Tembec CEO announces plans for C$100M expansion at Temiscaming, Québec, pulp mill, adding 30,000 tonnes/year of specialty dissolving pulp capacity, says plans not yet approved, but signs to go ahead look positive

LOS ANGELES , October 7, 2011 () – Tembec Inc.'s chief executive James Lopez has announced plans that could pave the way to a C$100 million expansion at the company's pulp mill in Temiscaming, Québec, by 2015, The Canadian Press reported Oct. 6.

Lopez made the comments at a New York investor conference, telling delegates that the expansion would increase the plant's specialty dissolving pulp production capacity by 30,000 tonnes/year.

Tembec has identified specialty dissolving pulp as a growth product because of high prices and obstacles to competitors wishing to enter the business, Lopez said. He added that customers would be relieved to hear the announcement as they are calling for more production.

The project would form the second phase of upgrades at the Temiscaming site, and Lopez said signs that it will go ahead are positive, although it has not yet been approved. Funding will come entirely from cash flow, and the expansion could start earlier than planned if profits exceed expectations.

The expansion would add 10 MW of electricity to be sold to Hydro-Quebec. It will also generate annual pretax operating earnings (EBITDA) of $41 million and have a 2.4-year payback period, The Canadian Press reported.

The project would increase Tembec's projected capital spending in Temiscaming to almost $300 million, following the first phase which would see the replacement of three old low-pressure boilers with a single new one. That investment would increase electricity output by 40 MW.

The first phase of the project will be partly funded with a low-interest $75 million loan from the provincial government, with the remaining funds coming from cash flow. It is expected to generate $42 million of EBITDA.

The primary source of this article is The Canadian Press, Montreal, on Oct. 6, 2011.

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