WestRock Company (WRK)

[801]

From the RockTenn 2010 Annual Report. . .

You might want to wade through the entire 100 odd pages (plus apendices!) for the full picture, but I decide to cut & paste the bits I liked best. . .

I apologise if this has been posted before, but it won't hurt to read it again!

Energy

Energy is one of the most significant manufacturing costs of our mill operations. We use natural gas, electricity, fuel oil and coal to generate steam used in the paper making process and to operate our recycled paperboard machines and we use primarily electricity for our converting equipment. Our bleached paperboard mill uses wood by-products for most of its energy. We generally purchase these products from suppliers at market rates. Occasionally, we enter into long-term agreements to purchase natural gas. Our Solvay mill purchases its process steam under a long-term contract with an adjacent coal fired power plant with steam pricing based primarily on coal prices. The mill’s electric energy supply is low cost due to the availability of hydro- based electric power.

We spent approximately $152 million on all energy sources in fiscal 2010. Natural gas and fuel oil accounted for approximately 33% (9.1 million MMBtu) of our total energy purchases in fiscal 2010. A hypothetical 10% increase in the price of energy throughout the year would have increased our cost of energy by $15 million.

We spent approximately $147 million on all energy sources in fiscal 2009. Natural gas and fuel oil accounted for approximately 34% (8.5 million MMBtu, which is lower than fiscal 2010 due primarily to decreased mill volumes) of our total energy purchases in fiscal 2009. A hypothetical 10% increase in the price of energy throughout the year would have increased our cost of energy by $15 million.

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