Pinnacle Renewable Energy announced its financial results for the fourth quarter of 2020, reporting a 27.8% revenue increase compared to the same period in 2019.
Revenue in Q4 2020 was $116.9 million (€76.3 million), up by $25.4 million (€16.5 million) on Q4 2019. The company’s net loss was $2.5 million (€1.6 million) in Q4 2020 compared to $3.1 million (€2 million) in 2019. The net loss for Q4 includes $10.1 million (€6.5 million) for expenses related to the proposed acquisition of Pinnacle by Drax Group.
Pellet production in Q4 was 489,000 MT, 11% higher than the same quarter in 2019, but 17% below Q3 2020. Shipments totalled 526,000 MT, 24% more than in Q4 2019, but 12% below the previous quarter. A total of 39,000 MT of third-party pellets were purchased in Q4 compared with 16,000 MT in the same period in 2019, and 15,000 MT in Q3 2020.
Production at Pinnacle’s Houston plant was suspended on 25 November following a fire-related incident in the dryer area of the mill. Production resumed on 10 December on a reduced basis. A plan to repair the dryer and other equipment damaged in the incident at a cost of $5.5-6 million (€3.5-3.9 million) has been developed and will be covered by the firm’s insurance policies. The incident affected production at the Houston plant by 16,000 MT during the quarter.
Due to operating and reliability issues at the company’s Aliceville plant, there was a loss of 20,000 MT during Q4. There were several unplanned shuts related to mechanical and electrical failures and the reinforcement of safety standards.
Operating disruptions at Pinnacle’s Lavington and Armstrong plants in the British Columbia (B.C.) interior stemming from congestion at the Fibreco terminal in North Vancouver resulted in the loss of around 5,000 MT of production during Q4 2020.
The company said the impact on service levels at the terminal as a result of the Fibreco grain silo collapse has been ‘more extensive’ and will take longer to resolve than initially expected. In addition to the impact on production, Pinnacle incurred approximately $500,000 (€326,000) in additional inland transport costs and demurrage associated with the incident in Q4. Around 9,000 MT of production was lost due to the CN service disruptions associated with the Fibreco incident.
The combination of lower production volumes and inclement weather in B.C. and Alabama, which impacted the pace of ship loading, had a negative impact on shipment volumes and revenues in Q4.
Pinnacle also reported a reduced supply of sawmill residuals, which dropped from 84% of the firm’s feedstock in Q3 2020 to 77% in Q4. This was due to reduced sawmill operating rates in the last two weeks of the quarter, and a company decision to utilise a higher level of fibre inventory as feedstock during Q4. Overall, fibre costs were up 3% quarter-over-quarter.
High Level, Alberta
A total of 8,000 MT of pellets were produced at the newly commissioned plant in High Level in Q4. While production levels were ahead of the firm’s commissioning plan, its adjusted EBITDA was negatively impacted by $700,000 (€457,000) in Q4 as operating costs at the plant were amortised over a ‘relatively small’ volume of production.
The 200,000 MT mill at High Level was completed during Q4 2020 and is owned 50% by Pinnacle and 50% by Tolko Industries. Pinnacle contributed $10.1 million (€6.5 million) to the project, bringing its total expenditures to $33.9 million (€22.1 million), or around 99% of its share of estimated total project costs.
Construction at the 360,000 MT per year mill at the Demopolis facility continued during Q4. Pinnacle has a 70% interest in the plant. Initial production at Demopolis is expected in Q2 this year.
Additional costs incurred to advance the electrical scope of the project and a barge loading area will add a further $4.5 million (€2.9 million) to the cost of the project, bringing the total capital investment at Demopolis to $133.2 million (€86.3 million), with Pinnacle’s share at $93.2 million (€60.8 million).
Pinnacle contributed $15.7 million (€10.2 million) to the project in Q4 2020, bringing expenditures to date to $55.9 million (€36.5 million) or around 60% of budgeted costs.
The Phase 2 Project at Aliceville, Alabama, was completed in early October. This project added a truck unloading system to the mill’s infrastructure, increasing access to sawmill residuals in the region.
The Meadowbank WESP upgrade was completed in Q4. The upgrade will enhance the operating flexibility of the facility and allow Pinnacle to continue to adapt to structural changes in fibre supply in the B.C. Interior. The upgrade is expected to increase production capacity by 40,000 MT per year.