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. Last Updated: 07/27/2016

Finland's Ruukki Falls on Kostroma Failure

Ruukki Group, a Finnish investor in the forestry industry, plummeted the most in more than four years in Helsinki trading Monday after the company canceled a sawmill and pulp mill project in the Kostroma region.

Ruukki fell as much as 27 percent to 1.96 euros, the most of any stock on the Helsinki exchange, and closed at 2.05 euros.

The company decided to stop the project after the regional government in Kostroma refused to back priority-investor status that would have let Ruukki harvest wood more cheaply, it said in a statement Monday.

"This is a big surprise," Ruukki chief executive Matti Vikkula said of the local authorities' decision, Thomson Financial News reported Monday.

He said the group had been confident that it would obtain priority investor status when it signed an investment agreement with the Kostroma authorities last summer, the news agency said.

The status would have enabled the Finnish investor to obtain cheaper access to timber without competing in auctions.

Vikkula said Kostroma's new governor had apparently been less enthusiastic about the project than his predecessor, who died in a car accident last fall, Thomson reported.

The company raised 337 million euros ($464 million) for the 1.1 billion euro project last summer by issuing new shares at 2.30 euros each.

The Kostroma mill complex was to have started producing lumber by the end of the year and pulp in 2010. Ruukki says it will seek other investment opportunities in Russia, primarily in the European part of the country bordered by the Ural Mountains.

Bloomberg, MT