Cascades Inc., Kingsey Falls, Quebec, has announced that it is moving forward on converting its White Birch Bear Island paper mill in Ashland, Virginia, to a containerboard machine to produce lightweight, 100-percent-recycled linerboard and medium for the North American market.
Cascades initially acquired the Bear Island paper mill from Greenwich, Connecticut-based White Birch Paper in 2018 for $34.2 million. According to a news release from Cascades, the company says it plans to convert the mill to containerboard by the first quarter of 2021.
The total cost of the Bear Island conversion will be about $380 million, which includes the initial $35 million acquisition cost paid to White Birch Paper in 2018. To finance the equity portion of the Bear Island mill conversion, Cascades says it has entered into an agreement with CIBC Capital Markets, RBC Capital Markets and BMO Capital Markets on behalf of a syndicate of underwriters, pursuant to which Cascades will issue from treasury and the underwriters will purchase on a “bought deal basis” 7.441 million common shares at a price of $16.80 per common share for gross proceeds of about $125 million. Following the completion of this offering, the equity requirements of the Bear Island mill project will be fully financed, Cascades states.
According to Cascades, the Bear Island plant will have an annual production capacity of about 465,000 tons and is scheduled to start up by the fourth quarter of 2022. It will operate at about 80 percent of capacity by the end of 2023, reaching 100 percent by the end of 2025.
“This investment, one of the largest in our company’s history, is a decisive and very important strategic move in the modernization of our packaging assets,” says Mario Plourde, president and CEO of Cascades. “By adding the Bear Island mill to our platform, more than 60 percent of our containerboard manufacturing capacity will be in the top quartile of the industry. In addition to offering a unique development platform, this plant will strengthen our geographic positioning and presence in the U.S. and will enhance the competitiveness of our asset base and our product offering regardless of economic conditions.
“From an operational standpoint, Bear Island will also optimize the flexibility of our manufacturing platform by providing a product offering that will be complementary to its sister plant Greenpac, located in Niagara Falls,” Plourde adds. “Bear Island will also offer 100-percent-recycled products with light basis weights. Greatly valued by our current and future customers, these eco-responsible products are particularly well suited for e-commerce.”
Charles Malo, president and chief operating officer at Cascades Containerboard Packaging, says the Bear Island mill “will be equipped with the latest technology and will be able to offer one of the lightest and high-end 100-percent-recycled containerboard products on the market.”
Allan Hogg, vice president and chief financial officer at Cascades, adds that the company is “confident” it will reach its targeted leverage ratio by the end of 2023 for financing on this project. During the project development period, the company says it plans to limit capital investment to approximately $200 million annually, excluding the Bear Island project. The project will add about $190 million to this envelope in 2021 and $120 million in 2022.
Closing two tissue plants
Cascades has also announced that it is progressively and permanently closing its tissue production and conversion operations at its plants in Ransom, Pennsylvania, and Pittston, Pennsylvania, between Dec. 7 and Jan. 31, 2021.
According to a news release from Cascades, the two paper machines at the Ransom plant have a total annual production capacity of 50,000 tons of tissue paper. Currently, the conversion of this volume into 6 million cases of product occurs primarily at the Pittston plant. These volumes will be moved to other Cascades plants and filled with additional capacity. The two sites employ a total of 229 workers.
“The aging equipment of these facilities, the low profitability, the high logistic costs and our recently announced investments in other production and converting units in the U.S. have prompted us to move production to our other sites to optimize operational efficiency,” says Jean-David Tardif, president and chief operating officer of Cascades Tissue Group. “The closure of these units is part of our ongoing strategic initiatives to improve the Tissue Group’s profitability. We would like to reassure our customers that Cascades’ service and product quality levels will not be impacted by this decision.”
Cascades reports that the company plans to work to mitigate the impact of this announcement on its employees at its Ransom and Pittston locations by offering them options to transfer to other Cascades’ business units where possible. Tardif adds, “I want to thank every one of our employees at the Ransom and Pittston operations for their loyalty and dedication over the years. I would also like to thank them in advance for their professionalism and commitment to continuing to serve our customers until the closures of the facilities.”