Mill loans and millstones
Timing is everything.
Last Sunday, the government of this province announced that they had reached a deal to essentially cover off Corner Brook Pulp and Paper’s unfunded pension liability. The provincial government will cover $88 million of pension liabilities if the mill shuts down, and in exchange, would be able to apply that money towards purchasing the paper mill’s electrical power generation assets at Deer Lake and Watson’s Brook.
The province had already loaned the papermaker $110 million against the same power assets in 2014, and had agreed that the purchase price would be close to $200 million.
The paper business is in trouble, as the argument goes, and Corner Brook Pulp and Paper and its corporate parent, Kruger Inc. of Montreal, just don’t have the money to do things like top up the pension fund to where it should be.
You might think that the provincial government struck the deal because they are keen to have Kruger’s power plant assets. They aren’t.
If there’s one thing that the province doesn’t want to have in its electrical arsenal, it’s even more generation capacity that would diminish the rationale for Muskrat Falls to the point of it being completely unnecessary. (For those who don’t remember, even the extremely hopeful analysis of Muskrat Falls at the outset of the project couldn’t conceal the fact that, if the Corner Brook mill closed and we had all of Corner Brook Pulp and Paper’s generating assets going into the grid, we wouldn’t have had any need for Muskrat Falls.)
But back to timing.
That announcement was Sunday, as I said, and was characterized by our provincial government as a “win-win.”
Wednesday, Kruger Inc. made a triumphant announcement of its own: it has just finished rebuilding its No. 10 paper machine in Trois-rivières, Que., and can now produce highstrength, 100 per cent-recycled linerboard at the facility.
But I’ll let them talk about it. “Kruger completed the PM10 rebuild as scheduled and on budget, after 500,000 hours of construction work over a period of 20 months. The company invested $250 million in this project to ensure optimal results, implementing the best and latest linerboard manufacturing technologies from around the world in every section of the machine. PM10’S recycled pulp is being supplied by a newly built (old corrugated container — OCC) plant that is fully integrated to feed the production line with clean, high quality, high strength pulp,” the company said in its news release.
If you go back to 2015, when the project was launched, you can see a section in another news release explaining where the money came from: “The modernization project will generate significant growth opportunities for the Trois-rivières facility, contributing to secure operations and the 270 jobs at the mill. The project has received $190 million in support from the Québec government, which includes an $84-million loan to finance the cost of the conversion and a $106-million participation, through Investissement Québec, in a new company that now combines all of Kruger’s Containerboard and Packaging activities.”
By the end of this summer, Kruger hopes to have another project finished, this time a new paper machine in its tissue paper manufacturing operation in Crabtree, Que. It’s a $55-million project: “Made possible by a $39.5 million loan from Investissement Québec, the project will help secure 600 jobs at the facility northeast of Montreal,” a company news release says.
By now, you should be getting the picture.
No one doubts that the paper industry has had and continues to have issues, especially in plants like Corner Brook that produce newsprint. Likewise, no one should doubt that, when you have the large numbers of workers that mill operations have, you also have great power with provincial governments that desperately want to keep those jobs.
Sure, we’ve now got dibs on a power plant the government desperately doesn’t want, and doesn’t want for a couple of reasons; getting the power would add further insult to the ongoing Muskrat injury, and the government needs the Corner Brook jobs to last.
As a result, we’ve got a stake of $200 million of loans and other exposure in an industry that clearly has grown tremendously skilled at shaking money out of all our pockets.
Where do you suppose we should really put the “win” in this equation?
No one doubts that the paper industry has had and continues to have issues, especially in plants like Corner Brook that produce newsprint.