Insolvent NewPage seeks buyer for Port Hawkesbury mill
By Pulp & Paper Canada
By Pulp & Paper Canada
As NewPage Corp., the largest North American manufacture of coated paper, was filing for Chapter 11 bankruptcy protection in the U.S., its wholly-owned Canadian subsidiary filed for creditor protection in Canada. NewPage Port Hawkesbury is…
As NewPage Corp., the largest North American manufacture of coated paper, was filing for Chapter 11 bankruptcy protection in the U.S., its wholly-owned Canadian subsidiary filed for creditor protection in Canada. NewPage Port Hawkesbury is petitioning the court for permission to proceed with a quick sale of the Port Hawkesbury, N.S., mill.
The company is requesting approval of the sale process, which would allow the mill to be shut down as announced a few weeks ago, but remain in a “hot idle” condition. This would allow it to be sold as a going concern. The alternative is a cold shut-down that would likely culminate in bankruptcy and the piecemeal liquidation of assets.
Documents presented to the court state that the Canadian operation has been losing about $4 million per month for the past year. These operating losses had been covered by its parent company, but NewPage Corp. is “currently experiencing its own financial difficulties and is unable to continue to fund the operating losses of NewPage Port Hawkesbury.”
Because of the integration of the two operating entities, there is uncertainty regarding rights to the current assets being produced at the Nova Scotia facility. The two companies are proposing to the court that a settlement and transition agreement valued at $25 million would settle the claims between the two entities, and allow NewPage Port Hawkesbury to continue operations until its scheduled indefinite shutdown mid-September, allow it to maintain a “hot idle” state, and fund the CCAA process and the sale process.
The company has been seeking buyers for several months, and a few are said to be interested in purchasing the mill.
The NewPage Port Hawkesbury mill consists of one newsprint machine and one supercalendered paper machine, plus a thermomechanical pulp mill. The company recently concluded a deal with Nova Scotia Power to build a co-generation plant on the site, and operate the plant on behalf of the utility. The target start date for the co-gen plant was Dec. 31, 2012. Nova Scotia Power has said it will proceed with plans to build the co-gen plant, and there are reports are that the government will allow Nova Scotia Power access to the wood resources on the one million acres of Crown land that were allocated to NewPage for the co-gen facility.
The court documents provide an insight into NewPage Port Hawkesbury’s operating costs. When fully operational, the mill “spends” roughly $1 million per day. Because the TMP process is so energy-intensive, the mill pays about $100 million per year for electricity. Nova Scotia Power has filed for a rate increase effective in 2012 that NewPage Port Hawkesbury calculates would have a real dollar impact of approximately $15 million per year.
The creditor protection application is scheduled to be heard by the court on Sept. 9. The documents state that the settlement agreement with NewPage Corp. must be approved by the court by Sept. 19, or else it will not be in force. If the application proceeds as requested, the target date for closing the sale of the mill is late November.