Nova Scotia

Dexter wants lower profits at NSP to save mill

Premier Darrell Dexter said he thinks it's time for shareholders in Nova Scotia Power Inc. to accept a lower rate of return on their investment.

NewPage pulp and paper plant to close in Sept.

Nova Scotia Premier Darrell Dexter met with executives of NewPage Port Hawkesbury Ltd. Tuesday in Halifax. (File)
Premier Darrell Dexter said he thinks it's time for shareholders in Nova Scotia Power Inc. to accept a lower rate of return on their investment.

The premier made the comments Tuesday after meeting with executives from NewPage Port Hawkesbury Ltd., which plans to close its pulp and paper mill indefinitely next month.

Electricity is the mill's No. 1 cost and a proposed power rate increase of 16 per cent is one of the factors responsible for NewPage's decision to shutdown.

"Nova Scotia Power should know that this is not the time to be asking for an increase on return on equity. It think that's inappropriate, given everything that we know," Dexter said.

"And my advice to them would be to withdraw it. I think we need to be realistic about the cost base for these industries, but also for ratepayers."

The premier said he's not taking sides in whether residential power customers should pay more to help the struggling pulp and paper plant.

The government is also exploring the idea of helping NewPage try to find new customers in South America and Asia, with a new marketing campaign in order to increase revenues, Dexter said. 

He has assigned a group of cabinet ministers to look for possible solutions for the mill.

The premier will be in Port Hawkesbury Wednesday to meet with union leaders at the mill, and Cape Breton-Canso Liberal MP Roger Cuzner.

Bill Stewart, a director of strategic initiatives with NewPage who met with Dexter, was unable to say how long the plant could be closed.

"Look, that's the question that I'm sure is on everyone's mind, but it's not a question that we really know the answer to at this point. It's something that we'll monitor," he said.

"I believe that the mill in Port Hawkesbury is an excellent mill, it's an excellent asset. We've got great people; we've got good resources. We face some significant challenges, as do many mills, and we need to find ways to work through those."

Time to sell plant?

Port Hawkesbury Mayor Billy Joe MacLean said the town needs help immediately to save its major employer. (CBC)
Port Hawkesbury Town Council is holding an emergency meeting Tuesday night to discuss the pending closure of the area's largest employer.

Mayor Billy Joe MacLean said the mill closure will hurt his community, as well as every municipality in eastern Nova Scotia.

With the American parent company facing bankruptcy, he said, it may be time to put the plant on the market.

"The only way that I can see, with that debt load, is that they find another buyer like Irving, like the Chinese, like Abitibi or one of those companies," he said Tuesday.

"And if they're going to sell the mill, what's the price? Can a company come in and look at the price and afford to buy it to make money? That's what we want to work on. If NewPage wants to continue, we're also there to support them."

MacLean said the town needs help to save the mill that employs 1,000 people.

On Monday, MacLean said the town can't afford to wait months for a decision from NewPage, and he wanted all three levels of government to step in.

"Work together for a common cause to see how we can get this mill re-opened, see if we can find a new buyer, see if we can help this existing company," he said.

Dexter said he is prepared to travel to NewPage Corp.'s Miamisburg, Ohio, headquarters to see what the province could do to keep a valued employer in northern Nova Scotia.

On Monday, NewPage announced an indefinite shutdown of its mill beginning in mid-September.

NewPage spokeswoman Patricia Dietz said the current economic conditions, including the strong Canadian dollar, led to the downtime. She also cited high utility and shipping costs.

The NewPage mill produces newsprint and glossy paper for magazines. ((CBC))
Earlier this month, the company said the rising loonie cost it $4 million in the second quarter of this year. It also said it expects energy costs at the mill to jump another 16 per cent next year.

The newsprint machine will be shut down on Sept. 10, while the machine that produces glossy paper for magazines will be turned off on Sept. 16.

Parker Stone, chairman of the Strait Area Chamber of Commerce, is trying to stay positive despite the news that 600 mill workers and another 400 forestry workers will be laid off next month.

Huge challenges

"Well, hopefully, for a short period of time," he said. "Two or three months and they'll be back on stream again and creating more jobs."

But a market analyst said the future is far from certain.

Paul Quinn, with RBC in Vancouver, said NewPage faces significant challenges, among them a high Canadian dollar, an uncertain economy, a huge debt of $3.3 billion at its parent company in Ohio and a big drop in the demand for one of its two main products — newsprint.

"You know, definitely on the newsprint side, that market is shrinking so everybody in that market has to shrink along with it," Quinn said.

The Wall Street Journal reported on Aug. 19 that parent company NewPage Corp. had "warned in a regulatory filing that it may have to file for bankruptcy protection if it's unable to refinance its crushing debt load."

NewPage said it was exploring restructuring alternatives, the newspaper reported.

"If we are unable to refinance our debt or generate sufficient cash flow to service out obligations, we will be required to seek to restructure our existing debt or to voluntarily seek, or be forced to seek, protection under the Chapter 11 of the U.S. Bankruptcy Code and applicable Canadian laws," the company said in a filing with the Securities and Exchange Commission.

The pulp and paper mill has been the major employer in the Port Hawkesbury area since the early 1960s. It was sold to NewPage in 2007.

NewPage is the largest glossy paper manufacturer in North America, with $3.6 billion in 2010 sales and plants in six states and Nova Scotia.