Partnerships promote rapid growth at Veracel.

When Aracruz and Stora Enso decided to create Veracel--beginning with ambitious plans to produce about one million metric tons of bleached eucalyptus pulp annually in Bahia, Brazil--they were resolved to find long-term partners to participate beyond normal boundaries. Right from the start, they aimed for high performance pulp for fast paper machines in the Americas, Asia and Europe. Under the plan, 50% of production would supply Stora Enso mills and 50% would be sold on the open market.

Strategic suppliers, banks, governments, and recently trained local workers delivered this US $1.2 billion mill on schedule, ramping up rapidly to full production over the past few months. Adding to the wisdom of this partnership approach is a feat of nature and forestry management--80,000 hectares of highly engineered eucalyptus plantations surrounding the mill, harvested every five to eight years.

CHEMICALS ISLAND

Integral to the Veracel pulp mill is the chemicals island, a US$ 80 million investment by Sweden-based Eka Chemicals, where subsidiary Eka Chemicals do Brasil S.A. produces and handles the pulp mill's total chemicals supply. That includes production units for sodium chlorate (58,000 metric tons/yr), chlorine dioxide (45 metric tons/day), oxygen (69 metric tons/day), and a tank park for handling all chemicals from other sources.

Commenting on Eka's delivery of the chemicals island, Veracel's CEO Renato Gueron says, "Chemical manufacture and know-how is not our specialty. But the best pulp can only result from our combined efforts. Critical to our success has been true synergy-- including joint efforts. We are comfortable with Eka because, like Veracel, they have a long-range view."

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Adds Valentin Suchek, head of Eka Brazil, "The obvious idea at Veracel is that all participants focus on their unique capabilities. Eka has the track record and know-how to take total responsibility for on-site manufacturing, handling, and performance of chemicals. Veracel's core competence is forestry, making pulp, and marketing".

Suchek points out that Veracel and Eka both save on transportation, contributing to Veracel's competitive advantage. "Because we produce a surplus of chlorate and chlorine dioxide (CI[O.sub.2]) on site to match their needs, we can help them now and as they expand. We also buy energy from Veracel to run our facilities, so we improve their efficiency."

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Gueron notes that producing top quality pulp began on schedule and has continued. Initially, during the construction phase, Veracel had to overcome heavy rains, logistical issues, and a short strike. Says Gueron, "Critical to our success has been true synergy--joint efforts with our strategic partners. We are comfortable with them because, like Veracel, they have a long range view."

Notes Jukka Harmala, Stora Enso's CEO, "We profoundly believe that this giant mill, based on sustainable forest resources, will assure us an important resource for future growth and profitability. We are highly satisfied with our partnership with Aracruz and grateful for the support we have received from the Bahian government, suppliers, and banks that have supported us in funding the project, especially BNDES, the European Investment Bank, and the Nordic Investment Bank."

BALANCE

Says Suchek on the practical point of shipping costs, "We both gain a lot through savings on transportation, contributing to Veracel's competitive advantage. Because we produce a surplus of chlorate and CI[O.sub.2] on site, we can help them now and as they expand. You cannot underestimate the economies of scale. Another link in the relationship is our purchase of energy from Veracel. We are their customer, too." Having the chemical island in Bahia is an obvious stronghold for Eka with Veracel and in support of other mills in the area.

Eka Industrial Director and Plant Manager Pablo Wiedenbrug emphasizes the value of intelligence gathering at the mill and globally. Says Wiedenbrug. "We benchmark against all equivalent Eka units around the world. Any member of our IT team can verify in real time if our unit, or any other, is under-performing, or exceeding expectations."

Looking to Veracel's options for the future, Suchek says that while CI[O.sub.2] is made with sulfuric acid and methanol today, the plant is designed to switch from methanol to peroxide, if desired.

All parties note that a project of this magnitude is about the long term. Comments Gueron, "Fifteen years is just a start. We hope that Eka and other strategic partners will play a role in our future expansion plans."

FAST GROWING OPERATORS

Both Veracel and Eka have made commitments to local communities by recruiting, educating and training operators and a wide range of other workers at the mill. While the young people of Bahia are not growing six meters per year like the eucalyptus trees of Veracel, their intellectual growth and skills to run complex bleaching and pulping processes are developing fast.

Veracel's Professional Training Center, located in nearby Eunapolis and Belmonte, was created to teach approximately 2000 of the 5900 people from the region who participate in professional training. The courses were established by the company in partnership with the state government, FIEB, and local city governments. Trained manpower has already supported construction, and now the operating phases of the mill.

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At the training center, there are 16 school rooms, 30 welding workstations and workbenches for mechanical assembly, instrumentation, and electro-mechanical work, all used to teach new professionals skills for activities required during the construction, mill assembly, and industrial and forestry operations of the Veracel project. There are now 10,000 direct and indirect job opportunities available.

According to Eka Bahia's Pablo Wiedenbrug, "In concert with Veracel's focus on local people, we have recruited and trained over 20 people for key operator positions and many people for other jobs. Individuals who were picking papaya in plantations, pumping gas, or doing odd jobs are now operators and skilled workers at the chemical island. After 18 months of intensive education and training, they are doing remarkably well."

Continues Wiedenbrug, "The operators should be very proud of the example they are setting for the next generation of managers and workers at sophisticated industrial plants around the world. And just like the Eucalyptus forests, they are home grown."

Gueron summarizes the partnership success in this way: "Social responsibility, along with economic efficiency and environmental protection, comprise the base of sustainability that grounds the existence and operational posture of the company's partners and hence Veracel itself."

ABOUT THE AUTHOR

Martin Koepenick of Innova International, Atlanta, Georgia, USA has written about the paper and allied industries for more than 20 years. Contact him by email at [e-mail], or by phone at [phone].

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MARTIN KOEPENICK, INNOVA INTERNATIONAL

WHAT YOU WILL LEARN

* Why Veracel developed long-term partnerships to help operate its new pulp mill

* How the chemicals island is central to mill operations

* Why Veracel is making social investments to develop and sustain local communities

ADDITIONAL RESOURCES

* "Veracel: The Wait is Over," by L. Perecin and R. Mercante, Solutions!, October 2005. To access this article, type the following product code in the search field on www.tappi.org: 050CTSO45. Or call TAPPI Member Connection at 1800 332-8686 (US); 1 800 446-9431 (Canada); [phone] (International).

* "Veracel completes the circle," by Olle Alsholm, Solutions!, March 2006, pp. 32-34.

RELATED ARTICLE: JULIANO'S DREAM

"When Juliano Oliveira was 11, he had several jobs. He always helped others and me. But we had nothing. Now that he's at Eka, he has his own home, a wife, and he's making my life better, too," says his grandmother, who raised him.

She adds, "Most of my neighbors don't know how to read or write. They have no chance. But people who know Juliano works at Eka admire him."

Juliano lights up when he reveals that his income is 12 times what he earned at his last job. Working in transportation logistics, he has the desire to continue to develop his skills.

Says Juliano, "Five years from now I will reach a new level, because Eka is a prosperous company. I will keep growing."

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RELATED ARTICLE: ABOUT ARACRUZ CELULOSE AND STORA ENSO

Aracruz Celulose is the world's leading producer of bleached eucalyptus pulp for the paper industry. One of Brazil's largest exporters, its pulp is destined for the production of high value-added printing and writing, tissue, and specialty papers. It owns about 255,000 hectares of eucalyptus plantations intermingled with approximately 136,000 hectares of native reserves. The company's operations extend into the states of Espirito Santo, Bahia, Minas Gerais, and Rio Grande do Sul and its annual pulp production is about three million metric tons. With the addition of 450,000 metric tons from its share of the Veracel pulp production, Aracruz will be responsible for 30% of the worldwide supply of bleached eucalyptus pulp.

Stora Enso owns paper manufacturing facilities in Europe, Asia, and the United States. It produces 16.4 million metric tons per year of paper products as well as 7.7 million cubic meters of solid wood products. The company employs 45,000 persons in 40 countries on five continents. In 2004, its sales totaled EUR 12.4 billion. The 450,000 metric tons of pulp it will receive from its stake in Veracel will be sent to Stora Enso manufacturing plants in Europe and Asia for the production of high value-added printing and writing and specialty papers.

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VERACEL PLANNING STARTED 16 YEARS AGO

The origins of the Veracel project date back to 1990, when planners designed an 80,000 hectare eucalyptus plantation to support annual production of 900,000 metric tons/yr of bleached pulp. The objective was to design a world-class pulp facility, providing long term benefits to shareholders and local stakeholders--at no expense to the environment.

Veracel also operates an exclusive marine terminal for shipping production to the Port of Portocel, its launch point for international pulp shipments. The company runs its own nursery, producing selected eucalyptus seedlings and seedlings of 350 Atlantic Forest tree species. In an effort to preserve and recover the Atlantic Forest, Veracel has reserved 50% of its land for recovery and protection of native forests.

VERACRUZ STATION: A VALUABLE RESERVE

Located 15 km outside of Porto Seguro, the Veracruz Station--owned by Veracel--is the largest Atlantic Forest Private Natural Heritage Reserve (RPPN) in Brazil. Containing 6069 hectares, the station is inserted in one of the regions with the highest diversity of trees species on the planet, with approximately 450 different species per hectare. At the location, a number of rare and threatened species can be found, such as pau-brasil, jacaranda and macaranduba. Also notable at the station are the large number of fauna species, with some 350 vertebrate species having been identified there. Several species are being conserved at the Veracruz Station since they are rare, threatened with extinction, endemic, or even new to science.

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PARTNERSHIP WITH THE UNITED NATIONS

With funding partially financed by the National Economic and Social Development Bank (BNDES), Veracel is investing (over the 2004-2005 period) about R$ 21 million in social programs earmarked for municipalities where the company operates. The company signed a partnership agreement with the United Nations Development Program (UNDP) that will develop performance indicators for Veracel's social action and regional programs.

Run in partnership with the Bahia state government and local city governments, the initiatives focus on environmental sanitation projects (water and sewage networks and improvement in waste collection and treatment systems), hospital equipment and health clinics, reform and expansion of day care centers and schools, public housing construction, and road paving/landscaping.

HEALTH

Veracel's social health program works with municipalities through preventive and curative medical-hospital plans, including both out-patient and in-hospital care. The company also trains health professionals who work in the region.

Veracel is investing R$ 1.4 million in a project to eliminate leprosy and fight tuberculosis in the regions' municipalities, benefiting more than 300,000 people over a two-year period. Veracel is partnering with the Bahia state government and regional city governments to carry out the program.

Veracel's environmental sanitation program supplements the health program because improvements in hygiene--through construction of sewage and water treatment systems, garbage collection, and rainwater runoff galleries--significantly reduce disease and contamination.

EDUCATION

Created to support the company's social work, the Veracel Institute coordinates, among others, the "Little Seed" and "To Be a Child" supplemental education projects. Conceived to help children and teenagers in at-risk situations and make it possible for them to achieve social inclusion and personal training, these projects contribute to the recovery of citizenship and create a spirit of solidarity among participants. Currently, the projects benefit about 1500 children and teenagers in the cities of Eunapolis, Itagimirim, Itapebi, Belmonte (Barrolandia) and Santa Cruz Cabralia (including the Ponto Central community).

Veracel constructed buildings to house the projects--such as the Itagimirim Coexistence Center and the Queen Silvia School--and reformed, expanded and equipped schools in Santa Cruz Cabralia, Itabela and Itapebi.

Veracel's request for UNDP cooperation was motivated by previous experiences with the agency in sustainable development projects. The UNDP, active in 166 countries, seeks to eradicate poverty. In Brazil, its work includes environmental management. Based on the agreement, UNDP will carry out technical and institutional reviews of the municipalities affected by Veracel, taking into account citizens, governmental agencies, civil institutions, and non-government organizations (NGOs), as well as Veracel, its suppliers, clients, and shareholders.