London, 23 July (Argus) — Russian pulp and paper company Vyborgskaya Cellulose will start production in September at its 900,000 t/yr wood pellet production plant in the western Russian city of Vyborg, it said.

The new facility, which is being built near the border with Finland, represents a substantial rise in global pellet production and will be the largest plant in the world.

Global forestry marketing firm Ekman is exclusive sales agent for the plant. Long-term supply deals have already been secured for most of the production, according to Ekman vice-president of bioenergy Arnold Dale. “Most of the supply will go to Scandinavia and the majority of it is already signed off for in long term contracts,” Dale said.

Many biomass power plants have found difficulty financing their projects unless they have long-term supply contracts locked in and secured. But a lack of sizeable suppliers capable of fulfilling contracts beyond five years leaves many prospective biomass power generators with no option but to secure the entire chain. The new Vyborgskaya plant should help some of these projects.

“We have found a lot of interest from utilities and generators right across Europe,” Dale said. “The buyers out there are happy to get such large volumes from one supplier and find a reliable partner that will be able to guarantee the supply.”

On the issue of price, Dale said the new plant will have a major say in determining future pellet prices but that current levels are not sustainable. “The market has bottomed out just now and it could be a year or so before we see things pick up, but some buyers see the arrival of such a large plant as an opportunity to get prices even lower, but that is not realistic,” Dale said. “We have major outlays for raw materials, building costs and logistics, so current levels of €115-120/t [for cif delivery into Europe] are not sustainable. We agree with many of the producers out there that need a minimum cost of around €130/t.”

The plant, which is financed by French bank VTB, is still being constructed, but all the equipment and logistics are in place. “The whole thing is still in the process of being erected, but this part of the construction happens quickly,” Dale said. “Once operational it takes around 12 months to get the plant fully up and running at capacity. We expect to produce 600,000t in first year and then 900,000t from 2012.”

The facility, which is around 25km from the port of Vyborg, consists of two dry barking lines, four driers, 16 hammer mills and 36 presses. The company is also building a 300m berth, as well as a 130m pontoon pier capable of docking four vessels. The plant will have a 25-hectare timber yard — one of the largest in Europe.

The Russian government does not allow the sale of forests so Vyborgskaya Cellulose has signed a 49-year forestry contract that secures 1.2mn m³/yr of round wood. Vyborgskaya Cellulose will transport the wood by rail and truck to the port of Vyborg.

The Russian firm plans to transport 400,000 m³/yr of wood from the Leningrad region and the rest from Pskov. Leningrad produces around 16mn m³/yr of wood waste, but less than 3pc of energy is produced from wood in the region, so there is scope for Vyborgskaya Cellulose to secure more raw materials.

The long-term contracts with the Russian government will help to ensure that the sustainability requirements of large utilities are met, with full certification of the wood crucial to consumers in terms of not only sustainability but requirements on receiving subsidies.

Austria-based Andritz is supplying equipment worth €40mn to build and complete the pellet plant and the company will spend the next month constructing the plant and testing it before operations begin in September.

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