Pinnacle to increase capacity at 2 British Columbia pellet plants

By Erin Voegele | May 09, 2019

Pinnacle Renewable Energy has announced plans to expansion production at its Williams Lake and Meadowbank pellet plants. The company also has a plan in place to rebuild the dryer area of its Entwistle plant, which experienced a fire in February.

The company made the announcements during a May 9 earnings call held to discuss first quarter 2019 financial results.

"Our strong first quarter revenue growth reflects early contributions from our new production facilities and the continued market demand," said Rob McCurdy, CEO of Pinnacle, in a statement. "While our profitability in the quarter was negatively impacted by the fire event at Entwistle and higher costs due to record and near record cold temperatures in our northern mill locations, our outlook for the remainder of 2019 is positive. We have restarted operations at Entwistle, our Smithers and Aliceville facilities are moving towards full production as expected, and we are undertaking significant upgrades to our Williams Lake and Meadowbank Facilities that will better position us to adapt to cyclical changes in wood fibre supply in B.C., while also improving production capacity and operating efficiencies."

During the call, McCurdy elaborated on challenges faced by the company during the quarter. In addition to the Entwistle fire, he said the company experienced record cold temperatures over a sustainable period during the quarter. The company’s larger Williams Lake, Meadowbank and Entwistle plants were particularly impacted, McCurdy said, due to their location and the relatively high consumption of high-moisture content fiber. These factors resulted in higher fuel costs for fiber drying and heating, he said, which was further exacerbated by a 15 percent increase in the price of natural gas during the quarter. McCurdy also noted the company’s results were also impacted by a rapid transition to processing a broader fiber mix at some of Pinnacle’s facilities.

Despite these challenges, McCurdy said Pinnacle sold more than 400,000 metric tons of pellets during the quarter, an increase of 23 percent when compared to the first quarter of 2018. Revenue was up 26.2 percent year-over-year, he continued.

The company’s Smithers pellet plant in British Columbia, which was developed in partnership with West Forest Timber Co. Ltd., commenced commercial operations early in the first quarter, McCurdy said. “Early production performance has exceeded our expectations,” he said, noting that operating costs were impacted by adverse weather in January and February. According to McCurdy, the Smithers plans is expected to reach a full production run rate of 125,000 metric tons per year during the third quarter of this year.

Regarding the Aliceville plant in Alabama, McCurdy said safety and operational performance improvements are continuing to progress. Production volumes have improved significantly as ramp up continues, he added. Pinnacle acquired a 70 percent stake in the plant in October 2017 from Westervelt Co., which owns the remaining 30 percent. McCurdy said the companies will be starting the first stage of a $10 million capital improvement program at the Aliceville facility in the upcoming quarter.

Work is also ongoing at the Entwistle plant, which experienced a fire in February. McCurdy said prior to the fire event, the plant was successfully ramping up production in line with the company’s expectations. Early fiber issues were resolved and the process was steadily improving, he said, noting daily production rates were meeting a previously established ramp up curve.

Pinnacle restarted the Entwistle plant in late March using dry fiber. The plant is currently operating at 25 percent to 30 percent capacity, McCurdy said. The company has developed and prepared a plan to restart a dryer at the plant in the fourth quarter.

Pinnacle is also making improvements to its Williams Lake and Meadowbank facilities. Both facilities are located within the Cariboo region of British Columbia.

LeRoy Reitsma, president and chief operating officer of Pinnacle, said that subject to the competition of the permitting process, Pinnacle plans to complete upgrades at the two facilities. These improvements will include the installation of new fiber drying and air filtration equipment, along with improvements to access infrastructure. The $34 million in upgrades will enhance the operating flexibility of the facilities and allow for a combined increase in annual production capacity of 80,000 metric tons, he said. The improvement project is expected to be complete by the end of the fourth quarter.

Reitsma also said Pinnacle is continuing to advance growth projects to meet consumer demand. This includes capacity expansions at existing facilities, new greenfield and brownfield projects and potential acquisitions.

Pinnacle reported revenue of $89.6 million for the quarter, up 26.2 percent from the same period of last year. Adjusted EBITDA was $8.3 million, down from $12 million. Pinnacle sold approximately 402,000 metric tons of industrial wood pellets during the quarter, up 22.6 percent when compared to the first quarter of 2018.