MeadWestvaco Corporation (MWV) recently announced its plan to invest $285 million for building a new state-of-the-art biomass boiler and upgrading the power infrastructure associated with it at its Covington, Virginia, facility.
This strategic investment not only improves the profitability of the company but also sharpens its competitive edge in providing high quality paper board packaging for the food, healthcare and tobacco markets across the globe. Besides, the upgrade of power infrastructure makes the facility self-sufficient in electric power and stream generation, thereby reducing the ongoing operating and maintenance costs.
The Covington facility in Virginia, the world’s largest solid bleached sulfate (SBS) mill, produces roughly 900,000 tons of high-quality SBS for some of the world’s well known tobacco, food, healthcare and personal care brands and exports nearly 50% of its production to international markets. The extension of this unit ensures the revenue growth of the company, thereby creating demand for MeadWestvaco’s products.
The new boiler and associated 75 megawatts steam turbine generator system will serve as replacements of its two old and less efficient units. The new plant will mainly burn renewable biomass including tree bark, wood residues left behind from logging activity and residuals from the waste water from the paper making process. Besides, these renewable resources serving as reliable and efficient sources of fuel can also produce steam and electricity for the mill at a very low cost.
This investment strategically made, reflects the company’s commitment to enable the facilities to profitably, serve the global markets and progressively improve its performance.
MeadWestvaco intends to begin the construction in fiscal fourth quarter after obtaining necessary permissions, while the plant is expected to be operational in late 2013. The project will be financed through a combination of cash and borrowings. We currently have a Zacks #3 Rank (short-term Hold rating) on the stock.
MeadWestvaco Corporation provides solutions to the companies operating in the healthcare, beauty and personal care, food, beverage, home and garden, tobacco, and commercial print industries. The company competes with the likes of International Paper Co. (IP) and Weyerhaeuser Co. (WY).
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