Calorific values of solid sludge obtained from paper recycling mill rejects were estimated by first drying the sludge in a pilot scale rotary dryer and then determining the heat of combustion of these sludge samples. Sludge samples with varying moisture and inorganic contents were studied. Study revealed that a net thermal energy saving was possible by optimizing final moisture content of sludge before combustion. Sludge containing high amount of inorganic components needs to be dried to a final moisture content sufficient enough to ensure a net energy saving after drying and combustion. Thus, high inorganic containing sludge samples from a fine paper recycling mill generated significantly less energy compared to that of a deinking mill sludge which was more rich in fiber content. Although the presence of inorganic components, decomposable fillers in particular, and moisture in sludge negatively influenced the energy recovery, a net gain in the thermal energy was obtainable from all the three studied sludge compositions by optimizing the residual moisture content during drying of the wet sludge.