NS announces $124.5M deal for paper mill

Nancy King
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[Port Hawkesbury, NS]— The province has announced a $124.5-million financial package for the company looking to reopen the idled NewPage Port Hawkesbury paper mill.

Premier Darrell Dexter, from left, speaks with NewPage retiree Roddie MacDonald and Inverness MLA Allan MacMaster after announcing details of a provincial package to help reopen the idled paper mill. 

Premier Darrell Dexter outlined the package for Pacific West Commercial Corp. at a press conference in Port Hawkesbury on Monday (Aug. 20).

Dexter said the money will go to develop a new sustainable forestry industry in Nova Scotia, and added that Pacific West’s business plan has been analyzed by financial experts.

“The province has done its due diligence and we are confident that it is the right plan for the province,” he said.

“Families, communities, government, industries — those are the bricks upon which the province is built and sometimes, sometimes government must be the mortar between those bricks.”

The biggest piece is a $40-million loan for working capital to help the mill become the lowest-cost and most competitive producer of supercalendered paper in North America. Repayment will start after year four, with up to $3 million to be paid in 2017, $4 million in 2018 and $6 million in subsequent years. It could possibly be repaid over 14 years.

It also includes a $24-million loan that will be forgivable at $6 million a year based on continuous operation of the mill’s supercalendered paper machine, PM2, subject to market-related shutdowns. There are safeguards in the agreement if there are extended breaks in normal operations of the mill. That money is intended to be used to help make the mill more efficient.

NewPage Port Hawkesbury shut down indefinitely and went into creditor protection in September, throwing 600 mill workers and 400 forestry contractors out of work. Vancouver-based Pacific West has been working for months to reopen the mill. If it does, it will only operate the supercalendered paper line and has slashed the ranks of unionized employees by more than half.

If the mill — which is to be called Port Hawkesbury Paper — makes money, the mill will share revenues of up to $1.5 million a year.

Another $1.5 million of the province’s money will go to training workers while $1 million will fund a marketing plan promoting the province’s forestry sector.

Under the agreement, the province is buying most of the lands owned by NewPage, about 20,800 hectares, for $20 million. That money will go to NewPage’s creditors.

As well, $3.8 million annually for a 10-year period from the forestry restructuring fund will go to supporting sustainable harvesting practices and woodlands management.

The land portion of the agreement represents a shift from the way NewPage, and Stora Enso before it, leased 600,000 hectares of Crown land in the province’s seven eastern counties. The province will retain control over those lands and Port Hawkesbury Paper will submit management plans to the Department of Natural Resources. It will remain able to harvest from most of the lands NewPage leased, less 93,000 hectares that will become protected areas.

The new approach will allow the province to move forward on its natural resources strategy and also meet Pacific West’s needs for wood supply, Dexter said.

Dexter said the package will support more than 1,400 jobs — 330 direct employees, 590 in woodlands operations and related industries such as saw mills, and the remainder in spinoffs. It will also allow the province to retain annual provincial income and sales taxes of $11-13 million.

He acknowledged that the province’s support isn’t being made without some risk, noting challenging paper markets.

Under the agreement, the amount of stumpage that the province can collect for harvested wood will increase by at least $600,000 a year.

The province has already provided up to $27 million to fund the ongoing hot-idle at the mill so it can quickly return to production.

PM2, which went into operation in 1998 after Stora Enso invested more than $750 million at the Point Tupper mill, is considered the most modern and efficient machine of its kind in North America. Glossy supercalendered paper is used in the magazine and catalogue market.

NewPage represented 2.5 per cent of the province’s gross domestic product, putting $160 million a year into the provincial economy.

Pacific West on Monday received approval from provincial regulators for a discounted electricity rate. One hurdle remains — the Canada Revenue Agency must provide an advanced tax ruling before Pacific West will reopen the mill. Once that takes place, the mill could be making paper within 10 days.

Pacific West’s bid for the mill was $33 million.

Cape Breton Post

Organizations: Pacific West Commercial, Stora Enso, Department of Natural Resources Canada Revenue Agency

Geographic location: Port Hawkesbury, North America, Nova Scotia Point Tupper Cape Breton

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