Pinnacle discusses entrance into US pellet market

By Erin Voegele | September 11, 2018

During a recent investor call, Pinnacle Renewable Holdings Inc. provided details on the company’s entrance to the U.S. pellet market through the acquisition of the majority share in an Alabama pellet plant and indicated plans for continued growth.

On Sept. 6, Pinnacle announced it has entered into a definitive agreement to acquire a 70 percent interest in an operating industrial wood pellet plant in Aliceville, Alabama, from the Westervelt Co. Westervelt will retain a 30 percent interest in the 270,000-metric-ton-per-year facility.

The following day, executives from Pinnacle hosted an investor call to discuss the transaction.

During the call, Robert McCurdy, CEO of Pinnacle, noted that the acquisition was not the result of a competitive bid process. Rather, he said Westervelt was looking for a partner, asked key people, and received a recommendation to approach Pinnacle.

Regarding the transaction, McCurdy said Pinnacle views the plant as an entry point into the U.S. Southeast market and a great platform for growth, noting the region offers exciting opportunities for Pinnacle in the future. “This transaction is highly strategic for us,” he said. “It serves as a platform for growth in this area.”

Westervelt is currently ramping up production at the Aliceville facility. Pinnacle is partnering with Westervelt to optimize asset configuration, distribution logistics and fiber supply.

Leroy Reitsma, president and CEO of Pinnacle, said this includes the addition of safety enhancements to the process that his company can bring to the table. He also noted the plant is able to handle a diverse input of fiber. Previously, Reitsma said the operation was 100 percent based on round wood chipping. However, the growth in sawmilling in the region will allow the plant to primarily utilize residuals. He said Pinnacle will help optimize the facility for the use of these wood fiber residuals.

According McCurdy, the transaction provides Pinnacle with immediate production volumes in the U.S. Southeast, eliminating the time and expenses associated with greenfield development. He also said the acquisition provides his company with a future platform to work with both Westervelt and other fiber partners in the region.

McCurdy noted that Pinnacle was clear during its initial public offering (IPO) process that it would seek to expand its operations across North America, including potential expansions into in Eastern Canada, the U.S. South, and the Pacific Northwest. He said the Aliceville plant is a “great springboard into areas where we see a lot of very high potential opportunities for ourselves.” He also stressed that having the right talent on your team is a key element to a successful entrance into the Southeast pellet market. “I think what makes this such a valuable transaction to us is it comes with some really good people and a really good relationship base on which to make some of those decisions.”