AbitibiBowater Agrees to Sell Stake in Ontario Hydro Assets for $300 Million
Feb. 14, 2011 - AbitibiBowater said that it has signed a binding agreement for the sale of its 75% indirect interest in ACH Limited Partnership ("ACH LP") to a consortium formed by a major Canadian institutional investor and a private Canadian renewable energy company (the "Consortium"). ACH LP was established in April 2007 to hold hydroelectric generating assets in Ontario, Canada by the Company's Abitibi-Consolidated Company of Canada subsidiary (now AbiBow Canada Inc.). As part of the transaction, the Caisse de depot et placement du Quebec has agreed to sell its 25% interest in ACH LP, taking into consideration AbiBow Canada's drag-along right contained in ACH LP's governing agreements between the Caisse and AbiBow Canada.
Cash proceeds for AbitibiBowater's 75% indirect interest will be approximately C$300 million and will be used to reduce the Company's debt, to enhance liquidity and for general corporate purposes. As part of the transaction, ACH LP will maintain its outstanding debt with the Caisse with a face value of C$250 million. The agreement values the hydro assets, which have a combined capacity of approximately 131 MW, at approximately C$640 million.
"We are looking forward to the completion of this transaction. Our intention is to immediately apply $100 million of the proceeds from this sale to reduce Company debt,'' stated Richard Garneau, President and Chief Executive Officer of AbitibiBowater. "We intend to protect the cost structure of the Iroquois Falls and Fort Frances mills and remain committed to reducing costs.''
The closing of the transaction is subject to certain terms and conditions, including, but not limited to, obtaining required consents and approvals and other customary conditions. Closing is expected to occur within the next 60 days.
Following the completion of the transaction, ACH LP will continue to supply electricity to AbiBow Canada Inc.'s Fort Frances and Iroquois Falls pulp and paper mills under the terms of a long-term power purchase agreement.