The StarPhoenix (Saskatoon)
REGINA -- One of the world's largest -- and most controversial -- pulp and paper companies is the buyer for Meadow Lake Pulp Mill, the biggest money-losing government investment in Saskatchewan history.
Industry giant Asia Pulp and Paper Co. Ltd. (APP) will pay $38 million for the fi xed assets of the mill, which is jointly owned by the provincial government's Investment Saskatchewan arm and Alberta forestry company Millar Western, confi rmed the mill's lawyer, Conrad Hadubiak.
The mill, which employs about 150 people, has been under bankruptcy protection since February and the deal must still be approved by the Court of Queen's Bench in a hearing slated for next week.
Under the deal, expected to close in late January, APP pledged to operate the mill for fi ve years, with penalties if it shuts the mill down before that time.
"I think this is good news for the town of Meadow Lake. We have a purchaser for the mill who is intending to continue to operate the mill and generate the economic activity and preserve the jobs that have been there over the last 12 years," said Hadubiak.
The deal is being done through a Canadian numbered company which is a subsidiary of Indonesia-based Sinar Mas, which owns Asia Pulp and Paper, said Hadubiak.
Singapore-based APP, which is already the biggest customer for the pulp produced in Meadow Lake, is estimated to be the sixth-largest paper and paperboard company in the world.
However, it has a checkered history.
The company went through major fi nancial diffi culties in 2001, including a massive default on bank loans and bonds.
It has also been a focus for environmental groups, which say the company has been involved in illegal logging of natural forests in China and targeting highly ecologically sensitive forests for conversion into plantations in Sumatra.
"I would see it as being a bad sign that they are coming into Saskatchewan," said Richard Brooks, head of the forest campaign at Greenpeace Canada, in a phone interview from Vancouver.
"This isn't an issue where they're just slightly bad on the environment. They're one of the worst offenders when it comes to protecting the environment, particularly protecting natural forests and forests that have very high conservation values. They rank very, very low on our list of companies operating in places like Asia." The NDP government's Eric Cline, minister responsible for Investment Saskatchewan, said he couldn't comment on the company's practices elsewhere in the world.
"But they're not going to have a bad environmental record in Saskatchewan, I can assure you of that. They, like any mining company or forestry company or other company in Saskatchewan, are going to comply with the laws and regulations of the Government of Saskatchewan and we have good environmental laws and regulations. And they know that," he said in a telephone interview.
Hadubiak said there was extensive due diligence done before the sale was agreed to, and "we're confi dent they're a fi nancially viable company." While Hadubiak said APP was chosen over another suitor because it made the most lucrative offer, he and Cline acknowledge the money involved is a far cry from recouping the massive losses racked up by the government over the years.
The province has lost $321.6 million since the deal was agreed to by the former Progressive Conservative government in 1990. The government calculates it has missed out on another $595.7 million in interest that was never paid over that period.
Not included in the sale to APP is the inventory of pulp up until the proposed close of sale in January, which is expected to be sold off at a value of about $40 million.
Hadubiak said most of the money from the sales will go to secured creditor HSBC, which is owed $28 million, and to repay the $15 million in debtor-in-protection fi nancing put forward by Investment Saskatchewan, which owns the government's 50 per cent stake in the mill.
About $1 million owed in property taxes will also be repaid.
A decision has not been made on whether a repayment plan for other creditors, collectively owed about $20 million to $30 million, will be presented.