Conifex puts $79 million price tag on bioenergy plant

Conifex's board of directors have tentatively approved a $79-million budget to build its Mackenzie bioenergy plant.

As part of a 20-year electricity purchase agreement with B.C. Hydro, the bioenergy plant is scheduled to be up and running by September 2013 and will produce enough electricity to power 20,000 homes.

The $79 million includes a $7-million contingency and B.C. Hydro will contribute $13 million in exchange for Conifex providing its own electricity to its Mackenzie sawmills.

The project's design and feasibility have been sent out to an engineer for an independent assessment and a draft report should be ready in about two weeks. Once received, a final budget and financing structure will be established.

The total is up from $60 million and CEO Ken Shields attributed the hike largely to moving some future expenditures forward to the initial budget - specifically construction of a fuel storage building and dust burners, enhancements to the fuel handling systems and modifications to improve boiler availability.

The work added just over $10 million to the initial cost, but will also increase earnings before interest, taxes, depreciation and amortization by $1.5 million per year.

"The scope changes provide us additional uptime and reliability, they improve our fuel efficiency and thereby lower our operating and maintenance costs," said Shields.

Conifex reported a loss for the first quarter of 2012 of $6.5 million or $0.38 per share. That's compared to a $7.5 million loss or $0.49 per share in the fourth quarter of 2011, and a $3.6 million loss or $0.24 per share for the first quarter of 2011.

Conifex's bottom line was affected by two industry-wide factors - exceptionally cold weather in January and unusually wide discounts on low-grade sales into China.

Specific to Conifex, Shields said closure of the Mackenzie planer complex to allow installation of a $3.2-million automatic grading system held back production, exports of so-called J-Grade lumber to Japan were down due to inferior sawlog profiles, and there was trouble converting the Fort St. James mill to two lines from three.