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New deal sees Hydro spending 8 times more on electricity from Kruger than last year

Corner Brook Pulp and Paper, owned by Montreal-based company Kruger, employs about 300 people in Corner Brook.  (Colleen Connors/CBC - image credit)
Corner Brook Pulp and Paper, owned by Montreal-based company Kruger, employs about 300 people in Corner Brook. (Colleen Connors/CBC - image credit)

Newfoundland and Labrador Hydro's payments to Kruger will be going up by at least a factor of eight this year, as part of the provincial government's effort to stabilize operations at the Corner Brook paper mill.

The deal announced last week — but quietly brokered by the province in January — will see Hydro spend $22 million to purchase power from the Deer Lake hydroelectric dam between February and July.

It's not uncommon for Hydro to call on Kruger for additional power during peak times, as the pair already had a 15-year agreement for capacity assistance that was renewed last November.

The difference? Hydro only needed $2.7 million in electricity from Kruger for a six-month period covering last winter, a stark comparison to the $22 million it will spend under the new agreement.

The most Hydro has ever spent on electricity from Kruger for a six-month period is $3.1 million, as first reported by business outlet allNewfoundlandLabrador.

Speaking at an unrelated news conference on Tuesday, Premier Andrew Furey said the government had to consider all the indirect costs associated with the mill when figuring out a plan. He was asked if he felt the deal they came up with was a good value for public money.

"We believe at this point in time that it is," he replied.

Jordan Brown, MHA for Labrador West, is suspicious of the mechanism used by the provincial government to purchase power from Kruger's generating facility in Deer Lake.
Jordan Brown, MHA for Labrador West, is suspicious of the mechanism used by the provincial government to purchase power from Kruger's generating facility in Deer Lake.

Jordan Brown, MHA for Labrador West, is suspicious of the mechanism used by the provincial government to purchase power from Kruger's generating facility in Deer Lake. (Ryan Cooke/CBC)

But the whole situation has left NDP MHA Jordan Brown perplexed.

"Clearly there is something here that is more than just a power purchase agreement. This is obviously some sort of deal for Kruger to, you know, find a way to get money into the company," Brown said.

Kruger's operations in Corner Brook have struggled over the past decade, as the newsprint industry as a whole took a dive. The company already owes the provincial government more than $117 million for a 2014 loan to save the mill — a loan the company hasn't made a payment on in more than two years.

When asked if the new deal felt like another bailout, Brown said: "The mechanism they're choosing is very suspect."

Wakeham applauds stability, pans "secrecy"

PC Leader Tony Wakeham said the deal could be good news if it means a more stable economy for the City of Corner Brook.

But he's not happy with the way it came to be, and not thrilled he found out about it from a news article months after an order-in-council was made.

"Finding out that the government did this deal somewhat in secrecy, I guess, that becomes part of the problem," Wakeham said.

PC Leader Tony Wakeham says the Kruger deal could be good for the 300 workers at the Corner Brook mill, but he's critical of the way the provincial government handled the situation.
PC Leader Tony Wakeham says the Kruger deal could be good for the 300 workers at the Corner Brook mill, but he's critical of the way the provincial government handled the situation.

PC Leader Tony Wakeham says the Kruger deal could be good for the 300 workers at the Corner Brook mill, but he's critical of the way the provincial government handled the situation. (Katie Breen/CBC)

Kruger has said it plans to use this six-month period to conduct a trio of studies on ways to diversify its Corner Brook business and get away from its reliance on newsprint. The leading contender is a biofuel production facility.

Furey said they're going to hold the company accountable to those plans.

"They've said that they're going to diversify and we'll hold them to that," he said. "This isn't a forever agreement. This is a 'please help us understand how you're going to diversify [agreement].'"

Wakeham believes the Liberal government should have had a plan to diversify the forestry industry years ago, when the writing was on the wall for the newsprint sector.

"What's the long-term strategy here for our forestry industry? You know, when we think about all the people that are employed in even the sawmill industry, and everything that depends on this. That's what's important."

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