Tembec has announced a capital investment totalling $25.7 million for its high-yield pulp mill located in Matane, Quebec. The investment will result in “energy, environmental and economic benefits”. Funding will come mainly from the Federal Government and the Province of Quebec, with $18.9 million related to black liquor credits earned by the Company under the Federal Green Transformation Program and $6.3 million from the Agence de l'efficacité énergétique's Heavy Oil Consumption Reduction Program.

The project has two main components. The first is a new anaerobic treatment facility. Estimated to cost $23.9 million, this system treats effluent and collects the methane gas produced in the treatment process, allowing it to be used as a bio-fuel for drying the pulp produced at the site. With an estimated cost of $1.8 million, the second component involves the installation of an electric boiler that will replace the current heavy oil fuelled boiler. The combined effect of the two components will result in the elimination of all heavy oils and the vast majority of the light oils currently used as a fuel source for the generation of the mill’s various process steam and drying requirements. They will also result in a significant improvement in the mill’s cost structure, with EBITDA projected to increase by $6 million on an annual basis, beginning when the project is completed in mid-2012.

“This investment will result in a significant reduction in costs for Matane and will allow the mill to be competitive in global markets for years to come,” said Yvon Pelletier, Executive Vice President and President, Specialty Cellulose and Chemical Group. “The environmental benefits will also provide an appealing attribute in the marketplace.”

“The investments announced today will improve the position of the Matane mill in environmental, energy and economic terms. This initiative is consistent with the Company’s stated objectives of investing in its core businesses, pursuing opportunities related to green energy projects, and moving all of its facilities into the first or second quartile of their respective cost curves,” said James Lopez, President and CEO of Tembec.

“Tembec is grateful for the support shown by the Province of Quebec and by the Federal Government. Minister Normandeau and Minister Paradis saw the potential offered by these projects and were diligent and effective advocates on behalf of the mill and the region. We thank them for their efforts,” concluded Mr. Lopez.

Tembec is a large, diversified and integrated forest products company which stands as the global leader in sustainable forest management practices. The Company’s principal operations are located in Canada and in France. Tembec’s common shares are listed on the Toronto Stock Exchange under the symbol TMB and warrants under TMB.WT. Additional information on Tembec is available on its website at www.tembec.com.