##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
      Form 10-K
      þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period from
    ____________ to
    ____________   Commission File No.:
    000-51826
  MERCER INTERNATIONAL
    INC.
 Exact name of Registrant as
    specified in its charter
  WashingtonState or other
    jurisdiction
    of incorporation or organization

47-0956945IRS Employer Identification
    No.   Suite 2840, 650 West Georgia Street, Vancouver,
    British Columbia, Canada, V6B 4N8
 Address of Office
  (604) 684-1099
    Title of each class

Name of each exchange on which registeredCommon Stock, par value $1.00

NASDAQ Global Market   None
  o þ
  o þ
  Securities Exchange Act of 1934 þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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TABLE OF
    CONTENTS
   
 PagePART IItem 1.

BUSINESS


5The Company


5Competitive Strengths


7Corporate Strategy


8The Pulp Industry


9Our Product


13Generation and Sales of Green Energy
    at our Mills


13Operating Costs


15Cash Production Costs


17Sales, Marketing and Distribution


18Capital Expenditures


19Environmental


20Climate Change


21Human Resources


23Description of Certain Indebtedness


23Additional Information


27Item 1A.

RISK FACTORS


27Item 1B.

UNRESOLVED STAFF COMMENTS


36Item 2.

PROPERTIES


36Item 3.

LEGAL PROCEEDINGS


37Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


38PART IIItem 5.

MARKET FOR REGISTRANTS COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS


39Item 6.

SELECTED FINANCIAL DATA


41Item 7.

MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


42Results of Operations


42Year Ended December 31, 2010 Compared to the
    Year Ended December 31, 2009


45Year Ended December 31, 2009 Compared to the
    Year Ended December 31, 2008


48Sensitivities


50Liquidity and Capital Resources


50Sources and Uses of Funds


50Debt


51Debt Covenants


51Cash Flow Analysis


51Capital Resources


52Future Liquidity


52Off Balance Sheet Activities


52Contractual Obligations and Commitments


53Foreign Currency


53Results of Operations of the Restricted Group
    Under Our Senior Note Indenture


54Restricted Group Results  Year Ended
    December 31, 2010 Compared to the Year Ended
    December 31, 2009


54Restricted Group Results  Year Ended
    December 31, 2009 Compared to the Year Ended
    December 31, 2008


55Cash Flow Analysis for the Restricted Group


57Liquidity and Capital Resources of the Restricted
    Group


57 2




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PageCritical Accounting Policies


58New Accounting Standards


60Cautionary Statement Regarding Forward-Looking
    Information


60Inflation


60Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


60Derivatives


61Interest Rate Risk


62Foreign Currency Exchange Risk


63Energy Price Risk


64Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


64Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


64Item 9A.

CONTROLS AND PROCEDURES


64Evaluation of Disclosure Controls and
    Procedures


64Managements Report on Internal Control Over
    Financial Reporting


64Changes in Internal Controls


65Item 9B.

OTHER INFORMATION


65PART IIIItem 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


66Audit Committee


68Compensation and Human Resources Committee


68Governance and Nominating Committee


68Environmental, Health and Safety Committee


69Lead Director/Deputy Chairman


69Code of Business Conduct and Ethics


69Section 16(a) Beneficial Ownership Reporting
    Compliance


69Item 11.

EXECUTIVE COMPENSATION


69Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


70Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE


70Review, Approval or Ratification of Transactions
    with Related Persons


70Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES


70PART IVItem 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES


71Financial Statements


71SUPPLEMENTARY FINANCIAL INFORMATION


112SIGNATURES


113EX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   3




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EXCHANGE
    RATES
      Years Ended December 31,2010


2009


2008


2007


2006(/$)End of period


0.7536



0.6977



0.7184



0.6848



0.7577High for period


0.6879



0.6623



0.6246



0.6729



0.7504Low for period


0.8362



0.7970



0.8035



0.7750



0.8432Average for period


0.7541



0.7176



0.6826



0.7304



0.7969(C$/$)End of period


1.0009



1.0461



1.2240



0.9881



1.1653High for period


0.9960



1.0289



0.9717



0.9168



1.0989Low for period


1.0776



1.2995



1.2971



1.1852



1.1726Average for period


1.0298



1.1412



1.0660



1.0740



1.1344   Form 10-K,
  Form 10-K
  Years Ended December 31,2010


2009


2008


2007


2006(C$/)End of period


1.3319



1.5000



1.7046



1.4428



1.5377High for period


1.2478



1.4936



1.4489



1.3448



1.3523Low for period


1.5067



1.6920



1.7316



1.5628



1.5377Average for period


1.3671



1.5851



1.5603



1.4690



1.4244    4




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##### Table of Contents



PART I  ITEM 1.
    BUSINESS    
    references to we, our, us,
    the Company or Mercer mean Mercer
    International Inc. and its subsidiaries, unless the context
    clearly suggests otherwise, and references to Mercer
    Inc. mean Mercer International Inc. excluding its
    subsidiaries;
    references to ADMTs mean air-dried metric tonnes;
    references to MW mean megawatts and MWh
    mean megawatt hours;
    information is provided as of December 31, 2010, unless
    otherwise stated or the context clearly suggests otherwise;
    all references to monetary amounts are to Euros, the
    lawful currency adopted by most members of the European Union,
    unless otherwise stated; and
     refers to Euros; $ refers to
    U.S. dollars; and C$ refers to Canadian dollars. The
    Company  General
      
    Rosenthal mill.  Our wholly-owned
    subsidiary, Rosenthal, owns and operates a modern, efficient
    ISO 9001 and 14001 certified NBSK pulp mill that has a
    current annual pulp production capacity of approximately 330,000
    ADMTs. Additionally, the Rosenthal mill is a significant
    producer of green energy and exported
    123,309 MWh of electricity in 2010. The Rosenthal mill is
    located near the town of Blankenstein, Germany approximately 300
    kilometers south of Berlin.
    Celgar mill.  Our wholly-owned
    subsidiary, Celgar, owns and operates the Celgar mill, a modern,
    efficient ISO 9001 certified NBSK pulp mill with an annual pulp
    production capacity of approximately 520,000 ADMTs. The Celgar
    mill also produces green energy and exported
    70,923 MWh of electricity in 2010. At the end of September
    of 2010, Celgar completed a new green energy
    project, referred to as the Celgar Energy Project,
    that is expected to increase surplus energy sales by over
    238,000 MWh annually and generate approximately C$20 to
    C$25 million of additional high-margin revenue per annum.
    The Celgar mill is located near the city of Castlegar, British
    Columbia, Canada, approximately 600 kilometers east of
    Vancouver, British Columbia, Canada.
    Stendal mill.  Our 74.9% owned
    subsidiary, Stendal, owns and operates a
    state-of-the-art,
    single-line, ISO 9001 and 14001 certified NBSK pulp mill that
    has an annual pulp production capacity of approximately 645,000
    ADMTs. Additionally, the Stendal mill is a significant producer
    of green energy and exported 325,773 MWh of
    electricity in 2010. The Stendal mill is located near the town
    of Stendal, Germany, approximately 130 kilometers west of Berlin. 5




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Organizational
    Chart
    
  History
    and Development of Business
               6




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Our
    Competitive Strengths    
    Modern and Competitive Mills.  We
    operate three large, modern, competitive NBSK pulp mills that
    produce high quality NBSK pulp, which is a premium grade of
    kraft pulp. We believe the relative age, production capacity and
    operating features of our mills provide us with certain
    manufacturing cost and other advantages over many of our
    competitors including lower maintenance capital expenditures.
    Leading Market Position.  Mercer is the
    largest publicly traded NBSK pulp producer in the world which
    provides us increased presence and better industry information
    in the markets in which we operate, and provides for close
    customer relationships with many large pulp consumers.
    Renewable Surplus Energy.  Our modern
    mills generate electricity and steam in their boilers and are
    generally energy self-sufficient. Such energy is primarily
    produced from wood residuals which are a renewable carbon
    neutral source. All of our mills also generate surplus energy
    which we sell to third parties. Our Rosenthal and Stendal mills
    benefit from special tariffs under Germanys Renewable
    Energy Resources Act, referred to as the Renewable
    Energy Act which provides for premium pricing and has
    materially increased their revenues from sales of surplus power.
    Additionally, our Celgar mill completed the Celgar Energy
    Project at the end of September 2010 and is party to an
    electricity purchase agreement, referred to as the
    Electricity Purchase Agreement with the British
    Columbia Hydro and Power Authority, or B.C. Hydro,
    British Columbias primary public utility provider, for the
    sale of surplus power for ten years. The Celgar Energy Project
    is expected to increase our consolidated total sales of surplus
    power by 238,000 MWh per annum to over 700,000 MWh per
    annum. We believe our generation and sale of surplus renewable
    green energy provides us with a competitive energy
    advantage over less efficient mills.
    Strategic Locations and Customer
    Service.  We are the only producer of market
    pulp in Germany, which is the largest pulp import market in
    Europe. Due to the proximity of our German mills to most of our
    European customers, we benefit from lower transportation costs
    relative to our major competitors. Our Celgar mill, located in
    Western Canada, is well situated to serve Asian and North
    American customers. We primarily work directly with customers to
    capitalize on our geographic diversity, coordinate sales and
    enhance customer relationships. We believe our ability to
    deliver high quality pulp on a timely basis and our customer
    service makes us a preferred supplier for many customers.
    Advantageous Capital Investments and
    Financing.  Our German mills are eligible to
    receive government grants in respect of qualifying capital
    investments. Over the last eleven years, our German mills have
    benefited from approximately 384.7 million of such
    government grants. In addition, in October 2009, our Celgar mill
    qualified to receive C$57.7 million of credits under the
    Canadian governments Pulp and Paper Green Transformation
    Program, referred to as the GTP. These grants reduce
    the cost basis of the assets purchased when the grants are
    received and are not reported in our income. Additionally,
    during the last eleven years, capital investments at our German
    mills have reduced the amount of overall wastewater fees that
    would otherwise be payable by over 55.8 million.
    Further, our Stendal mill benefits from German governmental
    guarantees of its project financing which permitted it to obtain
    better credit terms and lower interest costs than would
    otherwise have been available. The project debt of Stendal which
    matures in 2017, currently bears interest at a substantially
    fixed rate of 5.28% per annum plus an applicable margin and is
    non-recourse to our other operations and Mercer Inc. 7




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
    Proximity of Abundant Fiber
    Supply.  Although fiber is cyclical in both
    price and supply, there is a significant amount of high-quality
    fiber within a close radius of each of our mills. This fiber
    supply, combined with our purchasing power and our current
    ability to meaningfully switch between whole logs chipped at our
    mills and sawmill residual chips, enables us to enter into
    contracts and arrangements which have generally provided us with
    a competitive fiber supply.
    Experienced Management Team.  Our
    directors and senior managers have extensive experience in the
    pulp and forestry industries. In particular, our Chief Executive
    Officer has over 16 years experience in the pulp industry
    and has guided the Companys operations and development
    over that time. Our Chief Operating Officer and Chief Financial
    Officer each has over 30 years of industry experience. We
    also have experienced managers at all of our mills. Our
    management has a proven track record of implementing new
    initiatives and programs in order to reduce costs throughout our
    operations as well as identifying and harnessing new revenue
    opportunities. Corporate
    Strategy    
    Focus on NBSK Market Pulp.  We focus on
    NBSK pulp because it is a premium grade kraft pulp and generally
    obtains the highest price relative to other kraft pulps.
    Although demand is cyclical, between 1998 and 2008, worldwide
    demand for softwood kraft market pulp grew at an average of
    approximately 2.3% per annum. We focus on servicing customers
    that produce high quality printing and writing paper grades and
    tissue producers. This allows us to benefit from our stable
    relationships with paper and tissue manufacturers in Europe and
    Asia as well as participate in strong growth markets such as
    China where we also have strong customer relationships.
    Maximizing Renewable Energy
    Realizations.  In 2010 and 2009, our mills
    generated 520,005 MWh and 478,674 MWh, respectively,
    of surplus energy, primarily from a renewable carbon-neutral
    source. We are developing other initiatives to increase our
    overall energy generation and the amount of and price for our
    surplus power sales. We completed the Celgar Energy Project at
    the end of September 2010. Based upon the current production
    levels of our mills and after giving effect to the planned
    generation from the Celgar Energy Project, we expect to generate
    and sell between 700,000 MWh and 750,000 MWh of
    surplus renewable energy per annum. We expect energy generation
    and sales to continue to be a key focus for our mills for the
    foreseeable future.
    Enhancing Long-Term
    Sustainability/Growth.  In connection with the
    global slowdown that commenced in 2008, we shifted our
    short-term focus to enhancing the long-term sustainability of
    our business. To this end, we have extended the maturity of
    senior debt and reduced our overall debt levels in order to
    maximize our long-term liquidity position. Although pulp prices
    improved significantly in 2010, we intend to continue our focus
    on cost reduction initiatives while strategically evaluating and
    pursuing internal, high return capital projects and growth
    opportunities in order to enhance cash flows and maximize
    shareholder value.
    Operating and Maximizing Returns from our Modern,
    World-Class Mills.In order to keep our
    operating costs as low as possible, with a goal of generating
    positive cash flow in all market conditions, we operate large,
    modern pulp mills. We believe these production facilities
    provide us with the best platform to be an efficient and
    competitive producer of high-quality NBSK pulp without the need
    for significant sustaining capital. Our modern mills are also
    generally net exporters of renewable energy. We are constantly
    reviewing opportunities to enhance and maximize the usage of the
    strengths of our mills, including through increased energy
    generation, production of premium grades of pulp and other
    improvements, to capture the highest returns available. 8




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The Pulp
    Industry  General
          Markets
       9




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build-up
    Competition
    NBSK
    Pulp Pricing
       10




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Price
    Delivered to N. Europe (C$ and
     equivalent indexed to 2000)
  
 11




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The
    Manufacturing Process
    
           12




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Our
    Product           Generation
    and Sales of Green Energy at our Mills     13




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Mercer
    Electricity Generation and Exports
  
    German
    Mills
      Celgar
    Mill
     14




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and/or
 Operating
    Costs    Labor
    Fiber
           15




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16




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Energy
  start-up
  Chemicals
   Cash
    Production Costs    Years Ended December 31,Cash Production Costs

2010


2009


2008(per ADMT)Fiber


256



207



247Labor


42



37



36Chemicals


41



43



44Energy


17



13



21Other


54



42



43Total cash production costs(1)


410



342



391     (1)
    
    Cost of production per ADMT
    produced excluding depreciation. 17




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Sales,
    Marketing and Distribution    Years Ended December 31,2010


2009


2008(in thousands)Revenues by Geographic AreaGermany


278,348



154,323



198,340China


196,022



146,613



131,412Italy


56,301



44,616



56,487Other European Union countries(1)


182,246



107,276



133,621Other Asia


37,561



38,946



65,192North America


92,628



68,213



78,718Other countries


1,503



8,312



17,146Total(2)


844,609



568,299



680,916     (1)
    
    Not including Germany or Italy;
    includes new entrant countries to the European Union from their
    time of admission.(2)
    
    Excluding intercompany sales and
    third party transportation revenues.    Year Ended

Year Ended

Year EndedDecember 31, 2010

December 31, 2009

December 31, 2008(PIE CHART)

(PIE CHART)

(PIE CHART)     (1)
    
    Includes new entrant countries to
    the European Union from their time of admission.     18




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Capital
    Expenditures         19




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As at December 31,2010


2009


2008(in thousands)Properties, gross amount including government grants less
    amortization


1,144,759



1,152,288



1,171,891Less: government grants less amortization


297,992



283,730



290,187Properties, net (as shown on consolidated balance sheets)


846,767



868,558



881,704            Environmental       20




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state-of-the-art
    Fisheries Act Environmental
    Management Act
     Climate
    Change   21




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and/or
          
    increased growth rates for northern softwood forests due to
    greater atmospheric
    CO2
    levels;
    the expansion of softwood forests into less developed tundra
    areas;
    more intensive forestry practices and timber salvaging versus
    harvesting standing timber;
    greater demand for sustainable energy and cellulosic biomass
    fuels; and
    governmental incentives
    and/or
    legislative requirements to enhance biomass energy production
    and prices.            
    a greater susceptibility of northern softwood forest to disease,
    fire and insect infestation;
    the disruption of transportation systems and power supply lines
    due to more severe storms; 22




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
    the loss of water transportation for logs and our finished goods
    inventories due to lower water levels;
    decreases in quantity and quality of processed water for our
    mill operations;
    the loss of northern softwood boreal forests in areas in
    sufficient proximity to our mills to competitively acquire
    fiber; and
    lower harvest levels decreasing the supply of harvestable timber
    and, as a consequence, wood residuals. Human
    Resources           Description
    of Certain Indebtedness    2017
    Senior Notes
   23




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2013
    Senior Notes
      2012
    Convertible Notes
           24




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Stendal
    Loan Facility
  start-up
            
    if scheduled debt service for two consecutive half-year periods
    is partially or wholly financed by drawings from the DSRA and as
    a result the DSRA is less than
    331/3%
    Fully Funded;
    if the DSRA is fully drawn and Stendal exercises its current
    6-month
    principal payment deferral right in respect of the next
    repayment date; and
    failure to meet the Senior Debt/EBITDA Cover Ratio or Annual
    Debt Ratio as set out above.   25




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Rosenthal
    Loan Facilities
          Celgar
    Working Capital Facility
   26




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and/or
   Additional
    Information  www.mercerint.com Form 10-K, Form 10-Q Form 8-K, 1-800-SEC-0330. www.sec.gov
  ITEM 1A.
    RISK
    FACTORS  Private Securities Litigation
    Reform Act of 1995 Form 10-K
    
    the highly cyclical nature of our business;
    our level of indebtedness could negatively impact our financial
    condition and results of operations;
    a weak global economy could adversely affect our business and
    financial results and have a material adverse effect on our
    liquidity and capital resources;
    in a weak pulp price and demand environment there can be no
    assurance that we will be able to generate sufficient cash
    flows, to service, repay or refinance debt;
    cyclical fluctuations in the price and supply of our raw
    materials could adversely affect our business;
    we operate in highly competitive markets;
    we are exposed to currency exchange rate and interest rate
    fluctuations;
    increases in our capital expenditures or maintenance costs could
    have a material adverse effect on our cash flow and our ability
    to satisfy our debt obligations;
    we use derivatives to manage certain risks which has caused
    significant fluctuations in our operating results;
    we are subject to extensive environmental regulation and we
    could have environmental liabilities at our facilities;
    our Celgar Energy Project may not generate the results or
    benefits we expect;
    our business is subject to risks associated with climate change
    and social government responses thereto; 27




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
    we are subject to risks related to our employees;
    we rely on German federal and state government grants and
    guarantees;
    risks relating to our participation in the EU ETS, and the
    application of Germanys Renewable Energy Act;
    we are dependent on key personnel;
    we may experience material disruptions to our production;
    we may incur losses as a result of unforeseen or catastrophic
    events, including the emergence of a pandemic, terrorist attacks
    or natural disasters;
    our insurance coverage may not be adequate; and
    we rely on third parties for transportation services.    Form 10-K,
  Securities Act of
    1933 Securities Exchange Act of 1934
    Our
    business is highly cyclical in nature.
       28




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Our
    level of indebtedness could negatively impact our financial
    condition and results of operations.
    
    our ability to obtain additional financing for working capital,
    capital expenditures, general corporate and other purposes or to
    fund future operations may not be available on terms favorable
    to us or at all;
    a significant amount of our operating cash flow is dedicated to
    the payment of interest and principal on our indebtedness,
    thereby diminishing funds that would otherwise be available for
    our operations and for other purposes;
    increasing our vulnerability to current and future adverse
    economic and industry conditions;
    a substantial decrease in net operating cash flows or increase
    in our expenses could make it more difficult for us to meet our
    debt service requirements, which could force us to modify our
    operations;
    our leveraged capital structure may place us at a competitive
    disadvantage by hindering our ability to adjust rapidly to
    changing market conditions or by making us vulnerable to a
    downturn in our business or the economy in general;
    causing us to offer debt or equity securities on terms that may
    not be favorable to us or our shareholders;
    limiting our flexibility in planning for, or reacting to,
    changes and opportunities in our business and our
    industry; and
    our level of indebtedness increases the possibility that we may
    be unable to generate cash sufficient to pay the principal or
    interest due in respect of our indebtedness.       29




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A
    weakening of the global economy could adversely affect our
    business and financial results and have a material adverse
    effect on our liquidity and capital resources.
        In a
    weak pulp price and demand environment, there can be no
    assurance that we will be able to generate sufficient cash flows
    to service, repay or refinance debt.
    Cyclical
    fluctuations in the price and supply of our raw materials could
    adversely affect our business.
       30




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We
    operate in highly competitive markets.
    We are
    exposed to currency exchange rate and interest rate
    fluctuations.
    variable-to-fixed
  Increases
    in our capital expenditures or maintenance costs could have a
    material adverse effect on our cash flow and our ability to
    satisfy our debt obligations.
   31




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We use
    derivatives to manage certain risk which has caused significant
    fluctuations in our operating results.
  variable-to-fixed
      We are
    subject to extensive environmental regulation and we could have
    environmental liabilities at our facilities.
    
    unlawful discharges to land, air, water and sewers;
    waste collection, storage, transportation and disposal;
    hazardous waste;
    dangerous goods and hazardous materials and the collection,
    storage, transportation and disposal of such substances;
    the clean-up
    of unlawful discharges;
    land use planning;
    municipal zoning; and
    employee health and safety.   32




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The
    Celgar Energy Project may not generate the results or benefits
    we expect.
    Our
    business is subject to risks associated with climate change and
    social and government responses thereto.
    and/or
    and/or and/or and/or
 33




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
    a greater susceptibility of northern softwood forest to disease,
    fire and insect infestation, which could diminish fiber
    availability;
    the disruption of transportation systems and power supply lines
    due to more severe storms;
    the loss of water transportation for logs and our finished goods
    inventories due to lower water levels;
    decreases in quantity and quality of processed water for our
    mill operations;
    the loss of northern softwood boreal forests in areas in
    sufficient proximity to our mills to competitively acquire
    fiber; and
    lower harvest levels decreasing the supply of harvestable timber
    and, as a consequence, wood residuals.  and/or
  We are
    subject to risks related to our employees.
    We
    rely on government grants and guarantees and participate in
    European statutory programs.
    and/or
  We are
    dependent on key personnel.
    
    sales and marketing;
    reducing operating costs;
    identifying capital projects which provide a high rate of
    return; and 34




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
    prioritizing expenditures and maintaining employee relations.    We may
    experience material disruptions to our production.
  and/or
  
    unscheduled maintenance outages;
    prolonged power failures;
    equipment failure;
    design error or employee or contractor error;
    chemical spill or release;
    explosion of a boiler;
    disruptions in the transportation infrastructure, including
    roads, bridges, railway tracks, tunnels, canals and ports;
    fires, floods, earthquakes or other natural catastrophes;
    prolonged supply disruption of major inputs;
    labor difficulties; and
    other operational problems.  and/or
  We may
    incur losses as a result of unforeseen or catastrophic events,
    including the emergence of a pandemic, terrorist attacks or
    natural disasters.
    Our
    insurance coverage may not be adequate.
    We
    rely on third parties for transportation services.
   35




---



##### Table of Contents



ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS.    ITEM 2.
    PROPERTIES      
    an approximately 315,000 square feet fiber storage area;
    barking and chipping facilities for pulp logs;
    an approximately 300,000 square feet roundwood yard;
    a fiber line, which includes a Kamyr continuous digester and
    bleaching facilities;
    a pulp machine, which includes a dryer, a cutter and a baling
    line;
    an approximately 63,000 square feet finished goods storage
    area;
    a chemical recovery system, which includes a recovery boiler,
    evaporation plant and recausticizing plant;
    a fresh water plant;
    a wastewater treatment plant; and
    a power station with a turbine capable of producing 57 MW
    of electric power from steam produced by the recovery boiler and
    the power boiler.    
    an approximately 920,000 square feet fiber storage area;
    debarking and chipping facilities for pulp logs;
    a fiber line, which includes ten Superbatch digesters and
    bleaching facilities;
    a pulp machine, which includes a dryer, a cutter and a baling
    line;
    an approximately 108,000 square feet finished goods storage
    area;
    a recovery line, which includes a recovery boiler, evaporation
    plant, recausticizing plant and lime kiln;
    a fresh water plant;
    a wastewater treatment plant; and 36




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##### Table of Contents




    a power station with a turbine capable of producing
    approximately 100 MW of electric power from steam produced
    by the recovery boiler and a power boiler.    
    chip storage facilities consisting of four vertical silos and an
    asphalt surfaced yard with a capacity of 200,000 cubic meters of
    chips;
    a woodroom containing debarking and chipping equipment for pulp
    logs;
    a fiber line, which includes a dual vessel hydraulic digester,
    pressure knotting and screening, single stage oxygen
    delignification and a four stage bleach plant;
    two pulp machines, which each include a dryer, a cutter and a
    baling line;
    a chemical recovery system, which includes a recovery boiler,
    evaporation plant, recausticizing area and effluent treatment
    system; and
    two turbines and generators capable of producing approximately
    48 MW and 52 MW, respectively, of electric power from
    steam produced by a recovery boiler and power boiler.      AnnualProduction


Years Ended December 31,Capacity(1)


2010


2009


2008(ADMTs)Pulp Production by Mill:Rosenthal


330,000



324,194



310,244



328,693Celgar


520,000



502,107



466,855



485,893Stendal


645,000



599,985



620,342



610,401Total pulp production


1,495,000



1,426,286



1,397,441



1,424,987     (1)
    
    Capacity is the rated capacity of
    the plants for the year ended December 31, 2010, which is
    based upon production for 365 days a year. Targeted
    production is generally based upon 355 days per year.  ITEM 3.
    LEGAL
    PROCEEDINGS    Fisheries Act Environmental Management Act
 37




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##### Table of Contents



Comprehensive Environmental Response,
    Compensation and Liability Act
    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   38




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##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS  Market Information.
  Fiscal Quarter Ended

High


Low2010March 31

$
5.87


$
2.68June 30


6.08



3.98September 30


5.58



3.97December 31


7.95



4.932009March 31

$
2.24


$
0.25June 30


1.24



0.51September 30


4.37



0.50December 31


3.68



1.73   Shareholder Information.
  Dividend Information.
  Equity Compensation Plans.
  Number of Shares to be


Weighted-average


Number of SharesIssued Upon Exercise


Exercise Price of


Available for Futureof Outstanding Options


Outstanding Options


Issuance Under Plan2010 Stock Incentive Plan





$




2,000,0002004 Stock Incentive Plan


30,000
(1)

$
7.25



543,854
(2)Amended and Restated 1992 Non-Qualified Stock Option Plan


160,000


$
6.50




(3)     (1)
    
    The terms of the 2004 Stock
    Incentive Plan will govern all prior awards granted under such
    plan until such awards have been cancelled, forfeited or
    exercised in accordance with the terms thereof.(2)
    
    Pursuant to the terms of the 2004
    Stock Incentive Plan, we initiated a long-term performance
    incentive supplement or Performance Supplement in
    February 2008. An aggregate of 309,685 restricted shares have
    been issued under the plan. Grants for up to 534,783 shares
    have been made pursuant to the Performance Supplement.(3)
    
    The plan has expired.   39




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##### Table of Contents



Exchange Offer.
  Performance Graph.
  COMPARISON
    OF CUMULATIVE TOTAL RETURN
  ASSUMES $100
    INVESTED ON JAN. 01, 2006
 ASSUMES DIVIDEND REINVESTED
 FISCAL YEAR ENDING DEC. 31, 2010
  
  2005

2006

2007

2008

2009

2010Mercer International Inc.


100.00



151.02



99.62



24.43



39.44



98.60SIC Code Index


100.00



155.34



190.41



31.47



30.53



59.83NASDAQ Stock Market Index


100.00



110.25



121.88



73.10



106.22



125.36  40




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    Years Ended December 31,2010


2009


2008


2007(1)


2006(1)(Euro in thousands, other than per share and per ADMT
    amounts)Statement of Operations DataRevenuesPulp


856,311



577,298



689,320



704,391



623,977Energy


44,225



42,501



30,971



22,904



20,922
900,536



619,799



720,291



727,295



644,899Costs and expenses


732,793



632,598



706,962



657,709



552,395Operating income (loss)


167,743



(12,799
)


13,329



69,586



92,504Gain (loss) on derivative instruments


1,899



(5,760
)


(25,228
)


20,357



105,848Interest expense


67,621



64,770



65,756



71,400



91,931Investment income (loss)


468



(1,804
)


(1,174
)


4,453



6,090Income (loss) from continuing operations after income taxes(2)


94,748



(72,125
)


(85,540
)


23,640



70,313Net income (loss) per share attributable to common shareholders
    from continuing operationsBasic


2.24



(1.71
)


(2.00
)


0.62



2.08Diluted


1.56



(1.71
)


(2.00
)


0.58



1.72Weighted average shares outstanding (in thousands)Basic


38,591



36,297



36,285



36,081



33,336Diluted


56,731



36,297



36,285



45,303



43,084Balance Sheet DataCurrent assets


356,880



200,934



258,901



290,259



221,800Current liabilities


125,197



101,784



104,527



121,516



120,002Working capital


231,683



99,150



154,374



168,743



101,798Total assets


1,216,075



1,083,831



1,151,600



1,272,393



1,284,089Long-term liabilities


877,315



896,074



914,970



895,262



967,583Total equity


213,563



85,973



132,103



255,615



196,504Other DataPulp sales volume (ADMTs)


1,428,638



1,445,461



1,423,300



1,352,590



1,326,355Pulp production (ADMTs)


1,426,286



1,397,441



1,424,987



1,404,673



1,302,260Average pulp price realized (per ADMT)(3)


591



393



478



516



465     (1)
    
    The presentation for 2006 and 2007
    has been modified to conform to the presentation requirements as
    prescribed in the ConsolidationsTopic ASC 810.(2)
    
    We do not report the effect of
    government grants relating to our assets in our income. These
    grants reduce the cost basis of the assets purchased when the
    grants are received. See Item 1 
    Business  Capital Expenditures.(3)
    
    Our average realized pulp price
    reflects customer discounts and price movements between the
    order and shipment date. 41




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##### Table of Contents



ITEM 7.  MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS   Results
    of Operations  General
             42




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##### Table of Contents



2011(1)

2010

2009

2008RosenthalScheduled production downtime (Days)


12



9
(2)


24



10CelgarScheduled production downtime (Days)


10



12



10



12StendalScheduled production downtime (Days)


17



10



9



11     (1)
    
    Projected for 2011.(2)
    
    In addition to the
    nine-day
    scheduled production downtime taken by the Rosenthal mill, we
    also idled our electricity generation for an additional
    51 days for turbine maintenance.       43




---



##### Table of Contents



variable-to-fixed
  Significant
    Actions
    
    Effectively extended the maturity of our senior unsecured
    indebtedness by issuing $300 million in aggregate principal
    amount of 2017 Senior Notes, the proceeds of which, along with
    cash on hand, were used to acquire approximately
    $288.9 million, or 93.2% of our outstanding 2013 Senior
    Notes;
    Negotiated the conversion of $21.2 million of our 2012
    Convertible Notes into equity and repaid the balance of our 2010
    Convertible Notes;
    Completed the Celgar Energy Project, financed primarily through
    government grants provided by the Canadian government;
    Continued to focus on cost reductions and working capital
    management; and
    Continued to improve operations, which allowed us to achieve
    record annual pulp production and energy generation.  Current
    Market Environment
     44




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##### Table of Contents



Selected
    Financial Snapshot
    Years Ended December 31,2010


2009


2008ConsolidatedPulp Production (000 ADMTs)


1,426.3



1,397.4



1,425.0Scheduled Production Downtime (000 ADMTs)


43.5



52.1



47.0Pulp Sales (000 ADMTs)


1,428.6



1,445.5



1,423.3Pulp Revenues (in millions)


856.3



577.3



689.3NBSK pulp list prices ($/ADMT)

$
938


$
667


$
839NBSK pulp list prices (/ADMT)


707



478



571Average pulp sales realizations (/ADMT)(1)


591



393



478Energy Production (000 MWh)


1,444.1



1,445.3



1,456.6Energy Sales (000 MWh)


520.0



478.7



456.1Energy Revenue (in millions)


44.2



42.5



31.0Average energy sales realizations (/MWh)


85



89



68Restricted GroupPulp Production (000 ADMTs)


826.3



777.1



814.6Scheduled Production Downtime (000 ADMTs)


25.3



36.9



25.7Pulp Sales (000 ADMTs)


826.3



795.1



833.2Pulp Revenues (in millions)


490.0



318.4



401.0NBSK pulp list prices ($/ADMT)

$
938


$
667


$
839NBSK pulp list prices (/ADMT)


707



478



571Average pulp sales realizations (/ADMT)(1)


592



400



480Energy Production (000 MWh)


718.6



732.9



764.4Energy Sales (000 MWh)


194.2



178.4



177.2Energy Revenue (in millions)


15.1



15.2



12.1Average energy sales realizations (/MWh)


78



85



68Average Spot Currency Exchange Rates / $(2)


0.7541



0.7176



0.6826C$ / $(2)


1.0298



1.1412



1.0660C$ / (3)


1.3671



1.5851



1.5603     (1)
    
    Our average realized pulp price for
    the period indicated reflect customer discounts and price
    movements between the order and shipment date.(2)
    
    Average Federal Reserve Bank of New
    York noon spot rate over the reporting period.(3)
    
    Average Bank of Canada noon spot
    rate over the reporting period. Year
    Ended December 31, 2010 Compared to Year Ended
    December 31, 2009     45




---



##### Table of Contents



46




---



##### Table of Contents



47




---



##### Table of Contents



Years Ended December 31,2010


2009(in thousands)Net income (loss) attributable to common shareholders


86,279



(62,189
)Net income (loss) attributable to noncontrolling interest


8,469



(9,936
)Income taxes (benefits)


(5,879
)


(5,869
)Interest expense


67,621



64,770Investment (income) loss


(468
)


1,804Foreign exchange (gain) loss on debt


6,126



(2,692
)Loss (gain) on extinguishment of debt


7,494



(4,447
)Loss (gain) on derivative instruments


(1,899
)


5,760Operating income (loss)


167,743



(12,799
)Add: Depreciation and amortization


56,231



54,170Operating EBITDA


223,974



41,371  Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008                     48




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##### Table of Contents



Years Ended December 31,2009


2008(in thousands)Net income (loss) attributable to common shareholders


(62,189
)


(72,465
)Net income (loss) attributable to noncontrolling interest


(9,936
)


(13,075
)Income taxes (benefits)


(5,869
)


2,477Interest expense


64,770



65,756Investment (income) loss


1,804



1,174Foreign exchange (gain) loss on debt


(2,692
)


4,234Loss (gain) on extinguishment of debt


(4,447
)


Loss (gain) on derivative instruments


5,760



25,228Operating income (loss)


(12,799
)


13,329Add: Depreciation and amortization


54,170



55,762Operating EBITDA


41,371



69,091  49




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##### Table of Contents



Sensitivities    NBSK Pulp Price.
  Foreign Exchange.
 Liquidity
    and Capital Resources    Years Ended December 31,2010

2009(in thousands)Financial PositionCash and cash equivalents


99,022



51,291Working capital


231,683



99,150Property, plant and equipment


846,767



868,558Total assets


1,216,075



1,083,831Long-term liabilities


877,315



896,074Total equity


213,563



85,973  Sources
    and Uses of Funds         50




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##### Table of Contents



Debt         Debt
    Covenants    once-per-fiscal-year
  12-month
  12-month
   Cash Flow
    Analysis  Cash Flows from Operating
    Activities.
   51




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##### Table of Contents



Cash Flows from Investing
    Activities.
      Cash Flows from Financing
    Activities.
 Capital
    Resources   Future
    Liquidity     Off-Balance-Sheet
    Activities   52




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##### Table of Contents



Contractual
    Obligations and Commitments    Payments Due By PeriodContractual Obligations(8)

2011


2012-2013


2014-2015


Beyond 2015


Total(in thousands)Long-term debt(1)


16,429



48,899



543



255,396



321,267Debt, Stendal(2)


23,167



64,583



84,000



328,907



500,657Interest on debt(3)


58,750



105,653



93,148



99,503



357,054Capital lease obligations(4)


3,400



2,913



1,279



1,556



9,148Operating lease obligations(5)


3,287



4,291



2,791



3,287



13,656Purchase obligations(6)


1,055



751











1,806Other long-term liabilities(7)


1,973



1,285



1,538



5,115



9,911Total


108,061



228,375



183,299



693,764



1,213,499     (1)
    
    This reflects the future principal
    payments due under our long-term debt obligations, but excludes
    the Stendal Loan Facility. See Item 1 
    Business  Description of Certain Indebtedness,
    footnote 2 below and Note 7 to our annual financial
    statements included herein for a description of such
    indebtedness.(2)
    
    This reflects principal only in
    connection with the Stendal Loan Facility. See
    Item 1  Business  Description
    of Certain Indebtedness and Note 7 to our annual
    financial statements included herein for a description of such
    indebtedness. This does not include amounts associated with
    derivatives entered into in connection with the Stendal Loan
    Facility. See Item 7A  Quantitative and
    Qualitative Disclosure about Market Risk for information
    about our derivatives.(3)
    
    Amounts presented for interest
    payments include guarantee fees, and assume that all debt
    outstanding as of December 31, 2010 will remain outstanding
    until maturity, and interest rates on variable rate debt in
    effect as of December 31, 2010 will remain in effect until
    maturity.(4)
    
    Capital lease obligations relate to
    transportation vehicles and production equipment. These amounts
    reflect principal and interest.(5)
    
    Operating lease obligations relate
    to transportation vehicles and other production and office
    equipment.(6)
    
    Purchase obligations relate
    primarily to
    take-or-pay
    contracts, including for purchases of raw materials, made in the
    ordinary course of business.(7)
    
    Other long-term liabilities relate
    primarily to future payments that will be made for
    post-employment benefits other than pensions. Those amounts are
    estimated using actuarial assumptions, including expected future
    service, to project the future obligations. Additionally, the
    balance also includes pension funding which is calculated on an
    annual basis. Consequently, the 2011 amount includes
    1.4 million related to pension funding.(8)
    
    We have identified approximately
    0.2 million of potential tax liabilities that are
    more likely than not to be paid and approximately
    4.2 million of asset retirement obligations. However,
    due to the uncertain timing related to these potential
    liabilities, we are unable to allocate the payments in the
    contractual obligations table. Foreign
    Currency         53




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Results
    of Operations of the Restricted Group Under Our Senior Note
    Indenture    Form 10-K.
 Restricted
    Group Results  Year Ended December 31, 2010
    Compared to Year Ended December 31, 2009  51-day
                   54




---



##### Table of Contents



Years Ended December 31,2010


2009(in thousands)Restricted Group(1)Net income (loss)


62,327



(35,927
)Income taxes (benefits)


(8,651
)


(183
)Interest expense


31,498



27,351Investment (income) loss


(5,103
)


(5,002
)Foreign exchange (gain) loss on debt


6,126



(2,692
)Loss (gain) on extinguishment of debt


7,494



(4,447
)Operating income (loss)


93,691



(20,900
)Add: Depreciation and amortization


30,270



27,704Operating EBITDA


123,961



6,804     (1)
    
    See Note 19 of the financial
    statements included in this annual report on Form
    10-K for a
    reconciliation to our consolidated results. Restricted
    Group Results  Year Ended December 31, 2009
    Compared to Year Ended December 31, 2008     55




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##### Table of Contents



56




---



##### Table of Contents



Years EndedDecember 31,2009


2008(in thousands)Restricted Group(1)Net income (loss)


(35,927
)


(30,432
)Income taxes (benefits)


(183
)


3,728Interest expense


27,351



27,027Investment (income) loss


(5,002
)


(6,834
)Foreign exchange (gain) loss on debt


(2,692
)


4,114Loss (gain) on extinguishment of debt


(4,447
)


Operating income (loss)


(20,900
)


(2,397
)Add: Depreciation and amortization


27,704



28,867Operating EBITDA


6,804



26,470     (1)
    
    See Note 19 of the financial
    statements included in this annual report on Form
    10-K for a
    reconciliation to our consolidated results. Cash Flow
    Analysis for the Restricted Group  Cash Flows from Operating
    Activities.
  Cash Flows from Investing
    Activities.
  Cash Flows from Financing
    Activities.
 Liquidity
    and Capital Resources of the Restricted Group    Years Ended December 31,2010


2009(in thousands)Restricted Group Financial Position(1)Cash and cash equivalents


50,654



20,635Working capital


150,667



57,015Property, plant and equipment


362,274



362,311Total assets


662,944



555,977Long-term liabilities


312,631



301,173Total equity


289,141



200,247     (1)
    
    See Note 19 of the financial
    statements included in this annual report on
    Form 10-K
    for a reconciliation to our consolidated results. 57




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##### Table of Contents



Critical
    Accounting Policies        Derivative Instruments.
 58




---



##### Table of Contents



Impairment of Long-Lived Assets.
    Deferred Taxes.
  
    the history of the tax loss carryforwards and their expiry dates;
    future reversals of temporary differences;
    our projected earnings; and
    tax planning opportunities.  Income Taxes
    Inventory Provisions.
 59




---



##### Table of Contents



New
    Accounting Standards  Form 10-K.
 Cautionary
    Statement Regarding Forward-Looking Information  Form 10-K Private Securities Litigation Reform Act
    of 1995 Form 10-K Form 10-K.
 Inflation    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     Derivatives   60




---



##### Table of Contents



over-the-counter
  over-the-counter
               61




---



##### Table of Contents



Recognized





RecognizedGain (Loss)





Gain (Loss)Year Ended





Year EndedNotional


December 31,


Notional


December 31,Derivative Instrument

Maturity Date


Amount


2010


Amount


2009(in millions of


(in thousands)


(in millions of


(in thousands)Euros)





Euros)Interest Rate DerivativesStendal interest rate swaps(1)


October 2017



447.8



1,899



487.0



(5,760
)     (1)
    
    In connection with the Stendal Loan
    Facility, in the third quarter of 2002 Stendal entered into the
    Stendal Interest Rate Swap Contracts, which are
    variable-to-fixed
    interest rate swaps, for the term of the Stendal Loan Facility,
    with respect to an aggregate maximum amount of approximately
    612.6 million of the principal amount of the
    long-term indebtedness under the Stendal Loan Facility. The
    swaps took effect on October 1, 2002 and are comprised of
    three contracts. The first contract commenced in October 2002
    for a notional amount of 4.1 million, gradually
    increasing to 464.9 million, with an interest rate of
    3.795%, and matured in May 2004. The second contract commenced
    in May 2004 for a notional amount of 464.9 million,
    gradually increasing to 612.6 million, with an
    interest rate of 5.28%, and matured in April 2005. The third
    contract commenced in April 2005 for a notional amount of
    612.6 million, with an interest rate of 5.28%, and
    the notional amount gradually decreases and the contract
    terminates upon the maturity of the Stendal Loan Facility in
    October 2017. Interest
    Rate Risk      As at December 31, 2010Carrying


Fair


Expected maturity dateValue


Value


2011


2012


2013


2014


2015


Thereafter(in thousands)LiabilitiesLong-term debt:Fixed rate ($)(1)


15,341



15,571



15,341



















Average interest rate


9.25
%


9.25
%


9.25
%Fixed rate ($)(2)


224,031



230,192























224,031Average interest rate


9.50
%


9.50
%






















9.50
%Fixed rate ($)(3)


31,707



74,790







31,707















Average interest rate


8.5
%


8.5
%






8.5
%Variable rate ()(4)


500,657



500,657



23,167



24,583



40,000



40,000



44,000



328,907Average interest rate


6.3
%


6.3
%


6.3
%


6.3
%


6.3
%


6.3
%


6.3
%


6.3
%Variable rate ()(5)


3,807



3,807



1,088



1,088



1,088



543







Average interest rate


3.90
%


3.90
%


3.90
%


3.90
%


3.90
%


3.90
%Variable rate (C$)(6)


15,016



15,016











15,016











Average interest rate


5.70
%


5.70
%










5.70
%   62




---



##### Table of Contents



Nominal


Fair


Expected maturity dateAmount


Value


2011


2012


2013


2014


2015


Thereafter(in thousands)Interest Rate DerivativesInterest rate swaps:Variable to fixed ()(7)


447,763



(50,973
)


43,315



46,873



50,794



54,959



59,388



192,434Average pay rate


5.3
%


5.3
%


5.3
%


5.3
%


5.3
%


5.3
%


5.3
%


5.3
%Average receive rate


5.3
%


5.3
%


5.3
%


5.3
%


5.3
%


5.3
%


5.3
%


5.3
%     (1)
    
    Senior Notes due February 2013,
    bearing interest at 9.25%, principal amount $20.5 million.(2)
    
    Senior Notes due 2017, bearing
    interest at 9.50%, principal amount $300.0 million.(3)
    
    2012 Convertible Notes due January
    2012 bearing interest at 8.5%, principal amount
    $44.4 million.(4)
    
    Stendal Loan Facility bears
    interest at varying rates of between Euribor plus 0.90% to
    Euribor plus 1.85%.(5)
    
    Rosenthal investment loan bears
    interest at Euribor plus 2.75%. As at December 31, 2010,
    3.8 million was drawn from this loan and was accruing
    interest at a rate of 3.90%.(6)
    
    Celgar Working Capital Facility
    bears interest at bankers acceptance plus 3.75% or Canadian
    prime plus 2.0% on Canadian dollar denominated amounts and bears
    interest at LIBOR plus 3.75% or U.S. base plus 2.0% on U.S.
    dollar denominated amounts. As at December 31, 2010, the
    principal amount owing was C$20.0 million.(7)
    
    Interest rate swaps put in place on
    the Stendal Loan Facility, effectively converting it from a
    variable interest rate to a fixed interest rate loan. Foreign
    Currency Exchange Rate Risk      As at December 31, 2010Carrying


Fair


Expected maturity dateValue


Value


2011


2012


2013


2014


2015


Thereafter(in thousands)On-Balance Sheet Financial InstrumentsEuro functional currencyLiabilities:Fixed rate ($)(1)


15,341



15,571



15,341



















Average interest rate


9.25
%


9.25
%


9.25
%Fixed rate ($)(2)


224,031



230,192























224,031Average interest rate


9.5
%


9.5
%






















9.5
%Fixed rate ($)(3)


31,707



74,790







31,707















Average interest rate


8.5
%


8.5
%






8.5
%Variable rate (C$)(4)


15,016



15,016











15,016











Average interest rate


5.70
%


5.70
%










5.70
%     (1)
    
    Senior Notes due February 2013,
    bearing interest at 9.25%, principal amount $20.5 million.(2)
    
    Senior Notes due 2017, bearing
    interest at 9.50%, principal amount $300.0 million.(3)
    
    2012 Convertible Notes due January
    2012, principal amount $44.4 million.(4)
    
    Celgar Working Capital Facility
    bears interest at bankers acceptance plus 3.75% or Canadian
    prime plus 2.0% on Canadian dollar denominated amounts and bears
    interest at LIBOR plus 3.75% or U.S. base plus 2.0% on U.S.
    dollar denominated amounts. As at December 31, 2010, the
    principal amount owing was C$20.0 million. 63




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##### Table of Contents



Energy
    Price Risk    ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K, Form 10-K
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES Evaluation
    of Disclosure Controls and Procedures  Rules 13a-15(e) 15d-15(e) Form 10-K.
   Managements
    Report on Internal Control Over Financial Reporting      
    Pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of Mercer;
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures are being made only in accordance
    with authorizations of management and directors; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of
    assets that could have a material effect on the financial
    statements.   64




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##### Table of Contents



Internal Control-Integrated
    Framework
   Changes
    in Internal Controls  Rules 13a-15(f) 15d-15(f)
  ITEM 9B.
    OTHER
    INFORMATION   65




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    Jimmy S.H. Lee
  Kenneth A. Shields
  William D. McCartney
  Guy W. Adams
  Eric Lauritzen
  Graeme A. Witts
  George Malpass
  David M. Gandossi
 66




---



##### Table of Contents



Claes-Inge Isacson
  Richard Short
  Leonhard Nossol
  David M. Cooper
  Eric X. Heine
  Wolfram Ridder
  Genevieve Stannus
  Niklaus Gruenenfelder
  Brian Merwin
 67




---



##### Table of Contents



Audit
    Committee  Form 10-K www.mercerint.com Sarbanes-Oxley Act of 2002
  c/o Suite 2840,
 Compensation
    and Human Resource Committee  www.mercerint.com
 Governance
    and Nominating Committee  Form 10-K www.mercerint.com
 68




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##### Table of Contents



Environmental,
    Health and Safety Committee  www.mercerint.com
 Lead
    Director/Deputy Chairman   Code of
    Business Conduct and Ethics  Form 10-K www.mercerint.com (604) 684-1099) (206) 674-4639).
 Section 16(a)
    Beneficial Ownership Reporting Compliance    ITEM 11.
    EXECUTIVE
    COMPENSATION   69




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##### Table of Contents



ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE Review,
    Approval or Ratification of Transactions with Related
    Persons      
    Whether the transaction is fair and reasonable to us;
    The business reasons for the transaction;
    Whether the transaction would impair the independence of one of
    our non-employee directors; and
    Whether the transaction is material, taking into account the
    significance of the transaction.    Regulation S-K
  ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   70




---



##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  (a) (1)  Financial
    Statements
  PageReport of Independent Registered Chartered
    Accountants  PricewaterhouseCoopers LLP


73Consolidated Balance Sheets


74Consolidated Statements of Operations


75Consolidated Statements of Comprehensive Income
    (Loss)


76Consolidated Statements of Changes in
    Shareholders Equity


77Consolidated Statements of Cash Flows


78Notes to the Consolidated Financial Statements


79    (b)
    List of Exhibits  2
.1

Agreement and Plan of Merger among Mercer International Inc.,
    Mercer International Regco Inc. and Mercer Delaware Inc. dated
    December 14, 2005. Incorporated by reference to the Proxy
    Statement/Prospectus filed on December 15, 2005.3
.1

Articles of Incorporation of the Company, as amended.
    Incorporated by reference from
    Form 8-A
    dated March 1, 2006.3
.2

Bylaws of the Company. Incorporated by reference from
    Form 8-A
    dated March 1, 2006.4
.1

Indenture dated as of December 10, 2004 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form S-3
    filed December 10, 2004.4
.2

First Supplemental Indenture dated February 14, 2005 to
    Indenture dated December 10, 2004 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form 8-K
    dated February 17, 2005.4
.3

Indenture dated as of December 10, 2009 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form 8-K
    dated December 11, 2009.4
.4

Second Supplemental Indenture dated as of November 16, 2010
    to the Indenture dated December 10, 2004 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form 8-K
    dated November 19, 2010.4
.5

Indenture dated as of November 17, 2010 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form 8-K
    dated November 19, 2010.4
.6

Registration Rights Agreement among Mercer International Inc.
    and RBC Capital Markets, LLC and Credit Suisse Securities (USA)
    LLC dated November 17, 2010. Incorporated by reference from
    Form 8-K
    dated November 19, 2010.10
.1*

Project Financing Facility Agreement dated August 26, 2002
    between Zellstoff Stendal GmbH and Bayerische Hypo-und
    Vereinsbank AG, as amended by Amendment, Restatement and
    Undertaking Agreement dated January 31, 2009.10
.2

Shareholders Undertaking Agreement dated August 26,
    2002 among Mercer International Inc., Stendal Pulp Holdings
    GmbH, RWE Industrie-Lösungen GmbH, AIG Altmark Industrie AG
    and FAHR Beteiligungen AG and Zellstoff Stendal GmbH and
    Bayerische Hypo-und Vereinsbank AG. Incorporated by reference
    from
    Form 8-K
    dated September 10, 2002.10
.3*

Shareholders Agreement dated August 26, 2002 among
    Zellstoff Stendal GmbH, Stendal Pulp Holdings GmbH, RWE
    Industrie-Lösungen GmbH and FAHR Beteiligungen AG.10
.4*

Contract for the Engineering, Design, Procurement, Construction,
    Erection and
    Start-Up of
    a Kraft Pulp Mill between Zellstoff Stendal GmbH and RWE
    Industrie-Lösungen GmbH dated August 26, 2002. Certain
    non-public information has been omitted from the appendices to
    Exhibit 10.4 pursuant to a request for confidential
    treatment filed with the SEC. Such non-public information was
    filed with the SEC on a confidential basis. The SEC approved the
    request for confidential treatment in January 2004.10
.5*

Form of Trustees Indemnity Agreement between Mercer
    International Inc. and its Trustees. 71




---



##### Table of Contents



10
.6

Employment Agreement dated for reference August 7, 2003
    between Mercer International Inc. and David Gandossi.
    Incorporated by reference from
    Form 8-K
    dated August 11, 2003.10
.7

Employment Agreement effective as of April 28, 2004 between
    Mercer International Inc. and Jimmy S.H. Lee. Incorporated by
    reference from
    Form 8-K
    dated April 28, 2004.10
.8

2004 Stock Incentive Plan. Incorporated by reference from
    Form S-8
    dated June 15, 2004.10
.9

2010 Stock Incentive Plan. Incorporated by reference from
    Form S-8
    dated June 11, 2010.10
.10

Employment Agreement dated October 2, 2006 between Stendal
    Pulp Holding GmbH and Wolfram Ridder. Incorporated by
    reference from
    Form 8-K
    dated October 2, 2006.10
.11*

Employment Agreement effective September 25, 2006 between
    Mercer International Inc. and Claes-Inge Isacson dated
    December 5, 2008.10
.12

Employment Agreement effective September 1, 2005 between
    Mercer International Inc. and Leonhard Nossol dated
    August 18, 2005. Incorporated by reference from
    Form 10-Q
    dated May 6, 2008.10
.13*

Electricity Purchase Agreement effective January 27, 2009
    between Zellstoff Celgar Limited Partnership and British
    Columbia Hydro and Power Authority. Certain non-public
    information has been omitted from the appendices to
    Exhibit 10.13 pursuant to a request for confidential
    treatment filed with the SEC. Such non-public information was
    filed with the SEC on a confidential basis. The SEC approved the
    request for confidential treatment in March 2009.10
.14*

Revolving Credit Facility Agreement dated August 19, 2009
    among D&Z Holding GmbH, Zellstoff-und Papierfabrik
    Rosenthal GmbH, D&Z Beteiligungs GmbH and ZPR Logistik GmbH
    and Bayerische
    Hypo-und
    Vereinsbank AG. Incorporated by reference from
    Form 8-K
    dated August 24, 2009.10
.15

Loan Agreement dated August 19, 2009 among Zellstoff-und
    Papierfabrik Rosenthal GmbH, as borrower, and Bayerische
    Hypo-und Vereinsbank Aktiengesellschaft, as lender. Incorporated
    by reference from
    Form 8-K
    dated August 24, 2009.10
.16

Amended and Restated Credit Agreement dated as of
    November 27, 2009 among Zellstoff Celgar Limited
    Partnership, as borrower, and the lenders from time to time
    parties thereto, as lenders, and CIT Business Credit Canada
    Inc., as agent. Incorporated by reference from
    Form 8-K
    dated November 30, 2009.14


Code of Business Conduct and Ethics. Incorporated by reference
    from the definitive proxy statement on Schedule 14A dated
    August 11, 2003.99
.1

Audit Committee Charter. Incorporated by reference from the
    definitive proxy statement on Schedule 14A dated
    April 28, 2005.99
.2

Governance and Nominating Committee Charter. Incorporated by
    reference from the definitive proxy statement on
    Schedule 14A dated April 28, 2004.99
.3

Exchange Agreement dated November 25, 2009 between Mercer
    International Inc. and IAT Reinsurance Co. Ltd. Incorporated by
    reference from
    Form 8-K
    filed November 27, 2009.99
.4

Exchange Agreement dated November 25, 2009 between Mercer
    International Inc. and Alden Global Distressed Opportunities
    Fund L.P. Incorporated by reference from
    Form 8-K
    filed November 27, 2009.99
.5

Exchange Agreement dated November 25, 2009 between Mercer
    International Inc. and Greenlight Capital Qualified LP,
    Greenlight Capital LP and Greenlight Capital Offshore Partners.
    Incorporated by reference from
    Form 8-K
    filed November 27, 2009.21


List of Subsidiaries of Registrant.23
.1

Consent of Independent Registered Chartered
    Accountants  PricewaterhouseCoopers LLP.31
.1

Section 302 Certificate of Chief Executive Officer.31
.2

Section 302 Certificate of Chief Financial Officer.32
.1**

Section 906 Certificate of Chief Executive Officer.32
.2**

Section 906 Certificate of Chief Financial Officer.     *
    
    Filed in
    Form 10-K
    for prior years.**
    
    In accordance with Release
    33-8212 of
    the Commission, these Certifications: (i) are
    furnished to the Commission and are not
    filed for the purposes of liability under the
    Exchange Act; and (ii) are not to be subject to automatic
    incorporation by reference into any of our Companys
    registration statements filed under the Securities Act for the
    purposes of liability thereunder or any offering memorandum,
    unless our Company specifically incorporates them by reference
    therein. 72




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
          PricewaterhouseCoopers
    LLP
     73




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.CONSOLIDATED BALANCE SHEETS(In thousands of Euros, except per share data)
  December 31,2010


2009ASSETSCurrent assetsCash and cash equivalents (Note 2)


99,022



51,291Receivables (Note 3)


121,709



71,143Inventories (Note 4)


102,219



72,629Prepaid expenses and other


11,360



5,871Deferred income tax (Note 9)


22,570



Total current assets


356,880



200,934Long-term assetsProperty, plant and equipment (Note 5)


846,767



868,558Deferred note issuance and other


11,082



8,186Deferred income tax (Note 9)






3,426Note receivable


1,346



2,727859,195



882,897Total assets


1,216,075



1,083,831LIABILITIESCurrent liabilitiesAccounts payable and accrued expenses (Note 6)


84,873



85,185Pension and other post-retirement benefit obligations
    (Note 8)


728



567Debt (Note 7)


39,596



16,032Total current liabilities


125,197



101,784Long-term liabilitiesDebt (Note 7)


782,328



813,142Unrealized interest rate derivative losses (Note 14)


50,973



52,873Pension and other post-retirement benefit obligations
    (Note 8)


24,236



17,902Capital leases and other (Note 15)


12,010



12,157Deferred income tax (Note 9)


7,768



877,315



896,074Total liabilities


1,002,512



997,858EQUITYShareholders equityShare capital (Note 10)


219,211



202,844Paid-in capital


(3,899
)


(6,082
)Retained earnings (deficit)


(10,956
)


(97,235
)Accumulated other comprehensive income (loss)


31,712



23,695Total shareholders equity


236,068



123,222Noncontrolling interest (deficit) (Note 17)


(22,505
)


(37,249
)Total equity


213,563



85,973Total liabilities and equity


1,216,075



1,083,831Commitments and contingencies (Note 16)Subsequent events (Note 18)    74




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands of Euros, except per share
    data)
  For the Years Ended December 31,2010


2009


2008RevenuesPulp


856,311



577,298



689,320Energy


44,225



42,501



30,971900,536



619,799



720,291Costs and expensesOperating costs


643,529



551,781



626,933Operating depreciation and amortization


55,932



53,919



55,484201,075



14,099



37,874Selling, general and administrative expenses


33,442



27,414



30,158Purchase (sale) of emission allowances


(110
)


(516
)


(5,613
)Operating income (loss)


167,743



(12,799
)


13,329Other income (expense)Interest expense


(67,621
)


(64,770
)


(65,756
)Investment income (loss)


468



(1,804
)


(1,174
)Foreign exchange gain (loss) on debt


(6,126
)


2,692



(4,234
)Gain (loss) on extinguishment of debt (Note 7)


(7,494
)


4,447



Gain (loss) on derivative instruments (Note 14)


1,899



(5,760
)


(25,228
)Total other income (expense)


(78,874
)


(65,195
)


(96,392
)Income (loss) before income taxes


88,869



(77,994
)


(83,063
)Income tax benefit (provision) current


(3,881
)


(134
)


(501
) deferred (Note 9)


9,760



6,003



(1,976
)Net income (loss)


94,748



(72,125
)


(85,540
)Less: net loss (income) attributable to noncontrolling interest


(8,469
)


9,936



13,075Net income (loss) attributable to common shareholders


86,279



(62,189
)


(72,465
)Net income (loss) per share attributable to common shareholders
    (Note 12)Basic


2.24



(1.71
)


(2.00
)Diluted


1.56



(1.71
)


(2.00
)    75




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    (LOSS)(In thousands of Euros)
  For the Years Ended December 31,2010


2009


2008Net income (loss)


94,748



(72,125
)


(85,540
)Other comprehensive income (loss), net of taxesForeign currency translation adjustment


11,333



28,316



(41,876
)Pension income (expense) (Note 8)


(3,314
)


(3,128
)


4,079Unrealized gains (losses) on securities arising during the year


(2
)


379



(340
)Other comprehensive income (loss), net of taxes


8,017



25,567



(38,137
)Total comprehensive income (loss)


102,765



(46,558
)


(123,677
)Comprehensive (income) loss attributable to noncontrolling
    interest


(8,469
)


9,936



13,075Comprehensive income (loss) attributable to common shareholders


94,296



(36,622
)


(110,602
)    76




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.CONSOLIDATED STATEMENTS OF CHANGES IN
    SHAREHOLDERS EQUITY(In thousands of Euros)
  Accumulated OtherCommon Shares








Comprehensive Income (Loss)Amount








Foreign


Defined


UnrealizedPaid in





Retained


Currency


Benefit


GainsNumber


Par


Excess of


Paid-in


Earnings


Translation


Pension


(Losses) on





Shareholdersof Shares


Value


Par Value


Capital


(Deficit)


Adjustments


Plans


Securities


Total


EquityBalance at December 31, 2007


36,285,027



27,576



175,268



134



37,419



41,099



(4,929
)


95



36,265



276,662Shares issued on grants of restricted stock


21,000











61























61Shares issued on grants of performance stock


116,460











29























29Stock compensation expense














75























75Net loss


















(72,465
)


















(72,465
)Other comprehensive income (loss)






















(41,876
)


4,079



(340
)


(38,137
)


(38,137
)Balance at December 31, 2008


36,422,487



27,576



175,268



299



(35,046
)


(777
)


(850
)


(245
)


(1,872
)


166,225Capital contribution to acquire additional 4.32% of Stendal Mill














(6,809
)






















(6,809
)Shares issued on grants of restricted stock


21,000











52























52Stock compensation expense














376























376Net loss


















(62,189
)


















(62,189
)Other comprehensive income (loss)






















28,316



(3,128
)


379



25,567



25,567Balance at December 31, 2009


36,443,487



27,576



175,268



(6,082
)


(97,235
)


27,539



(3,978
)


134



23,695



123,222Shares issued on exercise of stock options






































Shares issued on grants of restricted stock


56,000











153























153Shares issued on conversion of convertible note


6,500,171



4,961



11,406



























16,367Stock compensation expense














2,030























2,030Net income


















86,279



















86,279Other comprehensive income (loss)






















11,333



(3,314
)


(2
)


8,017



8,017Balance at December 31, 2010


42,999,658



32,537



186,674



(3,899
)


(10,956
)


38,872



(7,292
)


132



31,712



236,068    77




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##### Table of Contents



MERCER
    INTERNATIONAL INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands of Euros)
  For the Years Ended December 31,2010


2009


2008Cash flows from (used in) operating activitiesNet income (loss) attributable to common shareholders


86,279



(62,189
)


(72,465
)Adjustments to reconcile net income (loss) attributable to
    common shareholders to cash flows from operating activitiesLoss (gain) on derivative instruments


(1,899
)


5,760



25,228Foreign exchange (gain) loss on debt


6,126



(2,692
)


4,234Loss (gain) on extinguishment of debt


7,494



(4,447
)


Depreciation and amortization


56,231



54,170



55,762Accretion expense (income)


2,492



181



Noncontrolling interest


8,469



(9,936
)


(13,075
)Deferred income taxes


(9,760
)


(6,003
)


1,976Stock compensation expense


2,394



455



264Pension and other post-retirement expense, net of funding


418



282



(758
)Inventory provisions










11,272Other


5,190



2,482



3,025Changes in current assets and liabilitiesReceivables


(40,038
)


31,907



(14,811
)Inventories


(24,462
)


32,158



(13,331
)Accounts payable and accrued expenses


(3,089
)


(2,950
)


(1,091
)Other


(4,566
)


(1,859
)


1,904Net cash from (used in) operating activities


91,279



37,319



(11,866
)Cash flows from (used in) investing activitiesPurchase of property, plant and equipment


(38,300
)


(28,828
)


(25,704
)Proceeds on sale of property, plant and equipment


1,138



436



2,000Cash, restricted






13,000



20,000Note receivable


1,113



152



5,708Net cash from (used in) investing activities


(36,049
)


(15,240
)


2,004Cash flows from (used in) financing activitiesRepayment of notes payable and debt


(234,598
)


(26,499
)


(34,023
)Repayment of capital lease obligations


(2,920
)


(3,178
)


(3,312
)Proceeds from borrowings of notes payable and debt


222,193



13,511



Proceeds from (repayment of) credit facilities, net


(2,660
)


(4,272
)


5,837Proceeds from government grants


17,952



9,058



266Payment of deferred note issuance costs


(6,095
)


(1,969
)


Net cash from (used in) financing activities


(6,128
)


(13,349
)


(31,232
)Effect of exchange rate changes on cash and cash equivalents


(1,371
)


109



(1,302
)Net increase (decrease) in cash and cash equivalents


47,731



8,839



(42,396
)Cash and cash equivalents, beginning of period


51,291



42,452



84,848Cash and cash equivalents, end of period


99,022



51,291



42,452Supplemental disclosure of cash flow informationCash paid (received) during the period forInterest


65,167



62,022



60,652Income taxes


461



377



1,100Supplemental schedule of non-cash investing and financing
    activitiesAcquisition of production and other equipment under capital
    lease obligations


2,087



625



5,318Decrease (increase) in accounts payable relating to investing
    activities


(8,562
)


(1,471
)


2,627    78




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
  Note 1.
    The
    Company and Summary of Significant Accounting Policies  Background
        Basis of
    Presentation
    Use of
    Estimates
    Cash and
    Cash Equivalents
    Investments
    available-for-sale available-for-sale
 79




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 1.
    The
    Company and Summary of Significant Accounting
    Policies  (Continued)  Inventories
    Property,
    Plant and Equipment
            Asset Retirement and Environment
  Government
    Investment Grants
   80




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 1.
    The
    Company and Summary of Significant Accounting
    Policies  (Continued)  and/or
    Deferred
    Note Issuance Costs
    Pensions
    Compensation-Retirement Benefits 715-30 715-60),
      Foreign
    Operations and Currency Translation
    Revenue
    and Related Cost Recognition
   81




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 1.
    The
    Company and Summary of Significant Accounting
    Policies  (Continued)    Segment Reporting 280-10).
  Environmental
    Conservation
    Stock-Based
    Compensation
  Compensation-Stock Compensation
      Income
    Taxes
  Income
    Taxes 740-10)
    Derivative
    Financial Instruments
   82




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 1.
    The
    Company and Summary of Significant Accounting
    Policies  (Continued)  Derivatives and Hedging 815-25), marked-to-market
  Net
    Income (Loss) Per Share
  Note 12-Net
  Reclassifications
    New
    Accounting Standards
  2010-13, Compensation  Stock Compensation (ASC 718): Effect
    of Denominating the Exercise Price of a Share-Based Payment
    Award in the Currency of the Market in Which the Underlying
    Equity Security Trades.
  Recently
    Implemented Accounting Standards
    2010-06, Fair Value Measurements and Disclosures.
 83




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
  Note 2.
    Cash and
    Cash Equivalents    December 31,2010

2009Cash and cash equivalents


99,022



51,291        Note 3.
    Receivables  December 31,2010


2009Sale of pulp (net of allowance of 1,005 and 952,
    respectively)


105,950



64,864Value added tax


3,669



3,001Other


12,090



3,278
121,709



71,143         Note 4.
    Inventories  December 31,2010


2009Raw materials


47,179



24,888Finished goods


27,127



24,198Work in process and other


27,913



23,543
102,219



72,629    84




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
  Note 5.
    Property,
    Plant and Equipment  December 31,2010


2009Land


25,137



24,921Buildings


131,546



126,570Production equipment and other


1,130,294



1,098,3801,286,977



1,249,871Less: Accumulated depreciation


(440,210
)


(381,313
)
846,767



868,558           Note 6.
    Accounts
    Payable and Accrued Expenses  December 31,2010


2009Trade payables


36,680



31,771Accounts payable and other


3,861



1,225Accrued expenses


27,452



31,441Accrued interest


13,640



18,039Capital leases, current portion


3,240



2,709
84,873



85,185   85




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
  Note 7.
    Debt    December 31,2010


2009Note payable to bank, included in a total loan credit facility
    of 827,950 to finance the construction related to the
    Stendal mill (a)


500,657



514,574Senior notes due February 2013, interest at 9.25% accrued and
    payable semi-annually, unsecured (b)(1)


15,341



216,299Senior notes due December 2017, interest at 9.50% accrued and
    payable semi-annually, unsecured (c)


224,031



Subordinated convertible notes due October 2010, interest at
    8.5% accrued and payable semi-annually (d)(2)






16,749Subordinated convertible notes due January 2012, interest at
    8.5% accrued and payable semi-annually (e)


31,707



26,160Credit agreement with a lender with respect to a revolving
    credit facility of C$40 million (f)


15,016



16,000Loan payable to the noncontrolling shareholder of the Stendal
    mill (g)


31,365



35,881Credit agreement with a bank with respect to a revolving credit
    facility of 25,000 (h)






Investment loan agreement with a lender with respect to the wash
    press project at the Rosenthal mill of 4,351 (i)


3,807



3,511Credit agreement with a bank with respect to a revolving credit
    facility of 3,500 (j)






821,924



829,174Less: current portion


(39,596
)


(16,032
)Debt, less current portion


782,328



813,142     Matures

Amount2011(1)


39,5962012


57,3782013(1)(3)


56,1042014


40,5432015


44,000Thereafter


584,303
821,924     (1)
    
    On December 20, 2010, the
    Company announced its intention to redeem all of its Senior
    Notes due 2013. The unconditional redemption notice stipulates
    that all outstanding Senior Notes due 2013 are irrevocably due
    and payable on the redemption date of February 15, 2011 and
    as such the Company has treated this amount as current as at
    December 31, 2010. See Note 18  Subsequent
    Events.(2)
    
    On January 21, 2010,
    15,162 of the subordinated convertible notes due October
    2010 were tendered for exchange for subordinated convertible
    notes due January 2012 and as such the Company treated this
    amount as non-current at December 31, 2009.(3)
    
    Includes revolving credit facility
    principal amounts totalling 15,016. 86




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 7.
    Debt  (Continued)     (a)
    Note payable to bank, included in a total loan facility of
    827,950 to finance the construction related to the Stendal
    mill (Stendal Loan Facility), interest at rates
    varying from Euribor plus 0.90% to Euribor plus 1.58% (rates on
    amounts of borrowing at December 31, 2010 range from 2.04%
    to 2.72%, principal due in required installments beginning
    September 30, 2006 until September 30, 2017,
    collateralized by the assets of the Stendal mill with 48% and
    32% guaranteed by the Federal Republic of Germany and the State
    of Saxony-Anhalt, respectively, of up to 455,657 of
    outstanding principal, subject to a debt service reserve account
    required to pay amounts due in the following twelve months under
    the terms of the Stendal Loan Facility; payment of dividends is
    only permitted if certain cash flow requirements are met.  On March 13, 2009, the Company finalized an agreement with
    its lenders to amend its Stendal Loan Facility. The amendment
    deferred approximately 164,000 of scheduled principal
    payments until the maturity date, September 30, 2017,
    including approximately 20,000, 26,000, 21,000
    of scheduled principal payments that were originally due in
    2009, 2010, and 2011, respectively. The amendment also provided
    for a 100% cash sweep, referred to as the Cash
    Sweep, of any cash, in excess of a 15,000 working
    capital reserve, held by Stendal which will be used first to
    fund the debt service reserve account to a level sufficient to
    service the amounts due and payable under the Stendal Loan
    Facility during the then following 12 months, or
    Fully Funded, and second to prepay the deferred
    principal amounts. As at December 31, 2010, the debt
    service reserve balance was approximately 6,968.  (b)
    In February 2005, the Company issued $310 million of senior
    notes due February 2013 (2013 Notes), which bear interest
    at 9.25% accrued, and payable semi-annually, and are unsecured.
    On or after February 15, 2009, the Company may redeem all
    or a part of the notes at redemption prices (expressed as a
    percentage of principal amount) equal to 104.63% for the twelve
    month period beginning on February 15, 2009, 102.31% for
    the twelve month period beginning on February 15, 2010, and
    100.00% beginning on February 15, 2011 and at any time
    thereafter, plus accrued and unpaid interest.  On November 17, 2010, the Company used the proceeds from a
    private offering of $300 million Senior Notes due 2017,
    described in Note 5(c) below and cash on hand to complete a
    tender offer to repurchase approximately $289 million
    aggregate principal amount of its 2013 Notes. Pursuant to the
    FASBs Accounting Standards Codification No. 405,
    Liabilities  Extinguishment of Liabilities(ASC
    405-20),
    the Company concluded that the tendering of the 2013 Notes met
    the definition of debt extinguishment. In connection with this
    tender offer and pursuant to FASBs Accounting Standards
    Codification
    No. 470-50,
    Debt-Modifications and Extinguishments(ASC
    470-50),
    the Company recorded approximately 7,500 to the loss on
    extinguishment of debt line in the Consolidated Statement of
    Operations which included the tender premium paid and the
    write-off of 2013 Notes unamortized debt issue costs. On
    December 2, 2010, a further $0.6 million of 2013 Notes
    were tendered.On December 20, 2010, the Company issued a redemption
    notice (the Redemption Notice) and announced
    its intention to redeem all 2013 Notes, of which approximately
    $20.5 million remain outstanding. The
    Redemption Notice is unconditional, and pursuant to the
    terms of the indenture all outstanding 2013 Notes are
    irrevocably due and payable on February 15, 2011 (the
    Redemption Date). The redemption price is 100.00% of
    the principal amount of the 2013 Notes redeemed, plus accrued
    and unpaid interest to, but not including, the
    Redemption Date. See Note 18  Subsequent
    Events. 87




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 7.
    Debt  (Continued)   (c)
    On November 17, 2010, the Company completed a private
    offering of $300 million in aggregate principal amount of
    Senior Notes due 2017 (2017 Notes). The proceeds
    from this offering were used to finance the tender offer and
    consent solicitation for approximately $289 million of the
    Companys 2013 Notes. See Note 7(b). The 2017 Notes
    were issued at a price of 100% of their principal amount. The
    2017 Notes will mature on December 1, 2017 and bear
    interest at 9.5% which is accrued and payable semi-annually.  The 2017 Notes are general unsecured senior obligations of the
    Company. The 2017 Notes rank equal in right of payment with all
    existing and future indebtedness of the Company and senior in
    right of payment to any current or future subordinated
    indebtedness of the Company. The 2017 Notes are effectively
    junior in right of payment to all borrowings of the
    Companys restricted subsidiaries, including borrowings
    under the Companys credit agreements which are secured by
    certain assets of its restricted subsidiaries.The Company may redeem all or a part of the 2017 Notes, upon not
    less than 30 or more than 60 days notice, at the
    redemption prices (expressed as percentages of principal amount)
    equal to 104.75% for the twelve month period beginning on
    December 1, 2014, 102.38% for the twelve month period
    beginning on December 1, 2015, and 100.00% beginning on
    December 1, 2016 and at any time thereafter, plus accrued
    and unpaid interest.  (d)
    On October 15, 2010 the Company repaid the outstanding
    principal balance of approximately $2.3 million for the
    Subordinated Convertible Notes due October 2010 (2010
    Notes) and any unpaid interest up to the redemption date.
    This balance represented the amount of 2010 Notes which were not
    exchanged for Subordinated Convertible Notes due January 2012.
    See Note 7(e).(e)
    On December 10 and 11, 2009, the Company exchanged approximately
    $43.3 million of Subordinated Convertible Notes due October
    2010 through private exchange agreements with the holders
    thereof for approximately $43.8 million of Subordinated
    Convertible Notes due January 2012 (the 2012 Notes).
    On January 22, 2010, through an exchange offer with the
    remaining holders of the 2010 Notes, the Company exchanged a
    further $21.7 million of 2010 Notes for approximately
    $22.0 million of the Companys 2012 Notes. The Company
    recognized both exchange transactions of the Subordinated
    Convertible Notes as extinguishments of debt in accordance with
    ASC Topic 470, Debt,because the fair value of the
    embedded conversion option changed by more than 10% in both
    transactions. As a result, for the year ended December 31,
    2009, the Company accounted for the December 10, 2009
    exchange as a debt extinguishment and recognized a gain of
    4,447 in the Consolidated Statement of Operations. During
    2010, the Company recognized a loss of 929 as a result of
    the January 22, 2010 exchange. Both the gain and the loss
    were determined using fair market values prevailing at the time
    of the transactions, and both will be accreted to income through
    to January 2012 through interest expense yielding an effective
    interest rate of approximately 13% on the December 10, 2009
    exchange and 3% on the January 22, 2010 exchange.    (f)
    Credit agreement with respect to a revolving credit facility of
    C$40.0 million for the Celgar mill. The credit agreement
    matures May 2013. Borrowings under the credit agreement are
    collateralized by the mills inventory and receivables and
    are restricted by a borrowing base calculated on the mills
    inventory and receivables. Canadian dollar denominated amounts
    bear interest at bankers acceptance plus 3.75% or 88




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 7.
    Debt  (Continued)  Canadian prime plus 2.00%. U.S. dollar denominated amounts
    bear interest at LIBOR plus 3.75% or U.S. base plus 2.00%.
    As at December 31, 2010, this facility was accruing
    interest at a rate of approximately 4.96% and the undrawn amount
    was approximately C$17.9 million.  (g)
    Loans payable to the noncontrolling shareholder of Stendal mill
    bear interest at 7.00%, and are accrued semi-annually. The loan
    payable is unsecured, subordinated to all liabilities of the
    Stendal mill, and is due in 2017. The balance includes principal
    and accrued interest. During the first quarter of 2010, the
    noncontrolling shareholder agreed to convert approximately
    6,275 of accrued interest into a capital contribution. See
    Note 17-
    Noncontrolling Interest.(h)
    A 25,000 working capital facility at the Rosenthal mill
    that matures in December 2012. Borrowings under the facility are
    collateralized by the mills inventory and receivables and
    bear interest at approximately Euribor plus 3.50%. As at
    December 31, 2010, approximately 2,100 of this
    facility was supporting bank guarantees leaving approximately
    22,900 undrawn.(i)
    On August 19, 2009 the Company finalized an investment loan
    agreement with a lender relating to the new wash press at the
    Rosenthal mill. The four-year amortizing investment loan was
    completed with a total facility of 4,351 bearing interest
    at the rate of Euribor plus 2.75%. Borrowings under this
    agreement are secured by the new wash press equipment. As at
    December 31, 2010 this facility was drawn by 3,807
    and was accruing interest at a rate of 3.90%.(j)
    On February 8, 2010, the Rosenthal mill finalized a credit
    agreement with a lender for a 3,500 facility maturing in
    December 2012. Borrowings under the facility will bear interest
    at the rate of the
    3-month
    Euribor plus 3.50% and are secured by certain land at our
    Rosenthal mill. As at December 31, 2010, this facility was
    undrawn.  Note 8.
    Pension
    and Other Post-Retirement Benefit Obligations    1,053
   89




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 8.
    Pension
    and Other Post-Retirement Benefit
    Obligations  (Continued)    2010OtherPost-RetirementBenefitPension


Obligations


TotalChange in benefit obligationBenefit obligation, December 31, 2009


27,219



12,073



39,292Service cost


81



391



472Interest cost


1,672



771



2,443Benefit payments


(2,494
)


(483
)


(2,977
)Past service cost (credit)










Actuarial (gains) losses


2,118



2,289



4,407Foreign currency exchange rate changes


3,472



1,602



5,074Benefit obligation, December 31, 2010


32,068



16,643



48,711Reconciliation of fair value of plan assetsFair value of plan assets, December 31, 2009


20,947







20,947Actual returns


2,189







2,189Contributions


570



483



1,053Benefit payments


(2,494
)


(483
)


(2,977
)Foreign currency exchange rate changes


2,651







2,651Fair value of plan assets, December 31, 2010


23,863







23,863Funded status, December 31, 2010(1)


(8,205
)


(16,643
)


(24,848
)Components of the net benefit cost recognizedService cost


81



391



472Interest cost


1,672



771



2,443Expected return on plan assets


(1,563
)






(1,563
)Amortization of recognized items


438



(310
)


128Net benefit costs


628



852



1,480     (1)
    
    The total of 24,964 on the
    consolidated balance sheets also includes the pension
    liabilities of 116 relating to employees at the
    Companys German operations. 90




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 8.
    Pension
    and Other Post-Retirement Benefit
    Obligations  (Continued)     2009OtherPost-RetirementBenefitPension


Obligations


TotalChange in benefit obligationBenefit obligation, December 31, 2008


20,028



10,297



30,325Service cost


56



305



361Interest cost


1,513



785



2,298Benefit payments


(1,715
)


(373
)


(2,088
)Past service cost (credit)






(70
)


(70
)Actuarial (gains) losses


4,366



(295
)


4,071Foreign currency exchange rate changes


2,971



1,424



4,395Benefit obligation, December 31, 2009


27,219



12,073



39,292Reconciliation of fair value of plan assetsFair value of plan assets, December 31, 2008


17,098







17,098Actual returns


2,561







2,561Contributions


589



373



962Benefit payments


(1,715
)


(373
)


(2,088
)Foreign currency exchange rate changes


2,414







2,414Fair value of plan assets, December 31, 2009


20,947







20,947Funded status, December 31, 2009(1)


(6,272
)


(12,073
)


(18,345
)Components of the net benefit cost recognizedService cost


56



305



361Interest cost


1,513



785



2,298Expected return on plan assets


(1,272
)






(1,272
)Amortization of recognized items


141



(279
)


(138
)Net benefit costs


438



811



1,249     (1)
    
    The total of 18,469 on the
    consolidated balance sheets also includes the pension
    liabilities of 124 relating to employees at the
    Companys German operations.    Amount2011


2,4482012


2,5092013


2,6112014


2,7342015


2,8622016  2020


16,445  91




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 8.
    Pension
    and Other Post-Retirement Benefit
    Obligations  (Continued)      December 31,2010


2009Benefit obligationsDiscount rate


5.00
%


5.75
%Rate of compensation increase


2.75
%


2.75
%Net benefit cost for year endedDiscount rate


5.75
%


7.25
%Rate of compensation increase


2.75
%


2.75
%Expected rate of return on plan assets


7.00
%


7.00
%Assumed health care cost trend rate atInitial health care cost trend rate


10.00
%


11.00
%Annual rate of decline in trend rate


1.00
%


1.00
%Ultimate health care cost trend rate


4.50
%


4.50
%Medical services plan premiums trend rate


6.00
%


6.00
%       December 31, 2010

December 31, 20091% increase

1% decrease

1% increase

1% decreaseEffect on total service and interest rate components


38



(39
)


37



(38
)Effect on post-retirement benefit obligation


572



(551
)


436



(419
)     Target


2010


2009Equity securities


60
%


63
%


63
%Debt securities


35
%


34
%


35
%Cash and cash equivalents


5
%


3
%


2
%100
%


100
%   Investment
    Objective:
   92




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 8.
    Pension
    and Other Post-Retirement Benefit
    Obligations  (Continued)    Celgar Plans asset fair value measurements at
    December 31, 2010:
  Quotedprices inactive


Significantmarkets for


other


Significantidentical


observable


unobservableassets


inputs


Inputs


TotalAsset CategoryLeith Wheeler Diversified Balanced Fund


11,971











11,971Phillips, Hagar and North Balanced Pension Trust


11,892











11,892Total assets


23,863











23,863   Concentrations
    of Risk in the Celgar Plans Assets:
    Note 9.
    Income
    Taxes  Income Taxes,
  and/or
 93




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 9.
    Income
    Taxes  (Continued)      2010


2009Balance at January 1


700



800Reductions  prior year tax positions


(500
)


Lapse of statute of limitations






(100
)Balance at December 31


200



700     non-U.S. taxes
    Year Ended December 31,2010


2009


2008U.S. Federal statutory rate


34
%


34
%


34
%U.S. Federal statutory rate on (income) loss from continuing
    operations before income tax and noncontrolling interest


(30,206
)


26,526



28,241Tax differential on foreign income (loss)


8,754



(3,412
)


(2,966
)Effect of foreign earnings


(6,721
)






(17,800
)Valuation allowance


13,326



(20,806
)


(5,530
)Change in undistributed earnings


15,186







Other


5,540



3,561



(4,422
)
5,879



5,869



(2,477
)Comprised of:Current


(3,881
)


(134
)


(501
)Deferred


9,760



6,003



(1,976
)
5,879



5,869



(2,477
)  94




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 9.
    Income
    Taxes  (Continued)    December 31,2010


2009German tax loss carryforwards


86,087



83,362U.S. tax loss carryforwards


28,310



9,409Canadian tax loss carryforwards


34,516



10,653Basis difference between income tax and financial reporting with
    respect to operating pulp mills


(65,237
)


(15,960
)Derivative financial instruments


14,311



14,844Long-term debt


(477
)


(2,407
)Payables and accrued expenses


(1,412
)


(1,454
)Reserve for deferred pension liability


5,102



3,358Capital leases


1,734



530Other


805



620103,739



102,955Valuation allowance


(88,937
)


(99,529
)Net deferred tax (liability) asset


14,802



3,426Comprised of:Deferred income tax asset


22,570



3,426Deferred income tax liability


7,768




14,802



3,426      95




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 9.
    Income
    Taxes  (Continued)    Note 10.
    Shareholders
    Equity  Common
    shares
    Preferred
    shares
    Note 11.
    Stock-Based
    Compensation    Performance
    Stock
  (
       96




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 11.
    Stock-Based
    Compensation  (Continued)    Restricted
    Stock
          Stock
    Options
    Outstanding OptionsWeighted



Exercisable OptionsExercise



Average

Weighted



WeightedPrice



Remaining

Average



AverageRange

Number

Contractual Life

Exercise Price

Number

Exercise Price(In U.S. Dollars)



(Years)





(In U.S. Dollars)$5.65


100,000



2.70



$5.65



100,000



$5.65$7.25


30,000



4.57



7.25



30,000



7.25$7.92


60,000



3.58



7.92



60,000



7.92      97




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
  Note 12.
    Net
    Income (Loss) Per Share  Year Ended December 31,2010


2009


2008Net income (loss) attributable to common
    shareholders  basic


86,279



(62,189
)


(72,465
)Interest on convertible notes, net of tax


2,439







Net income (loss) attributable to common
    shareholders  diluted


88,718



(62,189
)


(72,465
)Net income (loss) per share attributable to common shareholdersBasic


2.24



(1.71
)


(2.00
)Diluted


1.56



(1.71
)


(2.00
)Weighted average number of common shares outstanding:Basic(1)


38,590,797



36,296,649



36,285,027Effect of dilutive shares:Stock options and awards


469,527







Convertible notes


17,902,638







Diluted


56,962,962



36,296,649



36,285,027     (1)
    
    The basic weighted average number
    of shares excludes performance and restricted stock which have
    been issued, but have not vested as at December 31, 2010.            Note 13.
    Business
    Segment Information     98




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 13.
    Business
    Segment Information  (Continued)    2010


2009


2008Germany


278,348



154,323



198,340China


196,022



146,613



131,412Italy


56,301



44,616



56,487Other European Union countries(1)


182,246



107,276



133,621Other Asia


37,561



38,946



65,192North America


92,628



68,213



78,718Other countries


1,503



8,312



17,146844,609



568,299



680,916Energy revenues


44,225



42,501



30,971Third party transportation revenues


11,702



8,999



8,404
900,536



619,799



720,291     (1)
    
    Not including Germany or Italy;
    includes new entrant countries to the European Union from their
    time of admission.    2010


2009Germany


656,090



689,545Canada


190,648



178,941Other


1,507



2,934
848,245



871,420     Note 14.
    Financial
    Instruments    2010

2009Carrying



CarryingAmount

Fair Value

Amount

Fair ValueCash and cash equivalents


99,022



99,022



51,291



51,291Investments


275



275



230



230Receivables


121,709



121,709



71,143



71,143Notes receivable


2,978



2,978



3,819



3,819Accounts payable and accrued expenses


84,873



84,873



85,185



85,185Debt


821,924



847,875



829,174



769,207Interest rate derivative contracts  liability


50,973



50,973



52,873



52,873  99




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 14.
    Financial
    Instruments  (Continued)  Cash and
    Debt Instruments
        2010

2009

2008Unrealized net gain (loss) on derivative financial instruments


1,899



(5,760
)


(25,228
)   Energy
    Derivatives
    Interest
    Rate Derivatives
  variable-to-fixed
  Foreign
    Exchange Derivatives
   100




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 14.
    Financial
    Instruments  (Continued)  Credit
    Risk
    Fair
    Value Measurement and Disclosures
  Fair Value
    Measurement
    identical
  similar
      over-the-counter
      Fair value measurements at December 31, 2010 using:Quoted prices


Significantin active


other


Significantmarkets for


observable


unobservableidentical assets


inputs


inputsDescription

(Level 1)


(Level 2)


(Level 3)


TotalAssetsInvestments(a)


275











275LiabilitiesDerivatives(b) Interest rate swaps






50,973







50,973     (a)
    
    Based on observable market data.(b)
    
    Based on observable inputs for the
    liability (interest rates and yield curves observable at
    specific intervals). 101




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
  Note 15.
    Lease
    Commitments    Capital


OperatingLeases


Leases2011


3,400



3,2872012


2,114



2,7402013


799



1,5512014


612



1,4042015


667



1,387Thereafter


1,556



3,287Total


9,148



13,656Less imputed interest


1,166Total present value of minimum capitalized payments


7,982Less current portion of capital lease obligations


3,240Long-term capital lease obligations


4,742     Note 16.
    Commitments
    and Contingencies             102




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
  Note 17.
    Noncontrolling
    Interest  ASC 810-10-65,
    Note 18.
    Subsequent
    Events       103




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 19.
    Restricted
    Group Supplemental Disclosure    Combined
    Condensed Balance Sheets
  December 31, 2010Restricted


Unrestricted





ConsolidatedGroup


Subsidiaries


Eliminations


GroupASSETSCurrentCash and cash equivalents


50,654



48,368







99,022Receivables


70,865



50,844







121,709Inventories


60,910



41,309







102,219Prepaid expenses and other


6,840



4,520







11,360Deferred income tax


22,570











22,570Total current assets


211,839



145,041







356,880Long-term assetsProperty, plant and equipment


362,274



484,493







846,767Deferred note issuance and other


6,903



4,179







11,082Deferred income tax














Due from unrestricted group


80,582







(80,582
)


Note receivable


1,346











1,346Total assets


662,944



633,713



(80,582
)


1,216,075LIABILITIESCurrent liabilitiesAccounts payable and accrued expenses


44,015



40,858







84,873Pension and other post-retirement benefit obligations


728











728Debt


16,429



23,167







39,596Total current liabilities


61,172



64,025







125,197Long-term liabilitiesDebt


273,473



508,855







782,328Due to restricted group






80,582



(80,582
)


Unrealized interest rate derivative losses






50,973







50,973Pension and other post-retirement benefit obligations


24,236











24,236Capital leases and other


7,154



4,856







12,010Deferred income tax


7,768











7,768Total liabilities


373,803



709,291



(80,582
)


1,002,512EQUITYTotal shareholders equity (deficit)


289,141



(53,073
)






236,068Noncontrolling interest (deficit)






(22,505
)






(22,505
)Total liabilities and equity


662,944



633,713



(80,582
)


1,216,075  104




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 19.
    Restricted
    Group Supplemental
    Disclosure  (Continued)  Combined
    Condensed Balance Sheets
  December 31, 2009Restricted


Unrestricted





ConsolidatedGroup


Subsidiaries


Eliminations


GroupASSETSCurrentCash and cash equivalents


20,635



30,656







51,291Receivables


34,588



36,555







71,143Inventories


52,897



19,732







72,629Prepaid expenses and other


3,452



2,419







5,871Total current assets


111,572



89,362







200,934Long-term assetsProperty, plant and equipment


362,311



506,247







868,558Deferred note issuance and other


3,388



4,798







8,186Deferred income tax


3,426











3,426Due from unrestricted group


72,553







(72,553
)


Note receivable


2,727











2,727Total assets


555,977



600,407



(72,553
)


1,083,831LIABILITIESCurrent liabilitiesAccounts payable and accrued expenses


51,875



33,310







85,185Pension and other post-retirement benefit obligations


567











567Debt


2,115



13,917







16,032Total current liabilities


54,557



47,227







101,784Long-term liabilitiesDebt


276,604



536,538







813,142Due to restricted group






72,553



(72,553
)


Unrealized interest rate derivative losses






52,873







52,873Pension and other post-retirement benefit obligations


17,902











17,902Capital leases and other


6,667



5,490







12,157Total liabilities


355,730



714,681



(72,553
)


997,858EQUITYTotal shareholders equity (deficit)


200,247



(77,025
)






123,222Noncontrolling interest (deficit)






(37,249
)






(37,249
)Total liabilities and equity


555,977



600,407



(72,553
)


1,083,831  105




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 19.
    Restricted
    Group Supplemental
    Disclosure  (Continued)  Combined
    Condensed Statements of Operations
  Year Ended December 31, 2010Restricted


Unrestricted





ConsolidatedGroup


Subsidiaries


Eliminations


GroupRevenuesPulp


490,020



366,291







856,311Energy


15,145



29,080







44,225505,165



395,371







900,536Operating costs


361,272



282,257







643,529Operating depreciation and amortization


29,971



25,961







55,932Selling, general and administrative expenses and other


20,231



13,101







33,332411,474



321,319







732,793Operating income (loss)


93,691



74,052







167,743Other income (expense)Interest expense


(31,498
)


(40,852
)


4,729



(67,621
)Investment income (loss)


5,103



94



(4,729
)


468Foreign exchange gain (loss) on debt


(6,126
)










(6,126
)Gain (loss) on extinguishment of debt


(7,494
)










(7,494
)Gain (loss) on derivative instruments






1,899







1,899Total other income (expense)


(40,015
)


(38,859
)






(78,874
)Income (loss) before income taxes


53,676



35,193







88,869Income tax benefit (provision)


8,651



(2,772
)






5,879Net income (loss)


62,327



32,421







94,748Less: net (income) loss attributable to noncontrolling interest






(8,469
)






(8,469
)Net income (loss) attributable to common shareholders


62,327



23,952







86,279  106




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 19.
    Restricted
    Group Supplemental
    Disclosure  (Continued)  Combined
    Condensed Statements of Operations
  Year Ended December 31, 2009Restricted


Unrestricted





ConsolidatedGroup


Subsidiaries


Eliminations


GroupRevenuesPulp


318,448



258,850







577,298Energy


15,183



27,318







42,501333,631



286,168







619,799Operating costs


312,029



239,752







551,781Operating depreciation and amortization


27,453



26,466







53,919Selling, general and administrative expenses and other


15,049



11,849







26,898354,531



278,067







632,598Operating income (loss)


(20,900
)


8,101







(12,799
)Other income (expense)Interest expense


(27,351
)


(41,932
)


4,513



(64,770
)Investment income (loss)


5,002



(2,293
)


(4,513
)


(1,804
)Foreign exchange gain (loss) on debt


2,692











2,692Gain (loss) on extinguishment of debt


4,447











4,447Gain (loss) on derivative instruments






(5,760
)






(5,760
)Total other income (expense)


(15,210
)


(49,985
)






(65,195
)Income (loss) before income taxes


(36,110
)


(41,884
)






(77,994
)Income tax benefit (provision)


183



5,686







5,869Net income (loss)


(35,927
)


(36,198
)






(72,125
)Less: net (income) loss attributable to noncontrolling interest






9,936







9,936Net income (loss) attributable to common shareholders


(35,927
)


(26,262
)






(62,189
)  107




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 19.
    Restricted
    Group Supplemental
    Disclosure  (Continued)  Combined
    Condensed Statements of Operations
  Year Ended December 31, 2008Restricted


Unrestricted





ConsolidatedGroup


Subsidiaries


Eliminations


GroupRevenuesPulp


400,969



288,351







689,320Energy


12,119



18,852







30,971413,088



307,203







720,291Operating costs


369,923



257,010







626,933Operating depreciation and amortization


28,589



26,895







55,484Selling, general and administrative expenses and other


16,973



7,572







24,545415,485



291,477







706,962Operating income (loss)


(2,397
)


15,726







13,329Other income (expense)Interest expense


(27,027
)


(43,117
)


4,388



(65,756
)Investment income (loss)


6,834



(3,620
)


(4,388
)


(1,174
)Foreign exchange gain (loss) on debt


(4,114
)


(120
)






(4,234
)Gain (loss) on derivative instruments






(25,228
)






(25,228
)Total other income (expense)


(24,307
)


(72,085
)






(96,392
)Income (loss) before income taxes


(26,704
)


(56,359
)






(83,063
)Income tax benefit (provision)


(3,728
)


1,251







(2,477
)Net income (loss)


(30,432
)


(55,108
)






(85,540
)Less: net (income) loss attributable to noncontrolling interest






13,075







13,075Net income (loss) attributable to common shareholders


(30,432
)


(42,033
)






(72,465
)  108




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 19.
    Restricted
    Group Supplemental
    Disclosure  (Continued)  Combined
    Condensed Statements of Cash Flows
  Year Ended December 31, 2010Restricted


Unrestricted


ConsolidatedGroup


Group


GroupCash flows from (used in) operating activitiesNet income (loss) attributable to common shareholders


62,327



23,952



86,279Adjustments to reconcile net income (loss) attributable to
    common shareholders to cash flows from operating activitiesLoss (gain) on derivative instruments






(1,899
)


(1,899
)Foreign exchange (gain) loss on debt


6,126







6,126Loss (gain) on extinguishment of debt


7,494







7,494Depreciation and amortization


30,270



25,961



56,231Accretion expense (income)


2,492







2,492Noncontrolling interest






8,469



8,469Deferred income taxes


(9,760
)






(9,760
)Stock compensation expense


2,394







2,394Pension and other post-retirement expense, net of funding


418







418Other


2,519



2,671



5,190Changes in current assets and liabilitiesReceivables


(25,913
)


(14,125
)


(40,038
)Inventories


(2,885
)


(21,577
)


(24,462
)Accounts payable and accrued expenses


(10,304
)


7,215



(3,089
)Other(1)


(10,597
)


6,031



(4,566
)Net cash from (used in) operating activities


54,581



36,698



91,279Cash flows from (used in) investing activitiesPurchase of property, plant and equipment


(34,675
)


(3,625
)


(38,300
)Proceeds on sale of property, plant and equipment


251



887



1,138Cash, restricted










Note receivable


1,113







1,113Net cash from (used in) investing activities


(33,311
)


(2,738
)


(36,049
)Cash flows from (used in) financing activitiesRepayment of notes payable and debt


(220,681
)


(13,917
)


(234,598
)Repayment of capital lease obligations


(589
)


(2,331
)


(2,920
)Proceeds from borrowings of notes payable and debt


222,193







222,193Proceeds from (repayment of) credit facilities, net


(2,660
)






(2,660
)Proceeds from government grants


17,952







17,952Payment of deferred note issuance costs


(6,095
)






(6,095
)Net cash from (used in) financing activities


10,120



(16,248
)


(6,128
)Effect of exchange rate changes on cash and cash equivalents


(1,371
)






(1,371
)Net increase (decrease) in cash and cash equivalents


30,019



17,712



47,731Cash and cash equivalents, beginning of period


20,635



30,656



51,291Cash and cash equivalents, end of period


50,654



48,368



99,022     (1)
    
    Includes intercompany working
    capital related transactions. 109




---



##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 19.
    Restricted
    Group Supplemental
    Disclosure  (Continued)   Combined
    Condensed Statements of Cash Flows
  Year Ended December 31, 2009Restricted


Unrestricted


ConsolidatedGroup


Group


GroupCash flows from (used in) operating activitiesNet income (loss) attributable to common shareholders


(35,927
)


(26,262
)


(62,189
)Adjustments to reconcile net income (loss) attributable to
    common shareholders to cash flows from operating activitiesLoss (gain) on derivative instruments






5,760



5,760Foreign exchange (gain) loss on debt


(2,692
)






(2,692
)Loss (gain) on extinguishment of debt


(4,447
)






(4,447
)Depreciation and amortization


27,704



26,466



54,170Accretion expense (income)


181







181Noncontrolling interest






(9,936
)


(9,936
)Deferred income taxes


(176
)


(5,827
)


(6,003
)Stock compensation expense


455







455Pension and other post-retirement expense, net of funding


282







282Other


934



1,548



2,482Changes in current assets and liabilitiesReceivables


26,140



5,767



31,907Inventories


13,234



18,924



32,158Accounts payable and accrued expenses


5,839



(8,789
)


(2,950
)Other(1)


(18,265
)


16,406



(1,859
)Net cash from (used in) operating activities


13,262



24,057



37,319Cash flows from (used in) investing activitiesPurchase of property, plant and equipment


(26,839
)


(1,989
)


(28,828
)Proceeds on sale of property, plant and equipment


158



278



436Cash, restricted






13,000



13,000Note receivable


152







152Net cash from (used in) investing activities


(26,529
)


11,289



(15,240
)Cash flows from (used in) financing activitiesRepayment of notes payable and debt


(10,000
)


(16,499
)


(26,499
)Repayment of capital lease obligations


(680
)


(2,498
)


(3,178
)Proceeds from borrowings of notes payable and debt


13,511







13,511Proceeds from (repayment of) credit facilities, net


(4,272
)






(4,272
)Proceeds from government investment grants


9,058







9,058Payment of deferred note issuance costs






(1,969
)


(1,969
)Net cash from (used in) financing activities


7,617



(20,966
)


(13,349
)Effect of exchange rate changes on cash and cash equivalents


109







109Net increase (decrease) in cash and cash equivalents


(5,541
)


14,380



8,839Cash and cash equivalents, beginning of period


26,176



16,276



42,452Cash and cash equivalents, end of period


20,635



30,656



51,291     (1)
    
    Includes intercompany working
    capital related transactions. 110




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##### Table of Contents



MERCER
    INTERNATIONAL INC.
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (In
    thousands of Euros, except per share data)
   Note 19.
    Restricted
    Group Supplemental
    Disclosure  (Continued)   Combined
    Condensed Statement of Cash Flows
  Year Ended December 31, 2008Restricted


Unrestricted


ConsolidatedGroup


Group


GroupCash flows from (used in) operating activitiesNet income (loss) attributable to common shareholders


(30,432
)


(42,033
)


(72,465
)Adjustments to reconcile net income (loss) attributable to
    common shareholders to cash flows from operating activitiesLoss (gain) on derivative instruments






25,228



25,228Foreign exchange (gain) loss on debt


4,114



120



4,234Depreciation and amortization


28,868



26,894



55,762Noncontrolling interest






(13,075
)


(13,075
)Deferred income taxes


3,464



(1,488
)


1,976Stock compensation expense


264







264Pension and other post-retirement expense, net of funding


(758
)






(758
)Inventory provisions


8,637



2,635



11,272Other


2,046



979



3,025Changes in current assets and liabilitiesReceivables


(24,427
)


9,616



(14,811
)Inventories


(12,207
)


(1,124
)


(13,331
)Accounts payable and accrued expenses


861



(1,952
)


(1,091
)Other(1)


(2,321
)


4,225



1,904Net cash from (used in) operating activities


(21,891
)


10,025



(11,866
)Cash flows from (used in) investing activitiesPurchase of property, plant and equipment


(20,776
)


(4,928
)


(25,704
)Proceeds on sale of property, plant and equipment


189



1,811



2,000Cash, restricted






20,000



20,000Note receivable


5,708







5,708Net cash from (used in) investing activities


(14,879
)


16,883



2,004Cash flows from (used in) financing activitiesRepayment of notes payable and debt






(34,023
)


(34,023
)Repayment of capital lease obligations


(1,226
)


(2,086
)


(3,312
)Proceeds from (repayment of) credit facilities, net


5,837







5,837Proceeds from government investment grants


266







266Net cash from (used in) financing activities


4,877



(36,109
)


(31,232
)Effect of exchange rate changes on cash and cash equivalents


(1,302
)






(1,302
)Net increase (decrease) in cash and cash equivalents


(33,195
)


(9,201
)


(42,396
)Cash and cash equivalents, beginning of period


59,371



25,477



84,848Cash and cash equivalents, end of period


26,176



16,276



42,452     (1)
    
    Includes intercompany working
    capital related transactions. 111




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##### Table of Contents



SUPPLEMENTARY
    FINANCIAL INFORMATION (UNAUDITED)
    Quarterly Financial Data
    (Thousands of Euros, except per share amounts)  Quarter EndedMarch 31


June 30


September 30


December 312010Revenues


180,252



240,224



234,418



245,642Gross profit


18,024



47,888



51,411



50,420Net income (loss) attributable to common shareholders


(7,546
)


12,401



46,135



35,289Net income (loss) per share attributable to common shareholders*


(0.21
)


0.23



0.82



0.632009Revenues


139,572



158,884



156,231



165,112Gross profit


(12,413
)


(9,736
)


(493
)


9,843Net income (loss) attributable to common shareholders


(39,350
)


(11,476
)


(14,112
)


2,749Net income (loss) per share attributable to common shareholders*


(1.08
)


(0.32
)


(0.39
)


0.07     *
    
    On a diluted basis 112




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##### Table of Contents



SIGNATURES  Securities Exchange Act of 1934
  Mercer International
    Inc.Dated: February 17, 2011

By: /s/  Jimmy
    S.H.
    LeeJimmy
    S.H. Lee
        Chairman     Securities Exchange Act
    of 1934
  /s/  Jimmy
    S.H. LeeJimmy
    S.H. Lee
    Chairman, Chief Executive Officer
    and Director

Date: February 17, 2011/s/  David
    M. GandossiDavid
    M. Gandossi
    Secretary, Executive Vice President,
    Chief Financial Officer
    and Principal Accounting Officer

Date: February 17, 2011/s/  Kenneth
    A. ShieldsKenneth
    A. Shields
    Director

Date: February 17, 2011/s/  Eric
    LauritzenEric
    Lauritzen
    Director

Date: February 17, 2011/s/  William
    D. McCartneyWilliam
    D. McCartney
    Director

Date: February 17, 2011/s/  Graeme
    A. WittsGraeme
    A. Witts
    Director

Date: February 17, 2011/s/  Guy
    W. AdamsGuy
    W. Adams
    Director

Date: February 17, 2011/s/  George
    MalpassGeorge
    Malpass
    Director

Date: February 17, 2011  113




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description of Exhibit2
.1

Agreement and Plan of Merger among Mercer International Inc.,
    Mercer International Regco Inc. and Mercer Delaware Inc. dated
    December 14, 2005. Incorporated by reference to the Proxy
    Statement/Prospectus filed on December 15, 2005.3
.1

Articles of Incorporation of the Company, as amended.
    Incorporated by reference from
    Form 8-A
    dated March 1, 2006.3
.2

Bylaws of the Company. Incorporated by reference from
    Form 8-A
    dated March 1, 2006.4
.1

Indenture dated as of December 10, 2004 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form S-3
    filed December 10, 2004.4
.2

First Supplemental Indenture dated February 14, 2005 to
    Indenture dated December 10, 2004 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form 8-K
    dated February 17, 2005.4
.3

Indenture dated as of December 10, 2009 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form 8-K
    dated December 11, 2009.4
.4

Second Supplemental Indenture dated as of November 16, 2010
    to the Indenture dated December 10, 2004 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form 8-K
    dated November 19, 2010.4
.5

Indenture dated as of November 17, 2010 between Mercer
    International Inc. and Wells Fargo Bank, National Association.
    Incorporated by reference from
    Form 8-K
    dated November 19, 2010.4
.6

Registration Rights Agreement among Mercer International Inc.
    and RBC Capital Markets, LLC and Credit Suisse Securities (USA)
    LLC dated November 17, 2010. Incorporated by reference from
    Form 8-K
    dated November 19, 2010.10
.1*

Project Financing Facility Agreement dated August 26, 2002
    between Zellstoff Stendal GmbH and Bayerische Hypo-und
    Vereinsbank AG, as amended by Amendment, Restatement and
    Undertaking Agreement dated January 31, 2009.10
.2

Shareholders Undertaking Agreement dated August 26,
    2002 among Mercer International Inc., Stendal Pulp Holdings
    GmbH, RWE Industrie-Lösungen GmbH, AIG Altmark Industrie AG
    and FAHR Beteiligungen AG and Zellstoff Stendal GmbH and
    Bayerische Hypo-und Vereinsbank AG. Incorporated by reference
    from
    Form 8-K
    dated September 10, 2002.10
.3*

Shareholders Agreement dated August 26, 2002 among
    Zellstoff Stendal GmbH, Stendal Pulp Holdings GmbH, RWE
    Industrie-Lösungen GmbH and FAHR Beteiligungen AG.10
.4*

Contract for the Engineering, Design, Procurement, Construction,
    Erection and
    Start-Up of
    a Kraft Pulp Mill between Zellstoff Stendal GmbH and RWE
    Industrie-Lösungen GmbH dated August 26, 2002. Certain
    non-public information has been omitted from the appendices to
    Exhibit 10.4 pursuant to a request for confidential
    treatment filed with the SEC. Such non-public information was
    filed with the SEC on a confidential basis. The SEC approved the
    request for confidential treatment in January 2004.10
.5*

Form of Trustees Indemnity Agreement between Mercer
    International Inc. and its Trustees.10
.6

Employment Agreement dated for reference August 7, 2003
    between Mercer International Inc. and David Gandossi.
    Incorporated by reference from
    Form 8-K
    dated August 11, 2003.10
.7

Employment Agreement effective as of April 28, 2004 between
    Mercer International Inc. and Jimmy S.H. Lee. Incorporated by
    reference from
    Form 8-K
    dated April 28, 2004.10
.8

2004 Stock Incentive Plan. Incorporated by reference from
    Form S-8
    dated June 15, 2004.10
.9

2010 Stock Incentive Plan. Incorporated by reference from
    Form S-8
    dated June 11, 2010.10
.10

Employment Agreement dated October 2, 2006 between Stendal
    Pulp Holding GmbH and Wolfram Ridder. Incorporated by
    reference from
    Form 8-K
    dated October 2, 2006.10
.11*

Employment Agreement effective September 25, 2006 between
    Mercer International Inc. and Claes-Inge Isacson dated
    December 5, 2008. 114




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##### Table of Contents



ExhibitNo.

Description of Exhibit10
.12

Employment Agreement effective September 1, 2005 between
    Mercer International Inc. and Leonhard Nossol dated
    August 18, 2005. Incorporated by reference from
    Form 10-Q
    dated May 6, 2008.10
.13*

Electricity Purchase Agreement effective January 27, 2009
    between Zellstoff Celgar Limited Partnership and British
    Columbia Hydro and Power Authority. Certain non-public
    information has been omitted from the appendices to
    Exhibit 10.13 pursuant to a request for confidential
    treatment filed with the SEC. Such non-public information was
    filed with the SEC on a confidential basis. The SEC approved the
    request for confidential treatment in March 2009.10
.14

Revolving Credit Facility Agreement dated August 19, 2009
    among D&Z Holding GmbH, Zellstoff-und Papierfabrik
    Rosenthal GmbH, D&Z Beteiligungs GmbH and ZPR Logistik GmbH
    and Bayerische
    Hypo-und
    Vereinsbank AG. Incorporated by reference from
    Form 8-K
    dated August 24, 2009.10
.15

Loan Agreement dated August 19, 2009 among Zellstoff-und
    Papierfabrik Rosenthal GmbH, as borrower, and Bayerische
    Hypo-und Vereinsbank Aktiengesellschaft, as lender. Incorporated
    by reference from
    Form 8-K
    dated August 24, 2009.10
.16

Amended and Restated Credit Agreement dated as of
    November 27, 2009 among Zellstoff Celgar Limited
    Partnership, as borrower, and the lenders from time to time
    parties thereto, as lenders, and CIT Business Credit Canada
    Inc., as agent. Incorporated by reference from
    Form 8-K
    dated November 30, 2009.14


Code of Business Conduct and Ethics. Incorporated by reference
    from the definitive proxy statement on Schedule 14A dated
    August 11, 2003.99
.1

Audit Committee Charter. Incorporated by reference from the
    definitive proxy statement on Schedule 14A dated
    April 28, 2005.99
.2

Governance and Nominating Committee Charter. Incorporated by
    reference from the definitive proxy statement on
    Schedule 14A dated April 28, 2004.99
.3

Exchange Agreement dated November 25, 2009 between Mercer
    International Inc. and IAT Reinsurance Co. Ltd. Incorporated by
    reference from
    Form 8-K
    filed November 27, 2009.99
.4

Exchange Agreement dated November 25, 2009 between Mercer
    International Inc. and Alden Global Distressed Opportunities
    Fund L.P. Incorporated by reference from
    Form 8-K
    filed November 27, 2009.99
.5

Exchange Agreement dated November 25, 2009 between Mercer
    International Inc. and Greenlight Capital Qualified LP,
    Greenlight Capital LP and Greenlight Capital Offshore Partners.
    Incorporated by reference from
    Form 8-K
    filed November 27, 2009.21


List of Subsidiaries of Registrant.23
.1

Consent of Independent Registered Chartered
    Accountants  PricewaterhouseCoopers LLP.31
.1

Section 302 Certificate of Chief Executive Officer.31
.2

Section 302 Certificate of Chief Financial Officer.32
.1**

Section 906 Certificate of Chief Executive Officer.32
.2**

Section 906 Certificate of Chief Financial Officer.     *
    
    Filed in
    Form 10-K
    for prior years.**
    
    In accordance with Release
    33-8212 of
    the SEC, these Certifications: (i) are
    furnished to the SEC and are not filed
    for the purposes of liability under the Exchange Act; and
    (ii) are not to be subject to automatic incorporation by
    reference into any of the Companys registration statements
    filed under the Securities Act for the purposes of liability
    thereunder or any offering memorandum, unless the Company
    specifically incorporates them by reference therein. 115