The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Justin Joseph Jordan - BNP Paribas Exane, Research Division - Analyst
: I've got three different questions, if I could, please. Firstly, I appreciate this is a very delicate situation. But can I -- I suppose just trying to understand
the impact as you see it from the ongoing Ukraine-Russia conflict. You've talked about it as being potentially positive, I suppose, for plywood
demand because of less Russian competition. Do you see similar positive potential impacts in terms of sawn wood and then wood for construction,
pricing environment in, shall we say, ex-Russia, Europe?
And then secondly, just within the EUR95 million impairment that you've taken, I just want to clarify, have you written down the Chudovo, Russians
plywood mills to zero in doing that? Then perhaps secondly, more positively, can you just talk through the positive impact of the new labor
agreement that you've agreed from April '22, what's some more flexibility does this give you? And how should we think about this as potentially
a catalyst for future capital allocation to Finland going forward?
Jussi Pesonen
If I actually start with the first and maybe the last one and Tapio will come to the impairment. Justin, I think that the markets will then decide what
will be the balance of supply demand. Obviously, Russia has been quite big on plywood and in timber deliveries in even the global market. So,
we'll see how the demand-supply balance will move, but nothing to comment that. But of course, it is in plywood and in timber, Russia has been
quite a significant player.
And then when it comes to CLA, of course, first of all, therefore, I discussed about the plywood kind of quick win where you can see that the first
year after the signing of the deal will yield EUR25 million EBITDA contribution where the kind of the old CLA was not able to actually get that kind
of results. Similar case with all businesses. We do have different businesses where, like if I start from pulp where you have the continuous run needs
where you run 365 days, and then you have every second year in 18 months kind of face, we have the major shutdown. So, basically, we have that
kind of agreement now that we do not have a Christmas or mid-summer subs. We are having a full run and then allocating resources through the
major shutdowns. So that's kind of where actually we are getting a lot of efficiency. And hopefully, as I said, good contribution on kind of
competitiveness.
In the paper, which is totally different type of business where there's seasonality, cyclicality and a lot of volatility on demand is happening, there's
much more different type of flexibilities. We do not run the kind of Christmas and mid-summer breaks. And if we were in some year to do so, then
the cost will be lowered. There will be extra hours worked in that business to get the flexibility and how to organize the work and shift working
and multiple other things concerning that business.
In biofuels, once again, bit similar to what the pulp making is 365 days, operating model kind of security also when the strike and if there will be
disturbances, how to make the kind of mill running on the closed loop. That is an agreement allocating resources, of course, into the major shutdowns
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Question: Linus Larsson - SEB, Research Division - Analyst
: So Olkiluoto 3 is in ramp-up. And I wonder if you could provide just some update on how that is going? And what to expect in terms of production
for 2022? Maybe also comment on your hedging for that production and maybe even some comment on how you expect Olkilote 3 to impact your
P&L this year?
Jussi Pesonen
Yes. Well, you can actually kind of more or less real-time follow the production and the sort of testing program from the TVO website where they
give the forecast for the coming hours and couple of days as a kind of real-time figures. But at the moment, they have been running tests at this
so called 60% plateau where the unit is running at 60%, and they are conducting relatively sort of severe tests like on Sunday. They had a test of a
turbine trip. And this week, they will have another test of a reactor trip and so called loss of outside power tests. So, these kind of steps are now
being taken. In the next kind of weeks and months, we'll take the capacity up to 80% and 100% where the tests will be repeated. So, now it has
been around 850 megawatts output.
And obviously, also since the mid of May, when the connection to grid was taking place, then this kind of a test run electricity has been benefiting
the shareholders of TVO, obviously, very small still in the last quarter as it was from the mid of March, but then with current prices, there is value
for the shareholders now in the coming weeks and quarters. And the commercial start-up still, according to TVO expected at the end of July. And
there you will see actually again from the TVO web page is this kind of a real-time updated information of the expected production. So, it's best to
go and check there.
We have been, obviously, let's say, considering this ramp-up and the risks related to that in the hedging decisions, so in that sense, been sort of
cautious in terms of hedging any of the Olkilote 3 volumes to date as obviously this test run and exact volumes and timing as such is not certain.
But then going forward, as more information comes then we make the hedging decisions accordingly.
I've said earlier that the P&L impact is not material. Let's say, if you look at the UPM figures as a whole, but may be more meaningful than now
looking forward, when you look at it from at least the energy business area point of view if you look at where the current forward prices are, which
are at the levels which we have not been used to a couple of years ago still.
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