Posts Tagged ‘Thurso Mill’

Globe and Mail: “Quebec Mill Sees New Life In Rayon Market”

Posted: Friday, August 6th, 2010
fortress accumul 788601gm a 300x237 Globe and Mail: “Quebec Mill Sees New Life In Rayon Market”

The first shipment of industrial equipment, some of which is seen here being taken along a road in Finland, is scheduled to arrive in Thurso, in western Quebec. SOURCE: The Globe And Mail

For the town of Thurso, Que., a shot at economic renewal is literally arriving on massive barges in the Ottawa River.

Next month, the first shipment of bulky industrial equipment from Finland is scheduled to arrive in Thurso, in western Quebec. It will be used to transform the town’s hardwood pulp mill into a facility that makes a key ingredient used in the manufacture of rayon, which is seeing big spikes in demand in Asia and elsewhere.

“We’re looking forward to seeing those barges arrive,” said Thurso Mayor Maurice Boivin.

Vancouver-based Fortress Paper Inc. (FTP-T24.880.532.18%) bought the three digesters and other specialized processing equipment from Finnish company Stora Enso Oyi Cellulose Inc. as part of its bold strategy to convert the Thurso mill from pulp used to make paper – a declining market – to dissolving pulp used to manufacture rayon, a product with a bright future.

The man behind the strategy is Fortress chairman and chief executive officer Chadwick Wasilenkoff, a 38-year-old contrarian investor who seeks out opportunities in overlooked or depressed sectors, like the forest products industry.

“There isn’t enough dissolving pulp to feed the market demand for rayon,” Mr. Wasilenkoff said in an interview.

Rayon is a substitute for cotton (it has similar characteristics but is more breathable and absorbent) and is well-positioned because of the shrinking global supply of cotton as growers switch to less-expensive crops, he said.

“Everything just aligned” to make the conversion of Thurso possible, he said.

Fortress, which also makes banknotes and security papers as well as wallpaper, paid $1.2-million to financially beleaguered Fraser Papers Inc. for the mothballed Thurso mill. It is up and running again, producing hardwood pulp until the conversion to dissolving pulp is completed in about a year.

Fortress is investing $153-million in the transformation of the mill, including the building of a co-generation plant. Investissement Québec is providing a $102.4-million loan, and there is another $25-million or so in federal credits and other financial incentives under the green infrastructure program.

Mr. Wasilenkoff said he just returned from China, where he was overwhelmed by the demand for dissolving pulp from rayon producers.

The Thurso mill, which employs 300 people, is expected to produce 200,000 tonnes a year of dissolving pulp and he anticipates very tidy margins, given that the spot price for the commodity is in the $1,650-a-tonne range and total cost for production and delivery should come in at about $600.

“I like sectors that are out of favour – that are older, more mature – so I can get these kinds of opportunities,” says Mr. Wasilenkoff. In 2006, he bought Swiss-based Landqart AG, a venerable security-paper firm that is the exclusive maker of the Swiss franc and also provides euros to 10 European Union member states.

At the same time, he had been on the alert for a pulp mill in the financially strapped forestry industry, looking for something he could buy cheaply and then convert to take advantage of the booming rayon market.

A bargain-hunter, he said he bought the 12-year-old Finnish equipment for $3.8-million.

BY: Bertrand Marotte for The Globe And Mail. Tuesday, July 27, 2010.

SOURCE:
Globe And Mail: “Quebec Mill Sees New Life In Rayon Market”

Leaders Magazine: “Making Money and Wallpaper”

Posted: Tuesday, June 29th, 2010

An interview with Chadwick Wasilenkoff, Chairman, Chief Executive Officer, and Director, Fortress Paper Ltd.

Editors’ Note: As Fortress Paper’s Chairman, Chief Executive Officer, and Director, Chad Wasilenkoff oversees the company’s production of security and other specialty papers. Most recently, Wasilenkoff was the Chief Executive Officer and Director of Titan Uranium Exploration Inc. from July 2004 to July 2006 and an independent private equity investor from October 2002 to January 2004. From 1997 to 2002, Wasilenkoff was an investment advisor and financial planner at Canaccord Capital Corp. He has a Bachelor of Arts degree from The University of British Columbia.

Company Brief: Fortress Paper is a leading international producer of security and other specialty papers and pulp. The company operates three mills: the Landqart Mill in Switzerland, the Dresden Mill in Germany, and the recently acquired Fortress Specialty Cellulose Mill in Thurso Quebec, Canada. Fortress Paper’s security paper includes banknotes, passport, and visa papers and its specialty papers include non-woven wallpaper base products and graphic and technical papers. Its specialty pulp business currently includes NBHK and the mill is undergoing a conversion to dissolving pulp for the textile industry in Asia. As an extension of its security papers business, the Landqart Mill has been actively developing and marketing innovative paper-based security products.

What did you see in the market that made you feel Fortress Paper would be successful?

My background is as more of a contrarian investor, so I always start from the bottom up. I was looking at the forestry sector – everything else was taking off, but this was still in a steady decline and had been for 12 to 15 years. So I evaluated pulp companies and commodity paper companies, and found these two niche paper mills that were world class in what they did. They had growth industries in both of their core products, but what they lacked was a strong and focused management team and growth capital. So that’s how we built the company.

What is produced at each of the mills?

Our German mill, located just outside Dresden, specializes in a non-woven wallpaper base. Most wallpapers are traditionally made from a regular kraft pulp, and that is what leads to the problem of trying to remove the paper. Because of that, the industry was going through challenging times. It had been in about a 10 to 12 decline, it has since steadied and been fairly stable and mature. The reason for that stability is because the industry got together and created this non-woven product where we put synthetic fibers into the paper. With those synthetic fibers, we get the strength characteristics and it becomes dry-stoppable. So now, once you’re able to pull a corner away, it comes off in one pull. While the overall wallpaper market is stable, this non-woven product is growing within it at about a 15 to 20 percent per annum growth rate, and we currently represent 50 percent of the world production of non-woven wallpaper.

The other mill is our Landqart mill, based in Switizerland, and it specializes in high-security paper. What we’re best known for is the banknote side of things. We’re the sole maker of the Swiss Franc, which is the industry standard – it is the currency by which all international banks measure themselves. It has more security features than any other currency in the world and one of the lowest counterfeit rates. It has never had a professional counterfeit attempt against it.

We also make the Euro for about 10 different countries, passports for dozens of countries, the entry visa sticker for India and China, and brand protection for companies like Rolex.

Our latest acquisition, Fortress Specialty Cellulose, was a shut down NBHK Mill in Thurso Quebec, Canada. We put together a plan to purchase the mill and convert it to a higher margin product, dissolving pulp, which is primarily used for producing rayon in Asia. Most of the financing for the $153 conversion was provided by the Quebec government.

What impact is new technology having on counterfeit issues?

Probably the biggest change in the global counterfeiting market has been the advancement of color photocopier standards. Now anybody can go onto eBay and buy regular home officer equipment and do a half decent job of counterfeiting. A lot of money goes into research and development and new technologies to try to make it as difficult as possible for these counterfeiters. Unfortunately some of these products are too successful and they get commercialized. For instance, the hologram that you typically find on a banknote, you can now buy holographic wrapping foil, and with a fairly rudimentary stamp, create your own hologram with that denomination on it. So while it was a spectacular feature when it began, it is slowly losing ground. They are now continuing to work on holograms to try to improve them, to make them a lot more complex and difficult.

What are your key priorities over the coming year to make sure the growth continues and the brand remains strong?

When I bought the company, I had a three-stage long-term plan: stage one was to change and focus on hiring and retaining good management; the second stage was dealing with internal or organic growth, and leveraging off our existing assets; the third stage was going external, so now it’s more of a focus on mergers and acquisitions.

In our industry, especially on the banknote side, cost is probably fifth or sixth on the list for national banks. It’s reputation first and foremost. It’s and industry that is not going to shift over to low-cost production regions. It’s just too important of a product worry about coming from a low-cost environment. So it’s about reputation, quality, new innovative products, high-security measures, and staying ahead of the counterfeiter. It’s such an important product that they’re willing to pay for a new world-class innovative technology and security feature. We’d like to find small companies that have these great products but can’t break into the banknote industry because it is so conservative. A lot of the printers or papermakers have been around for more than 300 years, so nobody wants to take a chance on a little supplier. We can take a small company that has a world-class product, and acquire it or do a joint venture or at least enable the security of that particular product, and we can launch it under our umbrella, giving it the reputation.

Do you see yourself in this business for the long term?

We have a lot to accomplish with Fortress Paper and one of our biggest challenges today is our share price. While our stock is currently undervalued, we are working to ensure that our shares trade closer to the industry averages that will enable us to make creative acquisitions that increase our reach and technological acumen. At some point in the foreseeable future, I am likely to relinquish the CEO title but stay on Chairman and a happy shareholder.

From Leaders Magazine, Volume 33 Number 3.

BC Business: “Outside The Box Business Strategies”

Posted: Tuesday, June 29th, 2010

When life deals you pulp, you make cellulose. Learn how to recognize business opportunities, then reach out and grab them.

Any business needs a coherent strategy if it hopes to succeed. However, in a climate where marketplace and financial changes are becoming ever more rapid, clinging mindlessly to a strategy can be a recipe for disaster. Simply put, companies today must be more agile in their thinking to take advantage of business opportunities that may present themselves.


The Problem

North Vancouver’s Fortress Paper Ltd. has carved out a good and growing business niche since it began in 2006. That’s when CEO and chair Chadwick Wasilenkoff bought separate paper mills in Germany and Switzerland to produce specialty papers: security paper used in banknotes, passports and visas; and specialty papers such as non-woven wallpaper-base products and graphic and technical paper. But in 2009, the crushing downturn in the overall forestry industry threw an opportunity at Wasilenkoff that would move the company in a completely different direction. He had to decide: should Fortress stick with successful execution of a strategy or take advantage of an opportunity?


The Solution

Wasilenkoff has always approached business as an investor instead of as a manager, and so he applied solid investment principles in order to reach his decision. One of the primary ones, he believes, is that “it’s better to be lucky than good.” 


When Toronto’s Fraser Papers, which made printing and publishing papers, became a victim of the recession and filed for creditor protection in June 2009, Wasilenkoff started looking at its assets, especially Fraser’s shuttered hardwood pulp mill in Thurso, Quebec. The mill drew Wasilenkoff’s interest because it had the perfect technology for an idea he’d been playing with for some time: the conversion of hardwood pulp to dissolving cellulose, a commodity that was being sought by Asian textile producers. As the price of cotton soared, Asian textile companies wanted to replace it with rayon, which is derived from dissolving cellulose. 


Wasilenkoff decided the opportunity was too good to pass up and went for it. He formed a subsidiary that obtained the Thurso mill for the fire-sale price of $1.2 million. After a $153-million conversion, it will switch from producing northern bleached hardwood kraft (NBHK) pulp to dissolving cellulose. 


Wasilenkoff brought Quebec on board by providing jobs for union workers who had been laid off since the mill closed. The Quebec government was only too happy to lend him the funds needed for the conversion. Also, the Quebec and federal governments were willing to help fund a green 25-megawatt co-generation power plant fueled with wood waste and other biomass. 


The mill will begin turning out dissolving cellulose in 2011, but in the meantime Fortress also got lucky. The NBHK market, which was in a severe downturn, turned up because of factors such as the Chile earthquake and a strike in Sweden. Suddenly, the plant that was closed because of low NBHK prices was turning a profit that will continue during the conversion.


Lessons

• Get out of the groove. People tend to get caught up in groupthink. Wasilenkoff could see an opportunity because he takes a contrarian and long-term view of his and other industries. 


• Think like an investor. Fortress earlier moved into wallpaper because a new method had appeared that made it profitable. Wasilenkoff determined that the Thurso mill was low risk and high return. 


• Don’t drink the Kool-Aid. Look at everything around you from many angles. Wasilenkoff was able to make his decision because Fortress wasn’t a typical forest products company, which is usually concerned more with cost-cutting than its product mix.

By Tony Wanless for BC Business. July 7, 2010.

SOURCE:
BC Business: “Outside The Box Business Strategies”

Pulp Growth Ain’t Pulp Fiction – Embracing New Opportunities

Posted: Monday, June 28th, 2010

While “pulp fiction” may resonate with the hearts and minds of people, the wood pulp business sector sometimes results in a “hollow” response. While readers would not be able to turn the pages of their pulp fiction books or enjoy their cotton and rayon clothing without their wood pulp brethren, the pulp sector is often looked upon as sleepy.

Yawning all the way to the bank

While the pulp sector may appear quiet, the market players are “yawning” all the way to the bank. “Between 2002 and 2006, world exports of wood, pulp and paper products grew at an average annual rate of 10.6%,” reports Global-production.com Inc., a business economics consultancy. Despite the volatile economy, the upward price trend in market pulp continues across the world.

“The fundamentals of the pulp market continue to be very strong,” reports PulpWatch, a leading provider of business information and consultancy services to the international pulp and paper industry. “Pulp prices increased by $30-50/t in May, and are set to reach new records in Europe and North America in June. Producer inventories reached record lows in April, and consumer warehouses are similarly bare. European paper demand and order books have improved and prices for most grades are moving upwards, albeit at a slower pace than fiber prices.” This is currently a temporary cyclical high, but we will be getting out of this old product in approximately one year.

As a contrarian investor, I keep focused on industries widely considered to be depressed with an eye on purchasing world class assets at deeply discounted prices. My company recently paid $1.2 million to Fraser Papers for a facility in Quebec with an insured replacement cost of $851 million in assets. We are converting this operation into a specialty dissolving pulp operation. Dissolving wood pulp is chemically refined bleached pulp composed of pure cellulose fibers extracted from trees. Dissolving pulp is the major source for the natural cellulose used in the production of rayon.

Rayon – a very promising future

I believe rayon demand is at a tipping point around the world. The declining global production of cotton is insufficient to meet global textile industry demand; particularly with the rapidly expanding middle class in China and India. Industry analysts indicate that the rayon market has grown at 7% globally and over 10% in China for the last 5 years. Rayon is typically blended with other fibers and can logically displace the cotton shortfall. Rayon has high uniformity which leads to significant improvements in productivity in spinning and textile plants.

Rayon demand has revealed a gap in supply. Total dissolving pulp capacity in late 2007 was 2.4 million tonnes according to the CCF Group (China Chemical Fibers & Textiles Consultancy). Expansions and conversions with plants in Brazil, South Africa and Canada added 0.6 million tonnes of dissolving pulp capacity in 2008, but closures of many higher cost dissolving mills resulted in limited capacity to fill the increasing demand.

A specialty producer

Driven by overall textile demand and increasing preference for rayon over cotton, over one million tonnes of additional rayon capacity (dissolving pulp customers) was built in China in 2009 and an additional 0.5 to 0.7 million tonnes in China is planned to start-up in 2010. There is a current shortfall of approximately 0.5 million tonnes in annual rayon supply which is expected to continue during the next several years.

Rayon, derived from wood pulp, is a textile made from cellulose whose future is looking very promising which is why we sought to invest in this sector. With our Quebec facility, we are transforming an asset which was previously underutilizing its potential by operating as a high cost producer into a specialty product producer which is low-cost and globally competitive. Over 90% of the existing mill equipment is ideally suited to produce high quality specialty cellulose for the rayon textile industry.

The consumer advantages of rayon are clear as it is woven into soft, absorbent and comfortable fabric which supports vibrant colors and wears well. Rayon is one of the most widely used fabrics in the world which can be blended with man-made or natural fabrics. For many centuries, people have relied on plants and animals, such as silkworms, sheep and buffalo, to provide the materials needed for clothing. In our 21st century world, we look to technology and chemistry to create our fabrics. Rayon, dubbed “laboratory’s first gift to the loom” is widely considered to be one of the most versatile and economical man-made fibers available.

–Chadwick Wasilenkoff, Chairman & CEO of Fortress Paper Ltd.

SOURCE:
RISI: “Pulp Growth Ain’t Pulp Fiction – Embracing New Opportunities”

Pulp and Paper Canada: “Thurso’s Future Secure with Fortress”

Posted: Wednesday, June 2nd, 2010

There’s a new kid on the block and he’s playing by a different set of rules. Brimming with confidence, enthusiasm, and steadfast resolution to succeed, Fortress Paper offers a fresh perspective for Canada’s pulp and paper sector.

With its recent acquisition of the idled Thurso pulp mill located in the Outaouais region of western Quebec, Vancouver-based Fortress Paper plans not only to make a splash on the market, but a significant profit, too. By ditching the production of northern bleached hardwood kraft pulp in favour of manufacturing dissolving pulp, the company is confident it won’t fall prey to the relentless profit losses so many Canadian forestry companies have witnessed.

“We’re expecting to generate $60 million (EBITDA) but could potentially see profits in the order of $200 million,” says Chad Wasilenkoff, president and CEO of Fortress Paper, with a confidence not often heard in this industry.

Wasilenkoff refers to himself as a “contrarian” investor, as he keeps a punctilious eye on industries widely considered to be depressed, only to pounce on opportunities to grab world class assets at heftily discounted prices. For his $3 million* purchase price, Wasilenkoff pocketed $85 million worth of assets in buying the Thurso facility from insolvent Fraser Papers.

Fortress Paper currently owns and operates two pulp mills in Europe — in Germany and Switzerland. With an emphasis on specialty papers, the company’s product portfolio includes non-woven wallpaper base products, graphic papers, and technical papers. Fortress officially incorporated in 2006, with the intention of taking a closer look at investments in the forestry sector. The company was not specifically seeking to invest in Canada, but had been observing the dissolving pulp market for a number of years. When the Thurso pulp mill came on the market, the timing and price were compelling.

The acquisition is also welcome news to the 320 people formerly employed by the mill, who will, with only a few minor exceptions, be back on the job in June 2010.

“The Quebec government was very interested in getting people back to work,” Wasilenkoff confirmed. “We were informed that not only does the mill provide work for 320 people, but an additional 2900 indirect jobs are supported by the operation, as well.” The provincial government’s motivation to see the facility up and running translated to a cash infusion of $102 million, in the form of a 10-year loan.

It’s money that Wasilenkoff anticipates no difficultly in repaying. “We’re extremely comfortable with the underlying fundamentals,” he says, explaining the overall growth in the market his newly purposed mill will be supplying. “Asia will be our biggest market, and the textile industry there is very strong. As more and more people move into middle income brackets, research indicates consumption of clothing increases, and yet, cotton is an expensive material to produce. Rayon has very similar characteristics to cotton but is more absorbent and breathable, and is less expensive to produce. As a result, the finished product almost always trades at a premium compared to cotton. We consider this to be a very, very low-risk and high-return venture.”

Fortress has two additional multi-million dollar goodies in its bag: the company is entitled to $10 million from the federal Green Transformation Program, as well as $15 million from the Green Infrastructure Fund. Both are initiatives designed to encourage green energy generation and environmentally-friendly production upgrades. Fortress’ decision to construct a biomass-based cogeneration plant at the facility to produce green electricity positioned the company to benefit from these grants.

The mill won’t be making an immediate switch from NBHK production to dissolving pulp, however. Thurso will continue to churn out kraft pulp for another full year before producing its new product line starting in June 2011. Once the transition is over, the mill will produce 200,000 tonnes of air-dried product annually. The company plans to capitalize on bolstered demand for NBHK first. Wasilenkoff expects the restructuring to be a smooth process, however, as it requires very little in the way of retrofitting. Much of the equipment currently in the mill will be suitable for the production of dissolving pulp as it shares much in common with the process of manufacturing NBHK.

With a secure and reasonably priced fibre source (the company has a 50% Crown allocation), a ready-made labour force, and strong market fundamentals, Fortress appears poised for success. Coupled with Chad Wasilenkoff’s unstoppable “can-do” attitude, Canada’s pulp and paper sector may have a new market leader, and mentor, for the future.

* After price adjustments, Wasilenkoff notes, the final price paid for the Thurso facility may be in the order of $900,000.

By Heather Lynch for Pulp and Paper Canada. June 2, 2010.

SOURCE:
Pulp and Paper Canada: “Thurso’s Future Secure with Fortress”

Fortress Paper Announces Pulp Purchase And Sale Agreement For Fortress Specialty Cellulose

Posted: Monday, May 10th, 2010

VANCOUVER, British Columbia, May 10 2010 – Fortress Paper Ltd. www.fortresspaper.com (“Fortress Paper” or the “Corporation”) (TSX:FTP) announces that its wholly-owned subsidiary, Fortress Specialty Cellulose Inc. (“Fortress Specialty”) has entered into a pulp purchase and sale agreement (the “Agreement”) with International Forest Products Corp. (“IFP”) of Foxboro, Massachusetts.

Pursuant to the terms of the Agreement, IFP will be the exclusive distributor for the sale of northern bleached hardwood kraft (“NBHK”) pulp produced at the Thurso Mill for the duration of such production.

The Thurso Mill is expected to commence commercial production in June of this year and is anticipated to produce approximately 250,000 air dry metric tonnes of high quality NBHK pulp per year. The re-start plans are on track and the mill expects to promptly deliver the high quality that it was well known for in the market place.

“Everyone at International Forest Products Corporation (IFP) is extremely pleased to be working with Fortress Paper on this exciting venture,” said Daniel Kraft, President and CEO of IFP. “This relationship will align IFP with one of the world’s premier specialty paper producers.”


Fortress Paper Announces Energy Supply Agreement With Hyrdo Quebec For The Sale Of Green Power From Its Thurso Mill

Posted: Thursday, May 6th, 2010

VANCOUVER, British Columbia, May 6, 2010 – Fortress Paper Ltd. (“Fortress Paper” or the “Corporation”) announced today that it has signed, through its wholly‑owned subsidiary, Fortress Specialty Cellulose Inc. (“FSC”), an Energy Supply Agreement (the “Agreement”) with Hydro Québec for the sale of green electricity to be produced at the Thurso Mill upon completion of a biomass-based cogeneration facility.

Under the Agreement, the Company will construct a cogeneration facility to provide net 18.8 megawatts of green power to Hydro Québec over a 15 year term, with deliveries estimated to commence in the fourth quarter of 2012.

Chadwick Wasilenkoff, CEO of Fortress Paper, states, “The signing of the Agreement represents an important step in achieving our business plan at the Thurso Mill, which includes the building of a cogeneration plant that produces green electricity that in turn will ultimately benefit Québec residents. We believe that the results of this partnership with Hydro Québec will be beneficial to the environment and the economy of Québec, as well as providing net energy savings (income) to Fortress Paper.”

The Agreement is subject to final approval by the Régie de l’énergie in Québec which is expected to be received in the third quarter of 2010.

About Fortress Paper

Fortress Paper is a leading international producer of security and other specialty papers. Fortress Paper operates three mills, the Landqart Mill located in Switzerland, the Dresden Mill located in Germany and the Thurso Mill located in Canada. Fortress Paper’s security papers include banknote, passport and visa papers and its specialty papers include non-woven wallpaper base products, and graphic and technical papers. Fortress Paper’s pulp business currently includes NBHK with plans to convert this capacity into dissolving pulp production. Fortress Paper plans to build a biomass based cogeneration plant at the Thurso Mill.

Fortress Paper Announces Convertible Debenture Financing

Posted: Friday, April 16th, 2010
Fortress Paper Ltd. (“Fortress Paper” or the “Corporation”) today announces, further to its news release of March 18, 2010, the signing of a subscription agreement (the “Subscription Agreement”) with Solidarity Fund QFL (the “Fund”) providing for the subscription of an unsecured convertible debenture of Fortress Paper (the “Debenture”) in the principal amount of $15 million maturing five years following the date of its issuance and bearing interest at a rate of 7% per annum. The Debenture will be convertible, in whole or in part, at the option of the Fund into common shares of Fortress Paper at any time after the date of its issuance at a conversion price equal to $20.00.
The Debenture will be redeemable, in whole or in part, at the option of Fortress Paper from the second anniversary
date of its issuance, provided that the volume weighted average trading price of Fortress’ common shares on the
Toronto Stock Exchange (the “TSX”) is not less than $25.00.
The Debenture financing is part of the financing package being arranged by Fortress Paper in connection with its
plans to acquire and convert the Thurso Mill in Québec into a high quality specialty cellulose mill and to construct
a new cogeneration facility as announced on March 18, 2010.
The closing of the Subscription Agreement is subject to various conditions, including (i) the concurrent completion
of a senior debt financing providing for credit facilities in the amount of up to $100 million to be used in connection
with the Thurso Mill; (ii) the closing of the acquisition of the Thurso Mill; and (iii) receipt of TSX approval for the
issuance by Fortress Paper of the Debenture.
The Ontario Superior Court of Justice (Commercial List) has approved the sale of the Thurso Mill. The closing of
the acquisition of the Thurso Mill and Subscription Agreement is expected to occur on or about April 30, 2010.

A New Lease on Life for the Outaouais Cellulose Pulp Mill—Québec Government Loan Enables Fortress Specialty Cellulose Inc. to Convert its Thurso Mill

Posted: Friday, March 26th, 2010

Thurso, March 26, 2010 – Québec Premier Jean Charest and the Minister for Transport, Minister responsible for the Outaouais region and MNA for Papineau, Norman MacMillan, announced today a $102.4 million interest-bearing loan to Fortress Specialty Cellulose Inc. (FSCI) for its Thurso facility, formerly owned by Fraser Papers Inc. Awarded through Investissement Québec, the financial assistance will be used to convert the former pulp mill for cellulose production.

With a total estimated value of nearly $175 million, the FSCI initiative is designed to convert the Thurso mill from a facility that manufactures kraft pulp for paper into a cellulose pulp production facility and to set up a cogeneration power plant. The plant’s new product targets the viscose fibre (rayon) market, which is showing strong worldwide growth. Viscose fibre is most often blended with cotton, wool and polyester fibre to produce textiles and knits for the apparel industry.

“Putting the Thurso mill back into production is good news for the forest industry and part of an industrial development strategy that focuses on high value-added products,” declared the Premier. “The success of this operation will no doubt serve as a model for the forest industry’s future,” he added.

On the employment front, the outlook for the conversion project is bright. In addition to enabling the facility to call back 290 employees who worked for Fraser Papers, it will also help maintain some 1,500 direct and indirect jobs in the forest industry and throughout regional businesses.

“I am very pleased with today’s announcement, not only for the region but also for the forest industry. Fortress’s project proves that it is possible to find promising new solutions to help stimulate the forest industry and the Outaouais region’s economy,” said Minister Norman MacMillan.

“We are pleased to receive the Québec government’s support for the conversion of the Thurso mill. Fortress is confident that this undertaking will be a success, given Québec’s favourable business environment and the positive outlook for world markets,” affirmed Mr. Chad Wasilenkoff, President and CEO of Fortress Specialty Cellulose and Fortress Paper.

In addition to converting the mill for an industry that offers greater potential for long-term growth, the project will keep the city of Thurso’s water treatment plant in operation with no additional investments. In fact, all the necessary equipment can be found at the mill.

The Thurso facility was mothballed in June 2009, resulting in layoffs for 330 people in the single-industry municipality. The closing also had a major impact on the forestry activities of some 30 Québec companies.

About the Ministère du Développement économique, de l’Innovation et de l’Exportation

The department’s mission is to support economic development, innovation, export trade and research by fostering coordinated and concerted efforts by stakeholders representing the economic, scientific, social and cultural arenas. In so doing, it seeks to promote job creation, economic prosperity, scientific development and sustainable development.

In addition, the department portfolio encompasses various government corporations, agencies and funding bodies, including Investissement Québec.

SOURCE:
Investissement Québec: “A New Lease on Life for the Outaouais Cellulose Pulp Mill—Québec Government Loan Enables Fortress Specialty Cellulose Inc. to Convert its Thurso Mill”

Fortress Paper Announces an Acquisition to Enter the Specialty Cellulose and Bio-Energy Sectors

Posted: Thursday, March 18th, 2010

Fortress Paper Ltd. (“Fortress Paper” or the “Corporation”) (TSX:FTP), a leading producer of security and specialty papers, in a major strategic move today announces the signing of an asset purchase agreement (“APA”) to acquire the assets of a northern bleached hardwood kraft (“NBHK”) manufacturing facility located in Thurso, Quebec (the “Thurso Mill”) from Fraser Papers Inc. (“Fraser”) with the intention to convert this operation into a world class, low cost, specialty cellulose (dissolving pulp) operation. Concurrently, Fortress Paper intends to build a biomass-based cogeneration plant at the Thurso Mill which will produce green electricity resulting in material net energy savings (income).
Upon closing of the acquisition of the Thurso Mill, which will be completed through its wholly-owned subsidiary Fortress Specialty Cellulose Inc. (“Fortress Specialty”), the Corporation intends to incur capital expenditures of approximately $153 million to convert the non-operating NBHK mill into a high quality specialty cellulose mill and to construct a new cogeneration facility. In connection with the proposed capital expenditures, Fortress Paper is pleased to announce that it has pre-arranged specific financing initiatives to fund the conversion and cogeneration projects.

The specialty cellulose mill is planned to have an annual production capacity of more than 200,000 air dried metric tonnes and is expected to be completed in mid-2011. In entering into the specialty cellulose sector, Fortress Specialty will focus on producing dissolving grade cellulose for the textile industry, primarily targeting viscose fibre (rayon) products which have shown strong growth of approximately 10% in China and 7% worldwide over the past five years. Rayon is a technically evolved and versatile fibre with many advantages, particularly in the warmer and higher growth regions of the world.

Fortress Paper also plans to construct a 25 megawatt cogeneration facility to service a net 18.8 megawatt power supply agreement over a 15 year term. The location of the cogeneration facility provides it with access to on-site generation of biomass and an extensive local network of chip and other biomass suppliers. The cogeneration facility is expected to be supplying electricity in the fourth quarter of 2012.

Chad Wasilenkoff, CEO of Fortress Paper, states, “We are very pleased to announce this new acquisition which we believe will add significant shareholder value in the years to come. Both the Board of Directors and management of Fortress Paper feel that this new opportunity warrants the diversification of the Corporation into other specialty sectors as it has the potential to materially enhance shareholder value. Once the conversion and cogeneration projects are complete, we will be entering a new product segment which offers long-term growth prospects and attractive margins. During the interim period, we will capitalize on the current strength of the NBHK pulp market. We feel it is important to emphasize that this is not an acquisition to enter into the pulp industry, but rather the opportunity to acquire assets that are ideally suited to be converted into a bio-refinery and produce high value-added products. We intend to strategically enter this sector at a time when demand exceeds current capacity. We believe this trend will continue over the next several years given the limited announced new capacity.”

Pursuant to the terms of the APA, Fortress Paper will pay Fraser $3 million in cash at closing, subject to certain adjustments. The closing of the APA is subject to various conditions, including (i) as a result of Fraser and its subsidiaries having filed for creditor protection under theCompanies’ Creditors Arrangement Act (the “CCAA”) in Canada, the approval of the transaction by the Ontario Superior Court of Justice (Commercial List) in connection therewith, (ii) Fortress Specialty entering into renewed collective agreements with all unionized employees of the Thurso Mill, and (iii) the Corporation and Fortress Specialty securing financing as necessary to implement their proposed business plan at the Thurso Mill. Fortress is optimistic that it will be able to finalize mutually satisfactory renewed collective agreements with the three unions imminently and looks forward to building a mutually beneficial relationship with the community of Thurso. The closing of the acquisition is anticipated to occur on or about April 30, 2010.

Investissement Quebec (“IQ”) has committed, by way of an agreement in principle, to grant Fortress Specialty a loan in the amount of up to $102.4 million to support Fortress Paper’s proposed business plan in respect of the Thurso Mill. The loan will be secured by the capital assets of Fortress Specialty and will have a term of 10 years. Interest will be calculated at a fixed rate of 5.0% per annum for the first five years, followed by a rate based on the cost of IQ’s funds plus 2.0% for the remaining five years, up to a maximum of 5.5% per annum. The loan is subject to receiving the requisite approval of the Government of Quebec and is subject to completion of definitive documentation.

Fortress Paper has also signed a conditional commitment letter with a Quebec financial institution providing for the subscription of an unsecured convertible debenture of Fortress Paper (the “Debenture”) in the principal amount of $15 million maturing in five years with an interest rate of 7% per annum. The Debenture will be convertible, in whole or in part, at the option of the Quebec financial institution into common shares of Fortress Paper at any time after closing of the debenture at a conversion price equal to the lesser of 145% of the trading price of the common shares on the Toronto Stock Exchange (the “TSX”) and $20.00.

The Debenture will be redeemable, in whole or in part, at the option of Fortress Paper, from the second anniversary date of its issuance at par plus all accrued and unpaid interest, provided that the volume weighted average trading price of the common shares of Fortress Paper on the TSX is not less than 125% of the conversion price. The Debenture financing is subject to various conditions, including approval by the decision-making authorities of the Quebec financial institution, satisfactory due diligence, the concurrent completion of the IQ financing, the closing of the APA, receipt of TSX approval for the issuance by Fortress Paper of the Debenture and the completion of definitive documentation.

Included in the assets being purchased from Fraser is approximately $9.9 million in credits (black liquor credits) granted under the Canadian government’s Pulp and Paper Green Transformation Program (the “GTP”). The GTP aims to improve the environmental performance of Canada’s pulp and paper industry by funding approved capital projects with environmental benefits. Fortress Paper also intends to apply for approximately $15.2 million in federal credits under the Green Infrastructure Fund program of the Minister of Transport, Infrastructure & Communities relating to the planned cogeneration project.

As no definitive agreements have been entered into with respect to the financing initiatives described above, there can be no assurance at this time that the financing in connection with the Thurso Mill will be completed on terms acceptable to Fortress Paper or at all.

For more information on the Fortress Specialty Cellulose project you can access the Fortress Specialty Cellulose PowerPoint Presentation by going directly to the link atwww.fortress.presenternet.com

A prerecorded voice presentation is available to accompany the PowerPoint and can be accessed at:

Prerecorded Presentation dial-in number 1-877-353-9587 or from overseas 403-699-1055 and follow the prompts. When prompted, enter the 6 digit conference reference number 274464 followed by the number sign (#). The recording will be available for 7 days.

Future replays of the PowerPoint Presentation can be accessed by a link on the front page of our website at www.fortresspaper.com and alternatively at www.fortress.presenternet.com.

About Fortress Paper

Fortress Paper is a leading international producer of security and other specialty papers. Fortress Paper operates two paper mills, the Landqart Mill located in Switzerland and the Dresden Mill located in Germany. Fortress Paper’s security papers include banknote, passport and visa papers and its specialty papers include non-woven wallpaper base products, and graphic and technical papers. As an extension of its security papers business, the Landqart Mill has been actively developing and marketing innovative paper-based security products.

This news release contains certain forward-looking statements that reflect the current views and/or expectations of Fortress Paper with respect to its performance, business and future events, including statements relating to the Corporation’s completion of the APA and the outcome of its financing initiatives; its intention to convert the Thurso Mill into a specialty cellulose (dissolving pulp) operation; its plans to build a biomass based cogeneration plant and the financial results and production capacity expected therefrom; its ability to complete the necessary financing to make planned capital expenditures; the expected effects of the acquisition of the Thurso Mill on the business of the Corporation; the state of the market in the specialty cellulose and green bio-energy sectors; and its intended application for federal tax credits. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the business and the industry and markets in which the Corporation operates, including assumptions relating to the Corporation’s ability to complete the APA; its ability to complete the necessary financing to successfully implement its business plan in respect of the Thurso Mill; the success and profitability of the specialty cellulose operation and cogeneration plant; the expected effects of the acquisition of the Thurso Mill on the business of the Corporation; the state of the market in the specialty cellulose and green bio-energy sectors; and the Corporation’s ability to obtain certain federal tax credits. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, that the Corporation will not complete the APA; will not obtain the necessary financing to complete its business plan in respect of the Thurso Mill; will be unable to implement its business plan in respect of the Thurso Mill as planned or at all; that the specialty cellulose operation and cogeneration plant will not be successful or profitable and will not meet anticipated production capacities; that the Corporation will not obtain the federal tax credits; and those risks relating to changes in the market, potential downturns in economic conditions, fluctuations in the price and supply of raw materials, foreign exchange fluctuations, labour relations, regulatory requirements, reputation, competition, dependence on major customers, and other risk factors listed from time to time in the Corporation’s public filings. These risks, as well as others, could cause actual results and events to vary significantly. Accordingly, readers should not place undue reliance on forward-looking statements and information, which are qualified in their entirety by this cautionary statement. Fortress Paper does not undertake any obligations to release publicly any revisions for updating any voluntary forward-looking statements, except as required by applicable securities law.