CelluFuel Inc. of Halifax has raised $5 million in capital to build a demonstration-scale plant that will produce synthetic, renewable diesel fuel from wood biomass.

“We are extremely pleased with the successful completion of our demonstration project funding effort and excited about the value our new investors bring to our business,” CelluFuel president and CEO Chris Hooper said in a recent news release.

The company will build the plant at the province’s ReNova Scotia Bioenergy site in Brooklyn, Queens County, formerly Bowater Mersey Paper Co. Ltd.

The site serves as a provincial demonstration centre for companies focused on bioenergy innovation.

The Brooklyn plant will use local wood residuals, create local job opportunities and launch the expansion of commercial-scale projects throughout Canada.

CelluFuel expects to begin the construction its first commercial project within 12 months of commissioning its demonstration project.

PwC Corporate Finance Inc. was the lead adviser for the raising of the private equity, which included a $270,000 equity investment by Innovacorp, a provincial Crown corporation that assists startups. One of the company’s principal investors is Boralex of Quebec, a leading Canadian renewable energy producer.

“With our investment in CelluFuel, Boralex is strengthening its dedication to the development of renewable energy from sustainable resources and confirms its faith that various sources of wood residues are to be a part of meeting our energy needs,” said Boralex president and CEO Patrick Lemaire.

In March, CelluFuel received a $500,000 loan through the Atlantic Canada Opportunities Agency. Before that, the Nova Scotia government lent CelluFuel $1.5 million.