PRINCE GEORGE, B.C., February 25, 2008 (Prince
George Citizen) — Canfor Pulp is planning to become an
electricity producer using wood waste to answer B.C. Hydro's call
for green power.
Potentially, the project -- which is being fleshed out now -- could
be a big one.
For the past year, Canfor Pulp has been examining a range of
projects, but is focusing on a location next to one of its three
pulp mills in Prince George.
Canfor Pulp president and CEO Paul Richards said it makes more
economic sense to build a project that can utilize the heat that is
generated along with the electricity.
Richards provided an update to analysts on the project -- of which
there has been little public discussion so far -- during a
conference call on the company's year-end financial results this
Richards told analysts he still favors a larger project.
"My own desire would be to be bigger than smaller, but I'm being
reined in a little," he said. "So, we're looking potentially at
another co-gen facility, but there are other options we're looking
at as well."
A 60-megawatt capacity co-generation facility -- so called because
it generates both electricity and the heat Richards mentioned --
was completed at P.G. Pulp and Paper in 2006. The $130-million
project was designed to replace power being supplied by B.C. Hydro,
whereas a new project would be designed to provide power to the
provincial grid and help meet B.C.'s growing electricity
Richards told analysts that planning for the project has been
complicated by sawmill shutdowns from the U.S. housing collapse,
which makes it uncertain how much hog fuel will be available to
feed the power project.
He noted that Canfor Pulp is working closely with Canfor Corp.,
which operates sawmills and panel plants, and that a steering team
has been put together with senior staff from both companies. Canfor
Corp. spun off its three Prince George pulp mills into the Canfor
Pulp trust in 2006, but has retained a 50.2 per cent stake in the
Richards also noted that recently a project manager was hired to
provide expertise. The outside hire is from Poyry, a global
consulting and engineering firm.
The merits of this type of project were also laid out at a Raymond
James investor conference in New York last fall.
In his presentation, Richards noted there was an "energy
opportunity" in the Interior because of available wood fiber, which
included material from remaining beehive burners. Richards noted
that Canfor Pulp was capable of a significant expansion of power
generation and was also optimally located in the heart of the pine
Premier Gordon Campbell's bioenergy strategy, released recently in
Prince George, highlighted the opportunities from the massive
amounts of dead pine that will be left in the wake of the beetle
In an interview, Richards said a big issue will be the availability
of wood fiber, so the steering committee is examining supply from
sawmills, road-side logging debris and standing timber.
He said at the same time the company is determining B.C. Hydro's
needs. "If we can give them something that makes sense at 25
megawatts, for them that's OK, but if we can give them 100
megawatts, they would be more favorable to that," said
They're also examining if the project could be designed to deliver
spin-offs to Canfor Corp.'s solid wood side. For example, he said,
if a project was built at Northwood Pulp, it may be possible to
deliver benefits to nearby P.G. Sawmill.
B.C. Hydro's first call for proposals is expected soon, and
Richards said their submission will be fine tuned in the next few
months. "They want to make sure our intentions are there, otherwise
they're going to look to somebody else," he said.
Richards cautioned though that should a project go forward, it will
be two years before it's complete, particularly if a provincial
environmental assessment is required.
Forest industry analyst Mark Bishop estimated that depending on the
size of the project it could cost anywhere from $25 million to $250
Bishop, an analyst with RBC Capital Markets, said he believes a
power project tied to a pulp mill makes sense over stand-alone
independent power projects. The B.C. pulp and paper sector has
voiced concerns that the province's bioenergy strategy will create
new players that will compete for wood residue.
Bishop also noted that power projects would provide another revenue
stream for pulp mills, helping stabilize their business in the face
of growing global competition.
Canfor's three pulp mills in Prince George employ 1,250