Pinnacle and Tolko partner in new Northern Alberta pellet project
In Canada, wood pellet producer Pinnacle Renewable Energy Inc., (Pinnacle) has announced that it has entered into a limited partnership agreement with forest industry major Tolko Industries Ltd. (Tolko) to build Northern Pellet Ltd, a new industrial wood pellet production facility in High Level, Alberta (AB).
For Pinnacle, the facility further diversifies fibre supply by using high-quality wood fibre sourced primarily from Tolko’s existing sawmill in High Level. Under the terms of the Partnership, Pinnacle and Tolko will each own a 50 percent interest in the Northern Pellet Ltd facility, which is expected to have a run-rate production capacity of 170 000 to 200 000 tonnes per annum.
We look forward to expanding our business relationship with Tolko, growing our production platform in Alberta and further diversifying our regional fibre supply. We have established a strong working relationship with Tolko through the construction and operation of our jointly-owned Lavington, B.C. production facility, which was completed safely, on-time and on-budget. Our partnership with Tolko offers Pinnacle the ability to diversify the business further and position the Company well to implement our growth strategies, said Robert McCurdy, CEO of Pinnacle in a statement on July 4, 2019.
Annual production volumes from the Northern Pellet facility will be sold through Pinnacle’s contracted backlog of long-term, take-or-pay off-take contracts.
We’re excited to once again partner with Pinnacle Renewable Energy on a project that promises to bring economic, environmental, and employment benefits to both companies and the community of High Level. When commissioned, Northern Pellet Limited will reduce our carbon footprint, secure and increase full-time permanent employment opportunities in the area, and allow us to use all our bark, shavings, and sawdust to produce pellets for growing markets. We look forward to working with Pinnacle on the project and to a successful, on-time, on-budget completion, with start-up in 2020, commented Brad Thorlakson, President & CEO of Tolko.
First pellets expected by end of 2020
Under the terms of the Partnership, Pinnacle will operate the pellet plant and manage all aspects of customer relations, marketing, sales, and logistics. Tolko will supply both heat energy and fibre to the facility under long-term supply agreements. The plant, which will be built on land owned by Tolko, will begin construction in the third quarter of 2019.
Initial wood pellet production at the plant is expected to commence in the fourth quarter of 2020. When complete, the plant will bring approximately 25 direct full-time jobs to the community and will use state-of-the-art technology to produce pellets and will also use pollution control equipment that meets the requirements of Alberta Environment and Parks.
With the job creation tax cut and other bold government initiatives, we want job creators to know that Alberta is Open for Business. On behalf of the Alberta Government, I would like to thank Tolko and Pinnacle for their investment and the dozens of new jobs that they will create for families in Alberta, remarked Devin Dreeshen, Alberta’s Minister of Agriculture and Forestry.
The capital cost of the new facility is expected to be approximately CA$54 million, with 50 percent funded by Pinnacle and 50 percent by Tolko. Pinnacle expects the capital cost to be in line with its capital cost to run-rate EBITDA ratio target range. Pinnacle will fund its portion of the capital costs from draws on its recently expanded credit facilities. for
For Tolko, an additional CA$33 million is being invested for the biomass thermal energy plant, which the company says is an “exciting example of the many resource-based opportunities that exist in Alberta, which has a well-managed timber supply and policies that support the long-term success and development of the forest industry.”