pinnacle renewable energy inc. (tsx: pl) investor ... · global industrial wood pellet demand...
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A preliminary prospectus and an amended and restated preliminary prospectus containing important information relating to the securities described in this presentation has been filed with the securities regulatory authorities in eachof the provinces and territories of Canada. A copy of the amended and restated preliminary prospectus, and any amendment, is required to be delivered with this presentation. The amended and restated preliminary prospectus isstill subject to completion. There will not be any sale or any acceptance of an offer to buy the securities until a receipt for the final prospectus has been issued. This presentation does not provide full disclosure of all material factsrelating to the securities offered. Investors should read the amended and restated preliminary prospectus and the final prospectus and any amendment for disclosure of those facts, especially risk factors relating to the securitiesoffered, before making an investment decision.
Pinnacle Renewable Energy Inc. (TSX: PL)
Investor Presentation, April 2020
1
Disclaimer
FORWARD-LOOKING INFORMATION
This presentation may contain “forward-looking information” within the meaning of applicable securities laws in Canada. Forward-looking information may relate
to Pinnacle’s future financial outlook and anticipated events or results and may include information regarding its financial position, business strategy, growth
strategies, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding the Company’s expectations of
future results, performance, achievements, prospects or opportunities or the markets in which it operates is forward-looking information. In some cases, forward-
looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an
opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does not
anticipate”, “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be
taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or
circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent
management’s expectations, estimates and projections regarding future events or circumstances. If any of the opinions, estimates or assumptions underlying the
forward-looking information prove incorrect, actual results or future events might vary materially from those expressed in the forward-looking information. The
Company has no obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or
otherwise, except as required under applicable securities laws in Canada. Actual results and the timing of events may differ materially from those anticipated in
the forward-looking information as a result of various factors, including those described in “Risk Factors” which are described in the Company’s most recent
Annual Information Form (“AIF”) filed on SEDAR.
We caution that the list of risk factors and uncertainties is not exhaustive and other factors could also adversely affect our results. Readers are urged to consider
the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such
information. See “Forward-looking Information” and “Risk Factors” in the Company’s AIF filed on SEDAR for a discussion of the uncertainties, risks and
assumptions associated with these statements.
NON-IFRS MEASURES
This presentation makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, and do not have a standardized
meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided
as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective.
Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-
IFRS measures including “EBITDA”, “Adjusted EBITDA”, “Adjusted EBITDA per Metric Ton”, “Adjusted Gross Margin”, “Adjusted Gross Margin per Metric Ton”,
“Adjusted Gross Margin Percentage” and “Free Cash Flow”. These non-IFRS measures are used to provide investors with supplemental measures of our operating
performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that
securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS
measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine
components of management compensation. As required by Canadian securities laws, we reconcile these non-IFRS measures to the most comparable IFRS
measures in our Management Discussion & Analysis for the fiscal fourth quarter and year ended December 27, 2019.
2
Share information
(millions of shares) Shares Outstanding ¹ONCAP Entities 10.4Other Shareholders 1.5Public Shareholders 21.5Basic Shares Outstanding 33.4Stock Options 2.0Fully Diluted Shares Outstanding 35.4
Ownership
Analyst Coverage
1. As at March 25, 2019.
IPO issue price (Feb. 6, 2018) $11.25Recent closing price (Feb 24, 2020) $10.3952-week high / low $12.95 / $5.98Market Capitalization (Feb 24,2020) ~ $346 millionQuarterly Dividend $0.15 / shareYield (Feb 24, 2020) ~ 5.8%
3
British Columbia Alberta
Rail line
Pellet Plant
Port
Development
Office
WestviewHouston
Burns Lake
Williams Lake
Vancouver
Richmond
Armstrong
Lavington
EntwistleMeadowbank
Prince George
Smithers
Our Company
Nine production facilities in western Canada / Southeast U.S., two under construction in Alberta and Alabama
and a wholly-owned port terminal in B.C.
$7.0 billion of contracted backlog under long-term contracts with large utilities in Europe and Asia
Lowest quartile cost supplier
Canada / US Facility Network
Management team that drives continuous improvements and maintains industry-leading safety
3rd largest industrial pellet producer in three strategic fibre baskets in a rapidly growing global market
Annual capacity of approximately 2.83 million MTPA³
1. The Aliceville, Houston, Lavington, Smithers, High Level and Demopolis facilities are partially-owned by Pinnacle.
2. Pinnacle does not own shipping terminals at the Vancouver or Mobile ports.3. Assuming full run-rate production from facility upgrades and the Entwistle, Aliceville, High
Level and Demopolis facilities.
1
1
12
Alabama
Aliceville
Pellet Plant
PortMobile
Georgia
River (barge)
Mississippi
1
2
High Level1
Demopolis1
Development
4
1
1 1
2
3 5
8
11 13 13
15
18 20
24
28
31
37
-
5
10
15
20
25
30
35
40
2014A 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2026E
Potential demand is significantly higher than current operating capacity
Global Industrial Wood Pellet Demand (millions of MT per annum)
Source: Hawkins Wright —The Outlook for Wood Pellets, No. 21, Quarter 3 2019.
• Potential demand for pellets is expected to more than double from 2017 to 2022• European potential demand expected to be primary growth driver through 2021; Asia forecast to drive potential
demand growth beyond 2021, largely driven by Japan• Hawkins Wright forecasts that global production capacity of pellets will need to continue to grow through 2026 to
meet expected potential demand
The industrial wood pellet industry is experiencing an extended period of rapid demand growth
Industry Growth
Japan
25.0M MT Current Capacity
5
Update on Contracts
• In 2018 and 2019, Pinnacle entered into 12 new long-term contracts in Japan and South Korea totaling ~$4.6 billion
• $7.0 billion contracted backlog / weighted average remaining term of nine years (as at December 27, 2019)
Counterparty Annual Volume (MTPA) Start Year
100,000 2023
100,000 2022
110,000 – 120,000 2021
70,000 Late 2019
50,000 in year 1 / 150,000 thereafter Second Half of 2020
170,000 2021
30,000 Late Fiscal 2021
315,000 2021
75,000 2022
75,000 Early 2022
75,000 Late 2022
200,000 2022
Strong progress in business development in Asia
6
Regulatory frameworks driving continued industrial wood pellet demand
Industry / Market Update
Industrial wood pellets help countries and regions meet de-carbonization targets• Frameworks and policies have been put in place to facilitate a shift to a cleaner energy mix
Global Regulatory Frameworks
South Korea
EU (excl. U.K.)
U.K.• Largest pellet market in the world• UK’s Committee on Climate Change calls for
sustainably harvested biomass to make up 15% of UK’s energy mix by 2050 in order to achieve net-zero emissions
• Continued growth in next 5 years of ~1.2 million MT, driven by investment from MGT Power
• European Union import growth of 5% in 1H 2019, net importer of 4.7 million MT
• Netherlands demand expected to increase to 3.1 million MT by 2021
• Continued growth in the Netherlands resulting from the start-up of cofiring at several coal-fired power plants
Japan• Feed-in-tariff (¥21 – ¥24 / kWh), review expected in
2020/2021 aiming to ensure renewables are competitive
• Targeting 22% - 24% of electric supply generated from renewables by 2030, with 3.7% - 4.6% from biomass (20 million MTPA in pellet equivalent)
• Next growth phase will be existing coal-fired plants switching to co-firing. New energy efficiency calculation offers incentive for biomass cofiring.
• Anticipated growth of 2.0 million MT by 2023• Renewable Portfolio Standard policy aims to
increase of energy generated from renewable sources to 10% by 2024
• Four dedicated biomass-fired power plants are scheduled to commence operations in 2020 and target an additional 750MW by 2023
Source: Hawkins Wright —The Outlook for Wood Pellets, No. 21, Quarter 3 2019.
7
• US$10 million capital spending program (US$7 million Pinnacle share) to improve safety, product quality and plant efficiencies
• First phase of capital program successfully completed in July 2019
– Resulted in improved fibre flow, processing and operating efficiency
• First full year of production saw quarter over quarter production volume increases and we successfully ended the fourth quarter with an over 50% increase over Q4 2018 production
• Second phase of capital program to commence in Q2 2020
Aliceville Production Facility
70% 20% 10%
8
• Expanded footprint in the US Southeast
– Partnership expanded to build an industrial wood pellet production facility in Demopolis, AL, near the Aliceville facility and adjacent to a large sawmill
– Located on the same river system as Aliceville, finished pellets can be barged and loaded at the port in Mobile
• Annual run-rate production capacity of 360,000 MT
– Product to be sold through contracted long-term take-or-pay off-take contracts
– Commissioning beginning in Q2 2021
• Capital cost of $70 million (Pinnacle share of $99 million)
– Includes barge loading facility
– Funded from draws on existing credit facilities
– Expected to be toward the upper end of the capital cost to run-rate EBITDA ratio target range
US Southeast Expansion
Demopolis Production Facility 70% 20%
New facility diversifies fibre supply and leverages existing relationships and infrastructure established in Alabama
10%
9
Entwistle Production Facility
Restart and Performance Update
February 2019: Entwistle Incident
March 2019: Resumed partial operations using dry fibre
June 2018: Entwistle commenced commercial production
November 2019: Rebuild complete, dryer and furnace restarted
April 2019: Destoner installation project started
December 2019: Destoner operation commences and commissioning begins
23% of run-rate achieved
54% of run-rate achieved
71% of run-rate achieved
November 2019
December2019
January 2020
January 2020: Achieved 70% of expected run-rate
Successful restart and ramp up of production, well on the way to full run-
rate
10
• Expanded relationship with Tolko Industries
– 50% / 50% partnership with Tolko Industries to build an industrial wood pellet production facility in High Level, AB
– High-quality wood fibre sourced primarily from Tolko’s existing sawmill
• Annual run-rate production capacity of 200,000 metric tons
– Product to be sold through contracted long-term take-or-pay off-take contracts
• Construction began in Q3 2019
– $30 million capital cost (Pinnacle share of $60 million)
– Expect production to commence in Q4 2020
Western Canada Expansion
High Level Production Facility 50% 50%
New facility contributes to growth of Alberta production platform and further diversifies fibre supply
11
Western Canada Expansion
Smithers Production Facility
• Commenced initial pellet production in Q4 2018 and achieved commercial production in late December 2018
– Simpler facility design and white fibre supply facilitated seamless commissioning process
– No storage silo required due to close proximity to Westview shipping terminal
– Run rate production of 125,000 MTPA achieved in Q3 2019
• Upgrade planned for completion in Q3 2020
– Chipper and additional pelleter installation
– Upgrade to decrease costs and increase production run-rate output by 15,000 MTPA
– $4.2 million capital cost (Pinnacle share of $6.0 million) funded from existing credit facilities
70% 30%
12
Williams Lake & Meadowbank
• Williams Lake upgrade program commenced in Q2 2019. Expected completion and commissioning by end of Q1 2020
• Meadowbank upgrade program commissioning expected to commence in Q3 2020
• Upgrades will enhance operating flexibility and enable the facilities to adapt to cyclical changes in wood fibre supply
• Combined production capacity increase of 80,000 MTPA
Williams Lake
Meadowbank
Production Facility Upgrades and Capacity Expansion
13
Adding production capacity to meet growing contracted backlog
Production Capacity Expansion
YE 2017 Pro Forma
99%
1,422
2,827
• Pinnacle’s annual production capacity will
have grown by 1,420,000 MTPA since the
end of 2017 once facility upgrades are complete and the Entwistle, Aliceville, High Level, and Demopolis facilities reach full run-rate production
• Strategic entry and expansion in Alberta and Alabama significantly grows and diversifies fibre supply
• Positions Pinnacle for new forestry industry partnerships and opportunities
Annual production capacity (MTPA)
14
Investment Highlights
15
- 1,000 2,000 3,000 4,000 5,000
Enviva
Graanul
Pinnacle
Drax Biomass
RWE (Georgia Biomass)
An Việt Phát
FRAM
SY Energy
Highland Pellet
Pacific Bioenergy
Tanac SA
One of three global enterprise suppliers
Leading Producer and Global Supplier of Bioenergy Products in a Rapidly Growing Global Market
Nameplate Production Capacity of Global Industrial Wood Pellet Suppliers (000s of MT per annum) 1
We are one of only three global enterprise suppliers in a fragmented market✓
Major utilities demand reliable, long-term supply from counterparties with established
operational capabilities✓
Trusted supplier to the global utility market✓
Source: Hawkins Wright —The Outlook for Wood Pellets, No. 21, Quarter 3 2019, publicly available disclosure. Pinnacle data has been updated to reflect recently expanded/new facilities
Industry consolidating around three global suppliers with scale and capabilities required to service major global utilities
• Growth in potential demand expected to be driven by major utilities, concentrating procurement around global enterprise suppliers
Global
Enterprise
Suppliers
Captive
Utility
Suppliers
Smaller
Regional &
Merchant
Suppliers
# of
Facilities
8
12
11
4
1
1
3
1
3
1
Capacity under construction / financed
Temporarily operating at reduced capacity
2
16
Integrated network and scale create significant barriers to entry and position Pinnacle as a lowest quartile cost supplier to Europe and Asia
Production Facility Port OfficeStrategically located production facilities
Fibreco2B
1. Houston, Lavington, Aliceville, Smithers, High Level, and Demopolis facilities are partially owned by Pinnacle
2. Pinnacle is not the owner of Fibreco or Mobile.
WestviewA
Houston1 Burns Lake Williams Lake Lavington1 ArmstrongMeadowbank
Illustrative Cost to Transport One GJ Energy 100 km
Truck (Raw Fibre) $2.00
Rail (Pellets) $0.14
Sea (Pellets) $0.01
Alabama
9
Aliceville1
Smithers1
Mobile, AL2
8
Entwistle
Leading Producer and Global Supplier of Bioenergy Products in a Rapidly Growing Global Market
10
High Level110
1 2 4 5 63 87
9
C
11
Demopolis111
17
Geographic diversification of our asset base provides enhanced flexibility to cost-effectively
allocate supply to our customers in both Europe and Asia
Leading Producer and Global Supplier of Bioenergy Products in a Rapidly Growing Global Market
Scaling our platform
18
0
100
200
0 5000 10000 15000 20000
Cumulative Global Industrial Wood Pellet Supply, Thousand MT per Annum (90% Operating Rate)
0
150
300
0 5000 10000 15000 20000
Cumulative Global Industrial Wood Pellet Supply, Thousand MT per Annum (90% Operating Rate)
Cost advantage in supplying global markets
Scale, Vertical Integration and Operational Efficiencies Result in an Attractive Cost Position
Lowest-quartile cost supplier to rapidly growing markets in both Europe and Asia
EUROPESupply Cost Curve to CIF ARA1 (Q3 2019; US$ / tonne)
JAPANSupply Cost Curve to CIF Tokyo Bay1 (Q3 2019; US$ / tonne)
Substantial wood fibrebasket and operating
flexibility✓
Strategically located production facilities✓ Terminal operations✓
Operational efficiencies ✓
2019Average Cost:
$1402 2019 Average Cost:
$1422
Source: Hawkins Wright.1 Represents the short run marginal cost curve to each specified location, excluding capex recovery. ARA represents Amsterdam-Rotterdam-Antwerp area, a generic term for the area encompassing the
three ports in the Netherlands and Belgium.2 Our costs have been converted to USD at an exchange rate of 1.32 CAD/USD. No other foreign exchange adjustments have been made to the supply curves. Entwistle was excluded from this cost analysis
given operating on mostly dry-side for 2019.
176
205146
118
108
162
19
Growing contracted backlog in Asia
Increasing customer diversification
Customer Base Diversification
• Our contracts with customers in Japan, the U.K., South Korea, and Europe represent 48%, 33%, 17% and 2%, respectively, of our contracted backlog.
• To date we have signed nine long-term off-take contracts totaling $3.0 billion with customers in Japan. Our growing contracted backlog in Japan underlines both the increasing adoption of biomass and the strength of our competitive position in this market.
10%
86%
4%
Contracted Backlog, Q4-2017
Japan
UK
Europe
48%
17%
33%
2%
Contracted Backlog, Q4-2019
Japan
South Korea
UK
Europe
Contracted Backlog by Customer Region
20
Proven Project Development Capabilities & Attractive Project Pipeline
Note: Run-Rate EBITDA is the incremental annual earnings, before depreciation and amortization, finance expense and provision for income taxes that the Company expects to generate from the project.1 Represents Pinnacle’s proportionate share of overall spending. 2 Includes wholly-owned, partially-owned and in-development facilities (please refer to the Annual
Information Form dated March 19, 2019 for detail).
Key Project Facts
Ram
pin
g u
p P
rod
uct
ion
High Level, AB
Capital Costs • $30 million1 (In 4.0 - 5.5x EBITDA range)
Run-Rate EBITDA• Anticipated to be in line with Pinnacle’s other
production facilities
Status • Production expected in Q4 2020
Demopolis, AL
Capital Costs • $70 million1 (In 4.0 - 5.5x EBITDA range)
Run-Rate EBITDA• Anticipated to be in line with Pinnacle’s other
production facilities
Status • Commissioning expected in Q2 2021
Aliceville, ALAcquisition / Capital Costs
• US$44 million1 (4.0 to 5.5x Run-Rate EBITDA)
Run-Rate EBITDA• Anticipated to be in line with Pinnacle’s
other production facilities
Status• Ramping up production
• Optimizing asset configuration, distribution logistics and fibre supply
Historical & Forecast Tons Sold (000s MT)
FacilityYear of COD or
Acquired
Demopolis
High Level
Q2’21
Q4 ‘20
Aliceville
Smithers
Q4 ‘18
Q4 ‘18
Entwistle Q1 '18
Lavington 2015
Westview 2013
Burns Lake 2011
Meadowbank 2008
Armstrong 2007
Houston 2006
Williams Lake 2004
Strong track record of successful project development
2
2,827
1,540
2,020-2,070
230
220
72
225
380
300
400
155
300
200
360
2018 2019E AnnualCapacity
21
Financial Review&
Growth Strategy
22
$293
$347
$378
2017 2018 2019
$56 $55
$47
2017 2018 2019
$67 $68 $65
22.9%
19.5%17.2%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
0
10
20
30
40
50
60
70
80
2017 2018 2019
Financial Review
Revenue ($ millions) Adjusted Gross Margin ($ millions) Adjusted EBITDA ($ millions)
$9.9 millionNet loss in 2019
$2.7 millionNet profit in 2018
$17.2 millionFree cash flow in 2019
$32.2 millionFree cash flow in 2018
23
Q4 2019 Financial Review
($millions, except for %)Q4 2019
(13 weeks)Q4 2018
(13 weeks)
Revenue 91.5 103.7
Production Costs 60.3 73.5
Distribution Costs 13.8 13.4
SG&A Expenses 4.7 3.9
Net profit (loss) (3.2) 7.4
Net profit (loss) (excluding IFRS 16 and Entwistle impact) (5.5) 7.4
Adjusted Gross Margin 16.4 16.7
Adjusted Gross Margin (excluding IFRS 16 and Entwistle impact) 11.0 16.7
Adjusted Gross Margin % 17.9% 16.1%
Adjusted EBITDA 11.3 13.8
Adjusted EBITDA (excluding IFRS 16 and Entwistle impact) 6.1 13.8
Free cash flow 3.0 8.2
Free Cash Flow (excluding IFRS 16 and Entwistle impact) (2.2) 8.2
• Results impacted primarily by the disruption to our scheduled shipping due to the CN rail strike which resulted in lower sales for Q4 2019, higher fibre, fibre processing, and cash conversion costs in B.C., as well as increased distribution and SG&A costs
• Net debt to Adjusted EBITDA ratio of 6.3 times and available liquidity of $57.1 million
24
Financial Position
($millions) As at December 27, 2019 As at December 28, 2018
Cash and cash equivalents 11.3 18.0
Debt
Revolver loan (current portion) 19.2 18.5
Long-term debt (current portion) 4.2 9.5
Long-term debt 292.6 232.4
Total Debt 316.0 260.4
Net Debt 304.7 242.4
Well positioned to advance growth strategy
• $275 million available in credit facilities at end of Q4 2019 to support growth plan
• Full compliance with bank covenants
25
$34.1$43.9
$56.1 $55.1
$47.2
15.1% 16.5%19.2%
16.2%12.5%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
0
10
20
30
40
50
60
70
2015 2016 2017 2018 2019
5-Year Financial Review
Production1 (millions of MT per annum) Revenue (C$ millions)
Adjusted Gross Margin (C$ millions) Adjusted EBITDA (C$ millions)
$226
$266
$293
$347
$378
2015 2016 2017 2018 2019
$44.8 $53.1
$66.9 $67.6 $65.0
19.9% 19.9%22.9%
19.5%17.2%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018 2019
1,137
1,320 1,357
1,6071,722
2015 2016 2017 2018 2019
1. Includes 100% of production from the Houston facility.
26
Selecting logistically advantageous locations
2
Identified Growth Projects
Project Identification and
Initial Evaluation:
1.0 – 1.5 million MTPA
Conceptual Design
and Engineering
Final Development
and Construction
Stra
tegi
c Fi
t
Fin
anci
al A
ttra
ctiv
en
ess
Cap
acit
y to
Exe
cute
Development Blueprint Development FunnelQualifications Before a Capital Project
is Undertaken
Securing long term sales agreements for our production
output1
Obtaining all permits and authorizations
4
Utilizing proven engineering, design, construction, and commissioning program
5
Securing a sustainable long-term supply of wood fibre
3
As at December 27, 2019, Pinnacle had $275 million available under its bank credit facility. Given our 4.0-5.5x CAPEX to EBITDA investment model, we can spend approximately $30 million for each 0.1 turn of our senior debt to EBITDA coverage ratio. Pinnaclereceives credit for run rate EBITDA during the commissioning of new facilities.
1
2
3
27
Significant room to grow
Future Growth
BCAB QC
GAAL
MSLATX
OR
WA
SCNC
NL
NB
NS
PEI
FL
Satisfy end market demand✓
Leverage development and operational expertise✓
Enhance geographic, customer and wood fibre supply diversity✓
• We have identified and intend to pursue several new production development opportunities in geographies such as Western Canada, Eastern Canada, U.S. Southeast, and / or the U.S. Pacific Northwest
• Strategic acquisition targets are assessed based on the quality of the asset, price and ability to integrate within our network of production facilities
Proven ability to exploit growth opportunities
Support fibre suppliers✓
28
U.S. Southeast Growth Opportunity
• Extensive sawmill development plans from major forestry companies (including Canadian firms) entering Southeast U.S. fibre basket
• Exceptional opportunity pipeline for Pinnacle to partner with forestry companies • Pinnacle’s operating strategy of targeting long-term residual fibre supply agreements is attractive to
new sawmills
Mississippi
Alabama
Louisiana
Arkansas
Pinnacle’s strategic entry into the key U.S. Southeast fibre basket
broadens scope of future growth opportunities
29
Investment Highlights
Leading Producer and Global Supplier of Bioenergy Products in a Rapidly Growing Global Market
Scale, Vertical Integration and Operational Efficiencies Result in an Attractive Cost Position
Long-Term Contracted Revenue with Stable Free Cash Flow Characteristics
Proven Project Development Capabilities & Attractive Project Pipeline
Strategic Entry and Expansion to U.S. Southeast Broadens Scope of Future Growth Opportunities
30
Appendix
31
Directors and Executive Officers
Management Team
Name Position Notable Prior Experience
Rob McCurdy Chief Executive Officer, Director • LafargeHolcim Ltd.
Andrea Johnston Chief Financial Officer • Dassault Systèmes GEOVIA, Natural Resources Industry, NGRAIN, BC Hydro
Scott Bax Chief Operating Officer • Interfor Corporation
Vaughan Bassett Senior Vice President, Sales & Logistics • Sappi Trading, VP of the Wood Pellet Association of Canada
Erin Strong Director of Human Resources • Mark Anthony Group, Tolko Industries
Ranj Sangra General Counsel & Corporate Secretary • Ritchie Bros Auctioneers, CHC Helicopter Corporation
Adnan Khan Vice President, Strategic Capital • Allnorth Consultants, Ostara Nutrient Recovery, Jacobs
Board of Directors
Name Position Notable Prior Experience
Gregory Baylin* Director, Chair of the Board • Managing Director at ONCAP
Pat Bell* Director, Vice Chair of the Board • Former Minister of Forests for the Province of British Columbia
Rob McCurdy Director • CEO of the Company
Leroy Reitsma Director • Former COO of the Company
Michael Lay* Director • Managing Partner of ONCAP
Hugh MacDiarmid* Director• Former President and CEO of Atomic Energy of Canada; Former President and CEO of Laidlaw
Transit; Director of SeaCube Container Leasing, Terrestrial Energy and BWXT Canada
Jane O’Hagan* Director• Former Chief Marketing Officer and EVP of Canadian Pacific Railway; Director of USD Partners
GP, the general partner of USD Partners based in Houston, Texas and Descartes Systems Group
Rex McLennan* Director• Former Chief Financial Officer and EVP of both Placer Dome and Viterra Inc.; Director of
Endeavour Silver Corp, and former director of Boart Longyear
* Denotes independent board member
32
Pelletizing Process
• Raw fibre is delivered to the production facility, either from nearby sawmills, or directly from the forest block• We strategically allocate raw fibre amongst our facilities, to optimize the wood fibre input mix across our network Sourcing &
Logistics
• In order to achieve the industrial wood pellet quality standard, larger fibre particles must be reduced in size and filtered• We target 95% fibre reduced to fewer than two millimetres, of which 65% is less than one millimeter
Grinding & Hammering
• For a pellet to achieve the optimal energy density and combustion rate, it needs to have a moisture content that is approximately 5%
• We achieve optimal moisture content by utilizing either bed drying or a rotary drum drying technologyDrying
• Pellets are created by taking the previously ground, hammered and dried fibre and putting it through a roll and die system• The pelletizing machines form a pellet through a combination of temperature and pressure created as the fibre is forced
through holes in the diePelletizing
• Pellets are air-cooled in order to allow for the pellets to solidify and strengthen• We use a vibrating screen to remove any fine material (particles less than 3 millimetres)
Cooling & Screening
• We have developed, along with our logistical partners, loading systems to maintain the pellet quality• Gentle pellet loading, storage and transport systems are essential to minimize the amount of dust or fine material
generated during the handling operationsStorage &
Load to Rail