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Executive Council
Natural Resources
Finance
February 20, 2014

Investing in the Provincial Forest Industry and Economy

Agreements Completed with Corner Brook Pulp and Paper Limited

Today, the Honourable Tom Marshall, Premier of Newfoundland and Labrador, announced that the Provincial Government and Corner Brook Pulp and Paper Limited have signed a loan agreement for up to $110 million and a power assets and water rights purchase agreement.

“Our government’s investment of $110 million supports the sustainability of Corner Brook Pulp and Paper Limited and helps secure the future of our forest industry for the benefit of the residents and communities of our western region and our entire province.”
- The Honourable Tom Marshall, Premier of Newfoundland and Labrador

The details regarding the fully repayable loan are provided in the backgrounder below.

“By investing in Corner Brook Pulp and Paper Limited, we are reaching out to the entire forest industry. The paper mill, large sawmills and Crown land harvesting operators are integrated and therefore interdependent. We want to ensure the benefits from our renewable resources continue well into the future.”
- The Honourable Derrick Dalley, Minister of Natural Resources and Minister Responsible for the Forestry and Agrifoods Agency

The loan is secured by a mortgage and company hydro assets, including the Deer Lake Power Plant and Watson’s Brook Power Plant.

“The agreements support one of the largest private employers in the province and a strong contributor to the provincial economy. Corner Brook Pulp and Paper Limited, along with its suppliers, contribute $124 million annually to the gross domestic product.”
- The Honourable Charlene Johnson, Minister of Finance and President of Treasury Board

Kruger Inc., the parent company of Corner Brook Pulp and Paper Limited, is enthusiastic about the long-term success of the company’s operations in the province.

“We thank the Government of Newfoundland and Labrador for their support. This loan will enable Corner Brook Pulp and Paper to carry out capital projects that will reduce costs, improve productivity and, ultimately, increase the mill’s competitiveness on the global newsprint market.”
- Daniel Archambault, Executive Vice President, Industrial Products Division, Kruger Inc.

Through sound fiscal management and responsible decisions, the Government of Newfoundland and Labrador is strengthening the business environment, encouraging the development of innovative industries and building a vibrant economy.

QUICK FACTS

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The Provincial Government and Corner Brook Pulp and Paper Limited signed a loan agreement for up to $110 million and a power assets and water rights purchase agreement in Corner Brook.

Taking part in the signing were, from L-R: Honourable Derrick Dalley, Minister of Natural Resources and Minister Responsible for the Forestry and Agrifoods Agency; Honourable Tom Marshall, Premier of Newfoundland and Labrador; Honourable Charlene Johnson, Minister of Finance and President of Treasury Board; and, Daniel Archambault, Executive Vice President, Chief Operating Officer, Kruger Industrial Products Division.


Participating were: L-R: Vaughn Granter, MHA Humber West; Honourable Derrick Dalley, Minister of Natural Resources and Minister Responsible for the Forestry and Agrifoods Agency; Gary Healey, UNIFOR National Representative; Honourable Tom Marshall, Premier of Newfoundland and Labrador; Daniel Archambault, Executive Vice President, Chief Operating Officer, Kruger Industrial Products Division; Honourable Charlene Johnson, Minister of Finance and President of Treasury Board; and, David Angel, Executive Vice President and Chief Financial Officer, Kruger Inc.

Media contacts:
Milly Brown
Director of Communications
Office of the Premier
709-729-3960
millybrown@gov.nl.ca
Tracey Boland
Press Secretary
Office of the Premier
709-729-4304, 697-3128
traceyboland@gov.nl.ca
Diana Quinton
Director of Communications
Department of Natural Resources
709-729-5282, 631-8155
dianaquinton@gov.nl.ca

Tansy Mundon
Director of Communications
Department of Finance
709-729-6830; 693-1865
tansymundon@gov.nl.ca
Jean Majeau
Senior Vice President, Corporate Affairs and Communications Kruger Inc.
514-343-3213
jean.majeau@kruger.com

BACKGROUNDER
Loan and Power Assets Agreements

A loan agreement and a power assets and water rights purchase agreement have been finalized between the Provincial Government and Corner Brook Pulp and Paper Limited to support the sustainability of the mill and to ensure the company is committed to its long-term operation.

Corner Brook Pulp and Paper Limited will be provided with a fully repayable loan up to $110 million. Approximately $85 million will be released at the beginning of the agreement to allow the company to refinance existing debt, and for working capital. The remaining $25 million will be provided as planned capital improvements are completed.

The loan will be repaid in 59 quarterly payments of $1.85 million with the first quarterly payment due March 31, 2019. The final residual payment is due December 31, 2033.

The interest rate is four per cent for three years. After that, the interest rate will be the Provincial Government cost of borrowing plus 50 basis points (0.5 per cent). The default rate is the Provincial Government cost of borrowing plus 350 basis points (3.5 per cent).

The key requirements for Corner Brook Pulp and Paper Limited are to repay the loan, continue to operate the mill, and make planned capital expenditures in the mill and power assets. The company is required to contribute to employee pension plans and is responsible for environmental liabilities. It must file quarterly and annual financial statements and sustainability/capital plan progress reports. The company must also file an annual operating budget and business plan, pension and actuarial reports, among other reports.

The loan to Corner Brook Pulp and Paper Limited is secured by a mortgage over company power assets and water rights, including the Deer Lake Power Plant and Watson’s Brook Power Plant. The Provincial Government will purchase the power assets, water rights, and all related rights to the power assets for the people of the province, but only if the mill closes.

The power assets and water rights purchase agreement identifies the valuation methodology to be used in determining the purchase price as follows:

In addition to the loan announced today, the Provincial Government has invested approximately $100 million in Corner Brook Pulp and Paper Limited since 2004 for a power purchase agreement, silviculture, training, and forest protection.

2014 02 20                                         2:20 p.m.

 
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