CARTER HOLT HARVEY Operating EBIT
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Biorefining Opportunities for Chemical Pulp Mills BANZ Conference 7th June, 2012 Dr Jon Ryder Chief Executive Carter Holt Harvey Pulp, Paper, and Packaging 1 Key messages 1. Biochemicals and bio-fuels will be future products from the pulp & paper industry 2. Large scale is needed if they are to be nationally significant 3. Such products must be co-manufactured alongside Kraft pulp in an integrated biorefinery 4. The co-product options and development pathway are not yet clear => Woodco Strategy has a key role 2 Enormous Worldwide Interest in Biofuels Direct Combustion Steam Power Direct Pyrolysis Bio-oil Pre-Drying Thermal Direct Combustion Pelletizing Torrefaction Steam Power Pre-Drying Gas Gasification Steam Power Pelletizing Turbine Steam Biomass Thermochemical Catalysis Chemicals ChemicalsReforming Fermentation Ethanol Power Chemical Liquor Gasification Steam Chemical Pulping Recovery Pulp Gas Extraction Ethanol Turbine Steam Power Steam Power Ethanol Pretreatment Fermentation Distillation Hydrocarbons Deoxygenate 3 Algae Metabolism Source: Prof. R. Phillips, NCSU Outline of Presentation 1. Introduction and outline of our current pulp & paper business and operations 2. The opportunity for New Zealand - Issues that must be addressed 3. What is the solution for New Zealand? 4. Some real industry examples 5. Conclusions 4 Carter Holt Harvey at a glance Key Metrics - 2011 Total Revenue $NZ 3.1 billion NZ-made export revenue Over $NZ 800 million NZ Employees Over 3,400 Pulp, Paper & Packaging Building Supplies Group Market pulp New Zealand Timber Timber Distributor of Corrugated building Kraft LVL LVL packaging boxes supplies papers Paper bags Plywood Plywood Frame and Specialty board truss Recycled Australia Flooring Flooring manufacturing packaging Corrugated papers Panels Panels boxes 5 Paper cups Pulp, Paper & Packaging – Operations Pulp & Paper Kinleith pulp mill Tasman pulp mill Penrose Mill Lodestar Fullcircle (softwood and (softwood & containerboard) hardwood) 275,000 tonnes 290,000 tonnes of 85,000 tonnes Shipping 14 recycled of Bleached Bleached, of recycled and fibre facilities market pulp Unbleached, Fibre containerboard transport cement and Low 300,000 335,000 tonnes coarseness tonnes of Kraft market pulp collected container board annually (#6 Paper machine) Packagin g Corrugated Corrugated Paper Bag Cups New Zealand Australia Manufacturer of Manufacturer of Manufacturer of Manufacturer of paper corrugated packaging in corrugated packaging in multiwall sacks (90 cups for the Australian New Zealand (35% Australia (5% market million sacks per and New Zealand market share) share) annum) markets 3 corrugated plants and 2 plants 1 Plant in Auckland 1 plant in Brisbane 1 specialty board plant 6 A sustainable business 7 Fibre Supply · Wood fibre - 3.7million tpa · ~ 34% of the wood processed in NZ · Sourced from managed plantations · 30% sourced as sawmill chip · Mainly FSC Controlled wood · Recovered fibre · 300,000 tpa 8 Early mover in energy efficiency and CO2 emission reduction Example - Kinleith mill 1990 to 2011 700,000 Production increased Emissions Intensity reduced by 70% by 60% 600,000 0.9 500,000 0.8 400,000 CO2 emissions 0.7 reduced 1990 0.6 300,000 0.5 2011 0.4 200,000 0.3 0.2 Production/CO2 Tonnes Production/CO2 Tonnes 100,000 0.1 0 0 Emissions intensity ( CO2 Production T CO2/T product) emissions total tonnes 9 Kinleith Energy Sources and Generation Co-generation Plant Imported 450 kPa Steam Electricity 6.0% Black Gas 1250 kPa 12.8% Steam 4500 kPa Steam 4500 kPa Steam Liquor 4500 kPa Steam 62.8% Oil 1.6% No.8 PrimaryNo.8 Boiler PrimaryNo.7 Boiler No.4 Recovery Boiler Recovery No.4 Wood Boiler Recovery No.5 Waste 16.9% Condensate Condensate Condensate Condensate · 80% of primary energy from biomass. · 50% of electricity is internally generated Kinleith Steam Users · 100% of purchased electricity is hedged 10 Future business model Production tonnes per FTE · Continuous 1050 improvement in productivity in the last 950 decade has maintained profitability 850 · New co-produced bio- products will add 750 significant new revenue and justify 650 future investments 2011 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 11 CHH PPP - Bio-energy and bio-chemicals · These mills are on a scale to efficiently utilise the available wood supply · process 34% of the wood processed in NZ · They use almost all the “waste” wood within their catchments · Most is used to produce high value Kraft fibre · The rest is used as bio-energy · The mills are biorefineries · Largely run on renewable bio-energy and cogenerate their own electricity · They already produce significant value from bio-chemicals from the wood – Turpentine and Tall Oil 12 2. The Opportunity for New Zealand · NZ will need more renewable energy in the future · For bio-fuels to make a difference to New Zealand, it needs to be at scale. For example: · NZ consumes 6.1 billion litres/a of transport fuel ** · To replace 20% of that with ethanol from trees would require 9Mt/a of trees or residues (~ 80% of NZ’s processed wood) ** Parliamentary Commissioner for the Environment, 2010 13 New Zealand’s fibre resource will continue to drive significant export revenue – opportunity to value add Domestic Processing Pulp, Paper & Board Mills (~6 million) Domestic Total New 11 consumption Zealand million of ~NZD 2.0 Combined roundwood tonnes per billion export cut from all annum revenue of forests Other domestic manufacture (~5 million) NZD 4.8 billion (almost 70% of wood 22 harvested Export Logs Main export market has traditionally been ultimately Korea (~2.5 million) million exported as tonnes per either logs or annum value added Strong demand recently from China, now products) 11 representing largest export market (~6.5 million million) tonnes per annum India is also growing steadily (~1.0 million) Other (~1.0 million) 14 Harvest volume forecast to increase significantly over the next 10 to 20 years providing additional export growth opportunities NZ Forests National Harvest (constrained scenario) 38 40 35 32 30 25 21 20 15 Million Tonnes Million 10 5 0 2011 2021 2031 Year Ended 31 March Source: “A Forestry Sector Study” – Ministry of Agriculture and Forestry 15 Key issues and questions we must face when evaluating bio-energy options · Bio-energy from wood residues may work at small scale but at large scale all the “waste material” already has an economic value. · Stand-alone bio-energy from trees or wood residues on a large scale cannot pay enough for the fibre to be economic without large end-use subsidies · What will work at a sufficiently large scale to be significant within the NZ economy (eg. 4 Mt/a wood)? · Can the best bio-energy options compete with conventional products and bio-chemicals for capital and available raw material? 16 17 11% of Capital Cost Other countries are Top ROCE Technologies ROCETechnologies Top 40% asking 30% 20% the Source: Source: – B.C. Central Central B.C. same 10% FP Innovations, Canada Innovations, FP questions! 0% alone - Viscose Medium - - LVL largeLVL OSB large OSB Interior LVL Small LVL CHP DirectCHP OSB medium OSB SPF West large West SPF CHP (17.8 MW) (17.8CHP CHP via Pyrolysisvia CHP Pellets West small West Pellets LignolCommercial SPF West medium West SPF Pellets West medium West Pellets Pyrolysis Stand Pyrolysis Biocarbon West SmallBiocarbon West Nexterra Syngas dryerSyngasNexterra Torrefied Pellets West TorrefiedWest Pellets Ethanol via Syngas (E) Syngasvia Ethanol (E) viaSyngas Acetate DissolvingPulp Value Added ParticleboardAddedValue SPF West Large+ West Pyrolysis SPF Nexterra CHP smallCHPNexterra(<10Mw) LignolCommercial Brownfield Power via gasificationviaPower med(E) NBSK + H&PMedium+ Lignin+ NBSK SPF West Large + Largesmall PelletsWest SPF SPF West Large + LargeLarge PelletsWest SPF Cross LaminatedCross Timber 17 Borregaard on ethanol production and biorefineries 18 Source: Borregaard, Norway 3. What are the bio-product solutions for New Zealand? · Must be at large scale · Must be co-produced with higher value products, for raw material to be economic · But what solutions should we focus on? · Kraft mills have the potential to co-produce bio-energy, bio-fuels and bio-chemicals 19 Chemicals and fuels from wood 20 20 Source: Prof. R. Phillips, NCSU Chemrec Black Liquor Gasification Enhanced output of power through gas turbine Production of chemicals and fuels through F-T Catalysis 21 SourceSource:: Prof. R. www.chemrec.com Phillips, NCSU Lignin Removal Recovery boiler Lignin removal Evaporation White liquor preparation Digester Wood chips Pulp bleaching Pulp 22 Source: Prof.Source: R. Phillips, LignoBoost NCSU Recovered Lignin Applications • Low Value - Burn to improve boiler efficiency - Pelletize to improve energy density • Medium Value - Convert to phenolic resins - Gasify and convert to transportation fuels or other petroleum based chemicals • High Value - Carbon fibers for lightweight composite materials 23 Source: Prof.Source: R. Phillips, LignoBoost NCSU Biofuels / Bio-products Real Developments Technology Fit Status Gasify waste Not required in hog fuel boiler to be Multiple commercial wood to power neutral applications (Andritz eliminate Machinery and Lime Kiln Metso) Fuel Extract lignin 30% excess lignin to be power neutral 20,000 tpa semi- from black works plant liquor production in Sweden for more than 3 years (Lignoboost®) Convert tall Tall oil currently converted to gums and UPM (Finland) oil to rosins, may be of higher value as announced $150 biodiesel transportation fuel