November 16, 2012
In a letter sent to banks and other financial institutions last week, the European Environmental Paper Network (EEPN) asked financiers not to fund the new mill, which the coalition has linked to Asia Pulp and Paper (APP) and its parent conglomerate the Sinar Mas Group.
"The undersigned NGOs are very concerned about the threat any such new mill might pose to the remaining natural forests in Sumatra and beyond," the letter states, noting that APP has pulped more than 2 million hectares of forests in Sumatra since 19842. "Our concern is the environmental and social consequences of the massive destruction of natural forests that can be shown to be linked to past and current over-capacity in pulp milling plants in Indonesia. We would contend, however, that investment in further milling capacity that relies on natural forest or utilizes land without the free, prior and informed consent of affected communities carries considerable reputational hazard and economic risk to financial institutions."
Eucalyptus plantations east of Pekanbaru. © Greenpeace / Daniel Beltra
APP says the proposed South Sumatra mill would depend on fiber from "independent suppliers" not its own concessions, which it lacks in the province. The paper giant also says the new mill will not reply on mixed-tropical hardwood (MTH) which in the Indonesian pulp business only comes from natural forests.
The mill will allegedly have a capacity of 2 million tons per year and cost some $3 billion. Sinar Mas recently secured a $250 million loan from an unspecified bank in Indonesia, according to the Investor Daily, a sign that the conglomerate may be overcoming investor concerns tied to its $13.9 billion default in 2001. EEPN is nonetheless highlighting APP's track record to dissuade potential investors.
We would suggest that special caution is required in relation to Sinar Mas, APP and companies associated with
them, in view of the economic risks of adding pulp production capacity in large increments despite manifestly
inadequate pulp supplies outside of their continuing and increasingly controversial assault on natural forests.
Financial institutions should particularly note the circumstances and consequences of the previous failure of APP’s business model, graphically illustrated when APP declared a moratorium on the servicing of $US 14 billion in debt in 2001 and was subsequently delisted from the New York Stock Exchange. Although many of the details remain unclear, this resulted in substantial and unresolved losses to financial institutions and investors.
Much controversy still rages around this default. APP currently faces US court orders to pay back more than $900 million in defaulted debt to US creditors, but the company continues for various reasons to delay in complying with asset disclosure or payment orders. There are indications that environmental covenants agreed to with export credit agencies for the restructuring of debt have not been complied with, something that NGOs are continuing to pursue with the institutions concerned.
"We would welcome your assurance that you would not be investing in or supporting any investment in increased pulp milling capacity by companies associated with the Sinar Mas Group."
APP did not respond to mongabay.com's request for comment on the letter.
APP sent the following statement regarding the pulp mill after this story was posted
|Statement from APP - November 16, 2012
"As a business, Asia Pulp & Paper Group is always looking for new ways to grow and deliver more value to our customers, shareholders, and the communities in which we operate. Our goal is to be the largest and most respected pulp and paper company in the world, within the framework of the Sustainability Roadmap Vision 2020 which we published in 2012.
We do not engage in speculative commentary concerning our future expansion plans. We respect commercial confidentiality as a core principle of good business practice. At the same time, we also take very seriously the responsibility to inform stakeholders of new developments, when it is appropriate for those to be made public. APP is already on record as saying that any future development of our business must abide by the principles of our Sustainability Roadmap Vision 2020.
Among the most important of those are our commitment to protect High Conservation Value Forest (HCVF) across our entire supply chain and 100% reliance on sustainable plantation wood as raw material.”
APP overstates significance of its logging moratorium in Indonesia, says report
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Sustainability pact aside, Greenpeace says paper giant APP must stop facilitating deforestation
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In eco-pact, will controversial paper giant APP turn over a new leaf?
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Indonesia's pulp and paper targets incompatible with green growth goals
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APP's new 'sustainability roadmap' won't spare unprotected tiger habitat in Sumatra
(07/27/2012) Asia Pulp & Paper's new sustainability commitment represents a scaling back of earlier environmental pledges and does not offer new protection for natural forests in Sumatra, alleges a new report from Eyes on the Forest, a coalition of green groups based in Riau, Sumatra.
Another red herring from Asia Pulp & Paper on its deforestation problem
(05/29/2012) In a press release issued last Thursday, Asia Pulp & Paper (APP) asserted that the presence of mixed tropical hardwood fiber (MTH) in its products 'does not come from the felling of virgin tropical rainforest trees in Indonesia'. The embattled paper giant goes on to say that 'the presence of MTH fiber says nothing about whether the product is sustainable or not" and that "MTH can be found easily in recycled paper.' All these points are true. But what APP doesn't tell you is that its response is yet another facade in its effort to deflect criticism from its forestry practices.
Ongoing deforestation puts APP in breach of debt restructuring agreements, finds report
(03/27/2012) Asia Pulp & Paper (APP) has broken “legally binding” debt restructuring agreements by continuing to clear native forests in Sumatra, alleges a new report from Eyes on the Forest, a coalition of Indonesian environmental groups.
Some toilet paper production destroys Indonesian rainforests, endangering tigers and elephants
(02/09/2012) American consumers are unwittingly contributing to the destruction of endangered rainforests in Sumatra by purchasing certain brands of toilet paper, asserts a new report published by the environmental group WWF. The report, Don't Flush Tiger Forests: Toilet Paper, U.S. Supermarkets, and the Destruction of Indonesia's Last Tiger Habitats, takes aim at two tissue brands that source fiber from Asia Pulp & Paper (APP), a paper products giant long criticized by environmentalists and scientists for its forestry practices on the Indonesian island of Sumatra. The brands — Paseo and Livi — are among the fastest growing, in terms of sales, in the United States.
WWF: Asia Pulp & Paper misleads public about its role in destroying Indonesia's rainforests
(12/16/2011) Asia Pulp & Paper (APP) continues to mislead the public about its role in destroying rainforests and critical tiger habitat across the Indonesian island of Sumatra, alleges a new report from Eyes on the Forest, a coalition of Indonesian environmental groups including WWF-Indonesia. The report, titled The truth behind APP’s Greenwash, is based on analysis of satellite imagery as well as public and private documentation of forest cleared by logging companies that supply APP, which is owned by the Indonesian conglomerate, Sinar Mas Group (SMG). The report concludes APP's fiber suppliers have destroyed 2 million hectares of forest in Sumatra since 1984.
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Paper suppliers risk damaging Indonesia's reputation, argues report
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Palm oil, paper drive large-scale destruction of Indonesia's forests, but account for diminishing role in economy, says report
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Barbie, Legos, other toys linked to destruction of Indonesia's rainforests
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Pulp and paper firms urged to save 1.2M ha of forest slated for clearing in Indonesia
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Does chopping down rainforests for pulp and paper help alleviate poverty in Indonesia?
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Pulp plantations destroying Sumatra's rainforests
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