Industry

Paper mill recovery hinges on cheaper energy

Panpaper

The revived Webuye Paper Mills will need alternative, cheaper and sustainable raw materials to manufacture paper and also generate cheaper power for the factory. Photo/FILE

Committing a half billion shillings to revive Pan Paper Mills may be good news for the politicians, but long term interests of the direct beneficiaries of the paper factory may still be in jeopardy because major issues touching on operational costs have not been addressed.

The previous management that abandoned the factory when creditors came knocking put its power costs at 33 per cent of the total operational costs.

This is the highest single operational cost and does not even factor in the heavy diesel the company uses to run some of its boilers.

Costs and alleged poor management resulted in the company being put under receivership last year.

Some 4,000 permanent workers and 32 casuals lost their jobs.

A primary and secondary school for the workers was closed and the Webuye Town Council almost ground to a halt for lack of business.

The closure has had extreme social and economic effects on the area.

With electricity and fuel prices not showing any signs of falling, what would assure the government that the factory’s engines would still be running in a year’s time and that creditors would not come knocking at the door, seeking to be repaid piled-up debts?

What is on record and has been ignored is the need for alternative, cheaper and sustainable raw materials that can be used to manufacture paper and also generate cheaper power for the factory.

In South Africa and Egypt, paper manufacturing factories have introduced new raw materials for sugar production, blending them with the trees.

Bargasse —a rubbery by product of sugar refining — wheat and rice straws have become important paper manufacturing raw materials in these countries.

“Sugar bargasse, for example, is one of the best raw materials for paper production. Bargasse uses less power to make paper unlike wood,” said Mr Eliud Kakai Wamocho, a paper technologist trained at the University of Manchester and Aberdeen University.

He is a lecturer at the Moi University and has worked at Pan Paper.

For a country like Kenya, where the forest cover is almost gone — at 1.7 per cent against the recommended 10 per cent — it is obvious that use of wood as a raw material for any product should be reduced until optimal forest cover is achieved.

Mumias Sugar Company uses bargasse to generate electricity and is earning carbon emission reduction money from the venture, in addition to selling electricity to the Kenya Power and Lighting Company.

In the other six sugar companies, bargassee is either used to produce small amounts of electricity, like in Chemilil Sugar Company or thrown away.

Pan Paper Mills, now renamed Webuye Paper Mills, can take advantage of this availability of the raw material to either manufacture paper or generate electricity or do both.

Other raw materials that the factory can use to produce paper include straws of rice and wheat, which can also be easily obtained from the region.

Rice is grown at Ahero Irrigation Scheme in Nyanza and in Mwea Irrigation Scheme in greater Kirinyaga.

Rice straws have a fibre recovery rate of 85 per cent.

Wheat is grown in the Rift Valley, which borders Webuye.

The use of bargasse will also help open new income streams for the cash-starved sugar factories and farmers.

Using bargasse gives the factory opportunity to cut its energy costs by up to 30 per cent.

The residue from use of agricultural waste can be converted into fertiliser, which is beyond the reach of many farmers.

Bargasse has fibre recovery rate of 87 per cent, making it more competitive than wood, whose fibre recovery rate is slightly above 90 per cent.

So, shouldn’t the government have used the money it has committed to first acquire the technology to enable the factory use sustainable raw materials to make paper and produce its own electricity instead of taking a politically correct decision?

President Kibaki on Thursday told the Ministry of Finance to release Sh500 million that will be used to immediately revive the company and a further Sh1.1 billion to be set aside in the coming budget.

The company will have its name changed from Pan Paper Mills to Webuye Paper Mills.

Its reopening is a major win for the country because of employment opportunities and savings on foreign currency that had been used to import paper.

It is a win for companies like Tetra Pak, which sourced substantial volume of its raw materials from the company.

Raw materials

It was not clear whether the ownership structure will change, because the government owned 34 per cent of the company before it was put under receivership by its short term shareholders.

Treasury has released Sh190 million and has made further commitments to release Sh310 million within the next two weeks.

This will enable the company’s mill number three that deals with waste paper to reopen.

President Kibaki was speaking at his Harambee House office during a meeting with leaders from Western Province and officials of the Ministries of Finance and Industrialisation organised to discuss the revival of the factory.

The Kenya Power and Lighting Company has restored electricity to the factory after the government paid an outstanding bill of Sh80 million.

The President challenged the new factory management to seek ways of applying advanced technologies that would make the company produce products at competitive prices.

Pan Paper closed down in January last year when the management abandoned the plant over debts totalling Sh8.1 billion.

The government then secured the company and appointed experts in September, last year, who recalled workers to clean the factory in preparation for its reopening.

Long-term lenders wanted the government to indemnify them of the accrued debts before reopening the plant.

But Industrialisation minister Henry Kosgey said the demands were unrealistic.

The minister said the solution lay in the government agreeing with the concerned parties on a joint receivership and sale of the company to a new investor.

The company’s majority shareholder, Birla Group of India (54.3 per cent) has since left the country after the company failed.