Published on: Sunday, March 18, 2007 |
BILT, which acquired the stake for US$261 million (about RM991.8 million) through Ballarpur Paper Holdings, a joint venture company between it and JP Morgan Special Situation Asia Corporation, is pursuing an expansion of the concession area by about another 58,000 hectares to bring to about 350,000 hectares.
Ballarpur's acquisition of Malaysia's largest integrated pulp and paper mill saw the company being awarded SFI's existing concession area of about 300,000 hectares up until 2094.
BILT Managing Director Rajive R Vederah, who disclosed this, said the further expansion of the SFI concession area is vital to support its plan to increase the pulp and paper production at the SFI mill in Sipitang to about half-a-million in two years.
During the handing-over of ownership Friday, BILT had voiced its plan to invest US$100 million (about RM350 million) during the first phase of its operation to increase the SFI mill's paper production capacity to 200,000 tonnes per annum (from the present 144,000 metric tonnes) and pulp capacity to 250,000 tonnes per annum (presently 120,000 tonnes).
"If we want to support a mill with half-a-million tonnes of pulp and paper production per annum, we would be needing about 20,000 hectares per annum. That means we should be having about 150,000 hectares of plantable area," said Vederah.
He explained that currently the plantable area available is about 105,000 to 110,000 hectares. "So the further expansion (of the concession area) would enable us to meet our requirement for the mill," he said.
"Today the total concession area is about 288,000 hectares, and (if the request for additional concession area is successful) it will increase it to about 350,000 hectares altogether," he added.
"This thing will take a little time, but I think we have had a positive discussion with the Government and I personally feel we would be able to settle this matter over the next few months," said Vederah.
He said this at a press conference held in conjunction with a familiarisation visit for a media group from India to the SFI integrated pulp and paper mill in Sipitang, about three hours' drive from the State Capital, Friday afternoon.
Also present were BILT Group Vice President (Human Resources & Corp Communications), Lav Kumar Shelat, and CEO, Avinash Taneja, among others.
Asked whether BILT has plans to buy a sizeable land area outside Sabah or in Indonesia's Kalimantan region to feed the anticipated increase in the SFI mill production requirement, Vederah said: "No, because we have enough forest (in Sabah) to work on for a start."
Friday's acquisition of the Lion Group Industries shares in SFI was in line with BILT's strategy to globally expand paper and pulp operations. BILT controls 21 per cent of the writing and printing paper market and approximately 53 per cent of the coated paper market in India.
It has five paper mills in the states of Orissa, Haryana and Maharashtra (Ballarpur, Bhigwan and Ashti) with a capacity of 480,000 tonnes per annum and a pulp mill capacity of 100,000 tonnes per annum manufacturing rayon grade pulp.
"The acquisition of SFI is a very strategic move by Ballarpur," said Vederah, who was involved in the signing of transfer of ownership with Lion Group's Forest Director, Ngan You Chong, and SFI Chairman, Datuk K.Y Mustafa.
On the challenges, Vederah said these would be in optimising the SFI mill operation capacity and improving its efficiency. "We need to introduce and switch to coal-powered power plant which is a far more cheaper source for fuelling compared to fuel."
He said their specialists would be brought in to look into all sections of the mill to optimise the operation level.
"Also in our immediate plan is to increase the capacity of the two producing machines at the mill to the maximum level, that is to make it two times faster than the present speed, and boost the production capacity from about 140,000 tonnes per annum to 200,000 tonnes per annum."
This will take about 24 months or less to do this, he said, adding that two years from now they would be able to increase production capacity to about 200,000 tonnes per annum.
"Simultaneously we would increase the capacity of the pulp millÉbecause of the standing volume of wood in the forest area which is available, including the 40,000 hectares of forest plantation and about 30,000 hectares of mixed-tropical hardwood forest (although the concession area is much larger than that)," said Vederah.
"We are working at increasing the capacity up to 750 tonnes per day from today, where the production capacity is about 330 tonnes of pulp per day.
Part of this increase will go into feed that will increase from 140,000 to 200,000 tonnes per annum, while the balance of maybe 60,000 tonnes will be sent to India," he continued. BILT is currently also buying its supply of about 85,000 tonnes of pulp from Indonesia.
Vederah said they will start working in the forest (concession area) to achieve its target to plant about 5,000 hectares in the first year, before moving to planting 10,000 hectares in the second year and 20,000 hectares for planting acacia mangium and the eucalyptus tree species every year for the subsequent four to five years.
"This would enable us, maybe five to six years down the line, to achieve the half-a-million tonne production per annum," he said.
Vederah said the first phase of 24 months (following the acquisition) will cost BILT between US$80 million (about RM270 million) and US$90 million (about RM31.5 million), which will include the whole optimisation and conversion from fuel-powered to coal-powered plant and the expansion of the mill.
"The plantation of about 20,000 hectares is going to cost us about US$15- US$20 million per year in terms of input. And then the pulp mill will cost us another US$500 million," he said.
From today to over the next six or seven years, we would be putting in about a billion dollars at this side including the acquisition cost, he added.
"And with the pulp supply from here, we would be able to make our capacity in India grow up to 1 million tonnes per annum, which we will be by 2010, to the next level of 2million tonnes by 2015," said Vederah.
