SAPPI LIMITED

SAPPI
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS (Continued)
for the year ended September 2010
32. ENVIRONMENTAL MATTERS (Continued)
In August 2008, the EMIs conducted a comprehensive inspection at our Ngodwana mill. No major
findings were raised. The EMIs inspected our Enstra mill during October 2009 and carried out a
subsequent follow up visit in August 2010. Following that visit there has been correspondence with the
Department of Environmental Affairs regarding some aspects of Enstra’s compliance with standards for
atmospheric emissions; that communication is ongoing. The EMIs inspected our Tugela mill in October
2010. No oral findings were raised during the visit; a written report is expected within the next two
months.
The primary South African environmental laws affecting our operations are:
The National Water Act: This law addresses the water shortages in South Africa and relates to
both our manufacturing and our forestry operations. Abstraction of water, discharge of effluent
and management of forests are all regulated under a licensing system in which first allocations go
to, among other things, human consumption, before allocations are made to agriculture, industry
and forestry. All water use is subject to a charge.
The National Environmental Management Act: This law provides for the integration of
environmental considerations into all stages of any development process. The Act includes a
number of significant principles, such as private prosecution of companies in the interest of the
protection of the environment and the establishment of aggressive waste reduction goals.
The National Environmental Management Act: Air Quality Act was promulgated in the beginning
of 2005 and has now replaced the 1965 Atmospheric Pollution Prevention Act. The new Act will
impose more stringent compliance standards on our operations over a period of five to ten years.
The National Environmental Management Act: Waste Act was enacted on July 1, 2009. The Waste
Act regulates the use, re-use, recycling and disposal of waste and regulates waste management
by way of a licensing system.
The Kyoto Protocol: South Africa has also ratified the Kyoto Protocol. We are investigating Clean
Development Mechanism projects, as defined in the Kyoto Protocol, at South African mills.
The requirements under these statutes, predominantly with respect to air emissions from our mills,
will result in additional capital and operating expenditures, some of which may be significant. Our mills
are in the process to receive air registration certificates from the authorities which will clarify the impact
this will have on our business. Legislation is, however, making provision to phase in new standards; the
impact on our mills is therefore expected to be distributed over the next five to ten years. We are in
frequent contact with regulatory authorities during the phasing in of these requirements, in an attempt to
manage the transition period.
33. ACQUISITION
On 31 December 2008, Sappi acquired M-real’s coated graphic paper business for an enterprise
value of EUR750 million (approximately US$1.1 billion). The final purchase consideration was reduced
by assumed debt and other adjustments (including working capital) amounting to EUR102 million in
total. The transaction included M-real’s coated graphic paper business, including brands and company
knowledge, as well as four coated graphic mills. This transaction has been accounted for by the
purchase method of accounting.
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