Verso employing 3-pronged plan to be competitive

Posted Nov. 07, 2010, at 9:15 p.m.
Last modified Jan. 29, 2011, at 12:06 p.m.

BUCKSPORT, Maine — The planned $40 million boiler-turbine project at the Verso Paper Co. mill is part of a companywide program designed to keep paper machines at the company’s four paper mills running and to keep Verso competitive in the global paper market.

While that project, which includes improvements to an existing boiler at the mill and construction of a new steam turbine, still needs state and local approvals and will not produce any energy until 2012, it is part of a strategy that Verso President and CEO Mike Jackson laid out last year in the company’s 2009 Annual Report.

“By segmenting our priorities into three major categories,” Jackson wrote, “we have identified opportunities to improve our core products, enter new markets and capitalize on our green energy infrastructure capabilities.”

The company’s mills will still produce the lightweight coated paper that has been — and will continue to be — its staple, according to spokesman Bill Cohen. But Verso also will develop new paper products especially in the food and beverage packaging markets. The third prong of the strategy involves projects, such as the biomass boiler-turbine project in Bucksport that will allow the company to generate additional “green, renewable power” at its mills.

It is an expensive strategy. The combined price tag for the biomass boiler-turbine project in Bucksport and a similar project at the Verso mill in Quinnesec, Mich., is about $84 million. In addition, Verso has committed $9.7 million to match a $9.3 million U.S. Department of Energy grant to fund energy efficiency projects in three of its mills.

Those energy-efficient improvements in the mills will save the company money, and generating new energy from renewable, biomass sources will reduce energy costs in the long run. The improvements also will generate new “green energy” revenues, while the company develops new markets for existing and new products, according to Cohen.

“The goal is to diversify so we can be a player in multiple markets, keep producing and keep producing profitably,” Cohen said recently.

Aspects of the new strategy already are being implemented in Verso’s four mills with energy projects completed and underway at the two mills in Bucksport and Jay as well as at the Quinnesec, Mich., plant and the mill in Sartell, Minn.

At the Bucksport mill, however, all of the elements of the new strategy seem to be in play, including a research and development component.

The mill continues to produce coated paper as its primary function, but one of its paper machines also makes noncoated paper for the financial and food packaging markets. The planned boiler-turbine project will increase the facility’s production of electricity using renewable materials, power that will be used in the papermaking process and-or sold to the power grid.

According to Cohen, the No. 1 paper machine at the mill has a coater that is separate from the machine, which gives the mill the option of producing coated or uncoated paper on it. Last year, the machine was certified through a third-party audit and now meets federal Food and Drug Administration standards for food packaging. It regularly produces paper used for sugar and sugar substitute packets.

Verso is considering the option to seek FDA certification for other paper machines while it continues to look for other paper products that its machines could produce. To that end, the Bucksport mill is working with researchers at the University of Maine in Orono on a number of new projects, according to Cohen.

“We’re working closely with Orono to look at products we have initiated and things that they have suggested,” he said. “Orono works in the lab on different elements and then they bring it down here and we try it out in our production section.”

The research and development is a long process, often taking as much as two years to bring an idea to the point where it can be produced effectively, which, Cohen said, means profitably. At that point, the new product often faces a third-party review to ensure that it meets specialized needs for a specific customer.

Cohen declined to discuss specific products that may be in development.

“All of this is being done under a nondisclosure agreement,” he said. “And we take those nondisclosure agreements very seriously.”

The “trial work” on developing products — although it has to be balanced carefully with a regular production schedule at the mill — has kept Bucksport’s paper machines running consistently all year, he said. In fact, Cohen said, the only downtime that occurred companywide this year was at the Androscoggin mill that was required to complete work on energy efficiency improvements.

The absence of downtime this year is due in part to improved market conditions that, according to Verso’s third-quarter financial report released this week, have increased demand for the coated paper it produces. But, according to Cohen, it also reflects a new corporate philosophy that has developed since 2006 when Apollo Management purchased International Paper’s coated paper division and created Verso Paper to own and operate the company’s mills.

It’s a philosophy designed to keep the company’s machines producing.

“With Verso, we’re a small company with a leadership that is willing to take a few risks,” he said. “The Verso philosophy is that we have these long-term assets, and in order to continue to be players in a competitive global economy, we need to keep those assets busy doing other things.”

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