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Fledgling wood pellet maker preps for European exports

Budding wood pellet producer Rentech Inc. is counting on a new Quebec
City marine terminal to be an important logistical cornerstone of its
Wawa operation.

By way of a 15-year contract with Quebec Stevedoring, the Los
Angeles-based company intends to move pellets through a dedicated
storage and vessel loading facility situated at the port. The terminal
boasts 80,000 tonnes of capacity for wood pellets.

Speaking at the CanBio Conference in Thunder Bay in early September,
Steve Robert, Rentech’s managing director in Canada, emphasized shipping
is a vital component of the emerging biomass industry.

“(This) is the only dedicated port terminal in Eastern Canada that
can really move pellets in really any significant proportion, and it’s a
$25-million project in itself.”

Roberts said even though the new terminal comes with a hefty price tag, in the long run it will help keep costs under control.

“(To get) the economies of scale that are required for an industrial pellet, you have to have dedicated ship loading.”

The pellets moving through the terminal will originate at Rentech’s
plant near Wawa, a converted Weyerhaeuser OSB (oriented strandboard)
mill. It’s currently under construction and slated to be operational by
the end of the year.

The Wawa plant will focus on fulfilling a 10-year contract to supply
400,000 tonnes of pellets annually to Drax Group, a United Kingdom-based
electricity producer. Roberts said Drax’s willingness to sign on the
dotted line really helped things move forward.

“We have worked very hard (with Drax) to come up with long-term
off-take agreements that are fairly unique in this space, that have been
able to be the backstop of bank financing and building these projects.”

As for getting the pellets to port, a journey of more than 1,500 kilometres, Rentech has an agreement with CN Rail.

When faced with the complexities of taking their product to an
international market, Roberts said Rentech decided to bring in outside
expertise: Singapore- based CWT Commodities, a company specializing in
supply chain management.

“The level of sophistication required to get into these supply chains
and manage these supply chains, to manage your rail cars, to manage
when the lake window ends (St. Lawrence Seaway winter freeze-up) and
when your boats arrive at port is a whole industry unto itself.”

The challenge of shipping internationally stands in stark contrast to
Rentech’s smaller Northern Ontario project in Atikokan, a converted
particle board mill that will produce wood pellets for Ontario Power
Generation (OPG).

Rentech originally aimed to start production by summer’s end, but
pushed back the Atikokan launch date to October as some equipment had
yet to be delivered.

That facility’s fuel is destined for OPG’s Atikokan Generating
Station, the town’s former coal-burner that underwent a $170-million
conversion to roast biomass instead.

Like Rentech’s deal with Drax, the company has a 10-year supply
contract with OPG to provide fuel. However, the amount is only 45,000
tonnes a year, just under half of the Atikokan plant’s potential
100,000-tonne output.

Resolute Forest Products is the other pellet supplier.

According to Roberts, the two long-term contracts are especially
important to Rentech as it hopes to eventually take its wood processing
business public through an IPO in the next couple of years.

As for bringing the Atikokan and Wawa plants online almost simultaneously, he said it’s been a tremendous amount of effort.

“I really have to hand it to everybody that’s been involved.
Everybody is going full tilt on our projects right now. Really, if I was
going to summarize my experience of the past 15 to 16 months of putting
these projects together, whatever you think it’s going to take,
multiply by two or three. There is no question there is an insane amount
of work that goes into doing these.”

Roberts declined to do an interview with Northern Ontario Business following his presentation.

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