Pinnacle Pellet to build sixth plant

By Anna Austin
Posted September 29, 2010, at 5:06 p.m. CST

Pinnacle Pellet is building a 400,000 metric ton pellet plant near Burns Lake, British Columbia, its sixth location in the province, which will bring its total capacity to 1.1 million metric tons.

"We're well into our civil work and we've got mechanical components showing up every day, as is typical with our build-out schedules," said Leroy Reitsma, chief operating officer at Pinnacle Pellet. "We do a lot of preplanning and everything comes preassembled or modular, so from the time that we commence civil work to when the plant is running is usually only about 120 days."

Aptly named, Pinnacle Pellet resides at top of Canada's wood pellet manufacturing industry, producing more than 50 percent of the country's wood pellets, the majority of which are shipped overseas.

Founded in 1989 by brothers Jim and Rob Swan, today Pinnacle has four other major shareholders, three of whom are actively involved in management of the company, including Reitsma. He and many of the other 160 people working at the company's five strategically-located pellet mills have experience in the lumber industry, he said.

Reitsma said the company expects the new plant to be up and running by the end of the December. The maximum capacity for the facility will be 400,000 metric tons; actual initial production will run around 320,000 metric tons. "All of our other facilities' production numbers total up to about 800,000 [metric] tons, with the Burns Lake facility that will increase to about 1.1 million [metric] tons, and those are real production numbers," Reitsma said.

Pinnacle's plants are located within close proximity to Canadian sawmills. "We've always tried to locate adjacent to industry-leading sawmills to form symbiotic relationships," Reitsma said. "We support their business and provide them with high value for their residuals, and when a plant is associated with a strong sawmill it gets a consistent, reliable supply of residuals. The two operations strengthen and balance each other, and usually mutually ensure success."

Pinnacle's plants utilize a mix of sawmill residuals, and non-merchantable softwood timber, including pine beetle damaged wood. "That's been key with these projects-we've had an overall focus of trying to become an integral part of the overall value chain, a role in which we are the default for whatever can't be put to use as logs to make lumber or used to produce pulp, and so we're the catch-all at the end of the equation," Reitsma said.

The woody biomass is trucked to Pinnacle's plants, and from there the pellets are transported via rail to several British Columbia port facilities including Fibreco Terminal, the Kinder Morgan Terminal in north Vancouver and the Ridley Terminal in Prince Rupert. "Right now we're at a scale where we charter our own product to overseas customers," he said.

Pinnacle's current customer base consists of about 90 percent long-term large-scale utility overseas contracts overseas, according to Reitsma. "A major focus of our marketing plan is to serve large utilities as a coal displacement," he said. About 80 to 85 percent of Pinnacle's pellets are shipped to the U.K. and continental Europe, 8 percent used for domestic residential heating, and the remainder shipped to Asia.

Competition for woody biomass in Canada is at a reasonable level, from Reitsma's perspective. "There's a decent balance of supply and demand in the province right now, but that mainly depends on what is happening in the pulp and paper industry," he said. "When the price of pulp escalates and sawmills are not running at full capacity, pellet mills tend to get choked out. Who ends up with the feedstock is totally end-market driven."