“Krruger rides again.” The most proactive forest-products and paper company in North America continues to impress competitors and customers alike. On the heels of completing the most extensive plant m…
“Krruger rides again.” The most proactive forest-products and paper company in North America continues to impress competitors and customers alike. On the heels of completing the most extensive plant modernization in 20 years at its Wayagamack mill in Quebec, Kruger is now preparing to equip its nearby Trois-Rivires plant with its own old-paper de-inking facility, a $200-million project. Boasting an annual capacity of more than 342,000 metric tons, the facility is expected to come on stream within 30 months.
This add-on project to Kruger’s largest integrated operations (and one of the largest in North America) has been under discussion for some time. Prompting the decision were several factors: the newsprint and speciality-paper markets are demanding finished products with a greater recycled fibre content and, for some time, the Trois-Rivires plant had been buying de-inked pulp from its sister plant in Sherbrooke, QC. Taking into consideration the scope of its operations — seven paper machines (370,000 tons/yr of newsprint; 150,000 tons of supercalendered paper and 200,000 tons of WC #4 and #5 coated paper), this was not enough.
Cost and quality
The de-inking project meets the goals of cost reduction, which is an increasingly vital issue, and ever-greater quality objectives, according to Daniel Archambault, recently appointed senior vice-president, magazine papers, at Kruger. Archambault additionally oversees plant operations in Quebec and in Corner Brook, NL, and co-ordinates the company’s sales and purchasing operations.
“The Trois-Rivires de-inking facility will allow the plant to include 10-20% recycled fibre in its supercalendered and coated papers,” explains Archambault. “Moreover, it will use new technology, allowing for the production of two types of pulp, thus meeting the requirements for newsprint, as well as supercalendered and coated papers.” It appears the pressure on publishers regarding recycled-fibre content is not about to diminish, especially in the United States.
More importantly, the increased availability of de-inked pulp signals the demise of the plant’s ground-pulp operation, while simultaneously reducing its need for thermomechanical pulp. The energy component of the project also makes the undertaking an attractive option.
“The ground-pulp facility will be closed and the TMP one will be used less intensively,” confirms Archambault. “Consequently, electricity consumption for the production of ground pulp will be eliminated, while that for TMP will drop by 20%,” he adds. This will save 46 MW of electricity, or roughly the consumption of 24,000 households.
A constricting access to wood fibre also motivated Kruger to push ahead with the project, as the facility will help the company to reduce its dependency on forests. The production of de-inked paper in Trois-Rivires will save some 200,000 metric tons of wood chips and 229,000 cubic metres of roundwood per year, which translates to a 20% drop in electricity usage. A well-established old paper supply in the United States, purchased in U.S. dollars, also serves to protect the company from the volatile ups and downs of the Canadian dollar.
Partners
The de-inking project, which has pulled together the collaboration of Kruger’s major partners and the government, is proof of the company’s ability to inspire confidence even outside the industry. Investissement Qubec has made a non-refundable contribution of $20 million. Furthermore, the project meets the criteria of Hydro-Qubec’s Programme d’amlioration majeure d’usines — Grande entreprises (PAMUGE) regarding energy efficiency, resulting in a direct contribution of $30 million on energy deliveries. “Hydro offers a number of programs that have benefited our plants (e.g. the PIGE program). PAMUGE was a natural for this project,” said Archambault.
Further, Investissement Qubec is contributing a $50- million loan at market conditions while, overall, Kruger is injecting $150 million directly in this project, explained Archambault. “In order to finance a project in a mature industry, such as that of pulp and paper, one needs a really solid plan, and excellent prospects regarding the return on investment.” Archambault added, “And good powers of persuasion!”
This project was unveiled on February 23, with Premier Jean Charest in attendance. The media made quite a splash about his visit at the plant, which coincided with the launch of the electoral race in Quebec.
Kruger’s president and CEO, Joseph Kruger II, was also there for the announcement, as were Raymond Bachand, minister for Economic Development, Innovation and Exports, and Julie Boulet, minister for Transport and minister responsible for the Mauricie region.
Timeframe
Kruger is targeting the first quarter of 2009 for the phased start-up of the new de-inking facility, which is expected to be fully operational in 2010.
Project engineering will be completed this year and site preparation should be under way by the end of 2007. Construction is slated for 2008, as well as the selection of equipment and service providers. It is worth noting that the de- inking facility will be located very close to the current wood-chip area.
Expansion and diversification
Since early 2000, Kruger has invested nearly one billion dollars in its Quebec plants (including the de-inking project in Trois-Rivires). The Wayagamack project alone accounts for $500 million, while Sherbrooke, at a cost of $200 million, modified its PM1 and PM2, and invested in de-inking, and will soon start up its $85 million biomass cogeneration power plant. The new boiler has been on stream since mid-December 2006 and the plant should be able to sell electricity to Hydro-Qubec by the end of the summer.
These are substantial sums when one considers that the last entirely positive (but short-lived) financial period in the paper industry harks back to 1996.
Since the company’s financial results are not made available to the public, the question remains on many people’s lips of how Kruger will manage to sustain such an expansion. “Kruger’s managerial approach has two major components: prudence and tight debt control,” stated Archambault. The latter point is critical: most paper companies are burdened with excessive debt and have little elbow room to embark on major modernization projects.
Another difference with companies relying on debt financing is that Kruger can reinvest a larger chunk of its profits to consolidate its assets and support its expansion. Furthermore, concludes Archambault, the company’s growth strategy has taken a resolute aim at diversification over the past few years. Kruger’s involvement in the energy sector and its surprisingly uncharacteristic retail foray with the acquisition of Maison des Futailles, a leader in wine making, bottling and marketing of wines and spirits, exemplify this strategy.
It goes without saying that Kruger has its eyes on the future.
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