The California energy company which touted made-in-Northern Ontario green jet fuel just two years ago is now getting into the wood pellet business.
Los Angeles-based Rentech has dramatically changed the scope of its project in Northern Ontario by announcing in early May it had picked up a shuttered Weyerhaeuser fibre board mill in Wawa and the Atikokan Renewable Fuels mill in Atikokan.
In a complex series of moves, Rentech has struck a 50/50 joint venture agreement with Graanul Invest, an Estonian-headquarted pellet producer, and then acquired Georgia-based Fulghum Fibre, considered a leader in wood chip processing services.
Rentech inherits the 10-year off-take agreement that Atikokan Renewables signed last year with Ontario Power Generation (OPG) to supply 45,000 tonnes of pellets to a nearby power generating station, now being converted to burn pellets.
Rentech has also signed a 10-year agreement with Britain's Drax Power to supply them with 400,000 tonnes a year of pellets from Atikokan and Wawa. By 2017, Drax plans to spend (US)$1 billion to convert a former coal-burning power plant in the United Kingdom over to biomass.
Rentech officials were unavailable for comment but CEO Hunt Ramsbottom expressed his excitement to analysts in a May 9 quarterly conference call “about our entry into the wood fibre business.”
Ramsbottom said development on their Northern Ontario projects has already started.
The purchase price of both mills is (US) $9 million with the mill conversions bringing the total capital cost to $70 million, most of which will be spent this year.
To move the product to market, Rentech has struck a deal with Canadian National Railway to transport Wawa and Atikokan pellets to the Port of Quebec for shipment to Europe as early as 2014.
Rentech is promising unspecified job opportunities for First Nations.
Daryl Skworchinski, chairman of the Nawiinginokiima Forest Management Corporation on the north shore of Lake Superior, said he was keeping tabs on Rentech and knew they were leaning toward Wawa but had little idea of the project scale.
“It's extremely positive for the development for our region, the more diversified the landscape the better. There's an opportunity to put the wood to work and we're already having those preliminary discussions with the company.”
Rentech's Wawa mill will need 710,000 metres of Crown fibre.
Two years ago, Rentech received a whopping 1.1-million cubic metres of annual allocation through the province's wood competition. The company had ambitious plans to build a wood-to-aviation fuel refinery in White River, known as the Olympiad Project.
Rentech has ditched those plans and the White River mill has been sold to a new owner with plans to restart the sawmill.
To access Crown wood, Rentech is going to have to reapply, said David Hayhurst, director of the Ministry of Natural Resources' operations branch in Sault Ste. Marie, in an email.
“The wood supply offer...for the proposed Rentech biofuels project was withdrawn and does not follow to Wawa. The Rentech Wawa pellet project is in the process of making business arrangements to access some of this fibre.”
When Weyerhaeuser closed its Wawa mill in 2007, the wood allocation was thrown into the province's supply competition, some of which was awarded to Rentech for White River.
Hayhurst said the MNR is working to transfer the wood supply from Atikokan Renewables over to Rentech.
At the Atikokan mill, owners Ed Fukushima and Larry Levchak of Thunder Bay were already converting an oriented strandboard facility into a pellet mill after landing the supply contract with OPG.
Fukushima said the Rentech acquisition was his best option available to secure European agreements and work out the best financial and logistics solutions.
“The European guys wanted big volume and someone who was willing to take the risk to do the shipping. Because of our size we couldn't take that risk.”
With only 35 per cent of his 120,000-tonne mill capacity earmarked for OPG, Fukushima went looking for European customers and found Drax Power.
“As it turns out, Rentech was looking at the same customer and it went from there,” said Fukushima of the deal which had been in the works for six months. The plant is now sold out at full production capacity.
Fukushima will not retain an ownership stake but will remain involved to ensure the operation runs smoothly.
“With my other companies, we're in the electrical business and we get to supply materials, install and get to automate the place. That's why we got into this in the first place. It's a win for us for sure”.