PRT Announces Closure of Tree Seedling Nursery

Pacific Regeneration Technologies Inc. announced today that it will close PRT Pelton, its seedling nursery facility in Maple Ridge, BC. The closure will take place in phases over the next few months and will result in the eventual layoff of approximately 60 employees.

“The closure is the result of a major downturn in demand for tree seedlings across PRT’s market areas,” said Rob Miller, President and Chief Executive Officer of PRT.”

“Unfortunately, PRT Pelton has the highest cost structure of our 15 North American nursery operations. After a careful review, we have decided to close it in order to rationalize capacity. Following the closure, we will be able to increase overall efficiency by taking advantage of lower cost unused capacity elsewhere.”

Miller continued, “PRT does not expect any improvement in demand for seedlings in 2009 but does expect demand to improve eventually as U.S. housing starts recover. Seedling demand may also strengthen if jurisdictions across North America invest in tree planting to combat global warming, and if British Columbia accelerates its program to replant forests devastated by the Mountain Pine Beetle. PRT will retain key personnel and nursery assets from the closed facility in order to meet future demand as markets recover.”

The United Steelworkers Union, which represents the affected production workers, has been advised of the closure. PRT will be having further discussions with the union about the transition associated with the closure and its effect on employees.

PRT, North America’s largest independent supplier of forest seedlings, currently has annual capacity of approximately 250 million seedlings. This includes annual capacity of 50 million seedlings at PRT Pelton. PRT’s contracted customers include more than 100 North American forest products companies. These customers have reduced purchases of seedlings due to a severe contraction in demand for lumber, which in turn is related mainly to a sharp decline in U.S. housing starts. As a result, PRT expects to produce approximately 170 million seedlings in 2008, down from just over 205 million seedlings in 2007, and 230 million in 2006.

In British Columbia, PRT’s largest market, the company expects industry wide orders for PRT and other seedling suppliers combined will total approximately 210 million seedlings in 2008, down 22% from a recent peak of 270 million seedlings in 2006. PRT has nine nurseries in BC in addition to Pelton.

Without the nursery closure, PRT’s surplus capacity would have exacerbated the industry-wide excess supply of seedlings. However, PRT is well positioned for growth when markets recover because of its strong balance sheet and its seedling technology. Substantially all of PRT’s seedlings are grown in containers that produce consistently shaped and protected root systems to facilitate harvesting, packaging, storing and planting. Container grown seedlings have higher value because of improved survival and growth rates following planting, compared with bareroot (field-grown) seedlings. PRT is North America’s largest producer of container-grown forest seedlings.

The closure is expected to result in an estimated non-cash after-tax charge of $6.6 million to earnings, which will be recorded in the fourth quarter. Additional costs and charges related to decommissioning the site will be determined once the transition plans are finalized.

Pacific Regeneration Technologies Inc. is wholly owned by the PRT Forest Regeneration Income Fund (TSX:PRT.UN). Because of the severe downturn in demand for seedlings, the Fund has already reduced its monthly distribution to unitholders to a rate of $0.02 per unit. The Fund does not currently anticipate a further reduction in the monthly distribution as a result of this nursery closure.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations for future market conditions, planned efficiency improvements, estimated costs and charges attributable to the planned nursery closure, expectations for the monthly distribution and other statements that are not historical fact. Risks and uncertainties include, but are not limited to, future commodity prices and exchange rates, agricultural risks, the outlook for the forest industry, and other risks identified from time to time in the Fund’s annual report, and annual information return. These risks and uncertainties may cause actual results to differ materially from the expectations expressed herein. As such, readers are cautioned to not place undue reliance on forward-looking statements.

Forward-looking statements are based on current expectations and neither the Fund nor PRT assumes any obligation to update such information to reflect later events or developments, except as required by law.

Web Link: http://www.marketwire.com/press-release/Prt-Forest-Regeneration-Income-Fund-TSX-PRT.UN-905878.html