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Fortress Paper reports Q1 loss and new co-gen contract

After taking downtime at its Quebec mill for much of the first quarter, Fortress Paper Ltd. reported a 2014 first quarter EBITDA loss of $13.6 million. The Dissolving Pulp Segment, comprised of the Fortress Specialty Cellulose mill in Thurso,…

After taking downtime at its Quebec mill for much of the first quarter, Fortress Paper Ltd. reported a 2014 first quarter EBITDA loss of $13.6 million. The Dissolving Pulp Segment, comprised of the Fortress Specialty Cellulose mill in Thurso, Que., generated EBITDA loss of $15.2 million while the Security Paper Products Segment generated EBITDA of $3.2 million.

After planned market downtime through to early March 2014, the Fortress Specialty Cellulose mill restarted production. Using its ability to swing production between two types of pulp, the mill produced 14,130 ADMT of northern bleached hardwood kraft pulp.

Results from the Dissolving Pulp Segment reflect the downtime in the quarter combined with challenges during the subsequent ramp-up of both the Fortress Specialty Cellulose mill and cogeneration plant. In addition, continued delays in negotiations with customers due to the impact of the interim duty imposed by China’s Ministry of Commerce (“MOFCOM”), the final determination of which was announced in April of this year, has resulted in higher logistics costs, such as demurrage, customs and storage, the company explained.

Production at Fortress Specialty Cellulose transitioned to dissolving pulp mid-April. Fortress management states that production efficiencies and cash costs are improving.

In addition, the Thurso site has been awarded by Hydro Québec a power supply agreement for an additional 5.2 megawatts of power to be produced at its cogeneration facility. Yvon Pelletier, president of Fortress Specialty Cellulose Inc., said expanded power supply agreement “will allow us to better utilize the potential of our cogeneration facility and produce more environmentally friendly green energy for the region. The increased revenue from the additional 5.2 megawatts of power delivered under this new agreement will further improve the economics of the FSC Mill and reflects the value of the cogeneration facility.”

Fortress states that this increase will result in significant incremental revenue, which will translate into an anticipated overall cost savings at the FSC Mill of approximately $2.7 million annually with an opportunity for further optimization.

The amount of green power supplied by the FSC Mill’s cogeneration facility to Hydro Québec will increase from the current amount of 18.8 megawatts of power to 24 megawatts of power. The FSC Mill is expected to begin delivering the additional power in April 2015, at the latest, with a provision to start delivering power as early as the fourth quarter of 2014.