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Fibria announces increase in pulp capacity at Horizonte 2 Project at Três Lagoas to 1.95 million tons/year

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Fibria announces increase in pulp capacity at Horizonte 2 Project at Três Lagoas to 1.95 million tons/year

May 31, 2016 - 10:31

TRES LAGOAS, Brazil, May 31, 2016 (Press Release) -Fibria, a Brazilian forestry company and the world's leading eucalyptus pulp producer, announces an increase in the production capacity of its new plant in Três Lagoas, Mato Grosso do Sul, from 1.75 million tons/year to 1.95 million tons/year. This new expansion in the project does not change the total planned investment of R$8.7 billion, equivalent to around US$2.4 billion.

The announcement of the new production capacity comes at a time when the company celebrates one year of the Horizonte 2 Project, 32.5% of which has already been completed.  On May 31st, Fibria CEO Marcelo Castelli and the governor of Mato Grosso do Sul, Reinaldo Azambuja, announced the increase in production capacity at the company's construction site.

Combining the new line with the plant currently in operation, the Três Lagoas unit will expand its production capacity by 150%, exceeding the total capacity of 3.2 million tons of pulp/year. With this, Fibria's total production capacity, considering all its units in Brazil, will increase from the current 5.3 million tons of pulp/year to 7.25 million tons of pulp/year.

Fibria has been investing in the development of its forest base in the region to supply the new production line. The wood supply required to operate Fibria’s new plant will come from forests grown in Mato Grosso do Sul. A total of 187,000 hectares of forests planted on own, leased and partners’ areas will be used. Including the 120,000 hectares used to supply the current unit, the forest base that will supply the Três Lagoas unit will span 307,000 hectares. The average radius of the forests to the company's two production lines will be less than 100 kilometers, one of the most competitive in the market.

Fibria's Três Lagoas unit follows the most modern concepts in ecodesign, with cleaner and more efficient production processes. In addition, all the energy consumed is generated by the unit itself using biomass in the form of eucalyptus bark and the liquid biomass resulting from the industrial process. With the increase in production capacity, the industrial unit will generate and consume its own energy and will still have a surplus of 130 MWH, which will positively contribute to Brazil's energy grid and benefit the energy matrix by using renewable sources.

"The expansion of production capacity of the Horizonte 2 Project shows that the fundamentals that guided the expansion of our Três Lagoas unit are solid and supported by a financial structure that maximizes gains for Fibria.  We are announcing a bigger capacity without having to invest more. We are proud to see this work in progress, bringing jobs, better quality of life and development to Três Lagoas, Mato Grosso do Sul and Brazil,” said Fibria CEO Marcelo Castelli.

Horizonte 2 Project Financing Structure

In May this year, Fibria signed financing agreements with the Brazilian Development Bank (BNDES), the Midwest Development Fund (FDCO) of the Midwest Development Superintendent’s Office (SUDECO) and the Finnish export credit agency Finnvera. With this, all of the funds required for Fibria's new production line are formally contracted and guaranteed.

The average cost of financing of the Horizonte 2 Project will be around 2.1% per year in U.S. dollar. The financial solution for the project will improve the company's credit quality by reducing the current average interest rate in U.S. dollar from 3.4% to 2.9% and by lengthening the repayment terms.

To obtain the remaining funds required for the project, Fibria will complement the credit lines with the working capital resulting from the agreement signed in 2015 with Klabin for the sale of pulp produced by the PUMA project.

BNDES approved a R$2.3 billion loan for Fibria. The project includes the acquisition of railway cars, locomotives, domestically manufactured machinery and equipment, as well as social investments in the company's areas of influence. As part of project funding, Fibria issued Agribusiness Receivables Certificates (CRA) totaling R$ 675 million in October 2015. With this, the company could benefit from the Fixed Income Market Incentive Program, launched by BNDES in 2015 to stimulate the capital markets in Brazil.

SUDECO granted Fibria a loan of R$ 831.5 million. The company comes under SUDECO’s priority sector category as it belongs to a sector with a long operating history and since the project includes a pulp unit integrated to a reforestation project. It also comes under the priority location category as it is situated in the city of Três Lagoas in Mato Grosso do Sul and is classified in the typology of the Nacional Policy on Regional Development (PNDR), which establishes preference in the disbursement of FDCO funds.

In the international market, Fibria gained access to two financing facilities: a US$400 million syndicated export prepayment facility with an average cost of Libor + 1.43% and average term of 5 years; and a US$400 million facility from the Finnish export credit agency Finnvera, which finances equipment acquisitions in the country.

Commitment to the community

With the Horizonte 2 Project, Fibria reaffirms its commitment to operating in a responsible manner in stimulating the continuous development of surrounding communities. For this, it has also announced the Basic Environmental Program, which will invest another R$ 6.2 million in Três Lagoas to acquire equipment for the municipal departments and in repairs to four municipal schools, a dental clinic and an orthopedic clinic. Other entities such as the Fire Department, the local police, Salesian Center and APAE are also included.

The cities of Brasilândia and Selvíria will receive investments of over R$ 1.9 million to renovate the municipal school and hospital.  The Mato Grosso do Sul government received R$ 34 million through environmental compensation, with investments in the state and in local communities totaling R$ 41.5 million.

During the two years of project execution, 40,000 direct and indirect jobs will be created. At the height of construction, the project will employ around 10,000 workers. When the new pulp line goes operational, it will employ 3,000 direct and indirect workers. During project construction, Fibria will have around 60 suppliers from Três Lagoas, whose contribution will encourage the economic development of the city, thereby improving the quality of life of its people. The project work will also have a positive impact on public finance, with an estimated tax collection of R$ 450 million during the construction.

The Três Lagoas unit expansion project entails another R$ 11.7 million in social investments in partnership with BNDES. Apart from health and education, social investments will go towards projects focused on income generation, including the expansion of the Territorial Rural Development Program (PDRT), which helps surrounding rural communities to develop ways and means for income generation and social inclusion. A total of 43 projects will receive investments, benefiting 43,000 people.

About Fibria

The world leader in eucalyptus pulp production, Fibria strives to meet the growing global demand for forestry products in a sustainable manner. With production capacity of 5.3 million tons of pulp a year, it has industrial units in Aracruz (Espírito Santo), Jacareí (São Paulo) and Três Lagoas (Mato Grosso do Sul), as well as in Eunápolis (Bahia), where it operates Veracel in a joint operation with Stora Enso. Fibria has 969,000 hectares of forests, with 568,000 hectares of planted forests and 338,000 hectares of environmental preservation and conservation areas. The pulp produced by Fibria is exported to more than 40 countries. In May 2015, Fibria announced the expansion of its Três Lagoas unit, which will receive a new line with annual pulp production capacity of 1.95 million tons and is slated for startup in the fourth quarter of 2017. Learn more at