Willamette Industries Invest $475 Million in Modernization and Power Generation Expansion At Their Kingsport, Tenn. Mill

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According to Industrial Information Resources Incorporated (IIR), Willamette Industries (Portland, Ore.) began construction during the first quarter of 2001 on one of the largest capital projects in the forest products industry in recent years. Willamette's pulp and paper mill located in Kingsport, Tenn. will essentially be rebuilt from the ground up for an estimated $475 million. When completed in 2003, the modernization program will include a new soda pulp mill, recovery boiler addition and a new 1,200 ton per day paper machine. Willamette will also increase their position as an Industrial Energy Producer (IEP) by expanding on-site power generation capacity.

The Kingsport mill was built in 1916 by Kingsport Pulp Company and then sold to Mead Corporation in 1920. Willamette purchased the mill in 1995 and has made only modest improvements. This round of improvements will position the Kingsport mill to join the company's group of low-cost producing, environmentally friendly and energy efficient mills.

Kingsport is one of just a few mills in the country that utilizes the soda process to make pulp. Pulp production will increase from 400 tons per day to 1,200 tons per day and will be accomplished in a single continuous digester that will replace six batch digesters. A two million pound per day black liquor recovery boiler will compliment the current one million pound per day unit.

Set to come online in October of 2002, the new world-class paper machine will replace two older machines that together produced 800 tons per day of uncoated free-sheet. The fine papers machine, supplied by Valmet, will produce printing and writing papers as well as offset and copy paper.

During the fourth quarter of 2001, Willamette's board of directors will vote on whether to fund a $50 million expansion of the powerhouse, to supply 100% of the mill's electricity and thermal energy. The proposed 80MW steam turbine generator will supplement the existing 17MW powerhouse once completed by mid 2003.

Willamette has been proactive in modernizations and expansions of its manufacturing plants over the last ten years. Around 1994, the company completed a modernization of a mill in Johnsonburg, Pa. for an estimated $600 million. From 1996 through last year, Willamette's complex in Hawesville, Ky. received a new paper machine and pulp mill modernization that cost the company more than $600 million. While demand for paper is slowing and most other companies have slashed spending, Willamette continues to make large capital outlays. Building to increase volume while the market is `soft` positions the company ahead of its competitors to increase their sales potential when prices recover and demand improves.

According to Randy Godet, Pulp and Paper Group Manager at IIR, `Willamette Industries is a well managed, profitable company with energy efficient manufacturing plants.` Consequently, Weyerhaeuser has pursued them in a takeover effort for the last eighteen months. The unsolicited $5.5 billion offer, according to Willamette's board, undervalues the interest of the company and its shareholders.