Fortress Specialty Cellulose Mill update

During the second quarter,
the turbine component of the cogeneration project was successfully synchronized
to the power grid on more than one occasion and has operated up to four megawatts
without incident.

The turbine will continue to
undergo a series of additional tests by the manufacturer. Due to an unexpected
mechanical failure of the high-pressure water pump and the backup pump, the
cogeneration project will not be completed by the end of the second quarter as
previously anticipated. The company is currently implementing multiple
solutions to resolve this issue as quickly as possible and is working closely
with the supplier, who has undertaken a comprehensive review of the water pump.

As the current water pump
supplier expects the water pump to be operational in mid-July, the company
anticipates its cogeneration facility producing power before the end of July.
However, in order to mitigate the potential risk of further delays caused by
the current water pump repair not being resolved by such date, the company has
ordered another pump from another supplier which should be delivered in
approximately 10 weeks and require approximately one week to install.

The company will proceed
with the mandatory 100 hour grid test upon the installation of the repaired or
replaced water pump.

"While this further
delay in the start up of the cogeneration facility is frustrating, we remain
confident that in the near term this pump will be repaired or replaced," said Chadwick
Wasilenkoff, chairman and CEO of Fortress Paper. "Once the cogeneration
facility is operational, we will see production costs at the mill improve
towards our originally targeted cost structure."