Two years after being close to bankruptcy, one of Port Alberni’s largest employers is looking to expand in the United States with an agreement to buy two paper mills in Maine and Wisconsin.
Catalyst Paper has announced an agreement with NewPage Corporation to purchase two of their mills for US$74 million.
If the deal follows through, the purchase of the two mills is expected to grow Catalyst's annual production capacity by 995,000 tonnes of paper and pulp – a 65% increase from what the corporation currently produces in its three facilities in Port Alberni, Powell River and Crofton in the Cowichan Valley.
The expansion is conditional on a pending NewPage merger with Verso Paper currently before U.S. regulators.
"Our acquisition of these U.S. pulp and paper mills, once complete, will support our efforts to improve our balance sheet and enhance the company's long-term competitiveness," said Catalyst's president and CEO Joe Nemeth in a corporate statement released Thursday.
The development is expected to diversify Catalyst's range of products, as the Rumford, Maine mill can make coated paper and pulp while the Biron, Wisconsin operation specializes in lightweight coated paper.
"Efficiencies are expected to be gained as overhead costs will be distributed over a larger production base," stated Catalyst's release last week. "Access to new markets and business opportunities is anticipated." The development shows an improvement for Catalyst's prospects compared to its financial struggles of a few years ago.
The corporation only paid a portion of its 2009 property taxes to the City of Port Alberni and other municipalities where operations were based, forcing the local government to borrow from reserve funds to cover Catalyst's outstanding balance.
Later that year, the pulp and paper corporation went to the British Columbia Supreme Court with a claim that the $19.5 million in unpaid property taxes owed to municipal governments was unfair, as Catalyst's competitors in eastern Canada were charged smaller levies.
The court ruled in favour of the municipal governments, and by July 2010 Catalyst's outstanding $5.2 million tax bill was paid to the City of Port Alberni.
In early 2012, Catalyst went under creditor protection and requested financial assistance from the province and federal government, while some in Port Alberni feared layoffs if the local operation was forced to shut down.
But the city helped with an agreement to purchase Catalyst's sewage lagoon for $5.75 million, with plans to use it for the municipal water treatment system. This deal also brought a five-year freeze on property taxes for Catalyst and other industrial operations in town that will remain in place until 2018.
So far this year, Catalyst has reported profits, amounting to $25.7 million over the first quarter and $7.1 million over the second. Third quarter financial results are expected to be announced this week.
Catalyst Paper's Port Alberni mill employs 324 people. This year, the operation contributed $4.18 million in property taxes to the city.
