It’s amazing what can happen in 18 months.
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| A year ago, Rentech had little more than an old particle board processing mill and a nice sign in Atikokan, Ont. The plant is currently in its start-up phase.
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It seems like the anticipation for the opening of Rentech’s pellet production plants in Atikokan, Ont., and Wawa, Ont., has been present for years but, in fact, it has just been 18 months since we learned of the newest player in the Canadian wood pellet industry.
In early May of 2013, the announcement was made that California-based Rentech was purchasing Fulghum Fibres Inc. at a net purchase price of $112 million. The purchase included the Atikokan Renewable Fuels facility in Atikokan, once a particle board processing mill, as well as a former Weyerhauser OSB mill in Wawa. The deal also included logistics agreements with the Port of Quebec and CN Rail.
When the announcement came that both facilities would be converted into wood pellet production plants for domestic and international distribution, it thrust the company, immediately, into the industry spotlight. A solid domestic customer base was already established, as Rentech inherited the OPG Atikokan supply agreement of 45,000 tonnes of wood pellets per year that was originally awarded to Atikokan Renewable Fuels. For international distribution, Rentech wasted little time in establishing a supply contract with Drax in the U.K. once it got the green light to convert the former OSB mill to a pellet plant in November of 2013. Both contracts have led Rentech to pursue full capacity production at both plants as soon as is possible, ultimately producing upwards of 450,000 tonnes of wood pellets per year.
Helping that push to international markets is the logistics chain established through the aforementioned agreements involving CN Rail and the Port of Quebec. The agreement with CN Rail will provide affordable transport of pellets from the remote northern Ontario communities to the Port of Quebec since, by car, Atikokan is over 2100km from the port, while the facility in Wawa is just 1500km.
The agreement with the Port itself, and the subsequent partnership formed with Quebec Stevedoring, provides an ideal solution for shipping pellets to Drax and other potential European customers. The Port of Quebec facility is the largest bulk terminal in Eastern Canada, according to Steve Roberts, Rentech’s managing director – Canada. Roberts made a presentation at the CanBio conference held in Thunder Bay in September.
During his presentation, he discussed the scale of the port terminal in Quebec City-Wolf’s Cove. As part of the 15-year contract between Rentech and Quebec Stevedoring, who controls the handling facility, Rentech will have access to a dedicated unloading, storage and vessel loading facility once construction is complete. That will include dome storage of an estimate volume of 75,000-80,000 tonnes of wood pellets, and will have a shiploader capacity of 1900MT/hr. The facility will have the capability of handling Panamax vessels, the largest ship class that Drax is targeting for pellet transport.
Overcoming challenges
Early in 2014, it looked like there was a possibility that Rentech’s plans might get derailed.
A group called Concerned Rentech Shareholders (CRS) delivered a release to the media in late March citing fiscal mismanagement and a lack of desire to address shareholder concerns. The group was launched by two capital partners and, combined, made up one of the largest shareholders.
But less than two weeks later, the company announced a settlement with CRS and, at the same time, introduced a significant new investor in Blackstone’s GSO Capital Partners. The new investment represented an additional $100 million in cash flow as well as $50 in refinancing for borrowing under margin loans.
That capital announcement came within a few hours of the announcement that Rentech had acquired a 280,000m3 wood supply in central Newfoundland, previously allotted to Abitibi-Boawater’s mill in Grand Falls-Windsor. That acquisition has led to reports of several discussions that have taken place with provincial government officials to discuss potential pellet operations in that province. The Newfoundland-Labrador government has already invested more than $10 million into Holson Forest Products pellet plant in Roddickton. However, that plant has been idled due to complications with storage and a lack of port facilities. There was word in May that company officially had met with the St. Anthony Port Authority. St. Anthony is seen as a potential location for the infrastructure needed to support pellet shipments to European customers.
In May, the company also caught the industry by surprise when it announced the acquisition of New England Wood Pellet (NEWP). NEWP is the largest producer of wood pellet for U.S. pellet heating market, operating three pellet facilities with a capacity production of 240,000 tonnes per year. Combined with production from the two Canadian facilities, the addition of NEWP gives Rentech an overall production capacity of over 750,000 tonnes per year.
Moving forward
In late October, the company officially announced that startup of the Atikokan facility had begun. Within a few weeks following thorough safety inspections, equipment testing and final commissioning, pellet production will commence at the plant.
Coupled with the completion of the pellet plant in Wawa, Rentech will become one of the largest pellet producers in Canada, and one of the few to have a footprint in both the Canadian and American production market. With most of those pellets already spoken for in the domestic and international markets, and a growing appetite for pellets in Europe, Rentech is poised to continue to establish its footprint in the industry.
In just 18 months, Rentech has moved from a veritable unknown to a potential powerhouse in both the national, and the global, wood pellet industry.
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