Nova Scotia reaches new agreement in bid to reopen Cape Breton paper mill

HALIFAX – The government of Nova Scotia has reached a new agreement to reopen the shuttered NewPage Port Hawkesbury paper mill, one day a Vancouver company’s bid to buy the plant collapsed, Premier Darrell Dexter announced late Saturday.

Dexter announced the revised deal with Pacific West Commercial Corp., which has offered $33 million for the 50-year-old facility, during a news conference at the provincial legislature.

He said the agreement means the money the provincial government has spent in an effort to restart the mill should be repaid in as little as 12 years. That includes a $124.5 million aid package announced last month and $36.8 million that the government has spent so far to keep the mill in a so-called hot idle state in order to quickly resume operations.

“My government has worked for a year to restart the mill,” Dexter said.

“We didn’t do it because it was popular. We did it because it was the right thing to do.”

Pacific West Commercial announced late Friday that an unfavourable tax ruling earlier this month from the Canada Revenue Agency made it impossible to ensure the economic viability of the Cape Breton mill.

But Dexter said Saturday that the government and the company resumed negotiations later in the night and eventually came up with a revised agreement.

“We were not prepared to support something that was backward-looking,” he said.

“The paper industry is going through change, but there’s always going to be a paper industry and this is one of the most high-tech mills anywhere in the world.”

The province’s NDP government has placed a premium on reopening the Point Tupper, N.S., mill, which employed about 1,000 people. With a $25-billion federal shipbuilding contract secured for the largely urban Halifax region, Dexter has been eager to ensure some degree of economic success in rural Nova Scotia.

In recent weeks, critics have suggested the government has gone too far with Pacific West Commercial, repeatedly pointing out that the government has set aside more than four times what the company is prepared to pay for the mill.

The government first announced the $124.5 funding package in August. At the time, it included $66.5 million in loans, $40 million of which would have been repayable. The other $26.5 million would be forgiven if certain criteria including wage targets were met.

But the government said a week ago it would sweeten the fund after the Canada Revenue Agency rejected a tax break sought by Pacific West.

The request from the company involved a complex business arrangement with Nova Scotia Power Inc., the province’s privately owned utility. The deal would have given the utility a 30 per cent stake in the company.

At the time, the government said increases in tax revenue resulting from the tax agency’s ruling would allow the province to grant the company greater financial forgiveness on some of the loans.

On Saturday, the government said the previously repayable loan of $40 million to Pacific West Commercial would be forgiven if Nova Scotia Power paid the same amount in taxes as a result of energy purchases under a new proposed tariff.

Dexter said the government would not forgive more than what is paid to the province in taxes — to a cap of $40 million — over a maximum of 12 years.

Nova Scotia’s profit-sharing cap of $9 million will also be increased to $24 million under the new agreement.

Pacific West Commercial said it plans to formally take ownership of the mill on Friday and begin producing paper in early October.

“Many people have worked extremely hard to arrive at this moment, and we will all continue to work hard together over the coming years to ensure that Port Hawkesbury remains the highest quality, most competitive paper mill of its kind in North America,” company president Ron Stern said in a statement.

“I really want Nova Scotians to know how hard their government leaders — both provincially and municipally — have worked to ensure there is a future for this world-class mill and its people. It’s been our goal since day one and it’s what they deserve.”

The company has promised to rehire about 300 workers and operate one of the mill’s two paper machines.

The plant shut down last September, throwing some 600 people out of work and affecting another 400 forestry contractors. At the time, NewPage cited the high Canadian dollar and increased rates for shipping and electricity as the reasons for its closure.

It opened in 1962.