HOUSTON, Jan. 30 /PRNewswire-FirstCall/ -- Pioneer Companies, Inc.
(Nasdaq: PONR) announced that it is expanding its St. Gabriel, Louisiana
chlor-alkali plant by approximately 25% from its current annual production
capacity of 197,000 ECUs to 246,000 ECUs. The project will include the
conversion of the plant to membrane cell technology from the existing
mercury cell technology. The additional chlorine production from the
planned expansion will be shipped to nearby customers via Pioneer's three
existing chlorine pipelines at the St. Gabriel site. The project will
commence in the first quarter of 2007 with an anticipated completion in the
fourth quarter of 2008.
Pioneer believes that the anticipated financial and strategic benefits
of the project will commence upon its completion and are expected to
-- expanding the site's manufacturing capacity by 49,000 ECUs to meet the
demand from nearby industrial customers for chlorine supplied by
pipeline at a competitive delivered price;
-- meeting increasing customer demand for high-quality membrane caustic
-- significantly lower variable and fixed unit costs at the plant, due
- improved energy efficiency from the new membrane cells which use
approximately 29% less energy than the technology currently used at
the plant; and
- reduced maintenance and operating costs resulting from the use of
the newer technology;
-- the incremental gross margin contribution from the additional 49,000
ECUs of production capacity; and
-- eliminating the use of mercury at this plant.
The capital costs associated with this project are estimated to be
approximately $142 million. In addition to using existing cash reserves and
projected future cash flows, Pioneer plans to seek additional financing
from the capital markets to finance this project and other capital needs.
At December 31, 2006, Pioneer had cash and cash equivalents of
approximately $115 million and long-term debt of approximately $103
million, primarily consisting of $100 million of senior notes due in
December 2008. Pioneer redeemed $25 million of its senior notes on January
This project will also provide Pioneer with the ability to further
expand the plant's annual production capacity by an additional 97,000 ECUs,
to an aggregate annual plant capacity of 343,000 ECUs. The estimated
additional cost of this further expansion would be approximately $25
million. Pioneer believes that the further expansion, if undertaken, would
significantly enhance the anticipated economic benefits from this project.
Before making this further expansion decision, Pioneer plans to determine
whether customer commitments can be obtained for the additional chlorine
Michael Y. McGovern, the President and CEO of Pioneer commented: "We
believe this project positions Pioneer for the future. The St. Gabriel
plant is strategically located in one of the largest industrial complexes
of chlorine buyers in North America, and transports all of its chlorine
through three pipelines to nearby customers. This project will enable us to
meet the needs of our customers who are seeking chlorine delivered by
pipeline at a competitive delivered price. During 2006, we estimate that
approximately 150,000 tons of chlorine were shipped by rail into the St.
Gabriel industrial complex by other chlorine manufacturers, for subsequent
transportation to end customers via Pioneer's chlorine pipelines at the St.
Gabriel site. We believe that this volume presents an excellent market
opportunity for Pioneer. These customers want to be supplied by pipeline,
and this project will enable us to meet their needs."
Mr. McGovern continued, "We also believe this project will allow us to
significantly lower our production costs at the St. Gabriel plant. One of
the key reasons is that the membrane cells are approximately 29% more
energy efficient than mercury cells. If natural gas prices increase, the
economic benefits of this conversion will be more significant. Finally,
this project will eliminate the use of mercury at this plant, and allow us
to supply our customers with membrane caustic soda. For all of these
reasons, our management and employees, especially at our St. Gabriel plant,
are very excited by this project. We believe this project will position
Pioneer to meet the future challenges of the marketplace and create value
for our shareholders."
Pioneer, based in Houston, manufactures chlorine, caustic soda, bleach,
hydrochloric acid and related products used in a variety of applications,
including water treatment, plastics, pulp and paper, detergents,
agricultural chemicals, pharmaceuticals and medical disinfectants. Pioneer
owns and operates four chlor-alkali plants and other downstream
manufacturing facilities in the United States and Canada.
Pioneer will conduct a teleconference on Wednesday, January 31, 2007 at
10:00 a.m. CST to discuss this conversion and expansion of its St. Gabriel
chlor-alkali plant. A live webcast of the conference call, together with
other supplemental information, can be accessed through the Company's
website at www.piona.com, by going to the "Investors" tab and then to
"Conference Calls". To listen to the live webcast, please go to this
website approximately fifteen minutes prior to the start of the call to
register, download, and install any necessary audio software. For those
unable to participate during the live webcast, a replay will be available
shortly after the call on Pioneer's website.
To participate in the live conference call by telephone, please call
(800) 967-7141 at approximately 10.00 a.m. CST. Please note that there will
be supplemental information that is available on the webcast mentioned
above that will not be available if the conference call is accessed by
telephone only. A telephonic replay will be available from 1:00 p.m. CST on
Wednesday, January 31, 2007 through 12:00 a.m. CST on Sunday, February 4,
2007. To access the replay, please call (888) 203-1112. Please enter the
following ID Number: 9867148.
Certain statements in this news release are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act. Forward- looking statements relate to matters that are not historical
facts and include, but are not limited to, statements relating to the
expected additional production capacity of the St. Gabriel plant,
commencement and completion dates of the project, anticipated benefits of
the project, costs and financing of the project, and economic and other
implications of the project. Such statements involve risks and
uncertainties, including, but not limited to, increases in costs and delays
in the completion of the St. Gabriel project, risks that appropriate
financing will not be obtained or will be obtained on terms that are
unfavorable to the company, the cyclical nature of the demand and prices
for the company's products, the availability and costs of the raw materials
used to make the company's alkali products, the company's access to and the
cost of rail transportation, environmental risks, governmental regulation,
and the ability of the company to meet its business and financial goals and
the risks and uncertainties described in Pioneer's filings with the
Securities and Exchange Commission. Actual outcomes may vary materially
from those indicated by the forward-looking statements.
SOURCE Pioneer Companies, Inc.