Europe Europe

Mary LaschingerMary Laschinger

2

(Integrated) paper millContainerboard millBox plant

Employees:Employees: 14,00014,000

EBITDA margin: 15%EBITDA margin: 15%

FacilitiesFacilitiesUncoated paper mills: 4Uncoated paper mills: 4Containerboard mills: 3Containerboard mills: 3Box plants: 29Box plants: 29

ProductionProduction (metric tons)(metric tons)Paper: 1.2MMPaper: 1.2MMBoard: 0.3MMBoard: 0.3MMPackaging: 1.6MMPackaging: 1.6MM

IP Europe OperationIP Europe Operation

3

IP Europe ReturnsIP Europe Returns

>7%Box BusinessBox Business

<0%Paper WestPaper West

>10%Paper EastPaper East

ReturnsReturns

4

Europe is an Important Market Due to Size and Growth PotentialEurope is an Important Market Due to Size and Growth Potential

Source: Jaakko Poyry, RISI, Cepifine, Cepi Cartonboard, IP market intelligence

Uncoated Woodfree

Coated Board

Corrugated Container

Uncoated WoodfreeCorrugated Container

Coated Board0

5

10

15

20

25

0 5 10Growth Rate (%/a)

Eastern Europe

Western Europe

Market Size (MM metric tons)

5

IP Europe is Positioned to WinIP Europe is Positioned to Win

Strong customer positions

Well-known product brands, especially in Eastern Europe and in our box business

Long successful history with customers, people, supply chain and assets

Excellent cost position in Eastern Europe

6

IP European Cost Position is Very Good in Uncoated PapersIP European Cost Position is Very Good in Uncoated Papers

Global Uncoated Woodfree Sheets Manufacturing Costs + Delivery to Frankfurt, Germany

Source: Jaakko Poyry, Cost Track with Q2 ‘06 prices and exchange rates

0

200

400

600

800

1,000

1,200

1,400

1,600

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000Cumulative Annual Capacity (000 Metric Tonnes)

Manu

fact

urin

g Co

sts (

$/Met

ric T

onne

) Cash Costs Delivered to Frankfurt

Svetogorsk 4

Kwidzyn 2

Kwidzyn 1Saillat 2

Saillat 1

Inverurie 4

Inverurie 3

7

IP Europe Has a Leading Cost Position in Coated Virgin Fiber BoardIP Europe Has a Leading Cost Position in Coated Virgin Fiber Board

Global Coated Board Manufacturing Costs + Delivery to Frankfurt, Germany

Source: Jaakko Poyry, Cost Track with Q2 ‘06 prices and exchange rates

0

200

400

600

800

1000

1200

1400

0 1,000 2,000 3,000 4,000 5,000 6,000

Kwidzyn 4

Svetogorsk 1

Manu

fact

urin

g Co

sts (

$/Met

ric T

onne

)

Cumulative Annual Capacity (000 Metric Tonnes)

Cash Costs Delivered to Frankfurt

8

IP Europe Strategy IP Europe Strategy

Grow in key platform businesses where we are earning greater than cost of capital and have long-term cost advantage

Total Investments: USD 415MMTotal Investments: USD 415MMTotal Investments: USD 415MM

Paper / board cost reductionROI >15%

145 160

110

Eastern Europe paper / board capacity to support market growthROI >25%

Strategic InvestmentMoroccoROI >20%Projected returns

9

Future Profitability Will Be Driven by Cost Reduction and Customer InitiativesFuture Profitability Will Be Driven by Cost Reduction and Customer Initiatives

0123456789

10

Base Case 3Q06Annualized

Cost Reduction Volume and Mix Restructuring StrategicInvestment

Inflation Year 2009@Current Price /

Cost

* Component symbols used for illustrative purposes only, proportions not indicative of actual EBIT impact

Sales $2.5B $2.9BROCE 5% 9%

10

Without Additional Capacity, IP Will Be Limited for Growth in Russia / CISWithout Additional Capacity, IP Will Be Limited for Growth in Russia / CIS

IP’s Russia / CIS / Ukraine Cutsize Sales Forecast based on Maintaining Market Share

IPIP’’s Russia / CIS / Ukraine s Russia / CIS / Ukraine CutsizeCutsize Sales Forecast Sales Forecast based on Maintaining Market Sharebased on Maintaining Market Share

0

100

200

300

400

500

600

700

800

2004 2005 2006 2007 2008 2009

IP sales Others

CurrentSvetogorskcutsize capacity

k met

ric to

ns

11

Ilim Pulp EnterpriseProfile & Strategic FitIlim Pulp EnterpriseProfile & Strategic Fit

14 years of successful operations in the Russian market with 27% of total pulp & paper capacityAccess to channels and customers – Russia, CEE & AsiaLow cost integrated manufacturing base with 4 facilities in Russia to support growth3 year relationship with International PaperGrowth platform for IP core segments – paper & packaging– Maintain leadership position in uncoated woodfree papers– Grow coated board and establish leadership position– Gain entry into Eastern European Containerboard business– Support IP Asia strategy with low-cost fiber

12

Ilim Pulp Facilities Have an Excellent Cost PositionIlim Pulp Facilities Have an Excellent Cost Position

Global Bleached Softwood Kraft Market Pulp Delivered and Duty Paid to Shanghai

Global Bleached Softwood Kraft Market Pulp Delivered Global Bleached Softwood Kraft Market Pulp Delivered and Duty Paid to Shanghaiand Duty Paid to Shanghai

Source: Jaakko Poyry, Cost Track with Q2 ‘06 prices and exchange rates

0

200

400

600

800

1,000

1,200

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000Cumulative Annual Capacity (000 Metric Tonnes)

Manu

fact

urin

g Co

sts (

$/Met

ric T

onne

)

Bratsk

Ust-Ilimsk

Cash Costs + Delivery + Import Duty

13

0

200

400

600

800

0 3,000 6,000 9,000 12,000 15,000 18,000 21,000 24,000 27,000

Cash Costs + Delivery

Ilim Pulp Facilities Have an Excellent Cost PositionIlim Pulp Facilities Have an Excellent Cost Position

Global 42# Linerboard Delivered to FrankfurtGlobal 42# Linerboard Delivered to FrankfurtGlobal 42# Linerboard Delivered to Frankfurt

Source: Jaakko Poyry, Cost Track with Q2 ‘06 prices and exchange rates

Cumulative Annual Capacity (000 Metric Tonnes)

Manu

fact

urin

g Co

sts (

$/Met

ric T

onne

)

Kotlas 3

Kotlas 4

14

Ilim Pulp Sales are Targeting the Asian and Russian Markets Ilim Pulp Sales are Targeting the Asian and Russian Markets

Russia-CIS30%

Asia45%

Others25%

Ilim Pulp Sales by Destination in 2006Ilim Pulp Sales by Destination in 2006Ilim Pulp Sales by Destination in 2006

15

Ilim Pulp Facilities in RussiaIlim Pulp Facilities in Russia

Ust Ilimsk680,000 tonsBSK Market Pulp

Bratsk700,000 tonsBSK / BHK Market PulpContainerboard

Kotlas PPM900,000 tonsContainerboard, UWF, Pulp

St. Petersburg KPK220,000 tons Board

Beijing

16

ILIM EstimatedEBITDA Waterfall (2007 – 2011)ILIM EstimatedEBITDA Waterfall (2007 – 2011)

2007 EBITDA%

Volume Mix Cost Savings Inflation 2011 EBITDA%

EBIT

DA %

23%

34%

17

IP Europe Moving ForwardIP Europe Moving Forward

Complete ramp-up of Eastern Europe capacity additions

Successful start-up of BCTMP

Complete Ilim due diligence

2007 Priorities2007 Priorities2007 Priorities

18

A Stronger, More Valuable IPA Stronger, More Valuable IP

19

St. Petersburg KPK – Profile & StrategySt. Petersburg KPK – Profile & Strategy

Strategic IntentGrow coated board and establish leadership position in Russia, CIS & UkraineIncrease capacityImprove qualityReduce manufacturing costs

20

Kotlas – Profile & StrategyKotlas – Profile & Strategy

Strategic IntentMaintain leadership position in uncoated woodfree papers in Russia / CISGain entry into Eastern European containerboard with an integrated box strategyImprove qualityReduce manufacturing costsIncrease capacity

21

Ust Ilimsk – Profile & StrategyUst Ilimsk – Profile & Strategy

Strategic IntentSupport IP Asia strategy with low-cost softwood pulp and BCTMPIncrease capacityImprove qualityReduce manufacturing costs

22

Bratsk – Profile & StrategyBratsk – Profile & Strategy

Strategic IntentSupport IP Asia strategy with low-cost softwood pulpIncrease capacityImprove qualityReduce manufacturing costs