07/02/2013 10:12 EDT | Updated 09/01/2013 05:12 EDT

Fortress says pump failure will delay startup of cogen at Quebec cellulose mill

VANCOUVER - Fortress Paper's shares fell Tuesday after the company said an unexpected mechanical water pump failure will further delay the startup of a cogeneration facility at its specialty cellulose mill in Thurso, Que.

Shares in the Vancouver-based company (TSX:FTP) closed down 24 cents or nearly four per cent at $5.90 on the Toronto Stock Exchange.

Fortress said a failure of the high pressure water pump and backup pump means the cogeneration facility wasn't completed by the end of June as expected.

The company expects the cogeneration facility will produce power by the end of July.

It has also ordered another pump from an alternate supplier in case the repairs can't be completed as scheduled. However, this unit could only be delivered and installed in 11 weeks.

Fortress must do 100 hours of mandatory grid testing following the installation of the repaired or replaced water pump.

Chief executive Chadwick Wasilenkoff said the delay of the cogeneration plant is "frustrating" but said he's confident that the pump will be repaired or replaced in the near term.

"Once the cogeneration facility is operational, we will see production costs at the mill improve towards our originally targeted cost structure," he said.

The Fortress specialty cellulose mill in Quebec began production of dissolving pulp in early December 2011. The cogeneration facility was initially expected to be operational in early 2013, but has been delayed several times.

Meanwhile, it said the turbine component of the cogeneration project was successfully synchronized to the power grid during the second quarter.

Fortress Paper produces paper for bank notes, passports, visas and other secure applications.

It is also seeking to expand its dissolving pulp capacity with the recent acquisition of a cellulose mill in Lebel-sur-Quevillon, Que.