Within a day of being awarded a provincial wood pellet supply agreement, Thunder Bay's Ed Fukushima was on the phone negotiating with a manufacturer of pellet press dies.
The president of Atikokan Renewable Fuels had been waiting for months for word from Ontario Power Generation (OPG) on a procurement contract to supply the feed stock for the Atikokan Generating Station, a former coal burner now undergoing a $170-million conversion to burn wood pellets.
“This is a great announcement,” said Fukushima, who runs three Thunder Bay companies. “It helps us get our base loading on our plant and it triggers our financing to get our plant into production.”
In late November, his company, and Resolute Forest Products of Montreal, were both named the official suppliers of wood pellets to the Atikokan plant, located 200 kilometres west of Thunder Bay.
Both companies were handed 10-year contracts to each supply 45,000 tonnes of pellets annually when the plant begins burning wood pellets by the end of 2014.
Aecon Group is designing and building the generating station's pellet fuel handling equipment and storage silos. Construction began this past fall.
Atikokan Renewable Fuels is a startup company run by Fukushima and Larry Levchak. They bought a shuttered particleboard plant in Atikokan in 2009 with plans to convert it into a pellet mill.
Fukushima said having a supply contract with OPG in hand clears the way to start outfitting his plant.
At the same time, he is negotiating off-take agreements with European customers which he expects to be finalized by late December. That's where the bulk of his 140,000 tonnes of annual production will go. Only 30 per cent is earmarked for the power station, 14 kilometres away from his pellet mill.
But to secure financing for mill equipment, Fukushima said he was forced to go outside Canada, even offshore, since domestic chartered banks want nothing to do with forestry.
“Even with (European) off-take agreements, they are not interested.”
His pellet mill will be the cornerstone of a spinoff venture, Great North Bio Energy, a partnership with the Whitesand and Sand Point First Nations, which involves constructing two satellite pellet mills in those communities and training locals to operate them.
Fukushima's Atikokan mill will create 45 plant jobs, plus about 100 indirect harvesting and trucking jobs, and about 60 jobs in each of his partnering communities.
With a Crown wood allotment of 279,000 cubic metres, Fukushima intends to buy additional chips and round wood on the market. Should European orders really take off, his mill will be scalable to double production.
Fukushima said the lead time for delivery of the pellet dies is expected to be more than 20 weeks, which could be problematic for European customers, but luckily OPG is expecting pellets until January, 2014.
“The fact that we missed the heating season already, we're in no hurry. We'll just do the most cost-efficient process to get the plant up and running, and in the meantime we're still negotiating in Europe for the balance of our production.
“We're pretty confident we're going to land something.”
Resolute Forest Products said it expects to begin construction shortly on a $10-million pellet plant to be built in Thunder Bay next to its sawmill. When completed in 2014, the plant will create 24 jobs, attached to the 350 jobs already at the sawmill.
"This project provides the opportunity to enhance the use of our existing asset base to produce biofuel for a strategic, committed consumer and allows the company to gain valuable manufacturing experience in commercial biomass production,” said Richard Garneau, Resolute president and CEO, in a news release.
When finished, the Atikokan Generating Station will be one of the largest biomass plants in North America.
Chris Fralick, OPG's Northwest Thermal plant manager, said construction is in full swing with 80 workers on site in early December.
The one-unit, 207-megawatt station will be relied upon during peak power consumption periods on the Ontario grid.
The total 90,000 tonnes of pellet fuel from Atikokan Renewables and Resolute equates to 150 gigawatt hours, which is about 10 per cent less than what the generating unit is capable of. The unit's output will not be restricted, but will be spread out over the year by running to meet peak demand.
Fralick compares the conversion to preserving a car's horsepower (same engine) “but we now have a smaller gas tank.”
Next on OPG's agenda was to invite trucking companies to bid on the wood pellet haul through a request for indicative pricing (RFIP). The bidding process closed Dec. 7.
