Tembec secures funding for Cogen project

September 23, 2013, Montreal, QC (CNW) – Tembec announced
that it has secured an additional $27.8 million loan to fund
a portion of the Temiscaming, Québec, specialty cellulose Cogen project.

Tembec has entered into an additional loan in the amount of
$17.8 million with Investissement Québec and has entered into an amended and
restated credit agreement with Integrated Private Debt Fund III LP, as Agent
for the project's senior lenders, increasing its credit facility by $10 million.
This additional $27.8 million in loans increases the total project financing to
$132.8 million, with IQ now committed to $92.8 million of the financing and IPD
committed to $40 million.

To the end of August 2013, the company has spent $131
million on the project, which has a total estimated cost of $235 million. The company
has utilized a total of $48 million of the previously noted $133 million of
project financing. Of the remaining $104 million to be spent, $85 million will
be funded through the remaining project financing and $29 million from the company's
internally generated cash flow.

The project involves the replacement of three low-pressure
boilers with a single new high-pressure boiler designed to burn waste sulphite
liquor generated by the specialty cellulose manufacturing process. The project
also includes the installation of a new 50-megawatt electrical turbine. The
completion of the boiler portion of the project is scheduled for April 2014 and
the start-up of the turbine should occur in September 2014. The company
anticipates that the project will improve annual adjusted EBITDA by
approximately $48 million. The improvement will include approximately $28
million of incremental electricity revenues, $7 million of operating and
maintenance cost reduction and $13 million of productivity and margin
enhancements associated with an annual production increase of 15,000 tonnes of
specialty cellulose pulp.