UNITED Fiber (Unifiber) has cancelled a multi-million-dollar deal with China National Machinery & Equipment Import & Export Corp (CMEC) and, instead, awarded the US$863 million contract to China Metallurgical Group Corp (MCC).

The contract is for the building of a bleached hardwood kraft pulp mill in Indonesia, which will have capacity of 600,000 air dry tonnes per annum. The mill had been planned since 2002 as part of the former construction firm's move to transform itself into a pulp and paper play.

Construction was held up for years, as the parties waited for regulatory clearance from both the Indonesian and the Chinese governments.

The contract had been awarded to China National Machinery & Equipment Import & Export Corp, which was to finance 80 per cent of the project. But Unifiber officials said in April last year that while in-principle approval had been received, China's State Council had yet to give the final green-light.

Yesterday, Unifiber said that 'after further consideration', its board decided that China MCC20, a subsidiary of MCC, was 'a more synergistic partner as the turnkey contractor'.

'The engagement of MCC20 will allow the company to advance forward with the project in a manner that is most timely', it said. Under the new agreement, MCC20 will design, procure and supply all machinery and equipment, and perform the civil work and installation required for the complete pulp mill.

Within a month, the parties are expected to finalise all major pending items, including the financial package, detailed construction programme and groundbreaking, upon which Unifiber will make further announcements.

'We are fully committed to the pulp mill project and we will make sure that it is successfully completed', said Jaka Prasetya, chief executive of Unifiber. 'The decision to partner with MCC20 is a strategic one'.

MCC20 is an integrated company that does engineering consultation, building and process design, purchasing, construction and project management.

Its parent, MCC, is a leading investor licensed by the Chinese government to develop natural resources. It is a major driving force behind China's steel industry growth, and has invested as much as US$1 billion in mining resources abroad. It owns many natural resource facilities, including 2 billion tonnes worth of paper production.

MCC had revenues of over 18 billion yuan (S$3.54 billion) in 2006, and is the only central enterprise allowed to run pulp-making and papermaking businesses in and outside of China.

《Business Times》