Pinnacle reports record pellet sales for 2018

By Erin Voegele | February 25, 2019

Pinnacle Renewable Energy Inc. has released fourth quarter 2018 financial results, reporting record pellet sales, new long-term pellet contracts, and discussing future expansion plans. The company also discussed a recent fire at its Entwistle, Alberta, facility.  

Pinnacle sold a record volume of 1.6 million metric tons of industrial wood pellets in 2018. The company also secured six new long-term contracts with customers in Japan totaling $1.9 billion last year, including an additional contract during the fourth quarter. The company also said it secured two long-term contracts with CGN Daesan Power Co. Ltd. in South Korea last year totaling $1 billion, including an additional contract in the fourth quarter.

"We grew and diversified our customer base with nearly $3 billion in new, long-term contracts in Japan and South Korea," said Rob McCurdy, CEO of Pinnacle, in a statement.  "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."

During an investor call, McCurdy discussed progress made at the company’s new pellet plants in Smithers, British Columbia, and Aliceville, Alabama, along with the Entwistle plant. He said once those facilities are fully operational, they will increase Pinnacle’s annual wood pellet production capacity by 795,000 tons, an increase of 56 percent.  

According to McCurdy, the Smithers and Aliceville plants continue to advance on scheduled. He said the Smithers plant commenced commercial production on Dec. 29. The Aliceville plant is running well, he added.

Regarding Entwistle, McCurdy said the company is making strong progress. He said the storage silo is fully operational and the unit train service is working well. The plant has also addressed initial fiber quality issues, he said, noting fiber processing is improving. McCurdy indicated run rates were meeting expectations prior to the Feb. 11 fire and explosion

According to McCurdy, the fire and explosion occurred in the dryer area of the facility. A statement released by Pinnacle on Feb. 22 notes that one contractor remains in the hospital and six employees and five contractors were treated for minor injuries as a result of the accident. The cause of the fire has not yet been determined. A formal investigation is currently underway by Alberta Labour Occupational Health and Safety.

Operations have been suspended at the facility since the event occurred. OHS released the site back to Pinnacle on Feb. 20, McCurdy said. The company is now working on a two pronged approach, he added. Under the first, the company is assessing damage and rebuilding the dryer. Under the second, he said the plant is expected to resume production using dry fiber in March.

During the call, Leroy Reitsma, chief operating officer of Pinnacle, briefly discussed the company’s future expansion plans. “We continue to advance growth projects through our development blueprint, and have a series of projects that are now nearing the final investment decision,” he said. Reitsma also noted the company has added resources to its capital team in anticipation of an elevated level of growth and added a senior person to the business development team who is situated in the U.S. in anticipation of further diversification of the company’s footprint.

Pinnacle reported fourth quarter revenue of $103.7 million, up 42.2 percent when compared to the same period of the previous year. The increase was primarily attributed to increase sales volumes, which increased 41.6 percent to approximately 473,000 metric tons. Net profit and comprehensive income was $7.5 million, compared to $100,000 during the same period of 2017. Adjusted EBITDA was $13.8 million, up 7.8 percent when compared to the fourth quarter of 2017.

For the full year, revenue reached $347.4 million, up 18.7 percent when compared to 2017. The increase was primarily attributed to increased sales volumes and increase in average sales price per metric ton. Industrial wood pellet sales reached approximately 1.6 million metric tons, up from 1.4 million metric tons in 2017. Adjusted EBITDA was $55.1 million, compared to $56.1 million in 2017.