The project is the first phase of a two-phase investment plan for the facility. It will involve the replacement of three old boilers with a new high-pressure boiler designed to burn waste sulfite liquor, a co-product of the specialty cellulose manufacturing process, producing green steam for use at the facility. The project also calls for the installation of a new electricity turbine that will be driven by this steam. The turbine will increase the Temiscaming facility's green electricity production capacity from its current 10 MW to, eventually, 60 MW. The boiler is scheduled to startup in December 2013, followed by the turbine, in May 2014.
Hydro-Québec will offtake the additional green electricity produced by this turbine under a 25-year contract at $106 MW/hr, indexed with CPI, which will strengthen and stabilize Tembec's revenues through the economic cycle.
The $190 million investment in Phase 1 will be financed with $105 million of new debt, which includes a $75 million loan from Investissement Québec; the balance of $85 million will come from free cash flow from Tembec operations.
"This game-changing project for Tembec will make Temiscaming one of the most competitive mills in the global pulp and paper market. I want to acknowledge the critical support of the Québec Government, through Investissement Québec, and the continuing commitment of our employees to remaining competitive," said James Lopez, Tembec's president and CEO.
"This exciting project shows Québec's commitment to supporting its regional resource-based industries, and helping them compete on the world stage. By working together proactively with local governments and Investissement Québec, we are pleased to reinforce Tembec's leadership position in specialty cellulose, a growing and sustainable industry," stated Québec Premier Jean Charest.
Once the new equipment is in operation, Tembec expects a four-year return on investment, through new revenues from green electricity, the additional production of 5,000 metric tons of specialty cellulose, and lower costs. Tembec's management expects the project will reach an annual run-rate EBITDA (earnings before interest, taxes, depreciation and amortization) contribution of approximately $40 - $45 million by fiscal year 2015, assuming implementation as scheduled and planned.
The new boiler, turbine, and emission control equipment will be sized to accommodate Phase 2 of the project, a follow-on investment of $120 million which is currently projected for 2014 – 2015. Phase 2 would increase Temiscaming's annual specialty cellulose production capacity by 30,000 metric tons, boost green electricity generation by 10 MW to attain full turbine capacity, and further reduce operating costs.
Tembec's combined investment of $310 million in the Temiscaming specialty cellulose facility—$190 million in Phase 1 and $120 million in Phase 2—will be one of the largest in the forest products industry in many years. It will further reinforce Tembec's position as the world's second leading producer of specialty cellulose. The overall project will increase Tembec's annual production capacity of specialty cellulose from the current 310,000 metric tons to 345,000 metric tons.
The Temiscaming facility's production capacity will increase from the current 160,000 metric tons to 195,000 metric tons. Tembec's Tartas, France, specialty cellulose facility has a current production capacity of 150,000 metric tpy.
TAPPI
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