Conifex Timber (TSX-V:CFF) may be a forestry company, but it plans to rake in $20 million every year in energy revenue.
On Monday, the Vancouver-based lumber producer completed Energy Purchase and Load Displacement agreements with BC Hydro that will see Conifex supply a minimum of 200 gigawatt hours of electricity to the utility annually for a 20-year term, starting in the third quarter of 2012.
The energy would be produced from the company’s planned Mackenzie bioenergy project, which is expected to cost $50 million.
The junior company leapt onto the B.C. forestry scene in 2008 when it bought its Fort St. James mill for a rock-bottom $12.8 million.
Last year, the company picked up two more mills in Mackenzie, B.C., for $33.5 million.
Although the company mainly manufactures lumber, Conifex chairman and CEO Ken Shields recently told Business in Vancouver that it plans to use its wood waste to generate energy and drive revenue for the business.
“Bioenergy is really crucial because … your revenue stream when you sell onto the grid is denominated in Canadian dollars, it’s not subject to a softwood lumber agreement and it’s steady-eddy revenue,” Shields said in April. (See “Saw bucks” – issue 1120; April 12-18)
The company’s Mackenzie bioenergy facility is expected to generate approximately 230 gigawatt hours of energy per year (enough to power 24,000 homes).
Conifex said the energy supplied from the project under a load-displacement agreement with BC Hydro would offset the mills’ requirement for energy from BC Hydro.
As a result, the utility had agreed to provide incentive funding to be used toward the completion of the bioenergy project.
“The effect of the agreement is to augment and stabilize Conifex revenues and concurrently expand and stabilize the employment base in Mackenzie, B.C., the province’s most forest dependent community,” Shields said.
At market close Monday, Conifex’s shares were down $0.070 to $9.80.
Joel McKay