PCA Earmarks $215 Million for Mill Energy Projects

Oct. 9, 2009 - Packaging Corp. of America said that its Board of Directors has approved major capital projects at its Counce, Tennessee and Valdosta, Georgia linerboard mills which will reduce fuel and electricity purchases at these mills by 50% and 75%, respectively.

The investment will include a new recovery boiler, turbine generator, and paper machine drying efficiency improvements at the Valdosta mill, and a rebuild and upgrade of two existing recovery boilers plus a new turbine generator at the Counce mill.

According to PCA, the net capital invested is expected to be about $215 million, after deducting about $80 million in maintenance capital that will be avoided on equipment being replaced.

Both the Counce and Valdosta projects are expected to be completed by the end of 2011, PCA said.

The after tax return on these projects is expected to be between 20-25% of total capital ($295 million), or 25-30% of net capital ($215 million). The range of returns is primarily a function of current, proposed and potential legislation regarding tax incentives and benefits related to the production of green electricity and energy, PCA added.

“These projects will significantly reduce our manufacturing costs as well as reduce the potential impact of escalating fuel and electricity costs," said Paul T. Stecko, chairman and CEO of PCA.

"Upon completion of the projects, our Valdosta mill will burn only internally generated, wood waste and black liquor in its boilers and will self-generate 100% of its electricity requirements. Our Counce mill will lower its purchased electricity requirements by over 60% and lower purchased fuel consumption by over 35%. We expect essentially all capital required for these projects to come from cash received from alternative fuel mix credits, and existing cash on-hand,” Stecko said.

PCA is the fifth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.4 billion in 2008. PCA operates four paper mills and 68 corrugated product plants in 26 states across the country.

SOURCE: Packaging Corp. Of America

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