POLITICS

Pacific West wins bid to buy idled NewPage paper mill in Cape Breton

01/04/2012 03:15 EST | Updated 03/05/2012 05:12 EST
HALIFAX - The idled NewPage paper mill in Cape Breton has been tentatively sold to a company in British Columbia that intends to restart one of its two paper machines, but the sale won't be approved until certain conditions are met.

Ernst & Young, the court-appointed monitor overseeing the sale, announced Wednesday that Pacific West Commercial Corp. had edged out three other bidders.

Pacific West is associated with Stern Partners Inc., a Vancouver investment firm that also owns Alberta Newsprint Co. of Whitecourt, Alta., and Westland Paper Co., an Oregon-based mill.

Ernst & Young said it was uncertain when the sale may be finalized and it did not disclose the value of Pacific West's bid. However, it confirmed that NewPage will return to court Jan. 18 to request an extension to the sale process and protection from creditors to March 30.

The money-losing mill in Point Tupper was shut down in September, throwing 600 employees out of work, and affecting another 400 forest contractors.

Ohio-based NewPage has said the mill was losing about $4 million a month as it struggled with soaring electricity and shipping costs, a strong Canadian dollar and declining demand, particularly for newsprint.

Stern Partners president Ron Stern confirmed the mill's newsprint machine will be left idle if the sale is approved. But he said its supercalendered machine will continue making glossy paper for magazines and catalogues.

He wouldn't comment on the impact on jobs, wages or benefits, but he stressed that the mill will maintain a "substantial" number of positions.

Stern also said his company would not assume the unfunded liability associated with the existing pension plan, which he said is in excess of $100 million.

"I understand that it's a big issue for the people affected," he said in an interview from Vancouver. "We're doing a lot of work to position this (mill) as a low-cost producer ... If you were to step into that liability, you wouldn't have any hope of achieving that."

He wouldn't comment on whether the pension would need to be wound up.

As for electricity rates, Stern said the company is looking for significant cost savings.

"It is the biggest cost of the operation," he said.

Still, Stern said he doesn't want to saddle Nova Scotians with higher electricity bills.

"We're not restarting it and suggesting that ... other consumers should be paying more for power than they are with it not operating."

Charlie Parker, the province's natural resources minister, said Pacific West will enter into further negotiations with the provincial government, the province's electric utility and the union representing mill workers.

"Our government is very pleased that the successful bidder is one that is looking to keep the mill operating in a sustainable way and will help maintain hundreds of jobs in rural Nova Scotia," he told a news conference.

Parker said Pacific West is already negotiating with Nova Scotia Power Inc., the province's privately owned electric utility, to secure a new deal on electricity rates. The mill is one of the province's largest consumers of electricity.

As well, he said the bidder has to negotiate new leases with the province to gain access to timber on Crown land, and the sale won't be final until a settlement is reached with the union.

Archie MacLachlan, a vice-president of the Communications, Energy and Paperworkers union said Wednesday's announcement was "positive," even though there is plenty of work to do to land a deal.

MacLachlan said he recently met with Stern, who told the union he was most concerned about electricity rates.

"Power rates are high here," the union leader said. "It's a function of where we live."

MacLachlan said Stern should know that the union is determined to prevent its pension plan from being wound up.

"That's a priority for us," MacLachlan said. "I'm quite confident that we can come out with some kind of negotiated deal. It's not going to be done overnight."

In September, the province announced it would spend $15-million to keep about 500 contractors working in woodlots after the mill had shut down.

Parker said the province is prepared to invest more in the operation, subject to further negotiations.

"Everything is being considered," he said, including offering Pacific West subsidies to pay its power bills.

Billy Joe MacLean, mayor of nearby Port Hawkesbury, said he was elated with the announcement.

"Pacific West Commercial Corp. has a solid reputation and this is a good day for our communities, businesses and families," he said in a statement.

Ernst & Young has said there were three other qualified bidders for the mill, including one other that wanted to continue operations: Paper Excellence Canada Holdings Corp., a subsidiary of the giant Indonesian-owned PT Sinar Mas Group.

The other two bidders wanted to close the mill permanently and sell off its assets. They were not named.

Note to readers: This is a corrected story. A previous version reported the province will spend an additional $5 million keeping the plant operational.