Rayonier Advanced Materials (RYAM) announced today that its facility at Jesup, Georgia, has been impacted by a force majeure declared by its natural gas provider, Southern Natural Gas Company, L.L.C., due to an unscheduled outage of the Elba Express Pipeline’s Hartwell Compressor Station (the “SNG Force Majeure Event”, or “Event”).
RYAM’s Jesup facility is the largest cellulose specialties plant in the world. With two fiber lines producing both hardwood and softwood high-purity cellulose specialties, the Jesup plant manufactures approximately 330,000 metric tons each year. An additional fiber line produces up to 245,000 metric tons of commodity viscose and absorbent materials each year.
Southern Natural Gas Company has asserted that, during the period of the SNG Force Majeure Event, which commenced on December 24, 2022, RYAM’s Jesup facility will be subject to a financial penalty for each MMBtu of natural gas consumed in excess of a contractually allocated amount. Based on this and other current assumptions, RYAM expects the Event could reduce EBITDA by approximately $775,000 to $900,000 per day.
Accordingly, if the SNG Force Majeure Event were to continue through the end of 2022, the Company estimates that its aggregate EBITDA would be approximately $6 to $7 million lower than it otherwise would have been without the financial penalty.
RYAM’s facility at Fernandina Beach, Florida, is not affected by the SNG Force Majeure Event.
Prior to the SNG Force Majeure Event, the RYAM had expected that it would be able to achieve its guidance issued on November 1, 2022, that the Company’s full-year Adjusted EBITDA is expected to exceed $175 million, but the SNG Force Majeure Event may cause the Company’s full-year Adjusted EBITDA to be below that amount. The Company expects to meet its Net Debt guidance of $725 million or better.
RYAM has implemented various cold weather operating actions to protect its assets and ensure safe operations, including leveraging alternative energy sources, such as pulping liquor and biomass, to minimize the Company’s reliance on natural gas during the cold weather period. While the Company has been primarily focused on taking all necessary action to keep its facilities operating during the Event, it is reserving all rights to more fully examine, and potentially contest, the validity of the financial penalty.
Despite the SNG Force Majeure Event, RYAM does not currently intend to initiate its own force majeure under its customer and supplier contracts. The Company’s multiple reliable production facilities across multiple geographies have enabled it to adapt production to meet customer orders. If the Event were to worsen or continue beyond the end of 2022, however, the Company could reassess this determination and the need for additional mitigating actions to address customer or financial impacts.
RYAM is a global leader of cellulose-based technologies, including high purity cellulose specialties, a natural polymer commonly found in filters, food, pharmaceuticals and other industrial applications. The Company also manufactures products for paper and packaging markets.
SOURCE: Rayonier Advanced Materials Inc.