December 6, 2012 / 3:50 PM / in 5 years

UPDATE 2-Chile CMPC OKs $2.1 bln Brazil Guaiba plant expansion

* CMPC plans capital hike, bond issue to fund investment

* Expanded Brazil plant seen operational in Q1 2015

* Chilean firms expanding in Latin America

* Share price tumbles after announcement

SANTIAGO, Dec 6 (Reuters) - The board of Chilean forestry and paper company CMPC on Thursday approved a $2.1 billion expansion of its Guaiba plant in Brazil’s Rio Grande Do Sul state, a move that will bolster its position as one of the world’s leading wood pulp producers.

CMPC said it is planning a capital increase and bond issue as well as possible non-core asset sales to fund the investment. The company expects to see its wood pulp output jump to 4.1 million tonnes per year after the expanded Brazilian plant starts operating in the first quarter of 2015.

“This investment is a milestone for the company as it is the biggest investment in our history. Its execution will mean almost doubling our participation in the pulp market,” CMPC’s Chief Executive Hernan Rodriguez said in a statement.

The expansion will add an estimated 1.3 million tonnes of annual pulp production capacity to Guaiba’s current per-year capacity of 450,000 tonnes.

“With this investment, CMPC will increase its wood pulp productive capacity to around 4.1 million tonnes per year, consolidating its position as one of the world’s main makers of this product,” CMPC said.

“The project has all the state, municipal and environmental permits and authorizations for its execution,” the company added.

CMPC also said it will ask shareholders on Jan. 24 to approve a capital increase of up to $750 million and plans to issue up to $500 million in bonds to help finance the investment.

It has already secured a 10-year, $1.2 billion loan from Brazil’s state development bank BNDES and will also use cash flow while it mulls non-core asset sales.

News of the planned capital increase and bond issue sent CMPC’s shares tumbling 3.2 percent in midday trade on Thursday, far outpacing a 0.25 percent dip on Santiago’s blue-chip IPSA stock index.

CMPC, which also has operations across Latin America, is one of many growing Chilean companies flexing its muscles in the region.

Chilean retailer Cencosud recently acquired French retailer Carrefour’s Colombian assets for $2.6 billion, while Chile’s CorpGroup announced it was purchasing 100 percent of the shares of Colombia’s Helm Bank for around $1.3 billion.

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