Pinnacle to acquire 70% stake in Alabama pellet plant

Pinnacle Renewable Holdings Inc. today 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, from The Westervelt Co., a diversified land resources company. Westervelt will retain a 30 percent interest in the Aliceville facility.

The Aliceville facility has an annual production capacity of approximately 270,000 metric tons of industrial wood pellets. Approximately 210,000 metric tons 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. Run-rate EBITDA per metric ton is expected to be in line with Pinnacle's other production facilities and the capital cost of the Aliceville Facility will be within Pinnacle's target range of 4.0x to 5.5x run-rate EBITDA.

Westervelt is currently ramping up production at the Aliceville facility. Pinnacle is partnering with Westervelt to optimize asset configuration, distribution logistics and fiber 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 U.S. Southeast, one of North America's key fiber baskets. Geographic diversification of our asset base provides us with enhanced flexibility to cost-effectively allocate supply to our customers in Europe and Asia," said Robert McCurdy, CEO of Pinnacle. "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."

"Our mutual dedication to safety, environmental responsibility, quality and our people provides a strong foundation for our partnership," said Brian Luoma, president and CEO of The Westervelt Co. "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."

As part of the transaction, and consistent with Pinnacle's operating strategy, the Aliceville facility has now entered into long-term wood fiber supply contracts for residuals with several large local sawmills. Westervelt's sawmill, located in Moundville, Alabama, will remain an anchor supplier, ensuring strong alignment between Pinnacle and Westervelt.

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 purchase will provide accretive free cash flow per share on an annualized basis. Pinnacle's debt to EBITDA ratio for the next fiscal quarters will reflect this acquisition investment and Pinnacle's new production facility additions, but will be in line with Pinnacle's target of under 3.3x as commissioning progresses and production is ramped up at the new facilities. The transaction, which is subject to customary closing conditions, is expected to close in early October 2018.