Week of 17 May 2021: When your infrastructure is worth more than your mill
Email Jim at firstname.lastname@example.org
We have talked for decades about the internet overtaking the need for some grades of paper. A couple of weeks ago, we saw this phenomenon take on a whole new meeting. And, I must admit, I was blindsided by this one, an uncomfortable place for me...I usually think I am pretty good at seeing around the corners.
Ponderay Newsprint, in Usk, Washington has been in bankruptcy for months. The common thinking was that this newsprint mill is not a candidate for conversion to containerboard. It is not that the assets are too old, it is that the mill is far off the beaten path and a conversion is not logistically feasible--it is too far to haul OCC and its is too far from a customer base.
There were three bidders for the assets. The winner appears to be Allrise Capital Inc. of Irvine, California with a bid of $18.1 million. Although a fraction of the value of the assets if located elsewhere, too much as a paper mill asset in this location.
Now here is the kicker. While Allrise made some statements about a possible conversion to containerboard manufacturing, Allrise seems most interested in the electrical power infrastructure associated with the mill. What Allrise's real intent seems to be is to use this power infrastructure to "mine cryptocurrency."
I don't understand cryptocurrency and I don't understand mining it, although I have a couple of neighbors that do this in their basement (alongside operating their grow lamps, I suspect). Granted cryptocurrency seems to have some cachet and, when you think about it, good old US dollars are valuable only because you think they are--nothing but the US government backs them. However, I like my paper dollars as opposed to voodoo dollars; I don't care if Elon Musk will accept voodoo dollars for the purchase of a Tesla.
The point is, however, that asset value is in the eye of the beholder. While we sit here worrying about how and where we are going to be allowed to get real energy to make real paper grades in high demand (containerboard, tissue), others have found another way to use our discarded assets to make money--albeit voodoo money--another way.
For decades I have been saying the pulp and paper industry is one of the most exciting sectors in the manufacturing world. It is full of surprises, never ceases to be entertaining and is continually offering new ways to succeed. Now an outfit called Allrise Capital has once again reinforced my beliefs in this thinking.
Of course, even if you are "mining cryptocurrency" safety is important. The kind of power infrastructure found in a groundwood mill is nothing to fool with. Allrise will need highly skilled technicians to keep it all humming safely.
Be safe and we will talk next week.
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