Baikalsk Pulp and Paper Mill creditors to open bankruptcy proceedings in the enterprise, BPPM representative says; future of mill, Russian town remain in doubt, court to consider mill's transfer to bankruptcy proceedings on Dec. 19

Sandy Yang

Sandy Yang

Dec 3, 2012 – Itar-Tass

IRKUTSK, Russia , December 3, 2012 () – Creditors of the Baikalsk Pulp and Paper Mill (BPPM) at their meeting have made a decision to open bankruptcy proceedings in the enterprise, a BPPM representative told Itar-Tass on Monday.

The Baikalsk Pulp and Paper Mill was a major source of pollution of Lake Baikal. About 3,500 people were directly employed by the plant. The plant was closed in 2009 after new expensive waste water treatment equipment made the factory unprofitable after the global economic downturn. In Soviet times, the factory management was primarily responsible for the town's maintenance. The town and plant administrations were independent from one another but 95 percent of the town's budget used to come from the plant in form of taxes. In January 2010, following disturbances, the Russian government with the cooperation of its private owner reopened the factory and exempted it from pollution rules, but lowered the workers' wages. The future of the mill and the town remain in doubt.

"The issue of the mill's transfer to bankruptcy proceedings will be considered by the Arbitration Court of the Irkutsk Region on December 19. The current external manager, Alexander Ivanov, is planned to be vested with the authority of the bankruptcy manager," said the source. Ivanov's candidacy, which earlier caused serious criticism from Basic Element structures, was approved almost unanimously, according to a mill representative.

The external management procedure has been in effect at the BPPM since December 2010, and by the decision of the latest creditors' meeting and the decision of the Irkutsk Arbitration Court it was extended until December 22, 2012. It was planned that after that the mediators will extend the procedure further so that BPPM, according to the external administration plan, could pay off its debts by mid-2013.

"It is clear now that this will be possible only with considerable investments, which will make it possible to launch a second production line at the mill," the enterprise commented on the creditors' position. At present, the pulp bleaching line is put into operation at the mill that makes it possible to produce up to 84 thousand tonnes of the product per year. More than 90 percent of this volume is exported to China. To start the production of unbleached pulp, which was announced about six months ago, it is necessary to invest about 600 million roubles. Vnesheconombank (VEB) was named as a potential source of these funds.

It was planned that VEB Engineering and BPPM would sign an agreement last week on the opening of a credit line for the mill. The enterprise did not specify the fate of this document.

Last Monday, the management of the region together with the Director General of VEB Engineering, Dmitry Sheibe, visited the industrial site in Baikalsk. The mechanism of winding down the environmentally harmful production facility, as well as social support measures were discussed there. According to the regional authorities, BPPM workers who planned in the near future to stage another strike were satisfied with the outlined prospects and decided not to go on strike. Governor of the Irkutsk Region Sergei Yeroshchenko described this decision as "a credit of trust given in response to the plans of the state to take a civilised approach to the closure of the production facility on the shores of Lake Baikal."

BPPM was commissioned in 1966. The state represented by the Federal Agency for State Property Management (Rosimushchestvo) holds 49 percent of the mill shares, 51 percent - the investment company Kontinentalinvest. The enterprise's largest creditors are Alfa-Bank and Basic Element. BPPM exports 95 percent of its pulp to China.


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