Montreal, Quebec, Canada, 16 July 2010 -- /PRNewswire/ -- Domtar Corporation (NYSE/TSX: UFS) and FPInnovations today announced that they have formed a new joint venture company to build the world's first 1 metric ton/day commercial-scale nanocrystalline cellulose demonstration plant at the Domtar Windsor, Quebec, pulp and paper mill site. Construction will begin in the coming weeks and will take approximately 20 months to be completed.

"As the leader in our industry, we are very excited to explore new frontiers by bringing together our operational expertise and the technical knowledge of FPInnovations for the efficient manufacture of this innovative and renewable product," said John D. Williams, president and chief executive officer of Domtar Corporation. "The remarkable properties of nanocrystalline cellulose and wide range of potential applications speak volumes about the commercial potential of new fiber-based products that go beyond traditional pulp and paper applications."

"This is an important milestone cumulating over 15 years of R&D investments towards the future development of fiber-based products for the industrial world. During this time FPInnovations developed an extensive intellectual property portfolio around the manufacturing and application of nanocrystalline cellulose," said Pierre Lapointe, president and chief executive officer of FPInnovations. "I am confident that this partnership and the strong support of both governments will lead to exciting and successful new commercial applications."

Nanocrystalline cellulose is a renewable, recyclable, and abundant nanomaterial made of cellulose fibers from the wood pulp manufacturing process. Potential applications include optically reflective films, high-durability varnishes, and innovative bioplastics. The properties of this material will provide new opportunities in a wide range of applications for a variety of sectors and markets such as the aerospace, automotive, chemical, textile, and forestry industries. There are promising applications for the aerospace industry that will complement Quebec's innovative aerospace "green" aircraft program.

The cost of construction of the demonstration plant is approximately CAD 32.4 million and operating costs are estimated at CAD 8.4 million, for a total investment of CAD 40.8 million. CAD 12 million of Domtar's total contribution has been submitted for funding approval under the Government of Canada's Pulp and Paper Green Transformation Program. Natural Resources Canada and Quebec's Natural Resources and Wildlife Ministry are contributing CAD 10.2 million each to FPInnovations' portion of the funding of this project. All funding is still subject to approval.

During the construction phase, the project will provide approximately 50 jobs as well as engineering services from the Quebec and the Canadian engineering firms, Teknika and Noram, respectively. Approximately 10 permanent positions will be needed to operate the demonstration plant. In addition, numerous researchers and scientific personnel have been and will continue working to deliver on the potential new nanocrystalline cellulose applications and products.

Following the construction phase, under the joint venture agreement, Domtar and FPInnovations will explore the commercial viability of the production of nanocrystalline cellulose on a larger commercial scale.

About Domtar

Domtar Corporation (NYSE/TSX:UFS) is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on production capacity. It also manufactures papergrade, fluff, and specialty pulp. The company designs, manufactures, markets, and distributes a wide range of business, commercial printing, publishing, converting, and specialty papers. Domtar owns and operates Domtar Distribution Group, an extensive network of strategically located paper distribution facilities. The company employs more than 9000 people. To learn more, visit www.domtar.com.

About FPInnovations

FPInnovations is Canada’s leading not‐for‐profit forest products research institute which performs research, technical services, and technology transfer activities relating to wood harvesting, wood products, pulp and paper, nanotechnology, and bioenergy and chemical production. FPInnovations’ staff numbers more than 550. Its research laboratories are located in Québec City, Montréal, and Vancouver, and it has technology transfer offices across Canada. For more information about FPInnovations, visit www.fpinnovations.ca.