Big papermakers look to bolster energy base

HELSINKI (Reuters) - High energy costs and global environmental concerns are driving some of the world's biggest paper producers to step up self-sufficiency and seek new ways to power their mills, industry leaders told Reuters Paper Summit.

Like metals production, pulp and papermaking is energy-intensive, requiring high volumes of electricity. Power prices track oil and gas prices, so oil's ascent this year to peaks above $148 per per barrel has added worries.

The world's biggest magazine paper producer, Finland's UPM-Kymmene (UPM1V.HE), has a big position in nuclear power and will get access to even more atomic energy once the Nordic country's fifth rector is completed in 2011.

Hydropower remains important for UPM and rivals, but the large forest industry groups are also looking widely at alternative energy sources, from biomass to wind, geothermal and multi-fuel plants that can switch fuels with swings in costs.

"We are looking at investing in wind power," said Magnus Hall, chief executive of Swedish papermaker Holmen (HOLMb.ST), which plans wind parks in its forests. Wind turbines could boost its electricity self-sufficiency to nearly half, he said.

He said it would be costly, but once the turbines were in place, costs would be partly offset by selling renewable power certificates, known as "green certificates", to consumers who need them to prove compliance with renewable energy targets.

"The wind power discussion is driven by the green certificates," Hall said.

GEOTHERMAL DOWN UNDER

The bigger Nordic paper companies with global operations are engaged in energy developments far and wide.

Norwegian producer Norske Skog (NSG.OL) will soon get power from a geothermal plant being completed by its supplier at its Tasman newsprint mill at Kawerau, New Zealand.

"The new plant will be ready in a matter of weeks -- it is built and they are starting up the plant as we speak," said Norske Skog spokesman Tom Bratlie.

The plant, which belongs to the state-owned Mighty River Power company, will supply the mill with more than half the energy it needs under a long-term contract.

"We are also buying thermal power from a similar plant in the same area, so a huge part of the total energy consumption at the mill will come from thermal energy," Bratlie said.

Abundant hydropower in the Nordic region this year, internal power output and long-term supply contracts have helped curb electricity prices at home for the Nordic groups, but they are exposed to the jump in fossil fuels in many parts of the world.

"Globally for Norske Skog energy costs have increased over the past year by about 10 percent worldwide, mainly driven by oil and gas prices," Chief Executive Rynning-Toennesen said.

Norske Skog has long-term contracts for about 60 percent of its electricity needs, but for other power supplies it is exposed to fluctuations in fuel prices, he said.

The world's biggest paper and board maker, Finnish-Swedish Stora Enso (STERV.HE), is also boosting self-sufficiency by, among other things, building a 260 million euros ($386.5 million) multi-fuel power plant for its Langerbrugge mill in Belgium and Maxau mill in Germany. It is due on stream in 2010.

"We are looking also at other places where we can improve our self-sufficiency by building a power plant," Stora Enso's chief Jouko Karvinen told the Paper Summit in Helsinki.

(Reporting by John Acher)