PCA Approves $215M in Capital Projects

Packaging Corp. of America (PCA) has approved major capital projects at its Counce, Tenn., and Valdosta, Ga., linerboard mills, which will reduce fuel and electricity purchases at these mills by 50 percent and 75 percent, 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. 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. The after tax return on these projects is expected to be between 20 to 25 percent of total capital ($295 million), or 25 to 30 percent 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.

“These projects will significantly reduce our manufacturing costs as well as reduce the potential impact of escalating fuel and electricity costs,” Chairman and CEO Paul Stecko says. “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 percent of its electricity requirements. Our Counce mill will lower its purchased electricity requirements by over 60 percent and lower purchased fuel consumption by over 35 percent. We expect essentially all capital required for these projects to come from cash received from alternative fuel mix credits, and existing cash on-hand.”