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International Paper Takes on High Energy Costs After Spending $1 Billion Last Year

Press release from the issuing company

HOUSTON---July 2, 2001--The following is an advisory from Industrial Information Resources Incorporated (IIR): International Paper, the world's largest forest products company, is leading the charge among manufacturers against high energy prices. In a recent speech at the June 2001 International Joint Power Generation Conference & Exposition, the company outlined an agenda for how it plans to tackle high energy prices. Last year, International Paper spent over $1 billion on energy resources for its plants, an increase of $220 million over the previous year. This was mainly due to the high cost of electricity, oil and natural gas, which affected most parts of the country. In an effort to insulate itself from fuel price variances, the company is introducing a new paradigm emphasizing risk management versus risk tolerance. The first priority in the company's strategy to manage risks calls for the reduction of energy consumption through conservation. The focal point of the energy conservation program dictates a reduction in steam demand. Pulp and paper plants use steam generated from boilers to heat dryers on paper machines and also in the pulping process. By replacing equipment and process units with new technology that require less thermal energy, the company will ultimately reduce energy and operating costs. Beyond energy conservation, International Paper is also investigating the use of alternate fuels to reduce the dependency on traditional feedstocks such as natural gas and oil. One option being considered when replacing vintage equipment, particularly power boilers, is the possibility of adding coal-fired boilers utilizing new advanced clean coal technologies. The company is developing a fuel flexibility program that may include petroleum coke, recycled oil and refuse derived fuel (RDF). Most of the company's plants will require retrofits or replacements to accommodate these or other alternate fuels. Speaking at the conference, Wayne MacIntire, Senior Manager of Pulp and Power Technology for International Paper, said the company collectively generates approximately 2,400 mega-watts (MW) of electricity as an Industrial Energy Producer (IEP). Mr. MacIntire also stated that the company has in operation 74 power boilers, 58 black liquor recovery boilers, 83 steam turbine generators and seven gas turbine generators. Randy Godet, Pulp and Paper Group Manager at IIR, says, "In addition to declining demand for paper and forest products, the high cost of energy has forced some plants in this industry sector to curtail production or even close permanently." International Paper currently has over 100 major paper mill and converting plants nationwide, with approximately 30 wood products plants also located in the U.S. In the year 2000, gross revenues exceeded $28 billion, up from $24 billion in 1999. However, their cost of goods sold also increased to $20 billion in the year 2000, resulting in lower earnings for the company. With the new conservation plan in place, production cost should go down thus increasing their bottom line net earnings.