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Kruger VP mum on dollar figures in new power agreement with N.L. government

Roman Gallo is the senior vice-president and chief operating officer of pulp and paper for Kruger Inc., the company that owns the paper mill in Corner Brook. He left reporters with more questions than answers about a new deal that's seeing the company sell power to Newfoundland and Labrador Hydro. (CBC - image credit)
Roman Gallo is the senior vice-president and chief operating officer of pulp and paper for Kruger Inc., the company that owns the paper mill in Corner Brook. He left reporters with more questions than answers about a new deal that's seeing the company sell power to Newfoundland and Labrador Hydro. (CBC - image credit)

A senior executive with struggling paper giant Kruger spoke to reporters in Newfoundland and Labrador on Monday, but left them with more questions than answers about a new agreement to sell power to the province and prop up its Corner Brook paper mill.

How much electricity will be sold? How much will taxpayers pony up? How is this different than the existing power purchase agreement between the two sides? Senior vice-president Roman Gallo fell short of answering any of those questions.

"The way to think about the cost and to think about the megawatts is that there's a lot of things outside our control," Gallo said. "And so I don't want to get into a specific number of megawatts or a cost, because it will vary."

Kruger shut down operations for a week in November 2023, citing tough market conditions at the time. It also has an outstanding $117-million loan to the provincial government, which Gallo admits the company has not made a payment on in two years.

"We have not been paying on the loan," he said on Monday. "But that was with agreement with the government. And the loan is fully guaranteed, so that's not going to be an issue. The people of Newfoundland and Labrador, and the government of Newfoundland and Labrador, they're under no risk of that being a long-term liability for them."

CBC News has requested comment from Newfoundland and Labrador Hydro, as well as a trio of provincial government departments involved with Kruger's operations. This story will be updated with information once it is received.

How does this deal differ?

Corner Brook Pulp and Paper is powered by a hydroelectric dam in nearby Deer Lake. Both assets are owned and operated by Kruger.

Kruger has an existing 10-year agreement to sell excess power from the dam to Newfoundland and Labrador Hydro — the province's crown corporation for utilities.

Corner Brook Pulp & Paper, owned by Montreal-based company Kruger, has put in a request to harvest wood near the town's water supply.
Corner Brook Pulp & Paper, owned by Montreal-based company Kruger, has put in a request to harvest wood near the town's water supply.

About 300 employees work at the mill in Corner Brook. All were out of work for a week in November as the mill shut down due to challenging market conditions. (Colleen Connors/CBC)

On Friday, Kruger announced a new deal — a six-month contract to sell excess energy to the province. Gallo said they wanted a shorter-term agreement that would help steady the ship during these challenging times.

"We wanted it long enough where we could stabilize and efficiently operate the mill as well as deliver power to Newfoundland and Labrador Hydro."

But questions remain about why Newfoundland and Labrador Hydro would need to purchase power over the next six months. The province has just pulled through winter without any significant problems, and demand on the grid takes a considerable dip in the summer months.

When it comes to questions about government handouts to corporations, Gallo said it's fair comment.

"You can't fault people for having that point of view," he said, before adding how the mill provides economic benefits to the City of Corner Brook and province as a whole.

Looking for a green future

With the newsprint market in decline, Gallo said the company has hired three independent consultants to look at the future of Kruger's operations in Corner Brook.

Gallo said they'll take the results of each report and boil it down into a few options. A leading contender so far is the production of biofuel made from wood.

Gallo said the company's access to an electricity source, a mill and a deep-water port and said the chances of diversification are strong.

"What we're doing is taking a look at all those advantages, and we're saying what else could we make at Corner Brook, as well as newsprint, that could bring additional value to us?"

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