An agreement has been reached for the sale of the Prince Albert Pulp and Paper Mill.
As stock markets opened Monday morning, mill owner Domtar (TSX: UFS) announced it had reached an agreement to sell the dormant mill to Netherlands-based Paper Excellence, an associate of Asia Pulp and Paper.
Domtar spokeswoman Bonnie Skene said the company was courted by several groups interested in the Prince Albert facility, which closed in 2006, but Paper Excellence was the best choice.
“We carefully evaluated the options before us, and frankly, the Paper Excellence proposal was more comprehensive and most able to finalize something,” she said.
Neither company disclosed the sale price, but the city last valued the site at about $186 million in 2006.
Paper Excellence said they will repurpose the mill to dissolve wood pulp for the production of rayon and other materials. That repurposing will take an investment of around $200 million.
According to Ed Roste, Paper Excellence’s vice president of operations, it’s a smart investment for the company with increasing demand for the premium product of dissolved pulp.
“The Prince Albert mill comes with a significant amount of fibre that’s been allocated from the government of Saskatchewan, it’s in an area where we already do business, we already have relationships with the governments, with other forest players in the region, so we know what we’re getting into,” Roste said.
“Overall we think that the asset can be turned into a fairly modern facility. Two hundred million dollars is a lot of capital, and yes it comes with some risks, but we believe it’s a good investment given the market that’s there and taking a long-term view.”
Roste said the plant can be up and running again in as little as 18 months.
The government has agreed to supply 3.82 million cubic meters of softwood from various sources.
Once operational, Roste said the plant would produce around 300,000 tonnes of dissolved pulp per year, slightly more than 10 per cent of the company’s output of 2.5 million tonnes.
As well, it will produce power from its biomass generators and sell it back to the province.
Most conditions of sale already met
While the agreement has been announced, it will not be finalized until Paper Excellence can reach a collective agreement with the former workers union and reach an agreement with the province about environmental liability and fibre allocation.
However most of the issues have been addressed.
The union made a collective agreement with Paper Excellence in Nov. of 2010, which Roste said will be honoured.
On Monday, Minister of Municipal Affairs Darryl Hickie said the government had been involved with Paper Excellence since the beginning of sales negotiations, and most agreements, including fibre allocations and excess power sales, were already reached.
Roste confirmed, saying at this point, most issues were already agreed upon but there just needed to be a cooling period before they would be officially signed.
“It’s more of formality now, any kind of sale of an asset like this, there’s always a closing period where the final agreements are ratified … from a due diligence standpoint,” said Roste.
“There’s a whole lot of work in terms of hammering out the details, but essentially we have the majority of the agreements that we need … in place, in principle.”
Union pleased by the announcement
The former workers at the pulp mill are represented by CEP Local 1120.
Union President Anibal Bravo said it was truly good news to hear to the sale’s announcement.
“It means that we will be going back to work,” he said.
“This is excellent, not only for us, but for the city. We are excited for the city and also for the province. We’ve been saying this all along for the past…four, five, six years that the forest sector should not be dead in Saskatchewan, it should be alive and well, and Paper Excellence sees that and saw that opportunity,” he said.
Good news for forest management area
The wood allocated by the province will come from the newly formed Prince Albert Forest Management Area, now known as the Sakaw Askiy Management, which includes several First Nations companies.
Sakaw Askiy manager Dave Knight said the announcement will bring business to underused sawmills and will exploit what resources the region has.
“It’s just awesome news. It just means that after five years, forests are going to be managed and the full potential of the forest is going to be realized,” said Sakaw.
“The pulp mill will rely on the support of the anchor tenants—the four sawmills in the region—and it will have a huge positive impact on them. There’s really untapped potential.
Politicians get in on the action
In the flurry of action this morning, politicians held an emergency press conference to talk about the benefits the sale and subsequent reopening of the mill would bring.
Prince Albert Mayor Jim Scarrow said it was the beginning of the great things for the community.
“For Prince Albert, this is a truly great day in a year that will truly be Prince Albert’s year,” said Scarrow.
“We’re now seeing a resurgence, a rebirth of faith in the industry, which will not only being with the announcement today but encourage clusters of industries associated with the milling operating to call Prince Albert their home.”
Hickie said the announcement was a vindication of years’ worth of negotiations. He said he was happy to know that many families would benefit from the mill’s reopening.
“This announcement today is very important today for the city of Prince Albert and area because we know there’s going to be an investment and construction jobs as they refit the mill,” Hickie said.
“This is also an important day to those women and men who have waited since the mill initially closed. We have families being reunited. We have families that are going to be able to see a future for their children in an opportunity like this.”
adesouza@panow.com
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