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Province, Kimberly-Clark strike deal, employees to take over Spruce Falls.

Province, Kimberly-Clark strike deal, employees to take over Spruce Falls

The province and Kimberly-Clark Corporation have reached an agreement concerning the takeover of the Spruce Falls Power and Paper Company by its employees.

The major differences between the deal and an offer rejected by the province in June are a $20-million increase in Kimberly-Clark's loan to the employee purchasing group and an increase in the group's stake in the Kapuskasing mill.

According to Rene Piche, chairman of the citizen's group which lobbied the government to return to the bargaining table, the deal will likely be finalized later this month.

"It's going to take about four to six weeks before all the approvals are made," he said during a telephone interview shortly after agreement was announced.

The agreement came just one day before the bargaining deadline set by Darwin Smith, president of Dallas, Texas-based Kimberly-Clark. Had the deal not been reached, Smith said he was prepared to slash the mill's workforce from 1,470 to approximately 250 by shutting down three of its four paper machines.

According to the Ministry of Northern Development and Mines, the employee ownership plan calls for the mill's workforce to be trimmed to 800 by next year and to 670 after 1994. Some of the displaced workers will be offered severance and early retirement packages. Others, depending on their skills, will have hiring preference for construction projects during the upgrading of the facility.

Piche noted that the employment figures are only forecasts and that they could increase - as was the case in Temiscaming, Que. when Tembec Inc. took over the former Canadian International Sulphite pulp mill in 1973 and transformed it into an industry leader which produces a number of paper products including high-quality paper packing board.

Tembec has been signed on as a minority partner in the Spruce Falls Power and Paper venture.

The following are some significant details of the purchase agreement:

* The employee ownership group and the community will own 60 per cent of the mill, while Tembec will hold the balance. The 60-per-cent stake will cost the employee group and local residents $12.5 million for the facility's modernization. They raised $13.2 million in pledges earlier this year.

* Tembec will provide management expertise and $25 million in equity and loans to the company. Tembec officials have also agreed to invest approximately $15 million in the mill from 1993 to 1996

* The new owners plan to spend more than $300 million combined to modernize the mill.

* Kimberly-Clark will provide a $60-million loan for the modernization. It had originally offered a $40-million loan.

* Ontario Hydro will purchase the Smoky Falls hydro-electric generating station for $140 million from Kimberly-Clark and operate the facility regardless of whether or not the utility's planned redevelopment of the dam and four others on the Mattagami River receives the necessary environmental approvals.

* Under a 1989 agreement between Kimberly-Clark and Ontario Hydro, the Crown corporation agreed to provide the mill with 51.6 megawatts of power annually for 80 years. The current pact calls for Ontario Hydro to pay $34 million and give the mill 10 years of double power credits.

* Should Hydro's four-dam development proposal fail to receive environmental approval, the province will compensate the utility for the cost of power to the mill. The payment could reach $247 million.

PHOTO : The employee ownership plan for the Spruce Falls Power and Paper Company calls for the mill's workforce to be trimmed to 800 by next year and to 670 after 1994.
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Title Annotation:Ontario; Spruce Falls Power and Paper Co.
Publication:Northern Ontario Business
Date:Sep 1, 1991
Previous Article:Conventions, business travel generate substantial revenue.
Next Article:Official airport.

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