Stora Enso to Restart Port Hawkesbury Mill on Energy Deal

Sept. 29, 2006 - Stora Enso said that its Port Hawkesbury Mill in Nova Scotia, Canada, will restart operations following a 10-month shutdown due to profitability challenges.

The mill will carry out a phased-in approach to getting the two paper machines operating, beginning with the immediate start-up of its paper machine (PM) 2 which has an annual capacity of 360,000 tonnes of super-calendered magazine paper, followed by PM 1, which has an annual capacity of 190,000 tonnes of newsprint, Stora Enso said.

The Helsinki-based papermaker said the three primary local factors that have a direct impact the future profitability of the mill have been addressed through negotiations:

- Energy: The Nova Scotia Utility and Review Board established a new rate formula for large industrial customers based on the actual cost for Nova Scotia Power Inc. to produce electricity.

- Labor: The new labor contract allows modern work practices and includes wage concessions.

- Taxes: The local municipality has agreed to a 10-year realty tax agreement. The Province of Nova Scotia has agreed to phase out the capital tax.

On December 24, 2005, the mill ceased production due to a labor dispute.

The new five-year collective labor agreement (May 31, 2004 - May 31, 2009) was ratified on 20 June 2006. The agreement includes a 10% decrease in wages from the 2006 level, changes to key work practices such as flexibility and overtime, and 54 identified reductions in workforce, which have been achieved through a voluntary early retirement programme. In addition, wage reductions of 10% also applied to all salaried personnel. The agreement was necessary for the mill to achieve profitability with two machines.

The restart of the mill after the June ratification by the union was delayed until the issue of high electricity costs was resolved with the local power utility, Stora said. The Nova Scotia Utility and Review Board recently approved a revised power rate for Extra Large Industrial customers.

According to Stora Enso, the impact on the Group's operating profit during the shutdown period has been about EUR 5 million per month.

SOURCE: Stora Enso

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