July 23, 2015 - Viridis Energy Inc., recently announced that its wholly-owned subsidiary, Okanagan Pellet Company Inc. (OPC), has commenced a major one- to two-year plant upgrade that will be conducted in three phases. The OPC plant upgrades are intended to address new regulatory requirements for safe storage and management of wood pellets and ensure the plant complies with National Fire Protection Association and B.C. Fire Safety code.
The company additionally announced that OPC has entered into a new credit facility with the Royal Bank of Canada (“RBC”) for $875,000. The new credit facility is a revolving lease line of credit (the “Lease Line”) that bears interest at the annual rate of RBC’s prime rate plus 3%, which currently equates to 5.7%. The Lease Line will be used, in conjunction with OPC cash flow, to fund the first two phases of the upgrade.
The first phase is underway and will provide for a separation of the two main production lines, pellets and shavings, so they can be operated independently. This phase, which is expected to take eight to 10 weeks during which production will be suspended, also includes substantial improvements in the wood dust management system to ensure continued compliance with the increasingly stringent safety guidelines for the wood industry, implemented in British Columbia.
The second phase includes the addition of new, semi-permanent tent structures for the safe storage of wood fiber. The storage systems will substantially increase OPC’s fiber capacity and include the de-commissioning of the current storage building, improving production efficiencies. The third phase of the upgrades will include the addition of a new pellet press and state-of-the-art dryer that will expand the facility’s capacity by approximately 50%. Planning for the third phase will begin in Q4 2015.
This will mark the first significant enhancements of OPC’s facility since the plant was acquired by Viridis in April 2010 and are expected to create mid-term and long-term increases in revenue and profitability. In the short term, the Company anticipates incurring a production shortfall of approximately 10,000 tons of pellet production; however, it is expected to have less of an impact on sales. OPC is covering its wood pellet delivery obligations through a combination of existing inventory and additional product acquisition via Viridis Merchants Inc. (VMI). Company management plans to provide further detail on the short-term impact of the plant upgrade during the Company’s second quarter financial results announcement in August.
“Our industry continues to evolve and, with the help of the NFPA, WorkSafe BC and other governing bodies, we are improving our operations to create a safer, more efficient working environment,” said Christopher Robertson, Viridis’ CEO. “The benefit of our VMI operations is evident in this situation, in which a shortfall in one area of our business is being addressed by increasing the third-party purchases to fulfill customer orders. We expect OPC production to be more efficient after we complete the first two phases of the plant upgrade as it will mean less down time for manual clean up and dust management.”