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Kapuskasing's future is uncertain after Spruce Falls deal collapses.

Kapuskasing's future is uncertain after Spruce Falls deal collapses

Negotiations are under way with a number of potential buyers for the Spruce Falls Power and Paper Company in Kapuskasing.

"There are a couple of people who have expressed an interest in the mill," company president Fred Campling reported last month, "but there is no indication when they'll make a decision."

Tina Barry, a spokesman with the Kimberly-Clark Corporation of Dallas, Tex., declined to name any of the prospective buyers who stepped forward after a deal with Montreal-based Kruger Incorporated fell through in September.

While a Kruger official declined to comment on the ill-fated purchase attempt, Kimberly-Clark cited Kruger's inability to finance the purchase as the reason for the deal's failure.

Under the June purchase agreement, Kruger was to acquire Kimberly-Clark's 50.5-per-cent interest and the New York Times Company's 49.5-per-cent interest in Spruce Falls.

On Sept. 11 Kimberly-Clark officials said potential financiers for the deal were deterred by the mill's distance from markets, its high labor costs, constraints on productivity and the substantial capital investment required for the mill to meet new environmental regulations.

The down turn in the newspring market and the strong Canadian dollar were also cited as factors.

The aborted deal has also thrown the town of Kapuskasing into an economic limbo, as speculation over the mill's fate increases.

"There's always a concern when you're dealing with a single-industry town," said Gaetan Lacoursiere, president of the Kapuskasing Chamber of Commerce. "The problems with the sale, as well as the status of collective labor agreements (the local unions' current contracts expire this year) have added anxiety to the business community."

However, Lacoursiere noted that the community has taken heart from the fact that, despite the collapse of the Kruger deal, there "are parties who are still interested in buying the mill.

"The players are still active," he commented. "The real appeal of the mill is that it is selling at below book value, so it is an interesting scenario from an investor's viewpoint."

Lacoursiere pointed to the presence of free electricity (from the sale of the Smokey Falls hydro plant to Ontario Hydro), the co-generation plant at the facility and the proximity of massive stands of timber as major selling points for the mill.

The chamber president said any potential buyer must have a long-term plan to utilize the mill because of the amount of capital which will be required to bring its equipment up to 1990 standards.

"The infusion of capital is a necessity," Lacoursiere said.

Campling said that any modernization will be the responsibility of the mill's new owners.

"We have no plans to modernize. If it's done it will have to be by the new owners," he said. "And it's either modernize or shut down."

While there are no plans to shut down the mill, Spruce Falls recently laid off 36 people when it closed down its construction department. Campling said the move was made to trim operations.

"We've stopped all capital expenditures," he said. "We've decided not to spend any more money."

Campling explained that if any capital projects are undertaken in the future, they will be contracted out. The concept of contracting-out work was also put forward by the chamber of commerce president.

"There are certain aspects of the operations which can easily be replaced by the private sector," Lacoursiere added that the community had been the game of risk and reward, then they can make a tremendous amount of money."

Lacoursiere added that the community had been braced for the past five or six years for the possibility of large-scale job losses caused by a modernization of the mill.

However, he noted that even with a reported 350 jobs at stake, if the cuts are made properly, the community would probably escape any economic down turn.

"If the reduction is made through attrition, then it can be a very smooth transition," he said.
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Title Annotation:Kapuskasing, Ontario; Spruce Falls Power and Paper Company Ltd.
Author:Krejlgaard, Chris
Publication:Northern Ontario Business
Date:Nov 1, 1990
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