Tolko finalizes sale of paper mill to Canadian Kraft Paper Industries

WINNIPEG (Scrap Monster): Tolko Industries announced that its The Pas, Manitoba kraft paper and sawmill has been purchased by Canadian Kraft Paper Industries Limited. According to the announcement made Thursday by Manitoba Premier Brian Pallister, the sale of the paper mill has been finalized. The purchase deal is expected to save more than 300 jobs in the region.

The official press release noted that the government is extremely pleased that an agreement has been reached. The town was earlier informed that there was no hope for a potential buyer. The purchase agreement will preserve all existing jobs and will also help to secure long-term sustainable development under the new ownership, Pallister said. The provincial government further noted that the present employees will transition to the buyer and contribute to the future successful operation of the mill.

As part of the deal, Manitoba has granted Canadian Kraft Paper Industries Limited, three years of municipal taxes and debentures in the form of a grant that works out to nearly $460,000 per annum. The incentive is granted on the condition that the buyer keeps up on its property taxes. The buyer will pay the property taxes and the town will grant the money back. In addition, Canadian Kraft Paper Industries Limited should ensure production at the mill. Also, company representatives are required to present before the town council every year, a summary of the previous year’s operations and a forecast for the next year.

The town has reached an agreement with the workers to offer the buyer a three year break on additional pension payments for three years. Also, the workers have also agreed to 10% rollback in wages. The town has also addressed the buyer’s concerns around environmental issues with the mill’s tailings ponds.

Earlier in August this year, Tolko Industries had decided to close its Manitoba operations by December this year. The company had announced that all employees at the kraft paper and sawmill operations will be laid off when the operations are scheduled to come to an end Dec 2, 2016. The employees were also informed about the decision. The press release by the company had stated that it had failed to make the business financially sustainable, despite all its efforts to improve its cost structure and competitive position of the mill. Shortly afterwards, the American Industrial Acquisition Corporation (AIAC), to which Canadian Kraft Paper Industries Limited is affiliated, had put forward a letter of intent to purchase the mill.

Jim Baskerville, Tolko vice president had stated that the company had been losing money by way of high transportation costs in shifting wood chips and logs into the mill. The high energy costs at the mill too had hit the profitability of the operations. As per rough estimates, the company’s power cost per tonne of paper has increased by one-third between 2010 and 2014.

Tolko Industries Ltd. is a privately owned Canadian forest products company based in Vernon, British Columbia. It manufactures and markets specialty forest products to world markets. Tolko's products include lumber, plywood, veneer, oriented strand board, unbleached kraft papers, and a growing number of wood products manufactured at operations across Western Canada. The company had taken over Manitoba Kraft Paper and Sawmill Operations in The Pas in 1997.