Majority stake of Aliceville plant sold

A Canadian wood pellet manufacturer, producer and distributor has agreed to acquire a 70 percent stake in an Aliceville wood pellet plant owned by Westervelt Co.

Announced Thursday, Tuscaloosa-based Westervelt officials said this transaction marks Pinnacle Renewable Holdings' first entry into the Southeastern U.S. wood fiber market and will increase the Vancouver-based company’s annual production capacity by approximately 270,000 metric tons.

“Our acquisition of a majority stake in this facility will increase our production capacity and establishes a platform for Pinnacle’s future growth in the U.S. Southeast, one of North America’s key fiber baskets,” said Pinnacle CEO Robert McCurdy in a press release announcing the transaction. “Geographic diversification of our asset base provides us with enhanced flexibility to cost-effectively allocate supply to our customers in Europe and Asia.”

The purchase amount was not disclosed.

The market for wood pellets, generally produced from the leftover scraps at lumber mills or branches and other woody material collected from forests floors, has been growing in recent years.

While the material can be used to for commercial or residential heating and cooking, it’s primarily used as fuel for heating sources in Europe, where wood is steadily being used as an alternative to coal for producing heat and electricity, according to a 2015 report in Forbes magazine.

The Aliceville facility has an annual production capacity of around 270,000 metric tons of industrial wood pellets. Of this, about 210,000 metric tons per year is committed under a long-term contract to a major European utility, the companies said.

“We look forward to working with Westervelt to optimize the production capacity and operating efficiencies at the Aliceville facility, and to jointly explore other potential future growth opportunities in Alabama and Mississippi,” McCurdy said.

The remaining production volume from the Aliceville facility will be sold through Pinnacle’s backlog of long-term contracts.

Westervelt is currently ramping up production at the Aliceville facility, and Pinnacle is partnering with Westervelt to improve asset configuration, distribution logistics and fiber supply.

“Our mutual dedication to safety, environmental responsibility, quality and our people provides a strong foundation for our partnership,” said Brian Luoma, president and CEO of the Westervelt Co., in the press release. “Where Pinnacle brings decades of pellet industry experience, we bring generations of land stewardship and management, our core business competencies.

“This was a natural partnership because of our shared values, and because this joint venture takes advantage of synergies between the two companies.”

As part of the transaction, and consistent with Pinnacle’s operating strategy, the Aliceville facility has now entered into long-term wood fiber supply contracts for residuals with several large local sawmills.

Westervelt’s sawmill, located in Moundville, will remain an anchor supplier for the Aliceville facility.

The transaction, which is subject to customary closing conditions, is expected to close in early October.