Premier Kathy Dunderdale denies the government needs to keep the paper mill in Corner Brook going in order to justify the multibillion-dollar Muskrat Falls hydroelectric project.

"It doesn't make any kind of sense," said Dunderdale. "We have factored that into all of our considerations."

Natural Resources Minister Tom Marshall announced Wednesday that Corner Brook Pulp and Paper will get a $90-million loan from the province to help keep it operating.

That's in addition to $123 million the government has invested in the mill since 2004.

Report linked Muskrat Falls to mill

A recent report by Manitoba Hydro for the province's public utility board said the case for going ahead with the Muskrat Falls project largely depends on Newfoundland and Labrador Hydro's accurate forecast of future demand for power in the province.

The report stated any attempt at such a forecast would be problematic as long as the survival of the paper mill in Corner Brook remained in doubt.

About 10 per cent of electricity generated in the province is used by three major industries: the Duck Pond copper mine, Come By Chance oil refinery, and the paper mill in Corner Brook, which uses the most power of the three. The Duck Pond mine is expected to close soon, but Vale's processing plant in Long Harbour is expected to consume the power that the mine was using.

'Good news' for west coast

Meanwhile, the $90-million loan for the paper mill is welcome news on Newfoundland's west coast, where the mill is located.

Its future had been in doubt for months amid layoffs, contract concessions, and pension problems.

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Union representative Paul Humber says the loan is a sound investment. (CBC)

Paper mill union rep Paul Humber said the company's business model is sound.  

"It's an older mill, but it's well positioned on a deep-water port, it's got its own power plant. If we can, essentially, outlast some of the less efficient mills inland in North America, we are going to survive, I believe, for the medium to long term."

Kruger Inc., the mill's owner, has declined comment on the loan.