Mercer International Inc. · NASDAQ:MERC
Mercer International — Pacwest Conference June 2008
16 slides from Mercer International's conference presentation, Jun 16, 2008
Slide 1: A Formula for Sustainability
A Formula for Sustainability Pacwest Conference June 2008
Slide 2: Forward Looking Statements
Forward Looking Statements The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this presentation contains statements that are forward-looking, such as statements relating to results of operations and financial
Slide 3: Company Overview
Company Overview ? Mercer is the largest publicly traded NBSK(1) market pulp producer in the world ??Operates three pulp mills with 1.43 million ADMT(2) of capacity Rosenthal Stendal (3) Celgar (Germany) (Germany) (BC, Canada) 325,000 ADMT620,000 ADMT480,000 ADMT Constructed 1999Constructed 2004Cons
Slide 4: Mercer in Brief — Consolidated Financials
Mercer in Brief — Consolidated Financials In Millions of EURFor YearFor YearFor Year (unless otherwise stated)Ended2007Ended 2006Ended 2005 Pulp Production1,404,672 Admt1,302,260 Admt1,184,619 Admt Net Sales704.4624.0452.4 Operating EBITDA126.2148.369.8 In Millions of EUR December 31, 2007December 3
Slide 5: World Class Assets
World Class Assets Mercer versus other top 20 NBSK producers as of Q4 2007 (includes integrated capacity) ??Large, modern facilities — low capital requirements, high runability ??State-of-the-art environmental compliance ??Energy — net producers 750 STRONG 600 Potlatch Weighted Average Weyerhaeuser
Slide 6: Biomass to Energy — a Global Driver
Biomass to Energy — a Global Driver “EU & US energy strategies are the same in that they both are focused on achieving a secure, affordable and environmentally friendly supply” “Although each have a different approach to implement these strategies, the potential world wide impact on agricultural cro
Slide 7: Bio-energy in Europe
Bio-energy in Europe ? EU member states have agreed to a binding target to increase the amount of renewable energy to 20% of the total EU energy output by 2020 ? In 2005 renewable sources accounted for 6% of total EU energy output ? Biomass is expected to account for 40% of target Objectives versus
Slide 8: Cogeneration energy efficiency
Jurisdictions such as Europe have been the first to compensate in recognition of the energy efficiency realized by Cogeneration Cogeneration: ? Provides the most efficient use of the biomass resource by increasing thermal efficiency from 40% to 85% ? Reduces GHG emissions by up to 50% ? Decreases re
Slide 9: Pulp Transition to Bio-energy Economics
Pulp Transition to Bio-energy Economics ? The transition to bio-energy economics is happening with Europe at the forefront, and other first world jurisdictions following suit ? Historically, wood has been priced in the market based on its value for alternative uses, such that saw logs were more valu
Slide 10: Are we receiving value?
Are we receiving value? ?At $92/ barrel of oil, wood should be valued at approximately 212 EUR / odmt, which means various forest products should reflect these values in addition to the value created in the product itself ?Softwood kraft, with a wood to pulp yield of 45%, has an energy value of $675
Slide 11: Are we receiving value?
Are we receiving value? RISI EuropeRISI EuropeLumber Price per NBSKEucalyptusthousand bf 1, 2 2007 Average Commodity Price$806$712$275 Energy Value of Wood Content$675$614$193 Margin Above Energy Value16%14%30% 1 FX rat e of 1.45; assumed 0.628 odmt of wood per 1000bf of lumber 2 Market price seen i
Slide 12: Low Cost Fiber & Energy Value
Low Cost Fiber & Energy Value • If we look at current energy values and the Southern Hemisphere plantations that supply low cost wood to South American pulp mills, an argument can be made that these plantations are in fact subsidizing pulp production as there is a higher value use for this wood in t
Slide 13: World Wood Supply Transition to Bio-energy Economics
World Wood Supply Transition to Bio-energy Economics Wood based products have to start reflecting the energy value in wood • The use of historic pulp prices does not reflect future pricing mechanisms for pulp. Prices for wood commodity products such as pulp will have a higher floor price going forwa
Slide 14: In BC, do we receive value for the Energy we produce?
In BC, do we receive value for the Energy we produce? • BC Pulp & Paper mills produce significant quantities of Green Biomass Electricity • BC pulp mills must offset $30 / MWhr low cost industrial power, effectively valuing pulp mill biomass electricity — a premium product — at only $30 / MWhr • New
Slide 15: Current rates don't make economic sense
Current rates don’t make economic sense Historic Black Liquor Electricity Generation Costs LowHigh Cost of Black Liquor to generate 1MWh of eletricity$53$70 Operating Costs for pulp mill electricity generation$15$30 Total Generation Cost ( $ / MWh)$68$100 Cost of purchased power from BC Hydro ($ / M
Slide 16: Conclusions
Conclusions ? Reinvestment in BC P&P generating assets will not occur unless adequate returns can be achieved ? An opportunity exists in BC to create an environment with the right policies to make BC P&P energy generation sustainable and competitive going forward ? If changes do not occur, green ene