OPC begins plant upgrades
Okanagan Pellet Company (OPC), a wholly owned subsidiary of Viridis Energy, has commenced a major one to two year plant upgrade that will be conducted in three phases.
The OPC plant upgrades are intended to address new regulatory requirements for safe storage and management of wood pellets and ensure the plant complies with National Fire Protection Association and BC Fire Safety code.
In addition, OPC has entered into a new credit facility with the Royal Bank of Canada (RBC) for $875,000 (€754,000).
The new credit facility is a revolving lease line of credit (the lease line) that bears interest at the annual rate of RBC's prime rate plus 3%, which currently equates to 5.7%. The lease line will be used, in conjunction with OPC cash flow, to fund the first two phases of the upgrade.
The first phase is underway and will provide for a separation of the two main production lines – pellets and shavings – so they can be operated independently. This phase, which is expected to take between eight and 10 weeks during which production will be suspended, also includes improvements in the wood dust management system to ensure continued compliance with the increasingly stringent safety guidelines for the wood industry, implemented in British Columbia.
The second phase includes the addition of new, semi-permanent tent structures for the safe storage of wood fibre. The storage systems will increase OPC's fibre capacity and include the de-commissioning of the current storage building, improving production efficiencies.
The third phase of the upgrades will include the addition of a new pellet press and state-of-the-art dryer that will expand the facility's capacity by approximately 50%. Planning for the third phase will begin in Q4 2015.
This will mark the first significant enhancements of OPC's facility since the plant was acquired by Viridis in April 2010 and are expected to create mid- and long-term increases in revenue and profitability. In the short term, Viridis Energy anticipates incurring a production shortfall of approximately 10,000 tonnes of pellet production; however, it is expected to have less of an impact on sales. OPC is covering its wood pellet delivery obligations through a combination of existing inventory and additional product acquisition via Viridis Merchants (VM).
'Our industry continues to evolve and, with the help of the NFPA, WorkSafe BC and other governing bodies, we are improving our operations to create a safer, more efficient working environment,' says Christopher Robertson, Viridis' CEO. 'The benefit of our VM operations is evident in this situation, in which a shortfall in one area of our business is being addressed by increasing the third-party purchases to fulfil customer orders. We expect OPC production to be more efficient after we complete the first two phases of the plant upgrade as it will mean less down time for manual clean up and dust management.'