Merger won’t affect bio-mass boiler: Abitibi

FORT FRANCES—While the proposed merger between Abitibi-Consolidated and Bowater Inc. announced last week raised questions as to what it may mean to the local mill, Abitibi is saying that, at least until the merger is a done deal, it will be “business as usual.”
“First of all, what we announced Monday [Jan. 29] was our intention to merge,” Denis Leclerc, Abitibi’s director of public affairs, said Friday.
“But we’re still two independent companies, two competitors, so we cannot exchange with the other side any sensitive or competitive information, only what is publicly available,” he noted.
“The companies are still working separately with their 2007 strategic plans,” he added. “Is this merger changing anything with the Fort Frances [bio-mass] project? The answer is no.
“The intention is to complete everything for this project to be able to present it sometime in March to the board of directors,” Leclerc remarked.
“I don’t know if they’ve completed all the work because it is complex. But the intention was to complete all the paperwork, the proposal, the request for funds, and everything to be able to present it to the board in March.”
Leclerc stressed “the merger announcement has no impact whatsoever” on any of Abitibi’s mills.
“We have to continue to follow our strategic plan for the year,” he said. “It’s only when we get the approval for such a merger that we will start sharing competitive, or sensitive and confidential, information between the two companies.
“We need to continue business as usual. That’s important to understand,” added Leclerc. “Any type of decisions we will make before the merger is going to be based on our strategic plan and the market.”
Leclerc also noted the proposed merger has to be approved by the Canadian Competition Bureau as well as the U.S. Federal Trade Commission—a process that’s expected to take months.
“We think we’ll be in a position to realize the merger in the fall,” he said.
In related news, Abitibi-Consolidated announced Jan. 26 it had entered into a binding letter of intent with the Caisse de dépôt et placement du Québec to create a joint-venture for Abitibi’s Ontario hydroelectric generation facilities called ACH Limited Partnership.
Leclerc clarified that Caisse de depot is “the OMERS of Quebec.”
“It is a pension fund for investing. The don’t have any operating facilities, they’re not an operator,” he explained. “They’re just a financial partner.”
The company will retain a 75 percent interest in ACH Limited Partnership while the Caisse will acquire the other 25 percent.
The Caisse also has provided a commitment to ACH Limited Partnership for a 10-year unsecured term loan of $250 million, non-recourse to the company, to partially fund the acquisition of the facilities.
The transaction, on a consolidated basis, is expected to yield gross proceeds of $297.5 million to Abitibi-Consolidated.
ACH Limited Partnership is intended to be Abitibi-Consolidated’s growth vehicle in energy generation.
Abitibi-Consolidated’s substantial ownership interest in the joint-venture reflects the ongoing strategic importance of its electricity generation assets.
The company will enter into agreements by virtue of which it will continue to operate and manage the facilities.
Closing of the transaction is expected to take place in the first half of 2007, and is subject to execution of definitive agreements and certain other conditions and approvals.
This financial partnership ties into the severance of the hydro dam here to sell off power as a separate trust, known as the aforementioned ACH Limited Partnership.
“When [Finance] Minister [Jim] Flaherty announced in October the changes for income [trusts], we reviewed the financial structure of the new affiliate and we came up with what we announced [Jan. 26], which is having a financial partner owning 25 percent,” said Leclerc.
“That shows we’re still the major controller, with 75 percent, and nothing else changes with supplying our mills with energy,” he added.