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PanPaper challenged to set up power plant

NAIROBI, July 13 – Industrialisation Minister Henry Kosgey has challenged paper manufacturing company, Pan African Paper Mills, to set up a power plant to cut down on electricity costs.

Kosgey, who spoke during a tour of the paper mill that is based in Webuye, revealed that the company spends over 110 percent of its revenue on power bills and said this should not be.

He said he was ‘shocked to learn that the company pays over Sh180 million monthly in electricity bills, and yet it has the potential to generate its own power by virtue of its proximity to a waterfall’.

The Minister dismissed an appeal by the company’s management seeking Sh385 million shillings from the government to assist its recovery process after damage to its business during the post election violence period and massive debts.

The company had earlier in the year sought a cash injection of Sh325 million and conversion of shareholder debts totalling Sh752 million into equity, to stay afloat.

The Minister queried how the previous amount of Sh140 million extended to the company to aid recovery had been used, which the management of the paper mill indicated was used to offset power bills, leaving it with a debt of Sh40 million.

“I encourage you to lower the costs of the finished products so that you compete favourably in the international market,” said Kosgey.

He also announced plans for a campaign to encourage locals in the area and neighbouring districts to venture into the tree planting business, to ensure a constant supply of raw materials for the mills.

Tree planting plan

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Earlier in the year, the manufacturing company announced that it would spend Sh80 million in the next one year to plant six million tree seedlings and provide a steady supply for the firm to harvest wood.

According to executive director Niranjan Saha, the project would also help the government’s forestation and reforestation programmes, as well as boost the country’s forest cover.

Pan Paper has repeatedly urged farmers and schools to grow trees for commercial purposes and at least 8,000 farmers are targeted by the project, which has already kicked off.

Currently, Pan Paper is conducting a study in the Kaptagat area of Rift Valley, aimed at developing a disease-resistant and fast maturing tree variety of pinus radiata (the pine tree), which it wants to reintroduce on large scale plantations.

Demand for paper is poised to rise following a policy decision by the government, to discourage the use of plastic bags and this may put the factory back on track after years of steady losses.

Similarly, the implementation of the new Forest Act 2005 is expected to provide a sound framework for bringing Kenya’s forest management under control, and promoting the sustainable use of forest resources.

The mill has been on the verge of collapse owing to huge losses and growing competition from cheap paper manufacturers on the continent and elsewhere. Its debts were estimated at Sh6.7 billion as at June 2007.

A government report early this year proposed that Pan Paper should be allowed to extend its wood harvesting areas to forests in Kericho, Koibatek and North Nandi Districts which, it stated, would make it possible for the company whose annual capacity is about 120,000 tonnes, to obtain supplies of 450,000 cubic metres of wood annually.

Pan Paper Mills was started in 1969 and manufactures paper for the local and regional market.

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It is Kenya\’s only paper manufacturer and the largest in eastern and central Africa, offering direct employment to 1,600 employees.

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