Pinnacle adds wood pellet volume

(Posted on 02/01/20)

Pinnacle Renewable Energy has announced the planned construction of a new industrial wood pellet production facility in the southeast United States in close proximity to Pinnacle's Aliceville, Alabama facility (the "Aliceville Facility"). The new facility (the "Demopolis Facility") will be located adjacent to an existing large sawmill in Demopolis, Alabama. The Demopolis Facility is expected to have annual production volume of 360,000 metric tonnes per annum ("MTPA") that will be sold through Pinnacle's contracted backlog of long-term, take-or-pay off-take contracts. Commissioning the Demopolis Facility with initial industrial wood pellet production is expected in the second quarter of 2021.

Pinnacle is a rapidly growing industrial wood pellet manufacturer and distributor and the third largest producer in the world.

The Demopolis Facility will operate under a single partnership with Pinnacle, The Westervelt Company ("TWC"), a diversified land resources company, and Two Rivers Lumber Company, LLC ("TRL"), a McElroy Enterprises company, holding a 70%, 20% and 10% interest, respectively. TWC will sell a 10% interest of its currently held 30% interest in the Aliceville Facility to TRL. Under the terms of the partnership, Pinnacle will operate the Demopolis Facility and manage all aspects of customer relations, marketing, sales, and logistics. Anticipated capital costs to construct the Demopolis Facility is expected to be approximately US$99 million, and Pinnacle will fund its portion of the capital costs from draws on its existing credit facilities. Pinnacle expects the capital cost to be toward the upper end of its capital cost to run-rate EBITDA ratio target range.

The Demopolis Facility, to be located on the same river system as the Aliceville Facility, will be constructed to ensure finished pellets can be barged and loaded at the port in Mobile, Alabama, which is the same port used for pellets produced at the Aliceville Facility. The Demopolis Facility is currently in the final stages of design and construction planning and permit applications have commenced. Long-term fibre supply agreements have been completed with the majority of suppliers, including TWC and TRL.

"Building on our early success at the Aliceville Facility, which is currently producing wood pellets ahead of the commissioning curve, we are pleased to be expanding our presence in the U.S. southeast and leveraging the existing relationships and infrastructure we have established in the area," said Rob McCurdy, CEO of Pinnacle. "The U.S. southeast expansion further aligns the Company with our partners and fibre suppliers and allows for flexibility to optimize fibre flow between the facilities, while further diversifying our business in the region, which will see approximately 660,000 MTPA of pellet production once fully commissioned."

Brian Luoma, President and CEO of The Westervelt Company says "Since we began working with Pinnacle last year at the Aliceville mill, we have built a strong partnership based on our shared commitment to safety, quality, environmental responsibility and our communities. This new venture with Pinnacle and Two Rivers allows Westervelt to participate in a growing market while capturing the advantages of the abundant resources in this area. Whether it's industry experience, supply chain advantages or land management expertise, this partnership will benefit from the strengths of each of the companies involved."

Jay McElroy, President of TRL said "We are excited to partner with Pinnacle and Westervelt in the expansion of their U.S. southeast wood pellet production. Both organizations have great reputations and success stories. This partnership accomplishes our goal to further expand our investment into wood products and build upon our businesses in the region."

Pinnacle produces sustainable fuel for renewable electricity generation in the form of industrial wood pellets. This fuel is used by large-scale thermal power generators as a greener alternative to produce reliable baseload renewable power.