Canada-headed Pinnacle Renewable Energy Inc. (Pinnacle), the world's second largest pellet producer has provided an update on the Entwistle fire incident in its recently released financial results for fiscal year 2018 revealing record production and revenues."While the fire event that occurred on February 11, 2019, at our Entwistle facility is of concern to everyone at Pinnacle, we are working diligently to resolve this incident and resume production," said Leroy Reitsma, President & COO.
Wood pellet major Pinnacle Renewable Energy (Pinnacle), formerly Pinnacle Renewable Holdings, has recently released its financial results for the 13-week period (Q4 2018) and 52-week period “Fiscal 2018) ended December 28, 2018. Amongst other things, it sold a record volume of 1.6 million tonnes of industrial wood pellets with Fiscal 2018 revenue increasing by 18.7 percent to reach CA$347.4 million, compared to CA$292.7 million in Fiscal 2017.

However, revenue in Q4 2018 was negatively impacted by lower than expected production volumes due to commissioning issues at the Entwistle facility in Alberta (prior the fire event) and challenges associated with the company’s rail services provider.
Almost CA$3 billion in 2018 supply contracts
According to a statement, six new long-term contracts with customers in Japan totaling CA$1.9 billion were secured during Fiscal 2018. This includes an additional supply contract with Sumitomo Corporation (Sumitomo), a large, diversified trading company that was secured on December 28, 2018.
Under the terms of this Pinnacle’s second long-term, take-or-pay contract with Sumitomo, Pinnacle will supply 50 000 tonnes starting in the second half of 2020 for a one-year term. Following the initial one-year term, Pinnacle will supply a total of 150 000 tonnes to Sumitomo for the duration of the contract.
In South Korea, two new long-term contracts were secured with CGN Daesan Power Co., Ltd, a subsidiary of CGN New Energy Holdings Co., Ltd, a diversified independent power producer in Asia totaling CA$1.0 billion. The first contract was secured in June 2018 and entails supplying 315 000 tonnes per annum beginning in 2021.
The second long-term take-or-pay contract with CGN Daesan Power was entered into on December 14, 2018, and under the terms of this contract, Pinnacle will supply 75 000 tonnes to Daesan beginning in 2022.
We grew and diversified our customer base with nearly CA$3 billion in new, long-term contracts in Japan and South Korea. Our same-facility production volume increased 3 percent in 2018, reflecting record performance at our Burns Lake and Lavington Facilities. However, our 2018 financial performance was negatively impacted by challenges commissioning the Entwistle Facility and rail service disruptions said Rob McCurdy, CEO of Pinnacle.
As a result, Pinnacle’s contracted backlog increased to CA$5.9 billion at the end of Fiscal 2018, a 97 percent increase compared to the end of Fiscal 2017, and extended the weighted average remaining life of Pinnacle’s portfolio off-take contracts to nine years.
New capacity entering commercial production
During Fiscal 2018, Pinnacle entered into commercial production at its 400 000 tonne-per-annum facility in Entwistle, Alberta (AB) and started initial production at its new 125 000 tonnes-per-annum 70 percent owned production facility in Smithers, British Columbia (BC).
Furthermore, it acquired a 70 percent stake in a 280 000 tonnes-per-annum pellet production facility in Aliceville, Alabama (AL) marking its entry into the US Southeast fibre basket and the formation of a new strategic partnership with The Westervelt Company.
We made strong progress in advancing our growth objectives in 2018, completing the construction of two new production facilities and acquiring the facility in Aliceville, which increases Pinnacle’s run-rate production capacity by more than 56 percent. While the fire event that occurred on February 11, 2019, at our Entwistle facility is of concern to everyone at Pinnacle, we are working diligently to resolve this incident and resume production, said Leroy Reitsma, President, and COO of Pinnacle.
Entwistle fire incident update
On February 11, 2019, Pinnacle temporarily suspended operations at its Entwistle facility due to a fire and explosion incident that occurred at the dryer area of the plant. The company is currently investigating the cause of the incident while managing the impacts of the incident on its employees, contractors, customers, suppliers, and the neighboring community.
Management, Alberta Labour Occupational Health & Safety (OH&S), local fire authorities, Pinnacle’s insurance adjusters and equipment suppliers, as well as third-party experts, are engaged in an investigation into the accident. OH&S released control of the site back to the company on February 20, 2019.
Prior to the incident, it was “successfully ramping up” production at the plant. The storage silo is now fully operational and unit train delivery service commenced in Q4 2018. Fibre processing was improving and daily production rates were meeting the projected ramp-up curve.
Pinnacle is now working with its insurers, suppliers, and contractors to evaluate the damage and develop a plan to restart the dryer area. The company is working with its customers to mitigate the impact of the temporary operations suspension and expects consistent performance improvement once the plant resumes production.
The rest of the facility sustained little damage and is expected to resume pellet production in March 2019 from dry fibre sources. The financial impact of the recent incident and temporary suspension has yet to be estimated.
Fibre diversification mitigating BC sawmill curtailments
During 2018, a number of BC forest products companies enacted lumber production curtailment policies that have an impact on sawmill residual availability. A fibre diversification strategy has mitigated fibre availability issues and will result in Pinnacle procuring a greater proportion of higher cost harvest residuals such as pulp logs and bush grind.
Furthermore, Pinnacle says that it expects the impact to be mainly limited to some of its fibre sourcing at its Burns Lake and Meadowbank facilities.