NASDAQ:MERC $

Energy

All three of Mercer's mills generate energy in excess of their own energy needs.

Production Process

Once the cellulose fibers have been separated and removed from the process, a mixture of biomass chemicals and cooking chemicals called black liquor remains. The black liquor consists of the hemicellulose, lignin and extractive components of the wood. Most of the chemicals are recovered in a key step of the modern kraft pulping process called the recovery boiler. In addition to the recovery of spent chemicals, the recovery boiler produces high pressure steam. That high pressure steam passes through a turbine generator, which produces very efficient, biomass-based, renewable and carbon-neutral (or "green") electricity. The low pressure steam that exits the turbine (once electricity has been generated) is used to heat the mill and also dry our pulp. This cogeneration process is a key element of a carbon neutral pulp facility.

Market Fundamentals

All of our mills have long-term arrangements to sell surplus electricity to their respective regional utilities. In Germany, our mills benefit from special tariffs under Germany's Renewable Energy Act and in Canada, Celgar benefits from an Electricity Purchase agreement with BC Hydro; a government-owned regional utility. These long-term arrangements have generally provided our mills with premium pricing due to the fact that our energy is considered to be green (more fully described above). We receive this premium because governments in our mills' areas have recognized the value of our electricity as they look to achieve carbon emission reductions through sustainable resources.

Our Performance

All of our mills produce more energy than they consume, making them net suppliers of energy. In addition, both Celgar and Stendal currently have excess turbine-generator capacity, meaning energy generation from these mills could increase further.

In 2015, our mills produced nearly 1,847,000 MWh of energy. To put this into perspective, this is enough energy to power almost 170,000 U.S. households.* Of this energy produced by our mills, approximately 56% was used internally to run the mill, with the surplus 44% being exported and sold.

Our mills have a proven track record of increasing their energy production and sales over time. Since 2009, our mills have increased energy revenue by 26% from $59 million to $75 million.
* Based on the average U.S. household electricity consumption in 2014 of 10,932 kWh/year as per the U.S. Energy Information Administration
.