Fortress Starts Cogen Facility at Specialty Cellulose Mill

Fortress Paper Ltd., Vancouver, B.C., Canada, this week announced that its Fortress Specialty Cellulose (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 more than 96% of the time during this period.

The company is required to complete a continuous 100 hr. 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 hr., respectively, but has yet to complete the continuous 100 hr. grid test due to minor technical issues that were not directly related to the cogeneration facility and which will be resolved imminently. The company anticipates completing the 100 hr. grid test in the near future.

Fortress says that it 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 Paper operates internationally in two distinct business segments: dissolving pulp and security paper products. The company operates its dissolving pulp business at the FSC Mill 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 also is seeking to expand its dissolving pulp capacity with the recent acquisition of Fortress Global Cellulose Mill 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 in Switzerland, where it produces banknote, passport, visa, and other brand protection and security papers, and at its high security production and research facility in Canada, where it manufactures optically variable thin film material.

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