International Paper and Ilim take next step

Implications: International Paper continues to expand its presence outside the US

IP and Ilim have created a dynamic enterprise in Russia that brings together IP's considerable wealth with Ilim's 4 pulp mills and extensive logging permits to harvest millions of acres of Pine, Spruce and Larch trees

Russia's domestic demand is slated to increase by 6-8%/year through 2012 and as a market pulp supplier are ideally located to supply China and eastern Europe.

Analysis: IP already has  already successfully transformed the Svetogorsk mill north of St. Petersburg into a sohpisticated world class pulp and paper complex.   These experiences have taught them how to operate in the Russia culture as well as with the Gov't.   Merging with Ilim gives them four old Soviet-built pulp mills desperately in need of modernization and upgrading.   With IP's money and technical know how these mills could greatly expand their production as well as upgrading their quality levels.  It's possible one or more of these mills could have a papermachine installed which would permit IP to increase its share of the Russian paper business.  This is a great combination....vast forest reserves, low labor costs but highly motivated/well trained workers, an expanding domestic market and excellent export opportunities....all combine to provide the new Ilim Pulp-IP company with exceptional profit potential.