February 8, 2012

1. KapStone Paper Mill Cowpens, SC February 8, 2012

3. KapStone Paper TRUST & PARTNERSHIPS

4. Mill Hallway

5. Outside Wall

6. Tons Produced Per Employee Per Year Cowpens Mill 248,000 tons / 105 employees = 2,360 Tons Virgin Mill X 800,000 tons / 895 employees = 895 Tons

7. KapStone Paper Mill Cowpens, SC • FDA Approved 100% Recycled High Performance Liner and Medium Mill • 248,000 tons produced annually • 290,000 tons of recycled cardboard and mixed waste consumed annually • 105 Employees • Our Vision • The Cowpens mill will be the Safest, Highest Quality, and Lowest Cost Linerboard Mill in the World • The Cowpens mill will strive to be the best environmental mill in the industry and to be recognized as excellent stewards of the environment where we operate

8. Mill Water History 1992 Mill Start-up 1992 Zero Water Discharge

9. Mill Water History 1998 Water Clarification & Fiber Recovery 1992 Mill Start-up 1992 Zero Water Discharge

10. Mill History 1998 Water Clarification & Fiber Recovery 1992 Mill Start-up 1992 Zero Water Discharge 2001 UltraFiltration

11. Mill Water History 1998 Water Clarification & Fiber Recovery 1992 Mill Start-up 2001 Pellets from Sludge Reduced Landfill By 60% 1992 Zero Water Discharge 2001 UltraFiltration

12. Mill Water History 1998 Water Clarification & Fiber Recovery 1992 Mill Start-up 2001 Pellets from Sludge 1992 Zero Water Discharge 2003 NanoFiltration 2001 UltraFiltration

13. State of the Art Ultra & Nano Filtration Systems

14. Improvements in Water Solids 1995 1998 2001 2003 1500 GPM 1500 GPM 200 GPM 20 GPM

15. Partnering for Success • As Cowpens Mill worked to improve water quality through effluent treatment, a partnership with Nalco was formed to manage chemical usage and reduce water demand • Success Highlights • Change of retention program results in >50% reduction in sulfates while maintaining good retention

16. Partnering for Success • Success Highlights • Improvements in effluent treatment allowed Chemical dilution to use clarified water instead of fresh water. This change alone has saved over 200,000,000 gallons of fresh water since 1999

17. Partnering for Success • Success Highlights • Changes to dry strength chemical addition through a spray bar instead of thin stock addition improved press solids by >2% thus reducing energy demand, increasing throughput by 7% and improving chemical retention

18. Mill Water Consumption The mill consumes about 250,000 gallons of water daily Of the 250,000 gallons about 90,000 gallons a day is used for boiler make up water

19. Approximate Water Consumption in Paperboard Production 10,000 – 12,000 4,000 – 6,000 2,000 375 *TAPPI TIP 0404-47 “Paper machine performance guidelines”

20. Mill Control History ABB Distributive Control System • Installed in 1995 • Continually Upgraded over the years • First mill will real time reel data • First mill with ABB Fingerprint Diagnosis

21. Mill Control Room

23. 33 MW Electric Boiler

25. Re-using Mill Process Water Reduces Energy Demand * Jacobs and IPST “Pulp and Paper Industry Energy Bandwidth Study” ** TAPPI TIP 0404-63 “Paper machine energy conservation”

26. Paper Quality • Our Customers use our Recycled Paper interchangeably with Virgin Sheets • Comments • “The Cowpens mill paper is our preferred paper.” – Smurfit-Stone, Winston Salem, NC • “We have a 110” BHS Corrugator and the Cowpens Mill makes the best and flattest sheet!”- Smurfit-Stone, Winston Salem, NC • “[The Cowpens Mill is] probably one of the most environmentally-friendly and sustainable mills in the world” - Paper 360, March/April 2010 edition

27. Leadership Awards • DHEC 2000 Best Industry Recycled Program • DOE Grants for ozone water treatment and biomass gas production • Duke Energy Power Partner Award

28. Valmet Paper Machine Survey

29. Increased Production has led to Increased Dissolved Solids . . .

30. and Rising Conductivity

31. Mill Future 1998 Water Clarification & Fiber Recovery Biological Treatment 1992 Mill Start-up 1992 Zero Water Discharge 2003 Nano Filtration 2001 UltraFiltration

32. Future: Biological Treatment • Raw Materials have 2 - 4 % Starch • 27-30 tons of COD are put into the Mill each Day • The Biological Reactor uses Anaerobic Bacteria to digest this COD and convert it into Biogas • This Biogas will Provide ~10% of Total Steam Energy for Mill • Removal of COD from Water will Provide Cleaner Process Water for Paper Mill • Aerobic Treatment of Anaerobic effluent will further clean water to allow Mill Water to resemble “Open Mill” water quality • DOE Grant

33. Impact of Biological Treatmenton Mill Water Quality

34. Impacts of Mill Water Quality • Cleaner water will result in improved fiber bonding leading to stronger and lighter paper • We estimate 7,800 tons of Fiber or 130,000 trees can be saved annually through this reduction at Cowpens • Additional Benefits of reduced Basis Weight • $1.2MM/yr Savings in Raw Materials • Additional linear footage on rolls means less splices, waste, and downtime for our Customers • Reduced Freight (~390 Trucks/yr), Reduced Fuel • More efficient Drying leads to less energy consumed • Reduced Chemical Usage and Cost

35. Thinner Lighter Stronger Paper Improved Margins for Mill and Customers Clean Water

36. A Sustainable Solution Long before Sustainability was an industry and pop culture buzzword, KapStone Paper worked to establish and implement programs and processes that have helped create an industry standard that others now emulate.

37. THANK YOU!