Fortress Paper Updates Progress at Four Mills

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Fortress operates its dissolving pulp business at the Fortress Specialty Cellulose Mill, which is also in the process of expanding into the renewable energy generation sector with the construction of a cogeneration facility, which, it says, is proceeding generally as planned with some minor delays due to delivery impediments of major equipment. The turbine and generator are on site and installed with delivery of the final critical path item expected late this month. The cogeneration facility is expected to be delivering power in January. The company recently acquired the Fortress Global Cellulose Mill located at Lebel-sur-Quévillon, Qué., Canada, which it intends to convert into a dissolving pulp mill.

The Fortress Specialty Cellulose Mill has confirmed that the annual maintenance shutdown will be taken the last week of this month. During this outage, critical electrical work will also be completed to allow connection of the new power generating facility to the grid. This is the first scheduled maintenance shutdown since the mill commenced producing dissolving pulp, and it is anticipated that the next annual maintenance cycle may also require a higher level of planned maintenance downtime.

During August, the specialty cellulose mill operated at an average monthly rate of 83% of planned production capacity, with steady progress being made on de-bottlenecking activities. Production of dissolving pulp was recently curtailed for an equivalent of four days of pulp production as a result of a premature tube failure in the mill's No. 2 recovery boiler. The boiler and full mill were shut down safely to complete repairs and are now operating normally. The curtailment and subsequent ramp-up reduced the mill's overall production efficiency for the month.

Initial work has commenced at the Fortress Global Cellulose Mill following the close of the acquisition this past June, including building and equipment repair and the reactivation of services and utilities in a planned sequence. Water supply and fire protection services are operational and the high voltage distribution network is in the process of being reactivated. Critical equipment assessment is ongoing and the company is finalizing refurbishment plans for the key process areas. Various cost saving and asset preservation plans are being developed ahead of the coming winter season. To date, pulp mill repairs and re-commissioning activities are proceeding materially as planned.

The Fortress Global Cellulose Mill has also received an official authorization permit from the Québec Ministère du Développement durable, de l'Environnement et des Parcs. This permit is required to proceed with the construction of the new dissolving pulp plant.

Following the filing of its application with Hydro-Québec Distribution, the Fortress Global Cellulose Mill has received approval for its cogeneration project at Lebel-sur-Quévillon and is working with Hydro-Québec toward the conclusion of the power purchase agreement, expected to be completed shortly.

At the Dresden mill, continued growth of the worldwide market for non-woven wallpaper base has exceeded management's expectations and the mill is maintaining its position as a leader in this market, the company notes. During the general maintenance shutdown of the mill in the first 10 days of August, the company completed the main portion of its 2012 capital expenditures program. To date in 2012, the company has spent approximately EUR 3.7 million in Capex with the goal of increasing production speed from 450 m/min to approximately 475-500 m/min, depending on the product mix, and thereby increasing its theoretical annual production capacity from approximately 56,000 metric tpy to approximately 60,000 metric tpy. This increase in production capacity would enable Dresden to maintain its market share of approximately 50% of the world-wide non-woven wallpaper base market.

Although the Landqart Mill had another challenging month in July, results in August show a marked improvement with product shipments commencing for the large re-instated banknote substrate order, Fortress reports. Although waste rates remained relatively high during this period, they are decreasing and are coming in-line with expectations.