ALBERTA (News release) -- Pinnacle Renewable Energy 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, Canada. The facility further diversifies Pinnacle Renewable Energy's fiber 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% interest in the facility.
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 3Q 2019. Initial wood pellet production at the facility is expected to commence in the 4Q 2020.
The capital cost of the facility is expected to be approximately $54 million, with 50% funded by Pinnacle and 50% 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 is a rapidly growing industrial wood pellet manufacturer and distributor and the third largest wood pellet producer in the world.
Tolko is a leading North American manufacturer of a wide range of forest products.
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