Vapo investment in Harvestia

Powerflute Oyj

21 December 2010

POWERFLUTE OYJ

("Powerflute" or the "Company")

Vapo investment in Harvestia

Powerflute Oyj today announces that Vapo Oy ("Vapo") has agreed to acquire a 30% interest in Harvestia Oy ("Harvestia"), the Company's wood procurement venture with Myllykoski, through the purchase of shares from existing shareholders and a further investment in the equity of Harvestia. Under the terms of the agreement, the wood procurement operations of Vapo Timber, one of the largest sawmill operators in Europe, will be merged with those of Harvestia resulting in significant growth in both volumes and revenues and considerably strengthening the strategic position of Harvestia.

Powerflute is expected to receive aggregate net proceeds of €2.5 million in cash from the sale of shares to Vapo and from the repayment of working capital and equity contributions made as part of its initial investment in Harvestia. The proceeds will be applied to reduce Powerflute's net debt. Following completion of the contemplated transaction, Powerflute will retain a 30% interest in Harvestia. The transaction is subject to various consents including clearances from relevant competition authorities.

Vapo is a leading supplier of renewable fuels, bioelectricity, bioheat and environmental business solutions in Finland and the Baltic Sea region and is the leading producer of biofuel pellets in Europe. Vapo's turnover in 2009 was EUR 574 million, it has approximately 1,450 employees and is 50.1% owned by the Finnish government.

Harvestia is a wood procurement company established by Powerflute and Myllykoski in 2008 to source wood in Finland and Russia on behalf of both companies. Powerflute accounts for Harvestia as an associated company using the equity method and the results of Harvestia are not consolidated with those of Powerflute. The share of Harvestia's profit recognised in the income statement of Powerflute for the year ended 31 December 2009 was €155,000 and the carrying amount of the investment in the balance sheet of Powerflute at 31 December 2009 was €1,494,000.

Commenting on the transaction, Dermot Smurfit, Chairman of Powerflute, said:

"We are delighted that Vapo has decided to join us as an industrial partner and investor in Harvestia. The addition of Vapo will provide new opportunities and considerable growth, together with an improvement in the strategic position and purchasing abilities of Harvestia, helping to secure the future supply of wood on competitive terms for all partners."

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About Powerflute

Powerflute Oyj ("the Company" or "Powerflute") is a packaging group with established positions in Nordic semi-chemical fluting and coated woodfree papers.

Through its subsidiary Savon Sellu Oy, the Group operates a paper mill in Kuopio, Finland which produces a specialised form of semi-chemical fluting made from locally sourced birch. Corrugated boxes manufactured using Nordic semi-chemical fluting demonstrate strength and moisture resistance and are used for transportation of fruit and vegetables, high-value industrial goods such as electrical appliances and automotive components. The Kuopio mill has the capacity to produce up to 300,000 tonnes per annum and is one of three suppliers of Nordic semi-chemical fluting in Europe.

Through its subsidiary Papierfabrik Scheufelen, the Group operates a paper mill in Lenningen, Germany which produces a range of coated woodfree papers from mixed hardwood and softwood pulps. Coated woodfree papers are used in the production of printed promotional material such as brochures, leaflets and other point of sale materials for producers and distributors of premium branded goods. The Lenningen mill has the capacity to produce up to 300,000 tonnes per annum and supplies the majority of its products into the European market.