Installation of a deinking plant to increase paper machine production : financial analysis and final report
Savage, Maurice; Wiggins, Stanton; Howey, Matt; Wright, Kyla; Lenski, Marty (2015)
Lataukset:
Savage, Maurice
Wiggins, Stanton
Howey, Matt
Wright, Kyla
Lenski, Marty
Tampereen ammattikorkeakoulu
2015
All rights reserved
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2016112417309
https://urn.fi/URN:NBN:fi:amk-2016112417309
Tiivistelmä
CPP’s Raleigh, North Carolina uncoated freesheet mill has expressed the need for a capital project to generate incremental free cash flow in the coming decades. Two different capital project alternatives were proposed to CPP. The high-capital alternative involves installing a flotation deinking plant to supplement the mill’s virgin fiber and increase production. The low-capital alternative involves installing a hydropulper makedown system and purchasing market deinked pulp (MDIP) to increase production.
In each case, the primary changes to the mill would be to the paper machines, waste treatment system, and effluent treatment system; there would be only limited effects to other mill operations (woodyard, bleaching, pulping, and recovery). The production off of each paper machine would increase by approximately 11% in each of the envisioned scenarios. Effluent generation would increase in both cases, more significantly in the case of flotation deinking. Flotation would also generate almost 40,000 ODt/yr of deinking sludge that would have to be landfilled. Each project would require significant additional energy (both to dry the incremental paper and to run the pulpers or deinking plant) and fresh water. The increases in energy and fresh water usage were larger in the case of flotation deinking, as per the WinGEMS model developed for this report.
The total installed capital (TIC) cost of each of the proposed projects was estimated. Given the relative simplicity of the low-capital alternative, each individual piece of equipment was priced and a factored capital cost estimation method was used to estimate the TIC at around $2,400,000. Since the proposed flotation deinking plant would require numerous types of equipment for which reference quotes were unavailable, the Consulting Firm sought an all-inclusive vendor quote in the interest of accuracy. The total purchased equipment cost from the most pertinent quote ($6,900,000) was input into a factored capital cost estimator and the TIC of the high-capital investment was estimated at just under $28,000,000.
Separate FEL-0 level financial analyses were completed for each of the two proposed capital projects. It was quickly found that the low-capital alternative of purchasing MDIP would not be profitable or feasible for the mill, with an IRR of around -17% and an NPV of approximately -$50,000,000. The high-capital alternative of flotation deinking, on the other hand, had a much more financially feasible IRR of 10% and an NPV of approximately -$3,400,000.
The Consulting Firm believes that, given CPP’s need for incremental free cash flow in the coming decades, it would be in CPP’s best interest to commission an FEL-1 analysis of the proposed flotation deinking plant investment. The FEL-0 analysis discussed in this report is accurate only to within ±40%, so it is possible that the information gathered by completing an FEL-1 analysis could indicate better financial performance. In addition, the Firm suggests that CPP no longer pursues the low-capital alternative (MDIP usage) given its extremely poor financial performance.
In each case, the primary changes to the mill would be to the paper machines, waste treatment system, and effluent treatment system; there would be only limited effects to other mill operations (woodyard, bleaching, pulping, and recovery). The production off of each paper machine would increase by approximately 11% in each of the envisioned scenarios. Effluent generation would increase in both cases, more significantly in the case of flotation deinking. Flotation would also generate almost 40,000 ODt/yr of deinking sludge that would have to be landfilled. Each project would require significant additional energy (both to dry the incremental paper and to run the pulpers or deinking plant) and fresh water. The increases in energy and fresh water usage were larger in the case of flotation deinking, as per the WinGEMS model developed for this report.
The total installed capital (TIC) cost of each of the proposed projects was estimated. Given the relative simplicity of the low-capital alternative, each individual piece of equipment was priced and a factored capital cost estimation method was used to estimate the TIC at around $2,400,000. Since the proposed flotation deinking plant would require numerous types of equipment for which reference quotes were unavailable, the Consulting Firm sought an all-inclusive vendor quote in the interest of accuracy. The total purchased equipment cost from the most pertinent quote ($6,900,000) was input into a factored capital cost estimator and the TIC of the high-capital investment was estimated at just under $28,000,000.
Separate FEL-0 level financial analyses were completed for each of the two proposed capital projects. It was quickly found that the low-capital alternative of purchasing MDIP would not be profitable or feasible for the mill, with an IRR of around -17% and an NPV of approximately -$50,000,000. The high-capital alternative of flotation deinking, on the other hand, had a much more financially feasible IRR of 10% and an NPV of approximately -$3,400,000.
The Consulting Firm believes that, given CPP’s need for incremental free cash flow in the coming decades, it would be in CPP’s best interest to commission an FEL-1 analysis of the proposed flotation deinking plant investment. The FEL-0 analysis discussed in this report is accurate only to within ±40%, so it is possible that the information gathered by completing an FEL-1 analysis could indicate better financial performance. In addition, the Firm suggests that CPP no longer pursues the low-capital alternative (MDIP usage) given its extremely poor financial performance.