POLITICS

Tentative energy deal reached for idled paper mill in Cape Breton

04/27/2012 02:28 EDT | Updated 06/27/2012 05:12 EDT
HALIFAX - The Vancouver-based company planning to buy the idle NewPage Port Hawkesbury paper mill in Cape Breton has reached a tentative energy agreement with the province's electric utility company, a key step in its bid to get the mill operating again.

Pacific West Commercial Corp. announced late Friday it had submitted the seven-year agreement for approval to the Nova Scotia Utility and Review Board.

The tentative power supply arrangement requires privately owned Nova Scotia Power Inc. to provide the mill with hourly projections of electricity rates a week in advance. The mill operators will then draft a production plan based on those predicted costs.

"It allows the mill to be a low-cost producer," Pacific West spokesman Marc Dube told a news conference. "It's something that we're anxious to get on with."

The tentative deal would create a partnership between Nova Scotia Power and NewPage Port Hawkesbury. If the deal is approved, the utility will hold both preferred and common shares in NewPage Port Hawkesbury.

Nova Scotia Power expects to receive dividends reflecting the value of the energy used by the mill. Those payments will also include a $2 per megawatt hour contribution to the utility's fixed costs.

Robin McAdam, Nova Scotia Power's executive vice-president of customer services, said the utility would have a 30 per cent profit participation rate in the mill.

The deal is designed to ensure other customers, including residents, are not saddled with more costs, McAdam said.

"We're comfortable in saying that in no circumstance does this arrangement lead to other customers subsidizing the mill," he said.

"This is quite a different power supply arrangement than we have with other customers. ... It is a pretty complicated arrangement."

Pacific West said regulatory approval in Nova Scotia is expected to take another three to four months to complete.

Certain portions of the arrangement will require approval from the Canada Revenue Agency, but the company said it remains unclear how long that will take.

Earlier this month, unionized workers at the mill in Point Tupper, N.S., endorsed a new contract.

Close to 86 per cent of union members who cast ballots voted in favour of a deal that would see the layoff of about 320 employees of the 550-member workforce.

"Now that we've successfully completed negotiations with the union, this is the next important step in the process to reopen the mill," Pacific West president Ron Stern said in a statement.

"We know that for the mill to be competitive and successful, we need to ensure our key input costs, labour and electricity, are also competitive."

Premier Darrell Dexter has said that once the electricity rates are set, the government will start discussing other issues, such as Crown timber rights.

The government has already announced up to $30 million to support timber operations in the Port Hawkesbury area and to help keep the plant in a so-called hot idle state.

It has been closed since September.