Tembec announces investment at Tartas, France specialty dissolving pulp mill; reinforces Company’s commitment to this core business

December 16, 2010

Temiscaming, Quebec – Tembec today announced that its wholly owned subsidiary Tembec Tartas SAS will be making an investment in a green energy project at its specialty dissolving pulp mill located in Tartas, France. The project, which includes a new 18 megawatt steam turbine and improvements to the existing boiler system, will cost approximately 16 M€ (C $21 million). It is expected to be in operation during the second calendar quarter of 2012. Once the turbine is in full operation, the mill’s annual EBITDA should improve by 6 M€ (C $8 million).

The project will be funded in part by a 7.5 M€ loan (C $10 million) to be provided by a syndicate of French banks. The loan has a term of seven years at a rate of Euribor 3 months plus 2%.

With approximately 300,000 metric tonnes of capacity, Tembec is among the global leaders in the specialty dissolving pulp business. Tembec’s specialty cellulose division (Cellutions) is a leading producer of dissolving pulp for the cellulose derivatives market that includes Cellulose Acetate, Cellulose MCC, Cellulose Ethers and Nitrocellulose.

“Tembec’s specialty dissolving business has been and will remain one of the Company’s core businesses. The Tartas turbine investment will reposition that mill as a first quartile cost producer of specialty dissolving pulp generally, and particularly in its key grades of Cellulose Ethers and Nitrocellulose where it is the world’s largest supplier,” said Yvon Pelletier, Executive Vice President and President, Specialty Cellulose and Chemical Group.

“Ten years ago, the Tartas mill was restricted in its ability to produce these dissolving grades. Today, through a series of investments, the mill now has the capability to direct virtually all of its output into these products, with more than 90% of the production capacity currently dedicated to the specialty dissolving business. This project builds on those earlier investments and will result in energy, environmental and economic benefits – a great combination,” concluded Mr. Pelletier

In addition to the projected economic benefits, this investment will improve mill reliability with the retirement of a smaller and less efficient 40-year old steam turbine. This project will also help the site avoid disruptions associated with power interruptions and fluctuations from the grid.

“Tartas is a key facility in one of Tembec’s core businesses. The project announced today will position the Tartas mill as one of the lowest cost producers of specialty dissolving pulp in the world,” said James Lopez, President and CEO of Tembec. “This investment is consistent with Tembec’s overall strategy of having all of its assets in the first or second quartile of their respective cost curves.”

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

This press release includes “forward-looking statements” within the meaning of securities laws. Such statements relate, without limitation, to the Company’s or management’s objectives, projections, estimates, expectations or predictions of the future and can be identified by words such as “may”, “will”, “could”, “anticipate”, “estimate”, “expect” and “project”, the negative or variation thereof, and expressions of similar nature. Forward looking statements are based on certain assumptions and analyses made by the Company in light of its experience, information available to it and its perception of future developments. Such statements are subject to a number of risks and uncertainties, including, but not limited to, changes in foreign exchange rates, product selling prices, raw material and operating costs and other factors identified in our periodic filings with securities regulatory authorities. Many of these risks are beyond the control of the Company and, therefore, may cause actual actions or results to materially differ from those expressed or implied herein. The forward-looking statements contained herein reflect the Company’s expectations as of the date hereof and are subject to change after such date. The Company disclaims any intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable securities legislation.

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John Valley
Executive Vice President, Business Development and Corporate Affairs
Tel: 416-775-2819

Michel J. Dumas
Executive Vice President, Finance and Chief Financial Officer
Tel: 819-627-4268

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