News Release Details

LAKE FOREST, Ill.--(BUSINESS WIRE)--Oct. 8, 2009-- Packaging Corporation of America (NYSE:PKG) announced today that its Board of Directors has approved major capital projects at its Counce, Tennessee and Valdosta, Georgia linerboard mills which will reduce fuel and electricity purchases at these mills by 50% and 75%, respectively.

The investment will include a new recovery boiler, turbine generator, and paper machine drying efficiency improvements at the Valdosta mill, and a rebuild and upgrade of two existing recovery boilers plus a new turbine generator at the Counce mill. The net capital invested is expected to be about $215 million, after deducting about $80 million in maintenance capital that will be avoided on equipment being replaced. Both the Counce and Valdosta projects are expected to be completed by the end of 2011. The after tax return on these projects is expected to be between 20-25% of total capital ($295 million), or 25-30% of net capital ($215 million). The range of returns is primarily a function of current, proposed and potential legislation regarding tax incentives and benefits related to the production of green electricity and energy.

Commenting on the investment, Paul T. Stecko, Chairman and CEO, said “These projects will significantly reduce our manufacturing costs as well as reduce the potential impact of escalating fuel and electricity costs. Upon completion of the projects, our Valdosta mill will burn only internally generated, wood waste and black liquor in its boilers and will self-generate 100% of its electricity requirements. Our Counce mill will lower its purchased electricity requirements by over 60% and lower purchased fuel consumption by over 35%. We expect essentially all capital required for these projects to come from cash received from alternative fuel mix credits, and existing cash on-hand.”

PCA is the fifth largest producer of containerboard and corrugated packaging products in the United States with sales of $2.4 billion in 2008. PCA operates four paper mills and 68 corrugated product plants in 26 states across the country.

Some of the statements in this press release are forward-looking statements. Statements that contain words such as “will,” “should,” “anticipate,” “believe,” “expect,” “intend,” “estimate,” “hope” or similar expressions, are forward-looking statements. These forward-looking statements are based on the current expectations of PCA. Because forward-looking statements involve inherent risks and uncertainties, the plans, actions and actual results of PCA could differ materially. Among the factors that could cause plans, actions and results to differ materially from PCA’s current expectations include the following: the impact of general economic conditions; containerboard and corrugated products general industry conditions, including competition, product demand and product pricing; fluctuations in wood fiber and recycled fiber costs; fluctuations in purchased energy costs; the possibility of unplanned outages or interruptions at our principal facilities; and legislative or regulatory requirements, particularly concerning environmental matters, as well as those identified under Item 1A. Risk Factors in PCA’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission and available at the SEC’s website at “www.sec.gov.”

Source: Packaging Corporation of America

Packaging Corporation of America
Barbara Sessions
INVESTOR RELATIONS: 877-454-2509
PCA’s Website: www.packagingcorp.com