country.  The mill will produce 500,000 tonnes per annum of high-quality pulp, of which approximately 80% is expected to be from softwood for export with end uses in a variety of products, including specialty paper, tissue, and textiles.