andritz annual report - 2006

Annual Report 2006

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006 KEY FIGURES 2002–2006

OF THE ANDRITZ GROUP (IFRS)

Financial Figures in MEUR2006 2005 2004 2003 2002

Order Intake 2,891 1,975 1,837 1,394 1,300

Order Backlog as of 31.12. 3,397 1,696 1,439 1,054 904

Sales 2,710 1,744 1,481 1,225 1,110

EBITDA1) 194 131 115 84 81

EBITA2) 160 107 93 63 59

Operating Result (EBIT) 160 107 76 49 45

Earnings before Taxes (EBT) 166 110 77 49 46

Net Income 121 80 54 31 28

Cash flow from Operating Activities 143 237 208 5 76

Capital Expenditure3) 46 27 29 21 23

Employees as of 31.12. (excluding apprentices) 10,215 5,943 5,314 4,771 4,601

Fixed assets 593 308 276 279 293

Current assets 1,780 1,083 877 688 617

Equity4) 415 329 277 239 229

Provisions 386 190 160 150 145

Liabilities 1,572 873 717 577 536

Balance sheet total 2,373 1,391 1,153 967 910

EBITDA margin (%) 7.2 7.5 7.8 6.9 7.3

EBITA margin (%) 5.9 6.1 6.3 5.1 5.3

EBIT margin (%) 5.9 6.1 5.1 4.0 4.1

Net Income/Sales (%) 4.5 4.6 3.6 2.5 2.5

ROE (%)5) 29.2 24.3 19.5 13.0 12.2

Equity Ratio (%) 17.5 23.6 24.0 24.7 25.2

EV6)/EBITDA 9.1 6.3 4.4 5.2 2.4

Depreciation/Sales (%) 1.3 1.4 1.5 1.7 2.0

Amortization/Sales (%) 0.0 0.0 1.1 1.2 1.2

Stock Exchange related Figures2006 2005 2004 2003 2002

Earnings per share (EUR) 9.24 6.13 4.13 2.26 2.04

Dividend per share (EUR) 3.07) 2.0 1.4 1.0 0.9

Payout ratio (%) 32.5 32.6 34.3 44.2 44.1

Equity attributable to shareholders per share (EUR) 31.4 25.0 20.7 18.0 17.2

Market Capitalization as of end of period (MEUR) 2,135.9 1,207.1 729.3 493.4 298.9

Share price at year-end (EUR) 164.30 92.85 56.10 37.95 22.99

Highest closing price (EUR) 164.30 92.85 56.50 37.95 28.00

Lowest closing price (EUR) 92.50 56.59 35.00 21.00 19.40

Financial Calendar 200701.03.2007 Results for 2006

29.03.2007 Annual General Meeting

02.04.2007 Ex-dividend

06.04.2007 Dividend payment

07.05.2007 Q1 2007

03.08.2007 H1 2007

07.11.2007 Q1-Q3 2007

Notes

[1] EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization of goodwill

[2] EBITA: Earnings Before Interest, Taxes, and Amortization of goodwill

[3] Additions to tangible and intangible assets

[4] Equity: Total shareholders’ equity incl. minority interests

[5] ROE (Return On Equity): Net Income/Equity

[6] EV (Enterprise Value): Market capitalization based on

year-end closing price minus net liquidity

[7] Proposal to the Annual General Meeting

Can you summarize the keys to Andritz’s growth?

In the last decade, Andritz has emerged as a truly global

supplier. Sales – based on complementary acquisitions

and internal growth – have increased by more than 14%

annually, and we have achieved a solid and stable profit-

ability. A key factor to this success is our strategy of

complementary acquisitions which extends the range of

products and services we can offer our customers. An-

other factor is our active R&D, which helps customers

better achieve their profitability, sustainability, and envi-

ronmental goals. This increasing focus on sustainability

introduces new responsibilities for us.

What are these new responsibilities?

Although each market segment we serve is unique, there

is a common theme among the basic manufacturing in-

dustries: the efficient utilization of renewable and sustain-

able resources. As a supplier of machines and systems

to these industries, we have a responsibility to support

our customers’ activities and collaborate with them to

develop sustainable solutions.

We intend to live up to our responsibilities as a global citi-

zen and a local neighbor in the communities where we

have a presence. Integrity, persistent values, and a long-

term commitment to sustainability offer clear advantages

and business benefits for our customers and for us.

What are the key challenges/requirements

of your customers?

They have two major challenges: lowering their total

costs of production (investment and operating costs)

and ensuring that their production is sustainable. Our

customers continuously ask, “How can we be more pro-

ductive while wasting less of our precious resources?”

Their focus is on productivity – doing more with less.

This is easier to achieve with a new production line or a

new plant. The bigger challenge for our customers is to

be more productive and less wasteful with their existing

machines and assets. They look to us to help them in

achieving their goals.

ANDRITZ, A RESPONSIBLESuPPLIER AND PARTNER

ANDRITZ Annual Report 2006

Global Responsibility004

“The principles of sustainable development

are an integral part of our corporate policy.”

Wolfgang Leitner

The Andritz Group has shown strong growth during the last several years. Wolfgang Leitner, President and CEO of the Andritz Group, talks about the challenges of growing a sustainable global business and the responsibilities vis-à-vis its various stakeholders.


Global Responsibility 00�

They also want to improve the quality of their production

while reducing their costs. This means “doing more with

less, without sacrificing.” Again that is where we come in.

By focusing our R&D programs on sustainability and “do-

ing more with less,” we have increased the yield (more

product per unit of raw material) and reduced the relative

volume of the waste for our customers. Waste, after all,

is just another word for “pollution.”

Where does sustainability fit into your strategy?

Sustainable development – meeting the needs of the

present without compromising the ability of future gener-

ations to also meet their needs – has become an integral

part of our corporate policy. There are three fundamental

pillars for sustainable development: social progress, eco-

logical balance, and economic growth.

The ultimate goal is social progress achieved on the ba-

sis of ecological balance. The prerequisite for achieving

this is economic growth. Globalization creates economic

growth – both in the developed world and, more impor-

tantly, in the developing regions. With new jobs come

salaries and the ability to have a better life. With the jobs

also come training, experience, and ultimately, entrepre-

neurship. Sustainable enterprises must aim to support

free, open markets with stable societies and a fair distri-

bution of the benefits.

Andritz has a strong commitment towards the sustain-

able development of social life in the emerging markets.

For example, in the fast-growing countries of Brazil,

China, and India, we have created new jobs by establish-

ing engineering, production, and service sites. The num-

ber of Andritz employees working in these countries has

increased from �0 in year 2000 to a total of over 1,�00

today, thus contributing to social welfare and well-being

in these countries. By the way, this was not the result

of shifting jobs from Europe to Asia; during this period,

Andritz also increased the number of jobs in Europe.

During the last ten years, Andritz delivered the main

equipment for several new greenfield pulp mills in South

America, India, and China. These mills provide work for

more than 3,000 people – many of these newly-created

jobs requiring advanced technical or business skills –

and more than 1�,000 in the forestry and other related

branches.

At Andritz, we operate our business in a socially re-

sponsible manner. We look for suppliers who are equally

committed to economic, environmental, and social stew-

ardship. Our products and processes comply with the

highest international environmental standards, not just

the standards for the region where the products are be-

ing installed.

Can you cite examples of such

technological developments?

In Pulp and Paper, our largest Business Area, our patents

and developments in yield improvement, low-impact

bleaching, water conservation, waste reduction and re-

cycling, and energy efficiency all contribute markedly to

sustainability.

An increasingly important area where technology is the

key is climate change. The world has entered a new era

in which carbon emissions carry a cost and there are

economic incentives to reduce emissions. We recently

completed a very important project for SCA’s Östrand

mill in Sweden. The project is centered around the Andritz

HERB (High Energy Recovery Boiler) that operates at the

highest temperatures and pressures. SCA is now able to

produce virtually all its electricity in-house using a “green”

fuel which is a by-product of the pulping process. SCA

earns green certificates – monetary credit for reduc-

ing CO2 emissions that can be used to produce more

electricity that otherwise would have been lost as heat.

In the sustainability chapter of this Annual Report, you

can find further examples of our technological develop-

ments in the other Andritz Business Areas.

What has been the outcome

of this sustainability strategy?

Sustainability is a critical success factor and our actions

have been recognized. Our products are well regarded

by the industry’s top players. Our people are seen as in-

dustry and technical experts. Our pronounced increase

in Order Intake in every Business Area is proof of this ac-

ceptance of our products and strategy.

The positive performance of our share price since the

IPO can also be seen as confirmation of the success of

our sustainable strategy. We know that our investors are

also paying close attention to how – and not simply how

much – profits are generated. Sustainable development

criteria are being more and more integrated into the buy-

ing decision of investors.

What more needs to be done?

There is much more to sustainability than just environ-

mental impact. Companies that foster innovation can

substantially contribute to solving economic or societal

problems. In the long run, these are the companies that

will succeed.

New technologies will make a key contribution to sus-

tainable development. I know that Andritz has the cre-

ativity to bring innovative technologies to market. We are

already engaged in technology cooperation with cus-

tomers in developing countries. This is particularly im-

portant in helping these countries achieve social and

economic progress.

How will you accomplish this?

Emerging markets account for 1�–20% of the world’s

GDP and are home to 84% of the world’s population.

They have a right to pursue and achieve a better life ac-

cording to their dreams. The challenge is to achieve this

through sustainable development. Andritz will remain

active in bringing products and services that contribute

to sustainable development and social progress for the

developing areas of the world. Most of our customers

also contribute to the social progress and welfare of the

emerging markets. We showcase two impressive ex-

amples, one from Stora Enso in China, the other from

Veracel in Brazil, in the sustainability chapter of this An-

nual Report.

We reach our goals faster when we work collaboratively

with customer and supplier groups to find responsible

solutions to social and environmental issues. Sustain-

able thinking must be incorporated into the minds of all

employees, suppliers, and partners.

0�


Customer ProjectsPulp and Paper Business Area

Kenneth Eriksson, President and Group Executive Officer, SCA Forest Products

00�

“ANDRITZ’S SOLuTIONS fOR hEAT REcOvERY AND ENERGY GENERATION ARE vERY cOmPELLING.”


Customer ProjectsPulp and Paper Business Area

SCA is a global company that develops, produces,

and markets personal care products, tissue, pack-

aging, publications papers, and solid-wood prod-

ucts. It produces products in 40 countries and

markets in some 90 countries. SCA manages 2.6

million hectares of forest land (the biggest in Eu-

rope) and is one of only a few companies in the

world able to offer certified paper products based

on totally chlorine-free pulp. Andritz delivered a

new type of recovery boiler to SCA’s Östrand (Swe-

den) mill which started up in October 2006. We

spoke with Kenneth Eriksson, President and Group

Executive Officer of SCA’s Forest Products busi-

ness area, about renewable energy and Andritz’s

contribution.

Personal background

I was trained as a mechanical engineer and have been

involved with the pulp and paper industry since 19�1

when I began my career with MoDo Mekan (equipment

division of MoDo Paper). I came to SCA’s Östrand mill

in 19�9 as a project manager and then became main-

tenance manager. I left the company for nine years to

head up a company (the former Sunds Defibrator) that

supplied process technology and production machin-

ery to the industry. I rejoined SCA in 199� as President

of SCA Graphic Sundsvall (the pulp and papermaking

units which produce publication papers) and in 2000

was named President of the Forest Products business.

The Östrand project

The Östrand mill is a very important part of the value

chain from the forest to our customers. Our plans for the

mill required additional recovery boiler capacity, and the

old boiler had become a bottleneck. To rebuild the boiler

would have forced us into a very long shutdown, and we

could not have generated higher steam values with the

old technology.

Our team traveled the world to investigate the most en-

ergy-efficient technologies. What we saw convinced us

that a boiler at Östrand could go higher in temperature

and pressure than anything that had been attempted be-

fore, so we put the challenge before Andritz.

We were very impressed with Andritz’s solutions. In ad-

dition to high steam production which improves our

electricity yield, we wanted to get as much hot water

production as possible. There are several unique fea-

tures in this boiler to get the maximum energy from the

black liquor biofuel.

After two years of work and a 1�0 million Euro invest-

ment, our new Andritz High Energy Recovery Boiler

(HERB) enables us to generate �00 Gigawatt hours

(GWh) of electrical energy per year. That is enough to

make Östrand virtually energy self-sufficient.

The boiler was delivered exactly on time. The costs are

all within line. And, we didn’t have one serious accident

throughout the entire project. Andritz has done a very,

very good job and has had excellent project manage-

ment. We have to take our hats off to them and say we

are very happy.

Compelling solutions

Andritz’s technical solutions for internal heat recovery

were very compelling. We were convinced that the elec-

tricity yield would be high. But what really appealed to

us about Andritz was the way they solved the boiler ex-

pansion challenge. Although the initial design capacity is

3,300 t/d at �1�°C and 10� bar, it is currently operating

at 2,�00 t/d. In the future, it can be expanded to process

4,400 t/d at the same temperature and pressure. We

were very impressed when Andritz proposed to expand

the boiler by moving the sidewall, instead of the conven-

tional approach of moving the front wall. It is clearly su-

perior to what has been done before.

Black is green

Before the Andritz boiler started up, Östrand was pro-

ducing 242 GWh of electricity. The new boiler and

turbine-generator boosts this to 468 GWh. Since the

energy is being generated from biomass, we earn Green

Certificates, which bring additional economic credit for

reducing CO2 emissions.

SCA is financing some rather futuristic research and de-

velopment programs for energy technology, but I think

the most important step we have seen so far is what we

have achieved at Östrand – to increase the pressures

and use well-developed technologies to get maximum

energy from the black liquor. We are in a capital-inten-

sive industry. We cannot jeopardize our economics on

such an important part of our process with an unproven

technology.

Energy challenge

The high electricity costs in Sweden helped to steer us

toward the HERB technology. The price of electricity has

tripled within the last four years. There is no way our

global customers would allow us to pass these price in-

creases on to them.

Energy will become more and more expensive. Oil will be

less available in the future. What we see more of are in-

tegrated heat recovery systems. We have the possibility

to capture the heat that our mill normally sends out into

the air and into the water, and to use that in a good way

for the local community. For example, our paper mill in

Ortviken provides hot water to the city’s central heating

system.

cERTIfIED GREEN ENERGY

Interview with Kenneth ErikssonPresident and Group Executive Officer, SCA Forest Products

009

TEchNOLOGY PROvIDERS ARE kEY TO ThE SOLuTIONInterview with Marco MensinkEnergy & Environment Director for the Confederation of European Paper Industries (CEPI)

010

As energy costs skyrocket, and wood prices in-

crease at double-digit levels, the European pulp

and paper industry (PPI) struggles to compete in

global markets. Marco Mensink, Energy & Environ-

ment Director for the Confederation of European

Paper Industries (CEPI), discusses competitive-

ness issues and the importance of technology sup-

pliers in this interview.

Can you tell us about your position at

CEPI and your background?

I am responsible for coordinating and developing the

paper industry’s positions to the EU institutions with re-

gards to energy and environmental issues. Before join-

ing CEPI, I worked for the Royal Netherlands Paper and

Board Association (Royal VNP) and as a Senior environ-

mental consultant for Ernst & Young.

What is the most urgent issue facing

the European paper industry right now?

The most urgent is energy costs. The pulp and paper

industry is the fourth largest energy user in the EU in-

dustrial sector. Energy has overtaken personnel costs

so that 1�–2�% of the total costs of goods are related

to energy. Keep in mind that the pulp and paper indus-

try is competing in a global market. We cannot pass

through these price increases like the utilities do. Energy

price has become a key factor, along with markets and

raw materials, for determining where investments will be

made – on a global basis.

Why are energy costs rising so rapidly?

It is a combination of factors. Overall global economic

growth, especially in the emerging markets, is driving oil

and gas prices. The demand for energy in Europe con-

tinues to increase. If we continue business as usual, en-

ergy consumption will be 1�% higher in 2030 than it was

in 2000. It is projected that we will need �00 Gigawatts

of new capacity to secure Europe’s electricity supply to

2030. Given such a scenario, there is no question that

longer term energy prices will stay at high levels.

“The pulp and paper industry is already

the largest producer and user of bioenergy.”

Marco Mensink


Expert interviewPulp and Paper Business Area

011

“Business as usual” for energy in Europe is not sustain-

able – for climate reasons, for competitiveness, or for

security of supply. The EU started the liberalization of

energy markets and now must finish the work, as high-

lighted in the just published Energy Sector Inquiry. And

politicians have to push for energy efficiency and the use

of renewable energies, but must do it in a balanced way.

What about subsidies for renewable energy,

do they help?

The pulp and paper industry is already the largest indus-

trial producer and user of bioenergy in Europe. The prob-

lem is that there are other industries that want to use the

same biomass for fuel.

Governments subsidize the fuel alternative so that it is

economically attractive to transport wood four times the

distance for bioenergy than for industrial wood use. This

has created a huge market distortion. Wood prices have

risen an average of 20–2�% in 2006. In some regions,

the increase is as high as �0%.

When presented with the choice of putting one ton of

wood into bioenergy (fuel) or one ton of wood into the

production of paper, the paper industry contributes eight

times more added value to the European economy than

the bioenergy industry – and preserves from six to thir-

teen times more jobs.

What are the possible solutions?

The pulp and paper industry and the bioenergy industries

have to resolve the potential conflicts and live together

on a long-term basis. We need government policies that

reflect the interests of all the industries involved and look

at the total picture: job creation, economic growth, sus-

tainability, and environmental impact. The policies should

balance the support for renewables (biomass, hydro-

power, solar energy, and wind energy), energy efficiency,

and the use of certain subsidies. Perhaps a meaningful

subsidy would be to provide incentives to get the forest

residue (wood stumps, green chips, and other residues)

out of the forests. Mobilization to get maximum wood

from our forests is the right approach.

What role can technology suppliers play?

For the EU, the suppliers of technology to the pulp and

paper industry are key to the solution. Research and

technology will save us by cutting emissions and cutting

costs. If we offer rewards for the frontrunners, and take

away the institutional barriers, we can bring the most

promising technologies along quickly.

The supplier trend has been “faster-wider-bigger.” Sup-

pliers need to intensely focus on energy-efficiency. They

need to develop the low-energy or low-CO2 machinery of

the future. This is a huge task and responsibility.

Another key message is that we need to rethink the

way we produce energy. In this possible “war on fiber”

we should demonstrate to our governments that if they

want to really support bioenergy, they should support the

pulp and paper industry. The paper industry can offer a

bio-solution for climate change. By further developing

“bio-refineries,” we can produce energy, and produce

second-generation biofuels and chemicals – and then

combine it with the fiber we need. Either we do this our-

selves, or the refineries and chemical companies will

start using fibers for second-generation biofuels and

other products.

Are you positive or negative about the

pulp and paper industry in Europe?

I am positive. The European pulp and paper sector is

still a hugely competitive sector, leading in the world. We

have a strong base for technology development. And,

we can keep this asset for a long time. We have big chal-

lenges, but we have big opportunities.


Expert interviewPulp and Paper Business Area

013


Customer ProjectsHydro Power Business Area 013

Karl Heiz, President of Rätia Energie, Switzerland

“ANDRITZ vA TEch hYDRO mET ALL ThE chALLENGING TARGETS wE SET fOR ThEm.”

01�

Rätia Energie (RE) is a major Swiss electricity com-

pany founded in 1904. It has been building up a

strong position in the renewable energy segment

for several years. RE operates several hydroelec-

tric power plants, holds shares or long-term draw-

ing rights at other facilities, and is building new

production capacity in Italy. Karl Heiz, President

of the company, talks about renewable energy and

Andritz’s role as a key supplier.

Personal background

I graduated from the Swiss Federal Institute of Technol-

ogy with a degree in physics and I also hold an MBA.

I joined Rätia Energie in 198� as its Chief Executive Of-

ficer after a successful international career with Nestlé.

I am a member of the executive committee of the federa-

tion of Swiss electricity enterprises (VSE).

Balanced and integrated approach

RE has a balanced and integrated approach to the en-

ergy value chain. We started as a power generation

company and soon built transmission lines, which gave

us access to the Swiss and the international transmis-

sion grids. Distribution came later through acquisitions

in Switzerland and Italy. While distribution is a relatively

low-risk and low-growth business (at least in Switzerland

where market liberalization is less advanced than in the

EU), international trading offers us good growth oppor-

tunities. Key success factors for both distribution and

trade are a secure proportion of generation capacity and

access to the transmission and distribution grids. Envi-

ronmental compatibility is always an important aspect of

our projects. Several of our plants are ecologically certi-

fied as a result of different measures we have taken.

Current trends

Energy consumption will continuously increase. Energy

generation will be predominantly dependent on fossil

fuels; however, renewable energy will become more and

more important. Efforts to reduce CO2 emissions will be

intensified.

With market liberalization making progress all over Eu-

rope, price became the main issue for all customers and

security of supply was taken for granted. Today, con-

sumers consider security of supply and sustainability

as the main challenges. We also have observed an in-

creased demand for ecologically certified power. Both of

these factors speak in favor of hydropower.

Hydroelectric power development

Hydro is, by far, the most important source of renew-

able power, both in terms of quantity and ecological

value. Despite the fact that investment costs of a new

hydropower plant are extremely high, we believe that the

long-term economic prospects remain good. Pumped-

storage plants, in particular, are uniquely suited for gen-

erating power when demand for electricity is high and

for supplying reserve capacity to renewable, fossil-fueled

and nuclear plants. The production of renewable energy

should be encouraged and expanded. Existing plants

should be maintained and refurbished.

Renovating the Küblis station

The Küblis station is located in the Graubünden canton

in eastern Switzerland. It started operation in 1922 with

three 8-MW three-phase groups, one 2.9-MW single-

phase group, and two 8.�-MW single-phase groups.

The facility was granted an 80-year license when it went

into operation.

After lengthy negotiations, we were able to secure a new

80-year license in 200�. We set about to replace the

outdated machinery. Our technical goals were to pro-

duce 1�� GWh of electricity each year with two machine

groups. We wanted fully automatic and autonomous op-

eration of each machine group with high availability.

We also were constrained by architectural goals. The

power station, and particularly the machinery hall, at

Küblis are considered to be of historical value. When the

renovation began, it was a big challenge to ensure that

technical and safety requirements were met while pre-

serving the historical building.

Andritz VA TECH HYDRO

Through its predecessor companies, Andritz VA TECH

HYDRO has supplied machinery to Rätia Energie since

the 1930’s. This business relationship has lasted for sev-

eral generations.

When selecting potential suppliers, we look at the com-

pany (R&D, experience, locations, size, etc.) and we

evaluate the quality assurance systems. We look to see

how the supplier has improved its products over the

years, as well as the competence of its people. In ad-

dition, a solid financial base is absolutely necessary for

larger projects.

Andritz VA TECH HYDRO scores very well in all these

areas. We chose them for the Küblis project. Their scope

included the supply, erection, and start-up of the turbines,

governors, and turbine shut-off devices, as well as the

synchronous generators and their excitation equipment.

Performance

When the contract was signed with Andritz VA TECH

HYDRO in March 2004, we agreed to shut down the

Küblis station on March 29, 200�, dismantle the old ma-

chines, lay new foundations, and install the equipment

so that trial operations for Group 1 could begin on De-

cember 24, 200� and for Group 2 on February 13, 2006.

Andritz VA TECH HYDRO met the start and finish dates

exactly on schedule.

The machines have been in operation for almost one

year now and meet the challenging targets and require-

ments with regards to efficiency, reliability, availability,

and maintenance to our full satisfaction.

New legislation stipulates that we maintain a minimum

water flow for water catchments, which means that the

total quantity of water that can be utilized for power

generation has been reduced. Thanks to the higher ef-

ficiency of the new Andritz VA TECH HYDRO machines,

we can partly compensate for this loss of available wa-

ter volume.

I am very impressed with the willingness of Andritz VA

TECH HYDRO to meet future challenges using research,

development, and innovation. Their forward-thinking

provides us with solutions which meet the needs of our

markets.

cLEAN POwER fROm wATER

Interview with Karl HeizPresident of Rätia Energie, Switzerland

Customer ProjectsHydro Power Business Area


The International Hydropower Association (IHA)

has members in more than 80 countries and is a

non-profit organization advancing hydropower’s

role in meeting the world’s water and energy needs.

Richard Taylor has over 20 years experience in wa-

ter resource management and has been Executive

Director of the Association since 2001. He shares

with us his views about hydropower as a source of

renewable energy.

Personal background

My professional career started in 198�. I specialized in

hydropower project assessment, focusing on design

and environmental performance. Between 1986 and

2001, I edited international journals on hydropower and

dam construction. Since 2001, I have been the Executive

Director of IHA. I am also a Fellow of the Energy Institute

in the UK and have been engaged in various United Na-

tions initiatives. I am IHA’s observer to the UN Framework

Convention on Climate Change.

Supply and demand

Global energy use has risen by �0% since 19�1 and con-

tinues to increase at the rate of about 2% per year. There

are many scenarios for future demand and the energy

mix that will be needed to meet this.

In 200�, renewable energy represented one-fifth of total

power generation. Hydropower is the most advanced

and flexible of the renewables and represents 8�% of this

production. During 200� alone, 18 GW of new hydro ca-

pacity was commissioned. IHA estimates that only one-

third of the realistic potential has been developed.

Five countries make up more than half of the world’s hy-

dropower production: China, Canada, Brazil, USA, and

Russia. Taking Europe as a benchmark (proportion of

production in relation to realistic feasibility), we expect

to see a ten-fold increase of hydro in Africa, a three-fold

increase in Asia, a doubling in South America, and an

increase of about 10% in North America. Future devel-

opment in countries such as Chile, Colombia, Ethiopia,

Nepal, Romania, Turkey, and Zambia will rely on finding

appropriate long-term funding mechanisms and part-

nerships.

There are many recent cases of incremental hydropower,

both adding to existing capacity and retrofitting large

dams to increase hydropower production. There are

4�,000 large dams in the world and the majority does not

have hydro facilities. While this is not always an economic

option, there is a significant market niche in this area.

An even bigger market is plant modernization. Equip-

ment with improved performance can be installed, of-

ten to accommodate market demands for more flexible,

peaking modes of operation. Most of the 80� GW of

hydro equipment in operation today will need to be

modernized by 2030.

Drivers

Beyond basic energy demand, there is a long-term eco-

nomic advantage of hydro development. With annual

operating costs in the order of 1% of capital costs, hy-

dro’s autonomy from fuel price is a distinct advantage.

The flexibility of storage hydro (hydro with reservoirs) also

makes it a compelling partner to ensure security in mixed

power systems. Another driver is the increasing need

for water management. Multi-purpose hydro reservoirs

bring security of water supply as well as power.

Technologies

Most of the early hydropower projects were built to

provide a primary “baseload” to the power system. As

other technologies were introduced, hydro has tended

to evolve into a supporting role – responding to gaps

between supply and peak demand.

Consumers today subscribe to the need for a transition

from “dirty, insecure, and expensive” to an energy future

which is “clean, clever, and competitive.” However, there

is certainly no technology panacea on the horizon.

With hydropower technology, the challenge is to improve

by continuously pushing the envelope in terms of envi-

ronmental performance, materials, efficiency, operating

range, and costs. The least-cost alternative for produc-

ers desiring additional capacity is almost always to mod-

ernize existing plants, when this is an option.

“cLEAN, cLEvER, AND cOmPETITIvE”Interview with Richard TaylorExecutive Director of the International Hydropower Association (IHA)

016

“Water and energy are the world’s key challenges –

and hydropower has a vital role to play in both.”

Richard Taylor


Expert interviewHydro Power Business Area

Also, looking at new technologies, I think the hydro in-

dustry could take more of a lead in the marine energy

sector. More broadly, I think all renewable technologies

could benefit from closer collaboration.

Small versus large

This is an old debate. From the smallest to the largest,

all developments have a footprint, especially when you

look at the cumulative effect of a lot of small schemes.

Smaller-scale hydro plays an important role in remote ar-

eas and in maximizing the value of multi-purpose sites.

Large schemes will continue to be the most environmen-

tally benign to the power industry and urban centers.

Pumped storage

Storing hydro at times of low demand and releasing it

when demands are high can be a very good business.

Pumped storage can solve a plethora of system chal-

lenges. It can follow load fluctuations so that fossil plants

can continue to operate at their best efficiency. In many

countries, pumped storage units ensure total system se-

curity and maintain the quality of supply.

Synergies

There are good synergies between renewable energies.

For hydropower, the most developed relationships are

with wind and geothermal power generation. Wind pro-

duces a variable and intermittent supply and hydro can

provide the firming capacity to ensure both security and

quality in the system. Geothermal plant characteristics

lend the technology to baseload operation. Hydro’s flex-

ibility can support this by meeting peaks in demand. Sim-

ilar synergies between hydro and solar, biomass and the

marine technologies will develop as these technologies

move into larger scale deployment.

Issues

With regard to climate change, hydropower tends to

have a very low greenhouse gas (GHG) footprint. As wa-

ter carries carbon in the natural cycle, scientists have

investigated the extent to which a new reservoir might

accelerate carbon emissions. In some very shallow tropi-

cal reservoirs, this may be the case, and account would

need to be taken into consideration in the life cycle analy-

sis of such schemes. In contrast, several hundred res-

ervoirs around the world have been monitored to test

their emissions, confirming that hydropower is one of

the cleanest methods of power generation. Taking into

account an international average for hydropower emis-

sions, fossil fuel power plants tend to emit 10 to 3� times

more greenhouse gas per unit of electricity.

Population growth in emerging markets is both a driver

and a constraint. The demand for land and water re-

sources increases with population growth. Water man-

agement is key to sustainable development. Many of the

projects in the future will be multi-purpose: urban water

supply, flood control, in addition to power generation.

Finding the right balance is fundamental. Sustainability

criteria demand that economic decisions incorporate

environmental stewardship and social justice. To give

guidance, IHA has developed Sustainability Guidelines.

Supplementing this is an Assessment Protocol which

sets out a system by which sustainability can be mea-

sured. I believe that the Protocol will become the pri-

mary tool for certifying the sustainability of hydropower

development.

Following this, certification could be a win-win for all par-

ties. That is, the best performers will get the best returns,

and customers can buy with confidence.

Regulatory matters

Europe and North America tend to have the most ad-

vanced regulatory frameworks. While comprehensive

project assessment is a given, much unnecessary bu-

reaucracy is created in the development of new proj-

ects and the periodic re-licensing of existing installations.

The high administration costs are a significant burden,

especially for smaller companies. In Europe, the Water

Framework and Emissions Trading Directives are in need

of clarification regarding hydropower. For the “transition”

countries and developing world, regulations relating to

the Kyoto mechanisms need to be better understood. In

addition, financial institutions must standardize their poli-

cies to avoid unnecessary duplication and inefficiency.

Financing

Many economically feasible hydropower projects are fi-

nancially challenged. High up-front costs are a deterrent

for investment. Also, hydro tends to have lengthy lead

times for planning, permitting, and construction. When

you examine life cycle costs, however, hydro often has

the best performance, with operating costs being a frac-

tion of the capital investment.

The main challenges relate to creating investor con-

fidence in hydropower. Green markets and trading in

emissions reductions will undoubtedly give incentives

in some areas. In developing markets, such as Africa,

interconnection between countries and the formation of

power pools will build investor confidence. Feasibility and

impact assessments carried out by the public sector,

prior to developer tendering, will ensure greater private

sector interest in future projects.

However, I think most investment will only come when

the need becomes urgent – when the lights go out.

Unless policymakers are better informed, much of the

investment will be targeted at quick-fix solutions. It is

IHA’s priority to increase awareness of the role that hy-

dropower can play in the clean, clever, and competitive

markets of tomorrow.

01�


Expert interviewHydro Power Business Area

019019


Customer ProjectsRolling Mills and Strip Processing Lines Business Area

“ANDRITZ’S STRENGTh IS ThAT ThEY ThINk fROm ThE cuSTOmER’S SIDE TO OffER ThE BEST SERvIcE.”

Li Pi Hsien, Chairman, Lianzhong Stainless Steel Corporation, China

中国联众不锈钢有限公司李必贤董事长

“安德里茨公司的优势在于为客户着想,提供最好的服务。”

021


Customer ProjectsRolling Mills and Strip Processing Lines Business Area

China’s consumption of stainless steel now leads

all nations in the world. To reduce imports, China’s

share of global stainless steel production has risen

from approximately 8% to over 12% in the last

three years. After an investment of 800 million US

dollars and a five-year construction period, the Li-

anzhong Stainless Steel Corporation (LISCO), part

of the E-United Group, has become the leading in-

tegrated stainless steel manufacturer in southern

China. Li Pi Hsien, Chairman of LISCO, talks about

the market situation, environmentally sustainable

technologies, and Andritz’s contribution.

现今中国不锈钢的消费量牵动着世界所有的国家。为

了减少进口量,在过去的三年里中国的不锈钢产量在全

球范围内所占的份额已经从8%上升到超过12%。联众

(广州)不锈钢有限公司(LISCO)作为台湾义联集团的子

公司,在投资了八亿美元和经过五年的建设期之后,已

经成为中国华南地区领头的不锈钢综合制造商。联众

不锈钢公司的董事长李必贤先生谈及了市场环境,环境

可持续发展技术以及安德里茨公司(Andritz)的贡献。

Personal background

After graduating from School of Laws at Osaka City Uni-

versity, Japan, I joined the E-United Group. I have been

working for the steel industry for more than 20 years

now. I also served as Chairman of the Boards of I-Shou

University, Taiwan, and as congressman for the Taiwan-

ese Congress (two times for six years). At present, I am

Chairman of the Board at Lianzhong Stainless Steel Cor-

poration, and Member of the Boards of the E-United

Group’s other subsidiary companies.

人物背景

于日本大阪城市大学毕业后,旋即加入义联集团。迄今

已于钢铁行业从业超过20年,期间曾经担任义守大学董

事长,两届六年台湾立法委员,现任联众不锈钢有限公

司董事长,同时担任集团下属多家公司的董事会成员。

Company background

Since its establishment as Yieh Hsing Enterprise in 19�8,

the E-United Group of Taiwan has expanded from its

core steel business into the education, medical, and real

estate sectors. This demonstrates the Group’s commit-

ment to paying back to society. Our intention from our

founding has been to keep investing so we can make

contributions to the general public.

公司背景

台湾义联集团自1978年首创烨兴公司迄今,已从钢铁

基础产业发展至教育事业,并跨足医疗体系,展现了企

业“取之于社会,用之于社会”的理念。

The LISCO subsidiary, for which I am responsible, has

about 1,800 employees. Here on the Chinese mainland,

LISCO is a portfolio project for the E-United Group,

which means we play an important role in the Group’s

sustainable expansion.

我所管理的联众子公司拥有1800名员工,义联集团在中

国大陆投资的联众不锈钢有限公司是重要的投资综合

项目,在整个集团的持续发展中起着非常重要的作用。

Our customers are mainly in the Pearl River Delta, which

is the largest consuming region of stainless steel in

China. Because the GDP of China is growing so fast and

the middle-class population in China has more available

income, I strongly believe that the consumption of stain-

less steel will also show continued growth in the future.

我们的客户主要在珠江三角洲,它是中国最大的不锈钢

需求地区。中国的GDP飞速提高,中产阶级的有了更多

的富余收入,我坚信在未来不锈钢消费量仍然会持续增

长。

The Guangzhou facility

Our integrated facility at Guangzhou is one of the largest

and environmentally most advanced stainless steel pro-

duction facilities in the world.

广州厂的设备情况

我们广州厂采用的集成生产线是世界上生产能力最

高、最环保和先进的不锈钢生产线。

The facility has the first integrated WRAP line (white

rolling, annealing, pickling, skin pass mill, and tension

levelling) in the world. It is over 600 meters long and the

stainless strip length is over 2,000 meters.

公司具有第一条集成(轧机,退火,酸洗,SPM和矫

直机)的WRAP产线,600米长,不锈钢带的长度超过

2000米。

The line we call HAPL #1 is one of the largest and fast-

est annealing and pickling lines for hot-rolled stainless

steel strip in the world. It is �� meters long and has a

capacity of up to 800,000 tons per year. It is truly an in-

ternational line, featuring the most advanced equipment

from Andritz and other international suppliers. It is the

first in China that can process strip up to 10 mm thick-

ness, which is in strong demand by the petrochemical

industry.

我们称作HAPL #1的产线是世界上最大最快的退火酸

洗线,555米长,年产量80万吨。它是一条国际化的产

线,安装的是安德里茨公司(Andritz)和其他国际供应

商最先进的设备,这是在中国第一条可以处理10毫米厚

钢板的生产线,厚板应用于石化产业。

The acid regeneration plant uses the Andritz Pyromars

process and is the world’s largest regeneration system

for mixed acids. It has the highest efficient acid recovery

rate in China.

酸回收再生产线 ( A R P ) 使用了安德里茨公司

(Andritz)的Pyromars工艺,是世界上最大的混合酸回

收再生系统,在中国具有最高的酸再生率。

The CAPL, supplied by Andritz, can produce up to 3 mm

thick cold-rolled strip. It, too, has the most advanced

technology, which fits into our overall strategy.

由安德里茨公司(Andritz)提供的CAPL产线能够生产

3毫米厚的冷轧不锈钢钢板,它同样也使用了最先进的

技术,并能符合我们联众公司公司的全盘规划。 ➔

SuSTAINABLE STAINLESS STEEL mANufAcTuRING

Interview with Li Pi HsienChairman, Lianzhong Stainless Steel Corporation, China

持续性不锈钢生产采访李必贤先生

中国联众不锈钢有限公司董事长

02�

ANDRITZ Geschäftsbericht 2005

KundenprojekteGeschäftsbereich Walz- und Bandbehandlungsanlagen 02�

“wE uSE 30% LESS wATERThAN BEfORE.”

Claude Lopez Projektleiter bei Degrémont, Frankreich


Customer ProjectsEnvironment and Process Business Area

“wE uSE ThE mOST ADvANcED EquIP-mENT AND TREAT-mENT PROcESS IN ThE wORLD.”

Gu Hong, General Manager, Qingyuan Hua Yan Water Industry Co. Ltd., China

02�

02�


Customer ProjectsEnvironment and Process Business Area

The Suzhou Industrial Park, the largest in China,

was formed in Jiangsu Province in 1994 and is now

home to 260,000 people. This high-tech industrial

park encompasses 288 km2 and presents a garden-

like setting beside Jinji Lake. Andritz supplied the

filter presses for treating fresh water and waste-

water in this massive park. Mr. Gu Hong, General

Manager of the water industry serving the Suzhou

Park, speaks to the environmental aspects of the

project and Andritz’s contribution.

Personal background

My degrees are in chemical processes and international

trade. I am also working on my Executive MBA degree.

My first work was at a pharmaceutical factory in Suzhou.

In 1996, I joined the Suzhou Industrial Park. First, I was

the Manager of the Construction Department of Qin-

gyuan Hua Yan Water Industry Co. Ltd., and now I am

Vice President of the Municipal and Public Utility Group

of Suzhou Industrial Park and General Manager of the

Qingyuan Hua Yan Water Industry Co. Ltd., responsible

for the water network.

Suzhou Industrial Park water network

The water plant of Suzhou Industrial Park can supply

4�0,000 m3 of water every day. It consists of the three

parts: a water inlet and suction pump station with a ca-

pacity of 900,000 m3 per day; two water mixing pipelines

that are 28 km and 32 km in length; and a clean water

plant with a capacity of 4�0,000 m3 per day. The waste-

water plant has a treatment capacity of 200,000 m3 per

day.

Customer requirements

Our customers want their water supply to be safe and

sufficient, comparable to the best international stand-

ards for health and quality. After the water is recovered

and treated, they expect that the discharge will be envi-

ronmentally safe as well. In addition, we in the business

are concerned with the quality of the filtrate and the filter

cake. We want to re-use the filtrate in our processes and

have a high solids content for the filter cake. This way,

we can economize on energy usage and protect the en-

vironment at the same time.

Filtering and dewatering for the Suzhou plants

In earlier days, we used centrifuges for slurry dewater-

ing; however, the solids content was very low. We had to

dose the slurry with polymers, which increased our op-

erating costs. In addition, we could not convey the filter

cake easily, which led to pollution.

Today, environmental concerns are the most important

drivers for our investments. This was not always the case

in China, as you know. But we now recognize the need to

preserve and protect the environment. After comparing

the technical aspects, we decided to use filter presses.

They can handle large capacities, produce a filter cake

with high solids content, and the filtrate is clear. The filter

cake can be moved by conveyors, which is convenient

and saves money.

Based on our research, we set the target of 40% final

solids content.

Why Andritz?

I had no direct experience with Andritz before the Su-

zhou water plant and wastewater plant projects. How-

ever, I knew they were a global leader in supplying filter

presses for many industries, including water and waste-

water treatment.

Before we decided to purchase from Andritz, we care-

fully studied the company and its products. We com-

pared Andritz with other suppliers. Andritz has many

successful reference projects and is regarded as a good

problem solver. I visited the Wu’xi Meiyuan Water Sup-

ply Plant where the Andritz filter press is installed. The

dewatering effect and production situation are excellent.

Andritz also has an office in Shanghai and their after-

sales support is considered to be prompt and earnest.

Scope of supply

We selected Andritz to supply two filter presses for wa-

ter treatment (capacity 4�0,000 m3 of drinking water per

day) and three filter presses for wastewater treatment

(capacity 200,000 m3 per day). A new wastewater treat-

ment plant with a capacity of 400,000 m3 per day will be

completed next year.

For these projects, Andritz supplied the equipment and

process design, including the whole dewatering system

from slurry tank to cake conveyor. The entire filter press

system can run fully automatically.

This is our first application of filter presses in the waste-

water plant, so the project was an adventure for us. Also,

in our way of working, we must complete our projects

– from design to equipment selection, to installation to

commissioning – in one year. This is an extremely limited

period of time. Even with this short time, Andritz came in

under full sail to reach our target successfully.

Meeting international standards

Today, we use the most advanced equipment and treat-

ment process in the world. I believe that our treatment

level meets the international standards. We display the

water quality and wastewater discharge quality reports

every day on our Web site. Our customers can see how

we are performing.

We are very satisfied with the Andritz filter presses. The

most important aspects of their performance are the fully

automatic operation and the perfect dewatering effect.

The solids content of the slurry is 40%. We save money

by not having to add as much polymer. The cycle time is

short. The operation and maintenance costs are low. We

have gained even better results than originally planned

concerning environmental protection. Now we can work

within delightful and neat surroundings.

During the project, I found that Andritz worked to a high

standard all the time. They were concerned about safety

and schedule. We closely and happily worked together

with Andritz. My deepest impression of Andritz has been

its teamwork, earnest work attitude, and care for its cus-

tomers. We are not only partners at work, but now also

good friends.

Future

I now know why Andritz has become a successful, fast

developing, and international company. I wish Andritz

great success in China. We will be updating our equip-

ment in the future and the entire industrial park is ex-

panding. As we enlarge or build new plants, we will give

priority to the use of Andritz filter presses.

wORLD-cLASS wATER IN chINA

Interview with Gu HongGeneral Manager, Qingyuan Hua Yan Water Industry Co. Ltd., China

029


Customer Projects Feed and Biofuel Business Area 029

“ANDRITZ ImPRES-SIvELY DEmON-STRATED ThE ABIL-ITY TO DELIvER A cOmPLETE PROj-EcT fROm DESIGN TO START-uP.”

Dragutin Drk, Chairman and CEO of Vindija Group, Croatia

031


Customer Projects Feed and Biofuel Business Area

The Vindija Group developed from a small dairy es-

tablished near Varaždin, Croatia in 1959. The com-

pany takes its name from the nearby Vindija cave

which contains Paleolithic artifacts and Neander-

thal skeletons dating from more than 200,000 years

ago. Today, the state-of-the-art Vindija Group is an

internationally known cheese producer, a leader in

the dairy industry, and has expanded its portfolio to

include juices, poultry, pork, and bakery products.

Andritz supplied the production systems for a new

feed mill at Vindija’s Koka subsidiary. The mill is

capable of producing 400,000 tons of animal feed

per year. Dragutin Drk, Chairman and CEO of the

Vindija Group, talks about the company’s aggres-

sive internationalization and Andritz’s contribution

to the company’s expansion.

Personal background

I went to dairy school and then studied Economics at Za-

greb University. I started my professional career in 1961 as

production manager for Vindija. Four years later, at the age

of 2�, I was appointed General Manager. When I started

working for Vindija, it was a small dairy with 2� employ-

ees, which supplied milk to the city of Varaždin. Today, it

is the largest food company in Croatia. In my managerial

actions, I have always given particular attention to the re-

lationship with my employees because I firmly believe that

people are the decisive criterion for quality.

Vindija profile

The Vindija cave, now an archeological treasure, was

once used for the ripening of cheese. We took the name

to evoke a link between the cave as a natural milieu for

cheese and our current position as the largest food in-

dustry in Croatia (32� million Euros of sales and 3,300

employees). We have over 900 products and approxi-

mately 12% of our sales are exported to regional coun-

tries and the European Union.

Our Koka (chicken) and Vindon (turkey) subsidiaries are

the only poultry producers in Croatia certified to export to

EU countries. Koka was founded in 1961 and is now the

leading chicken meat producer in Croatia. The business

is fully integrated – from breeding to hatchery to broiler

farms, feed mill, slaughterhouse, and processing.

Key to success

Using quality raw materials and state-of-the-art process-

ing technologies are key factors to us being certified to

international quality standards. We are the first in Croatia

to meet the International Food Standard (IFS).

We understand the need to make investments in the

best technologies to support our production increases,

improve quality, expand our product assortment, and

improve our profit margins. This has permitted us to ex-

pand our markets beyond the region and into the Euro-

pean Union.

BIOdar and a new feed mill

BIOdar is the brand name of the feed generated by

our new mill. Koka built its first feed mill in 1964. It pro-

duced feed blends for breeding poultry with a capacity

of 120,000 tons of feed per year.

There have been significant developments in poultry pro-

duction and feed science since that time. Over the years,

we added equipment and rebuilt our processes to in-

crease capacity and improve the feed – such things as

adding heat treatment for blends (pelleting and adding

liquids). But we reached our practical physical limits and

decided to build a completely new modern factory.

The goals which we wanted to accomplish with the new

construction were to more than triple our production

capacity, improve the feed quality, and trace the produc-

tion “from farm to fork” to conform with the latest EU

regulations.

Andritz capabilities

Before this project, we had no direct experience with

Andritz. During our analysis and negotiations, we visited

several reference installations. The impression we got

during the visits played an important part in our selec-

tion of Andritz.

Our criteria were straightforward. We wanted a long-

term and reliable partner because our projects are based

on long-term goals. We wanted a supplier who could of-

fer a turnkey package. And, of course, we were looking

for value for money invested.

Andritz has a long tradition supplying technology for feed

mills. They were flexible in applying their technology to

our needs. They were willing to deliver a turnkey solution

with guaranteed quality and capacity. And, they offered

a competitive price. We signed the contract with them

in February 2003.

Andritz’s scope

Andritz worked with our Koka team to design the pro-

cess. Then they delivered all the production lines, includ-

ing automation systems, for the factory’s 400,000 tons

per year production. There are two lines for pelletized

feed for poultry, one line for pelletized special diet feed,

an integrated process line for thermal treatment of full fat

soy beans, and a complete premix process line for the

addition of vitamins and minerals which serves the feed

factory as well as bagged products for third parties.

During construction, Andritz supervised the installation.

We suffered through a long and extreme winter, which

delayed civil construction. When the physical construc-

tion was completed, Andritz started up the factory in

February 2006.

Performance

The project for turnkey delivery stayed within the defined

budget. We encountered construction delays along the

way, as a result of situations beyond our control, but

each challenge was solved mutually and with good co-

operation.

The feed mill is working to design capacity and supplies

Koka with fodder blends. In addition, we are supplying

other customers with different types of blends and pre-

mixes for all animal categories. There is a noticeable im-

provement in the feed quality.

Since the factory is so close to the city of Varaždin, Andritz

had the responsibility to reduce municipal waste, and to

minimize dust emissions and the release of any pollu-

tion into the environment. They have achieved all these

targets. In addition, they installed systems for recovering

and reusing waste heat from the production process.

Over the longer term, it will be important to see what im-

pact the new fodder blends from the factory will have on

the health and growth of the animals.

Andritz demonstrated to us the ability to offer a complete

project from design to start-up with guaranteed capacity

and final product quality.

fROm fARm TO fORkInterview with Dragutin Drk

Chairman and CEO of Vindija Group, Croatia

“iT’S AbOuT buildiNG A bETTER liFE.”The streets of Barrolandia. Once a small community in the poorest region of Brazil, Barrolandia has benefited from the Veracel mill just 18 km away. Veracel has invested in the infrastructure – new streets, new sewers, bathrooms, medical facilities – as well as providing jobs.


Sustainability and Corporate ResponsibilitySocial Sustainability046

Photo: Gleison Rezende

“iT’S AbOuT buildiNG A bETTER liFE.”


Veracel Celulose of Brazil started up one of the

world’s largest and most environmentally advanced

market pulp mills in 2005. The mill is a showcase

for Andritz’s advanced technology. However, this

story is not about technology. It is about people.

Thousands of jobs were created when Veracel was

built. And now, the company provides work for 538

people in the mill and 3,095 others in the forestry

and corporate branch. Thousands more count on

the mill for their livelihoods – as tree farmers, sub

suppliers, or recipients of social programs. Vera

cel brought significant improvements through its

eleven million US dollars investments in local infra

structure, healthcare, and education, plus the 23.3

million US dollars it paid in taxes in 2005.

One Veracel employee can especially relate to the

“better life” Veracel has brought to a poor district

in the southern Bahia state. We are proud to be a

partner with Veracel and to bring you this story.

Special thanks to Cristina Moreno and Cyntia Fa

rabotti of Veracel for their contribution.

Sandoval Nascimento Silva was born in 1985 in Barro-

landia, a small community in perhaps the poorest region

of Brazil. Sandoval’s father moved there 40 years ago to

work in the wood harvesting business long before the

Veracel mill was even conceived.

At that time, Barrolandia was “in the middle of nowhere.”

Today, the Veracel mill is just 18 km from the village and

Sandoval is an operator at the mill. But his journey from

Barrolandia to Veracel did not follow a straight path.

His early years were good. Sandoval’s father built a

house, owned a car and a motorcycle, and enjoyed a

hard-working, but decent life. As a child, Sandoval re-

members playing football with friends, swimming in the

nearby river, and exploring the forest in search of great

adventures.

The good times came to an end in the early 1990s as the

trees were harvested and the cocoa trade diminished.

The cocoa trees were invaded by a virus and on the for-

estry side there was a growing concern about environ-

mental issues in Brazil. Sandoval’s father owned a small

supermarket at the time, but with no forests remaining,

no cocoa industry, and very few opportunities for work,

he had to sell almost everything to survive.

Young Sandoval made a decision. “I knew that the only

way to get a good job was to get a good education,”

Sandoval says, “so at the age of 14 I moved with my

sister to the city of Eunapolis, which, at that time, had

approximately 84,000 inhabitants (today: approximately

94,000 inhabitants). We lived alone. Eunapolis was like

a big city for me. Being away from my family and friends

was difficult.”

But Sandoval took advantage of the opportunity to learn.

“I was the best student in my class,” he says proudly.

One day, he heard about the Veracel mill that was going

to be built nearby. “I did not know about the pulp indus-

try, but I knew that the plant would have high technol-

ogy,” Sandoval says. “My father told me it would be the

best job that I could ever get in this region.”

Sandoval woke up early and went to apply at Veracel.

“The line of applicants was very long, but I didn’t give

up,” he says. “I really wanted a chance to get into the

internship program for technical training.” And he was

successful.

“I enjoyed the training and learning how to operate the

fiberline,” Sandoval says. “Everything was state-of-the-

art and the computer systems were amazing. My parents

are really proud of me. My father reminds me of the great

opportunity that I have, after coming from a small, poor

place like Barrolandia.” ➔

A bETTER liFE iN bARROlANdiA

Veracel improves living conditions in Brazil.

Sustainability and Corporate ResponsibilitySocial Sustainability 047


Veracel has invested in over 90 infrastructure and social

projects in Barrolandia and the surrounding communi-

ties according to Cristina Moreno, Sustainability General

Manager for Veracel. “Our local investments in sanita-

tion, healthcare, security, and education are part of the

commitment we made when we received funding for

this project,” she says. “It started out as a way to sup-

port the construction of this mill and has evolved now to

finding out what each local community needs to build a

better life.”

Barrolandia was of special interest because it housed

many of the construction crews working at the Vera-

cel complex. “We started by building barracks for the

workers to live in,” Moreno says. “We knew that sanita-

tion was not adequate so we built sewage lines and rain

water drainage systems for the town. From this, we saw

that many homes did not have sanitary bathrooms so

we invested in a plant where local people were trained

to make bricks and build the necessary bathrooms with

the materials we provided.”

One thing led to another. Next, Veracel helped build ad-

ditions to the primary school, built a new police precinct,

and added on to the local hospital.

“Building is easy,” Moreno says, “but understanding is

more difficult. We have had over 30 public meetings with

the people in Barrolandia over the last two years to find

out what they need and to explain what we are doing. It

takes lots of dialogue to build trust.”

In many parts of the world, leprosy has been eradicated,

but that was not the case in Barrolandia. Veracel began

a program which, to date, has trained 300 medical pro-

fessionals and 115 healthcare community agents in the

early detection of leprosy. In addition, the company do-

nated modern equipment to medical and dental clinics

in the communities around the mill.

And, what of Sandoval today? He is an operator at the

Veracel mill and in July 2006 he received his accounting

degree from the local university. “I’ve been able to make

a few economic improvements,” he says. “I bought a car

that my father also uses.”

The Silva family is back together in Barrolandia. “It’s close

to the mill and is my home,” he says. “Things have really

improved because of the hospital, the sewers, the paved

roads, and the school. Plus, a few years ago, everyone

knew someone with leprosy, but now it is really rare.”

As always, Sandoval is planning for the future. “I am sav-

ing money for post-graduate work and I want to advance

in my career,” he announces. “All of this because of

Veracel.”

048

“It started out as a way to support the construction of this mill and has evolved now to finding

out what each local community needs to

build a better life.”

“Building is easy,” Cristina Moreno says,

“but understanding is more difficult.”

Sustainability and Corporate ResponsibilitySocial Sustainability

Veracel‘s investments in sanitation, healthcare, security, and education are part of the commitment it made when it received funding for the mill. “We are finding out what each community needs to build a better life.”

Sandoval Nascimento Silva at work as an operator at the Veracel Celulose mill in Brazil. “I am saving money for postgraduate work and want to advance in my career.”

049


Top photos: Emandes Alcantara

A local volunteer constructs a sanitary bathroom using bricks from the Veracelfunded brick factory.

Photo: Gleison Rezende

Sustainability and Corporate ResponsibilitySocial Sustainability

andritz annual report - 2006

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