A loan agreement announced Thursday between Corner Brook Pulp and Paper and the provincial government implies the paper mill will be around for a long time.
Daniel Archambault (right) executive vice-president Kruger Inc.’s industrial products division, shakes hands with Premier Tom Marshall (centre) and Gary Healey, Unifor national representive, at the announcement of the province’s loan to the paper mill in Corner Brook Thursday.
— Photo by Geraldine Brophy/The Western Star
The deal states the paper company will repay $110 million in 59 quarterly payments of $1.85 million, with the first payment due March 31, 2019 and the final residual payment due Dec. 31, 2033.
Around $85 million will be released immediately to allow the company to refinance its existing debt and for working capital. The remaining $25 million will be provided as planned capital improvements are completed.
Flexibility to make capital investments
The company said the upfront money, plus the fact it doesn’t have to start repaying it for another five years, will give the mill more flexibility to finance capital investments. The company expects to invest about $70 million of its own, along with the $25 million coming from government.
“There’s $95 million in capital expenditures,” noted Premier Tom Marshall. “So, there is investment going into the mill and the (Deer Lake) power plant and that augers well for this mill.”
That’s a long way from two years ago when the paper company was negotiating labour agreements with its eight unions and seeking a five-year extension on covering its obligations to the unfunded liability portion of the company’s pension funds. At the time, the paper company was saying the operation was in jeopardy if it could not come to terms with its current and former employees on all those issues.
Reaching those agreements, which have all since happened, was also a condition of accessing the government loan announced Thursday.
Daniel Archambault, executive vice-president of Kruger Inc.’s industrial products division, was in at the announcement on behalf of the mill’s parent company. He said the deal will help Corner Brook Pulp and Paper improve its cost structure and ensure the sustainability of its assets in Corner Brook and Deer Lake.
“This mill has the potential to be one of the best mills, if not the best mill, in Canada when you talk about overall cost structure and quality of the product,” Archambault said. “We are moving there at a very good pace and we are convinced the place will be competitive. It is (competitive) today and we will continue to improve our competitivity.”
The key requirements for Corner Brook Pulp and Paper are that it has to repay the loan, continue to operate the mill and make planned capital expenditures in the mill and power assets. The company is required to contribute to employee pension plans and is responsible for environmental liabilities.
The company must file quarterly and annual financial statements and sustainability/capital plan progress reports. It must also file an annual operating budget and business plan, pension and actuarial reports, among other reports.
The loan is secured by a mortgage over company power assets and water rights, including the Deer Lake Power Plant and Watson’s Brook Power Plant. The provincial government will purchase the power assets, water rights, and all related rights to the power assets for the people of the province, but only if the mill closes.
Marshall noted the mill being operational is crucial to the province’s entire forest industry since many sawmills have a symbiotic relationship with the paper company when it comes to wood harvesting.
The premier said the deal was made possible by the company, its past and present employees and the government coming together with the common goal of ensuring the mill’s continued operation.
He hopes the mill will continue to drive the western Newfoundland economy long enough to celebrate its 100th anniversary in 2025.
“There’s no guarantees, but I do know we have an owner who has made it clear he is committed to the mill. We have a government that is supportive, a workforce that has been making paper for years — they know what they are doing,” said Marshall. “If anybody can make a go of this, this operation can.”