Note 13 Associated Companies

Carrying Values

	Year Ended 31 December
EUR million	2002	2003	2004

Historical Cost
At 1 January	251.3	225.3	319.7
Translation difference	-6.9	-7.0	-1.4
Additions	1.5	103.5	250.4
Disposal proceeds	-185.5	-0.4	-0.1
Equity adjustment disposal	60.8	-	-
Income Statement Profit on disposal	76.7	0.3	-
Subsidiary transfers	29.2	-2.4	-1.9
Transfer to available-for-sale investments	-1.8	0.4	-
Historical cost at 31 December	225.3	319.7	566.7

Equity Adjustment to Investments in Associated Companies
At 1 January	55.4	-13.6	-0.7
Translation difference	-13.6	-1.9	0.1
Disposals	-60.8	-	-
Effect of adopting IAS 41 Agriculture	-	44.0	-
Share of results before tax	14.6	-23.0	38.9
Dividends received	-9.5	-3.2	-7.5
Income taxes	0.3	1.7	-8.4
OCI on Bergvik Skog AB (Note 24)	-	-	-19.0
Subsidiary transfers	-	-4.7	-2.0
Equity Adjustment at 31 December	-13.6	-0.7	1.4

Carrying Value of Associated Companies at 31 December	211.7	319.0	568.1

The principal addition in both 2004 and 2003 related to the Group’s Brazilian interests. Stora Enso and its Brazilian partner, Aracruz Celulose S.A., are constructing a 900 000 tonnes per year eucalyptus pulp mill for their jointly owned associate company Veracel Celulose S.A. at Eunápolis in the state of Bahia, Brazil; each company has a 50% stake and will be entitled to half of the mill’s output. The pulp mill project cost is estimated at USD 860 (EUR 631) million with a further USD 80 (EUR 59) million for infrastructure, EUR 400 million and EUR 28 million having been spent to date respectively. An additional USD 300 (EUR 220) million has also been spent on forestry-related activities and construction of infrastructure, mainly roads and a harbour. Construction of the mill began in mid-2003 and start-up is scheduled for mid-2005. The total investment is estimated at EUR 917 (USD 1 250) million, to be financed by 45% equity and 55% loans provided by a number of development banks, currently split equally between US dollars and local currency. Equity injections to date amount to EUR 273.0 (EUR 192.6) million and after the deduction of start-up costs of EUR 22.5 (EUR 24.8) million and currency fluctuations of EUR 60.7 (EUR 63.1) million, gives a carrying value to the Group of EUR 189.8 (EUR 104.7) million.

In March 2004, 56.74% of Stora Enso’s Swedish forest holding company, Bergvik Skog AB, was divested to institutional investors, leaving the Group with a minority shareholding of 43.26% valued at cost of EUR 169.3 (SEK 1 527) million. During the year, the carrying value has been increased for the Group’s post-divestment share of the result for the year of EUR 24.2 million, less tax of EUR 6.8 million, and reduced by EUR 19.0 million on account of the net after-tax fair value loss on its cashflow hedge accounted interest rate swap.

The principal addition in 2002 consisted of the acquisition of a 41% holding in Tornator Timberland Oy, a company established in conjunction with Finnish financial institutions, in exchange for the divestment of the greater part of Stora Enso’s Finnish forestry assets (see Note 4). The intention is to further reduce the Group interest, but the holding will continue to be subject to equity accounting until it drops below 20%.

The principal disposal in 2002 related to the sale of 29.5% of Billerud AB’s share capital for SEK 1 667 (EUR 182.1) million, resulting in a capital gain of SEK 702 (EUR 76.7) million. The Group residual holding in Billerud since 2004 has comprised 300 000 shares, valued at EUR 2.9 (EUR 2.9) million and representing 0.5% of the share capital and votes; this is shown as a Listed Security under Available-for-Sale Investments.

Principal Associated Companies

		As at 31 December
		2004	2002	2003	2004
Company	Domicile	%	EUR million

Bergvik Skog AB	Sweden	43.3	-	-	167.9
Veracel Celulose S.A.: pulp mill & plantation	Brazil	50.0	27.3	104.7	189.8
Tornator Timberland Oy: forest	Finland	41.0	29.2	83.0	81.7
Sunila Oy: pulp mill	Finland	50.0	45.3	44.4	48.8
Thiele Kaolin Company Inc: China clay	USA	34.9	34.1	37.1	36.6
Steveco Oy: stevedores	Finland	34.3	14.9	12.5	9.3
Mitsubishi HiTec Paper Group (Bielefeld & Flensburg): office papers	Germany	24.0	22.2	7.3	7.2
Holzwerke Wimmer GmbH: timber processing (1)	Germany	49.0	6.8	5.6	7.6
AS Imavere Saeveski: sawmill (33.3% to subsidiaries in 2003)	Estonia	N/A	6.6	-	-
			186.4	294.6	548.9
Others			25.3	24.4	19.2
Carrying Value of Associated Companies at 31 December			211.7	319.0	568.1

1) To become a subsidiary in early 2005

Associated Company Balances

	As at 31 December
EUR million	2002	2003	2004

Receivables from Associated Companies
Long-term loan receivables	2.8	34.8	229.6
Trade receivables	16.0	21.6	28.9
Short-term loan receivables	6.2	14.4	9.5
Prepaid expenses and accrued income	0.6	0.8	0.9

Liabilities due to Associated Companies
Trade payables	11.0	13.6	16.2
Accrued liabilities and deferred income	0.3	0.1	6.4

Associated Company Transactions

	Year Ended 31 December
EUR million	2002	2003	2004

Sales to associated companies	119.0	139.6	166.4
Interest on associated company loan receivables	0.4	3.1	15.1
Purchases from associated companies	79.8	54.2	150.0

The Group engages in transactions with associated companies, such as sales of wood material and purchases of wood, energy and pulp products. All agreements are negotiated at arm’s length and are conducted on terms that the Group considers customary in the industry and generally no less favourable than would be available from independent third parties.

Total loans to Associates came to EUR 239.1 (EUR 49.2) million of which EUR 178.8 million was due from Bergvik Skog and a further EUR 38.3 (EUR 34.8) million from Tornator. Interest income on associate loans totalled EUR 15.1 million, of which EUR 11.4 million came from Bergvik Skog and EUR 3.1 (EUR 2.9) million from Tornator.