The New Brunswick government will pay almost $11 million to cover a failed job creation plan negotiated between the former Liberal government and a Norwegian solar company, CBC News has learned.
The provincial government will buy land and equipment from Norway's Umoe Solar that cancelled plans for a plant in Miramichi.
Umoe Solar said in early 2009 it would take over the former UPM Kymmene paper mill site and build a solar cells plant, which would create 350 jobs in the economically hard-hit region.
But in May 2010 Umoe Solar put the Miramichi project on hold.
In a release by Jens Ulltveit-Moe, the CEO of Umoe Group, he said he invested $30 million into the failed project.
"This venture entailed many challenges, not least of which involved the acquisition and demolition of two industrial sites and the management of several environmentally risky properties," said Ulltveit-Moe.
Former premier Shawn Graham's government promised Umoe Solar that if they didn't go ahead, the provincial government would buy back the property and assets the company bought from UPM Kymmene.
"World economic conditions took a turn for the worse, and Chinese competition in the solar energy industry proved very difficult to meet," said Ulltveit-Moe. "After exhaustive and unsuccessful efforts to find an alternate use for the sites, I had no choice but to call on the Province to fulfill its guarantee."
The David Alward government is obligated to keep that promise, which amounts to an $10.8-million expense without a single permanent job to show for it.
Economic Development Minister Paul Robichaud confirmed on Friday the provincial government is being forced to live up to the agreement made by his predecessor.
"I'm not very excited as Business New Brunswick minister today to make this announcement, because I consider that we are forced to honour an agreement made by the former government in 2009, a very bad agreement, a very high risk agreement," Robichaud told reporters.
Robichaud compared it to the Liberals' even more expensive Atcon failure.
"You know it was almost a culture in the former government to be partners in very high risk projects. We saw a lot of good examples only in the Miramichi area where they were partners in very high risk projects."
Liberal MLA Roger Melanson said everyone should look on the bright side.
"$11 million for a piece of industrial land, prime land on the Miramichi, that now is available to taxpayers for future investment, future companies to come in."
Except Umoe is just the latest company to realize it couldn't make a go of it on that prime land, despite large-scale government subsidies.
The provincial government is taking over a portion of the former UPM assets, which include the former paper mill site and ground wood mill site.
Umoe will keep control of the Fornebu sawmill in Bathurst and manage a parcel of Crown land. The Bathurst-area mill has roughly 95 employees, while the Miramichi office employs about 25.
Robichaud also said demolition plans will move forward for the former paper mill site and proceed to the ground wood mill site later in 2011.
Lower power rates promised
UPM, which was the northern city's largest employer, closed in December 2007, leaving more than 500 people out of work.
Umoe Solar was then lured to take over operations, in part, by a promise from the former Shawn Graham government that its power rates would be reduced to rival Quebec's.
Lower rates for industry later became the centrepiece of the Graham government's plan to sell NB Power to Hydro-Québec.
After the NB Power deal collapsed in March 2010, then-premier Shawn Graham said he would try to keep the promise to Umoe Solar for lower power rates.
"Now we're going to have to look at other innovative solutions on how we can help this company attain those competitive rates with Quebec, and we're in those discussions as we speak," Graham said at the time.