Nova Scotia sweetens deal to keep paper mill restart alive

Posted Sept. 17, 2012, at 6:15 p.m.

HALIFAX, Nova Scotia — Despite news that could have derailed the sale and reopening of a shuttered paper mill in this maritime province, Nova Scotia’s government on Friday said it would sweeten the already generous deal it has offered the mill’s prospective buyer in an effort to keep the sale on track and get the mill restarted by the end of the month.

Pacific West Commercial Corp. is the potential buyer of the Port Hawkesbury paper mill from NewPage Corp. The provincial government has offered the company $124.5 million in loans and other assistance to help it restart the mill, which paper industry observers say would have a negative impact on Maine paper mills that make the same grade of supercalendered paper.

However, as a condition of its purchase of the mill, Pacific West had requested an advanced ruling from the Canada Revenue Agency on a complex deal with Nova Scotia Power Inc. that would have allowed it to use about $1 billion in tax losses accumulated by the mill to help lower the power rate it would pay over the next seven years, according to the Chronicle Herald in Halifax.

Canada Revenue Agency rejected that proposed deal, according to a statement from Nova Scotia’s Department of Natural Resources.

Unwilling to let the potential mill sale fall apart, Charlie Parker, Nova Scotia’s minister of natural resources, announced Friday that the province would restructure the $124.5 million package of loans, incentives and other assistance to make the deal more attractive for Pacific West, while not increasing the cost to taxpayers. Parker said losing the mill would represent thousands of lost jobs and send ripple effects throughout the entire province’s economy.

“The tax ruling from the federal government, while it isn’t what Pacific West was looking for, will actually mean millions of dollars in tax revenue that the Province of Nova Scotia would not have otherwise collected,” Parker said in a statement.

Using that added revenue, the province would “create room” for Pacific West to earn forgiveness on some of the previously announced loans, Parker said.

Parker said details on the restructured assistance package would be released early this week. A spokesman for the provincial government would not be more specific when asked when the details would be released. “When the province is in a position to release finalized details a press release will be issued,” he told the Bangor Daily News. “We are hopeful that will take place this week.”

Pacific West on Friday said the rejection of its proposed tax deal would not derail its purchase of the mill. In a statement, the company said the sale is still on track with the extra help from the provincial government and the mill could be restarted by the end of September.

The province’s original package of loans and incentives, announced in August, included $40 million in repayable loans and $26.5 million in forgivable loans to Pacific West, according to the Herald. The package would require the province to spend $20 million to buy land associated with the mill, and an additional $38 million over 10 years to support sustainable harvesting and forestland management, the newspaper reported.

Even with the restructured incentives package, Parker said, “the province will still come out a bit further ahead” with the extra tax revenue it wouldn’t have had if Canada Revenue Agency had granted its approval.

The Maine mill that would be most affected by the restart of the Port Hawkesbury paper mill is UPM’s mill in Madison, which produces 220,000 tons of paper a year and employs about 240 people, mill manager Russ Drechsel told the BDN. Both mills produce the same grade of supercalendered paper used for glossy magazines and catalogs.

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