OREANDA-NEWS. June 06, 2013. RusForest AB has engaged AS Hekotek, a mechanical engineering company, to build a wood pellet production facility at the RusForest’s LDK-3 sawmill in Arkhangelsk, Russia, as the company said in a press release received by Lesprom Network.

RusForest has completed a review of its Arkhangelsk assets and has identified the region as a core focus for the Group. Following the recent divestment of the Shenkursk sawmill, the remaining assets in the region include the LDK-3 sawmill with annual sawnwood capacity of 120,000 cubic meters and forestry leases with annual allowable cut (“AAC”) of 958,800 cubic meters. The Company has recently hired a new management team in Arkhangelsk led by Mihkail Papylev, the former CEO of the Arkhangelsk pulp and paper mill.

As previously disclosed, the Arkhangelsk region is suffering from financial difficulties in the pulp sector, and the Company’s sawmill residual revenues are at risk. In order to address this situation, RusForest has engaged Hekotek to build a wood pellet production facility with up to 100,000 tons of annual capacity. The pellet facility will allow RusForest to monetize its sawmill by-products by exporting wood pellets to Europe.

Total investment for the pellet plant is estimated to be approximately Euro 10 million before value added tax (“VAT”), with approximately 70% expected to be financed by local bank facilities. The investment will benefit from the Company’s previous Euro 1.6 million deposit made to Hekotek in 2008.

Anton Bogdanov, the Company’s COO, commented, “We are fortunate to have Mihkail Papylev and his team join RusForest, and I believe they will add significant value to the northwest assets. The pellet investment is crucial to make our Arkhangelsk sawmill profitable. The LDK-3 sawmill benefits from a unique port location with favorable logistics for shipping sawnwood and pellets to Europe. A pellet facility will help insulate our operations from the financial situation of the local pulp mills.”

AS Hekotek is a mechanical engineering company. Its main operations include the design and production of woodworking technologies and facilities.

RusForest is a Swedish forestry company operating in Eastern Siberia and the Arkhangelsk region of Russia. The Company controls long-term timber leases and utilizes these resources to produce a wide range of sawnwood products.