2007 Annual Report - Sappi

33. Events after Balance Sheet date
On 13 November 2007, the EU Commission took the position that Belgian coordination centres, which are subject to a
specific tax regime in Belgium, had to renew their authorisation during the period February 2003 through to December 2005
without extending the specific tax regime until 31 December 2010. This could impact the tax position of Sappi International
SA, our Belgian coordination centre as their authorisation expired before 31 December 2005 and it has been operating under
an extended authorisation until 2010.
At this stage, it is not clear how the Belgian government and/or Forum 187 (an organisation representing about 90% of
Belgian coordination centres) will react and whether they would want to challenge this decision of the EU Commission and
bring the matter in front of the European Court of Justice (ECJ). It should be noted that historically the Commission has
taken controversial positions which have been overruled by the ECJ.
We have reported a contingent tax liability of US$16 million in respect of this issue in note 27.
34. Environmental matters
Sappi operates in an industry subject to a wide range of environmental laws and regulations in the various jurisdictions in which
it operates, and these laws and regulations have tended to become more stringent over time. Typically, Sappi does not
separately account for environmental operating expenses but does not anticipate any material expenditures related to such
matters. Sappi does separately account for environmental capital expenditures. Sappi spent approximately US$15 million in
financial year September 2007 (September 2006: US$13 million) on capital projects that control air or water emissions or
otherwise create an environmental benefit. Amounts to be spent in future years will depend on changes to existing
environmental requirements and the availability of new technologies to meet such requirements.
In South Africa, requirements under the National Water Act, National Environmental Management Act and the Air Quality Bill
may result in additional expenditures and/or operational constraints. South Africa is also a signatory of the Kyoto Protocol
and Sappi is currently identifying and initiating Clean Development Mechanism projects at a number of our South African mills.
Although we are uncertain as to the ultimate effect on our South African operations, our current assessment of the legislation
is that any compliance expenditures or operational constraints will not be material to our financial condition.
Sappi Fine Paper North America is subject to stringent environmental laws in the United States. These laws include the
Federal Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and their respective state
counterparts. In connection with ongoing settlement discussions with government agencies and environmental groups in
Maine, Sappi Fine Paper North America plans to remove the Cumberland Mills Dam on the Presumpscot River and over the
next thirty years install fishways at its upstream dams to allow natural migration and promote the restoration of native fish
species to the river. The total cost of these projects is estimated to be approximately US$18 million. The US is a non-signatory
of the Kyoto Protocol, but we closely monitor State and Federal GHG initiatives in anticipation of potential effects, if any, on
our operations.
Sappi Fine Paper Europe is subject to extensive environmental regulation in the various countries in which it operates. These
countries are all Member States of the European Union (EU). The vast majority of pertinent environmental legislation is EU
legislation which subsequently are adopted by the Member States into national law. These include the Integrated Pollution
Prevention and Control directive (IPPC) which regulates air emissions, water discharges and defines permit requirements and
best available control techniques (The national European acts regulate the waste framework and restrict the landfills of non-inert
waste to prevent contaminated leachate and methane emissions and the production and use of chemical substances is regulated
by REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals). The European countries in which we operate
are all signatories of the Kyoto Protocol and we have developed a green house gas strategy in line with this protocol.
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