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kraft pulp (BSKP) would require a capital investment of approximately US 

 $900 million, or $1,800/annual ton. The historical trend selling price for 

 BSKP is approximately US $680/ton. 



Experience within the industry indicates that companies investing in new 

 mills or production lines can typically expect to achieve a real, after tax, 

 internal rate of return between 10% and 15%, and will require a project life 

 of between 20 to 30 years in order to realize that return. 



Major Rebuild 



Major rebuilds of pulp and paper assets are typically designed to result in 

 a significant increase in the productive potential of a mill, or to facilitate 

 the conversion of an asset to the production of a higher valued grade. A 

 major rebuild typically can require an investment on the order of 20% to 

 50% of the investment requirement to build new capacity. 



While a major rebuild will often result in a significant increase in the 

 remaining life of a facility, in most cases the project life will be somewhat 

 less than would be expected with new capacity. As a result, experience 

 indicates that companies will typically require a more significant rate of 

 return, perhaps 15% to 20%, in order to compensate for the added 

 uncertainty around project life. With this type of major rebuild investment, 

 a company will usually require a project life of 10 to 20 years to realize 

 return expectations. 



Productivity and/or Margin Enhancements 



Expenditures falling within this classification are minor capital projects 

 relative to new investment and major rebuilds, and are typically 

 undertaken in order to realize the full productive potential of a facility, 

 resulting in incremental sales volume and/or improved profit margins. 

 This type of expenditure can be further segmented to include productivity 

 enhancement, cost reduction, and quality enhancement expenditures. 



Productivity enhancements result in incremental capacity and an 

 improved revenue stream. Often, productivity enhancements are 

 accomplished without increasing the annual fixed costs of the facility, and 

 therefore have the added benefit of reducing the operating cost per unit of 

 production. 



Cost reduction expenditures result in improved profit margins while having 

 little or no impact on the capacity of a facility. An example of this type of 

 expenditure would be an increase in the level of automation at a facility 

 which results in a permanent reduction in the level of required personnel. 



