Port Alice Pulp Mill Reopens

May 5, 2006 (Press Release) - The Neucel Specialty Cellulose plant in Port Alice, British Columbia officially opened Friday, with international investors putting their money behind the strong market demand for dissolving sulphite pulp. The mill, in the remote Canadian resource community on northern Vancouver Island, has been the economic lifeline for the community of 700 people for nearly a century.

The plant had been purchased in early December 2005 by an investment consortium of Wellspring Capital Management of New York and Charlestown Investments, based in Switzerland. An extensive capital program of equipment maintenance and upgrading has been underway to improve efficiency, reliability and move the mill's production into high-purity cellulose.

"As promised, over the past five months, we have invested approximately $35 million in capital and equipment upgrades to become competitive in both production costs and product offerings," said CEO, Richard Bassett. "A further US$10-15 million is due to be spent between May and August of this year with an additional US$70-80 million due to be earmarked for investment by the end of 2008."

Over the past month, Neucel has hired almost 300 employees and a recent sales trip to Europe, the US and Japan was very positive. "The sales opportunities are there," said Bassett, "especially for the high-purity cellulose such as acetates and ethers. There was a great deal of interest among buyers to see our products and begin testing them for purchase."

Investors saw the potential opportunities of a specialty cellulose plant Bassett said, but required a number of changes to make the investment work. "We worked out a fair taxation schedule with the Village of Port Alice," he said, "as well as a progressive labour agreement that gives us the flexibility to improve productivity, sustain the wage rates to attract skilled employees, and allow a bonus program when we make profits. So it really took a lot of cooperation for this to happen."

Most importantly, he added, the BC government was willing to acknowledge their responsibility for historical environmental liabilities. "The BC government negotiated a deal with Neucel to protect investors from past environmental liability for which they had no responsibility. In making that decision, government recognized that a tax-paying plant with 300 employees anchoring the economics of North Island was preferable to a bankrupt, closed mill needing expensive environmental remediation work."

Bassett added that while B.C.'s Economic Development Minister Colin Hanson was responsible for steering the environment liability deal, B.C.'s Minister of Forests, Rich Coleman was a critical advocate for the plant within government. "Simply put," said Bassett, "Minister Coleman supported this deal at its most critical time."

The Quatsino First Nations were also supporters, he added. "They stored equipment, and supported the transfers of various foreshore rights and water licenses to us. We needed that support and we have also gained a number of employees from the Band who won jobs during our interview process."

Today's noon-hour ceremony and barbeque will officially launch the plant opening. Attendees include British Columbia Forests Minister, Rich Coleman, North Island area families including the Village of Port Alice, Quatsino First Nations representatives, Neucel executives, and mill employees.

Neucel Specialty Cellulose will begin selling pulp immediately and will move into the high-purity markets to ensure financial stability as its products are qualified by buyers.

Neucel Specialty Cellulose is owned by Wellspring Capital Partners, and Charlestown Investments.

Wellspring is a New York based private equity firm which has consistently ranked among the top-performing private equity funds specializing in the middle market. Wellspring currently manages more than $2 billion in equity capital on behalf of some of the largest and most respected institutional investors in the United States, Canada, and Europe. Long term limited partner investors in Wellspring include pension and retirement plans, representing the interests of over 2,000,000 members in North America (including more than 250,000 Canadian public workers).

Charlestown Investments is an investment holding company registered in Zug, Switzerland and controlled by a group of private European investors. Charlestown has other investments in software, real estate, biotechnology and business services providers.

SOURCE: Neucel Specialty Cellulose

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