You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
SAPPI<br />
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued)<br />
for the year ended September <strong><strong>20</strong>06</strong><br />
14. EQUITY INVESTMENTS (Continued)<br />
China and is principally engaged in the manufacturing and sales of paper and paper products. The<br />
financial statements of Jiangxi Chenming are to the 31 December of each year which was the reporting<br />
date when the company was established. The last audited financials were to the 31 December <strong>20</strong>05.<br />
Umkomaas Lignin (Pty) Ltd<br />
Joint venture agreement between <strong>Sappi</strong> and Borregaard for the construction and operation of a lignin<br />
plant at Umkomaas and the development, production and sale of products based on lignosulphates in<br />
order to build a sustainable lignin business. The financial statements of Umkomaas Lignin (Pty) Ltd are to<br />
the 31 December of each year which is the year end of Borregaard. The last audited financials were to<br />
the 31 December <strong>20</strong>05.<br />
Sapin S.A.<br />
A joint venture agreement for the buying and selling of wood and wood chips to <strong>Sappi</strong> and other<br />
paper manufacturers. The financial statements of Sapin S.A. are to the 31 December of each year which is<br />
the year end of Sapin S.A. The last audited financials were to the 31 December <strong>20</strong>05.<br />
VOF Warmtekracht<br />
A Joint venture agreement between <strong>Sappi</strong> and Essent for a co-generation electricity and steam<br />
producing plant. The financial statements of VOF Warmtekracht are to the 31 December of each year<br />
which is the year end of VOF Warmtekracht. The last audited financials were to the 31 December <strong>20</strong>04.<br />
Timber IV<br />
In 1998, our interests in timberlands located in Maine and certain equipment and machinery were sold<br />
to a third party timber company, Plum Creek Timberlands LLP, in exchange for cash of US$3 million and<br />
three promissory notes receivable in the aggregate amount of $171 million. In 1999, <strong>Sappi</strong> contributed<br />
these promissory notes to a special purpose entity (“SPE”). The promissory notes were pledged as<br />
collateral for the SPE to issue bonds to investors in the amount of US$156 million. In <strong>20</strong>01, <strong>Sappi</strong><br />
contributed its interest in the SPE to a limited liability company in exchange for 90% of the outstanding<br />
limited liability membership interest. All voting control of the limited liability company is controlled by an<br />
unrelated investor that has significant capital at risk and therefore has not been consolidated by <strong>Sappi</strong> in its<br />
financial statements.<br />
The SPE may not be liquidated prior to repayment of the bonds it issued, which mature in three<br />
tranches on February 11, <strong>20</strong>07, February 11, <strong>20</strong>09, and February 11, <strong>20</strong>11. <strong>Sappi</strong> may not redeem its<br />
investment in the SPE (via its ownership interest in the limited liability company) prior to complete<br />
repayment of the bonds issued by the SPE and our investment has a subordinate interest to the payment of<br />
the outstanding bonds. We have not guaranteed the obligations of the SPE and the holders of the notes<br />
payable issued by the SPE have no recourse to us.<br />
The SPE is bankruptcy remote and serves to protect the investors in the notes from any credit risk<br />
relating to <strong>Sappi</strong> Limited by isolating cash flows from the Plum Creek notes receivable. The structure was<br />
set up to raise funding using the promissory notes as collateral in a manner that would not result in either<br />
F-57
Change language