Not out of the woods yet
Published Saturday October 17th, 2009
Forestry: Fraser Papers Inc. awarded $33.1 million in tax credits, returns to court (next week seeking to extend its creditor protection, and as the soaring loonie keeps (its N.B. sawmill operations at a standstill, the Plaster Rock union accepts a new contract
Fraser Papers Inc. will be back in a Toronto courtroom next week applying for an extension to its creditor protection.
Peter Gordon, CEO of the papermaker, said while the firm is making headway on retooling operations, the company still faces significant barriers.
"We're making good progress in Fraser towards a restructuring that will recover value for the creditors," Gordon said in an interview from his Toronto office.
"I will say that the business conditions continue to be extremely challenging with (low) demand for paper and a rising Canadian dollar," he said.
The company announced this week that Ottawa has awarded the firm $33.1 million in tax credits under the Pulp and Paper Green Transformation Program - a $1-billion fund meant to counteract so-called black liquor subsidies U.S. mills are receiving from Washington to burn the pulping byproduct with other fuels.
The Canadian credits will allow Fraser Papers to begin several projects to improve energy efficiency at its Edmundston and Thurso, Que. pulp mills - which both burn black liquor as fuel.
The company filed for bankruptcy protection in June, citing ongoing weakness in the pulp and lumber markets and a cash shortfall.
The firm received an extension to the creditor protection in mid-July that was originally due to end Friday. Because the courts were booked up, Fraser Papers was given an extra week of reprieve until this Thursday - when a judge will decide whether to award another extension.
The soaring value of the Canadian dollar, which closed at 96 cents U.S. Friday, is posing particular difficulty for Fraser Papers, Gordon said.
The company's revenues are denominated in U.S. dollars while much of its operating costs are in Canadian dollars, he explained.
"The impact is significant and it only gets worse for any penny (U.S.) that the Canadian dollar rises," Gordon said, adding that the loonie's artificially high value is among reasons neither of the firm's two New Brunswick sawmills are currently operating.
The company is reviewing whether to reopen the Plaster Rock operation, which recently completed a modernization project.
The sawmill's 170 Regional Council of Carpenters Millwrights and Allied Workers unionized labourers accepted a new contract Thursday, voting 91 per cent in favour and nine per cent against the deal.
Hector Losier, executive secretary treasurer of the union's New Brunswick workers, said labourers accepted concessions with regards to changes in overtime and bonus incentives.
"Up to now, everybody seems to understand that hey, times are tough in forestry, and to have a job is better than no job at all," Losier said.
"Plaster Rock, this is the livelihood of the population here in Plaster Rock.
"When the mill is fully going, full-time work is up to 200 people plus the woodworkers and all that."
Gordon said low lumber prices and the high Canadian dollar are also factors that must be taken into consideration before Fraser Papers starts up the mill.
The company restarted operations in August at its Edmundston sulphite pulp mill, which was first shut down in June for maintenance but remained closed while a labour deal was being negotiated.
Gordon said the mill is running at about 95 per cent capacity due to softened demand for paper - which the company prints at its adjoining Madawaska, Maine, operation.
"We're running the paper mill at reduced capacity and therefore we're running the Edmundston mill at reduced capacity," he said.
In the coming weeks, the company will be deciding on and submitting plans to Ottawa for projects at Edmundston under the green transformation fund that could pertain to improving the wood handling process, pulp bleaching and cogeneration facility - where Fraser Papers burns about 800,000 tonnes of biomass a year, generating about 35 megawatts of power for sale on the New Brunswick grid.
The company is considering adding a cogeneration plant to its Thurso mill.
Twenty-four Canadian companies have been awarded tax credits under the program.
According to Catherine Cobden, vice-president of economics and regulatory affairs at the Forest Products Association of Canada, Canada's response to the U.S. program is good policy because money doled out by Ottawa forces firms to become greener - which often represents cutting energy usage, and in turn spending.
"From our vantage point, economics and environmental performance are tied at the hip," Cobden said.
"As you become more environmentally sound, you become more competitive."
Disabled
Search Articles
More CE Network Sites & Partners:
