Pinnacle and Tolko to build new pellet facility in Northern Alberta

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Pinnacle/Tolko/Fordaq
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Pinnacle Renewable Energy announced that it has entered into a limited partnership agreement with Tolko Industries Ltd. to build Northern Pellet Limited Partnership, a new industrial wood pellet production facility in High Level, Alberta. The facility further diversifies the company's fibre supply using high-quality wood fibre sourced primarily from Tolko's existing sawmill in High Level.

The facility is expected to have a run-rate production capacity of 170,000 to 200,000 metric tons per annum. Annual production volumes from the facility will be sold through Pinnacle's contracted backlog of long-term, take-or-pay off-take contracts. Under the terms of the Partnership, Pinnacle and Tolko will each own a 50 percent interest in the facility.

Under the terms of the partnership, Pinnacle will operate the facility and manage all aspects of customer relations, marketing, sales, and logistics. Tolko will supply both heat energy and fibre to the facility under long-term supply agreements. The facility, which will be built on land owned by Tolko, will begin construction in the third quarter of 2019.

Initial wood pellet production at the facility is expected to commence in the fourth quarter of 2020. The capital cost of the facility is expected to be approximately $54 million, with 50 percent funded by Pinnacle and 50 percent by Tolko. Pinnacle expects the capital cost to be in line with its capital cost to run-rate EBITDA ratio target range. Pinnacle will fund its portion of the capital costs from draws on its recently expanded credit facilities.

Pinnacle operates eight industrial wood pellet production facilities in western Canada and one in Alabama and owns a port terminal in Prince Rupert, B.C. The company has entered into long-term take-or-pay contracts with utilities in the U.K., Europe, and Asia that represent 109% of its production capacity through 2021 and 109% of its production capacity through 2026.

Tolko is a leading North American manufacturer of a wide range of forest products, including lumber, plywood, veneer, oriented strand board, co-products, biomass power and a growing number of specialty wood products.

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