Metsä Board, part of Metsä Group, announced on 26 April 2019 that it will launch a pre-engineering for the first phase of the renewal of its Husum pulp mill in Sweden. The first phase of the renewal consists of a new recovery boiler and a new turbine. Pulp production will remain on a level permitted in the current environmental permit. On 27 August 2019, the company announced that the competent authority in Sweden, Länsstyrelsen, had decided that the planned new recovery boiler will require an amendment to the environmental permit. At the same time, the company estimated that the final investment decision on the first phase of the renewal can be made in the second quarter of 2020, at the earliest.
The company aims to minimize the delay in the start-up of the new recovery boiler and turbine due to the environmental permit process. This is to enable the introduction of new cleaner and more energy efficient technology as quickly as possible, and to minimize the production interruption risk related to the old recovery boilers. To reduce the delay, the company has selected the main equipment suppliers and will make certain financial commitments for the implementation phase of the project already at the end of 2019 and early 2020, although no final investment decision will be made prior to receiving the environmental permit. The total value of the commitments will be a maximum of EUR 100 million. The total value of the investment is estimated at approximately EUR 320 million. The amount includes financial commitments made prior to the investment decision.
The investment increases renewable electricity generation and reduces oil consumption
The new recovery boiler and turbine are expected to increase the Husum pulp mill's electricity generation by about 330 gigawatt-hours per year, resulting in cost savings at current electricity prices of approximately EUR 12 million per year. In addition, the investment would reduce the amount of purchased oil. The investment would enable to extend the interval between planned maintenance shutdowns and reduce the duration of the shutdowns in the integrated mill, which would slightly increase the annual pulp and board production. The annual maintenance investments and expenses would also be lower. Through the improvements listed above combined, the investment is expected to generate an annual cash flow improvement of approximately EUR 35 million, of which approximately EUR 30 million is EBITDA improvement and EUR 5 million is reduced maintenance investments. The impact on operating profit is expected to be positive despite increasing depreciation. The company's financing costs are expected to increase by approximately EUR 2 million per year from the start-up of the recovery boiler and turbine.
The company expects to record an impairment loss of approximately EUR 19 million on the assets of the Husum pulp mill in its 2019 financial statements.