Fortress Paper begins conducting strategic assessment of alternatives for its Thurso, Quebec, specialty cellulose mill in event China imposes dumping tariffs on dissolving pulp imports; mill's cogen plant loses supply pact with Hydro Quebec, will resubmit
VANCOUVER, British Columbia
September 30, 2013
Fortress Paper Ltd. ("Fortress Paper" or the "Company") (TSX:FTP) provides a general corporate update relating to its operations.
Fortress Specialty Cellulose Mill
The Company is pleased to announce that on September 16, 2013 its Fortress Specialty Cellulose Mill (the "FSC Mill") successfully installed a new high pressure water pump for its cogeneration facility and synchronized the cogeneration facility with the Hydro Québec grid without issue. Since the successful installation of the new high pressure water pump, the cogeneration facility has generated 4,617 MW hours in cumulative power and averaged daily electrical output of 20.25 MW per hour. In addition, the boiler, turbine and generator components of the cogeneration facility operated over 96% of the time during this period.
The Company is required to complete a continuous 100 hour grid test before the cogeneration facility can deliver power to the Hydro Québec grid at the contracted rate. Since the installation of the high pressure water pump, the cogeneration facility has operated continuously on two occasions for 71 and 94 hours respectively, but has yet to complete the continuous 100 hour grid test due to minor technical issues which were not directly related to the cogeneration facility and which will be resolved imminently. The Company anticipates completing the 100 hour grid test in the near future.
The Company continues to respond to inquiries from China's Ministry of Commerce ("MOFCOM") relating its investigation into dissolving pulp imports into China, but no date for MOFCOM's final determination on the matter has been set. To mitigate any adverse impacts resulting from the threatened imposition of a dumping tariff by MOFCOM on the import of dissolving pulp into China, and challenges in the dissolving pulp market generally, the Company has begun conducting a strategic assessment of alternatives for the FSC Mill.
During the third quarter, the Company implemented a plan to reduce logistics, transportation and distribution costs at the FSC Mill. As a result, there will be an increase in the finished goods inventory levels, due to the Company retaining ownership of such inventory for a longer period in the sales cycle. Going forward, the Company expects these savings to increase the net realized revenue. Inventories at the FSC Mill may also increase as a result of the uncertainty caused by MOFCOM's investigation resulting in Chinese buyers suspending purchase orders for dissolving pulp.
Fortress Global Cellulose Mill
The Company announces that, as a result of a change in timelines relating to the Fortress Global Cellulose Mill ("FGC Mill") project, it reviewed with Hydro Québec its electricity supply agreement dated September 28, 2012, for the FGC Mill's cogeneration facility, as a result the agreement is no longer in effect. The Company's FGC Mill intends to submit a tender for a new power supply agreement under Hydro Québec's power purchase program request for proposals expiring December 21, 2013. Among other things, the new tender will include a request for an increase in the amount of power to be supplied by the cogeneration facility from the previously approved 34 megawatts to 42 megawatts. There is no assurance that the Company will be granted another power supply agreement. The Company continues to explore strategic alternatives and seek new partners for the FGC Mill project and discussions are continuing with respect to potential revised terms for its project financing.
About Fortress Paper
Fortress Paper operates internationally in two distinct business segments: dissolving pulp and security paper products. The Company operates its dissolving pulp business at the Fortress Specialty Cellulose Mill located in Canada, which is also in the process of expanding into the renewable energy generation sector with the construction of a cogeneration facility. The Company is also seeking to expand its dissolving pulp capacity with the recent acquisition of Fortress Global Cellulose Mill located at Lebel-sur-Quévillon, Québec, which the Company is evaluating to convert into a dissolving pulp mill and re-start the cogeneration facility. The Company operates its security paper products business at the Landqart Mill located in Switzerland, where it produces banknote, passport, visa and other brand protection and security papers, and at its high security production and research facility located in Canada, where it manufactures optically variable thin film material.