Pinnacle to acquire 70% stake in Westervelt pellet facility
Canada's largest and the world's second largest wood pellet producer, Pinnacle Renewable Holdings Inc (Pinnacle) has announced that it has entered into a definitive agreement to acquire a 70 percent interest in an operating industrial wood pellet production facility located in Aliceville, Alabama (AL) from The Westervelt Company (Westervelt), a diversified land resources company. The deal marks Pinnacle's entry into the Southeast US fibre basket.
According to a statement, the deal increases Pinnacle’s annual production capacity by approximately 270 000 tonnes and establishes a platform for future growth. Westervelt will retain a 30 percent interest in the Aliceville Facility.
Approximately 210 000 tonnes per annum is committed under a long-term off-take contract to a major European utility. The remaining production volume from the Aliceville Facility will be sold through Pinnacle’s contracted backlog of long-term, take-or-pay off-take contracts. Westervelt is currently ramping up production at the Aliceville Facility. Pinnacle is partnering with Westervelt to optimize asset configuration, distribution logistics, and fibre supply.
Our acquisition of a majority stake in this facility will increase our production capacity and establishes a platform for Pinnacle’s future growth in the US Southeast, one of North America’s key fibre baskets. Geographic diversification of our asset base provides us with enhanced flexibility to cost-effectively allocate supply to our customers in Europe and Asia. Through this transaction, we are also pleased to form a partnership with Westervelt, a leading forestry and land resource company in the region. We look forward to working with Westervelt to optimize the production capacity and operating efficiencies at the Aliceville Facility, and to jointly explore other potential future growth opportunities in Alabama and Mississippi, said Robert McCurdy, CEO, Pinnacle.
As part of the transaction, and consistent with Pinnacle’s operating strategy, the Aliceville Facility has now entered into long-term wood fibre supply contracts for residuals with several large local sawmills. Westervelt’s sawmill, located in Moundville, AL, will remain an anchor supplier, ensuring strong alignment between Pinnacle and Westervelt.
Our mutual dedication to safety, environmental responsibility, quality, and our people provides a strong foundation for our partnership. Where Pinnacle brings decades of pellet industry experience, we bring generations of land stewardship and management, our core business competencies. This was a natural partnership because of our shared values, and because this joint venture takes advantage of synergies between the two companies, said Brian Luoma, President and CEO of The Westervelt Company.
Pinnacle expects to fund the purchase of its 70 percent stake in the Aliceville Facility through a draw on its credit facility and cash on hand. The transaction, which is subject to customary closing conditions, is expected to close in early October 2018.