01/25/2013 09:29 EST | Updated 03/27/2013 05:12 EDT

Fortress Paper shares plummet as co-gen startup delayed, costs higher

VANCOUVER - Fortress Paper Ltd. shares plummeted in early trading Friday after the company said the startup at its co-generation project at its Quebec speciality cellulose mill will be delayed and costs will increase by as much as 20 per cent.

Shares in the company fell $1.21, or 11.7 per cent, at $9.55 in morning trading.

Fortress also said Friday it expects to soon resolve "minor technical issues" as it continues to ramp-up production of dissolving pulp at the new facility in Thurso, Que.

The company (TSX:FTP) said overall construction of the energy project is about 94 per cent completed, but startup was being delayed due to unforeseen piping issues, worker shortage and other issues.

It now expects power will begin to flow late in the first quarter or early in the second quarter, but costs will be 10 to 20 per cent higher than previously forecast.

After a promising start to dissolving pulp production in early December, the mill has faced challenges as it ramps up to full capacity. Fortress said it expects its efforts will soon improve the operating efficiency and productivity.

"Although the beginning of 2013 has presented certain minor technical issues and constraints beyond our control, we believe that these matters will be resolved in the near term and we will continue on with our progress towards full capacity," chairman and CEO Chadwick Wasilenkoff said in a statement.

In addition to a dissolving pulp mill in Thurso, Fortress recently acquired a cellulose mill in Lebel-sur-Quevillon, Que., which it intends to convert into a dissolving pulp mill and re-start the co generation facility.

The company also has a specialty wallpaper manufacturing business in Germany, a mill in Switzerland that makes paper for banknotes, passports and other uses, and optically variable thin film material at another plant in Canada.