AbitibiBowater signed a deal Friday to sell its interest in its Ontario hydro assets for $300 million, including the hydro dam here in Fort Frances, but the transaction will not affect the 1905 historic power agreement.
“It will not impact the historic power agreement. The only thing that will change is the entity that the agreement is with,” Fort Frances Power Corp. CEO Joerg Ruppenstein said yesterday.
“The agreement is in place, it’s a Supreme Court ruling,” he explained.
“This is not the first time there’s been an ownership change,” he noted. “We’ve actually dealt with, I believe it’s three, ownership changes in recent history.”
AbitibiBowater has reported it will sell its indirect interest in ACH Ltd. to a consortium including an unidentified Canadian institutional investor and a private Canadian renewable energy company.
“I was in contact with [ACH Ltd.],” said Ruppenstein. “We don’t have a buyer name yet.
“However, we were informed our contact people are staying the same, and for the time being it’s business as usual,” he added.
“There’s a 60-day due diligence period in this transaction before it’s finalized, and after that, all of the legal transactions are finalized.
“At that point, then they’ll start the paperwork to change ownership,” Ruppenstein said.
“But as far as we are concerned, the structure and framework is in place, and this is merely an ownership change,” he reiterated.
“And in the ownership change, all of the rights and obligations that are assigned to the power agreement are fully transferred.
“Basically, what it boils down to is our historic power agreement is tied to the local generation dam; it’s tied to those generating assets and the residents and small businesses of Fort Frances—that’s who the agreement is between.
“An ownership change doesn’t really have an impact on the actual rights and obligations of that agreement. It’s 100 percent transferable.
“The residents won’t see any changes, they’ll continue to see a credit on their bill as always,” Ruppenstein pledged.
The credit is dependent on the market price of electricity. The current payout rate is one cent per kilowatt hour.
At year end, a lump sum is paid out for any residual value.
As reported by the Canadian Press, the company is selling its 75 percent interest in the hydro assets.
The deal values ACH’s hydro assets at $640 million.
The company said proceeds from the sale will be used to pay down debt, enhance liquidity, and for general purposes.
“Our intention is to immediately apply $100 million of the proceeds from this sale to reduce company debt,” said AbitibiBowater president and chief executive Richard Garneau.