New deal sees Hydro's payments to Kruger increase eightfold over last year

Newfoundland and Labrador Hydro's payments to Kruger will be going up by at least a factor of eight this year, as part of the provincial government's effort to stabilize operations at the Corner Brook paper mill.

The deal announced last week — but quietly brokered by the province in January — will see Hydro spend $22 million to purchase energy from the Deer Lake hydroelectric dam between February and July.

It's not uncommon for Hydro to call on Kruger for additional power during peak times, as the pair already had a 15-year agreement for capacity assistance that was renewed last November.

The two deals are difficult to compare, as one is for power measured in kilowatts and the other is for energy measured in kilowatt hours.

The difference in cost, however, is stark. Hydro needed $2.7 million in power from Kruger for a six-month period covering last winter, compared with the $22 million it will spend on energy under the new six-month agreement.

The most Hydro has ever spent on power from Kruger for a six-month period is $3.1 million, as first reported by online business outlet AllNewfoundlandLabrador.

On Tuesday, Premier Andrew Furey said the government had to consider all the indirect costs associated with the mill when figuring out a plan. Asked if he feels the deal they came up with was good value for public money, he replied, "We believe at this point in time that it is."

But the whole situation has left NDP MHA Jordan Brown perplexed.

"Clearly there is something here that is more than just a power purchase agreement. This is obviously some sort of deal for Kruger to, you know, find a way to get money into the company," Brown said.

Kruger's operations in Corner Brook have struggled over the past decade, as the newsprint industry as a whole has declined. The company already owes the provincial government more than $117 million for a 2014 loan to save the mill — a loan the company hasn't made a payment on in more than two years.

When asked if the new deal felt like another bailout, Brown said: "The mechanism they're choosing is very suspect."

Wakeham applauds stability, pans "secrecy"

PC Leader Tony Wakeham said the deal could be good news if it means a more stable economy for the City of Corner Brook.

But he's not happy with the way it came to be, and not thrilled he found out about it from a news article months after an order-in-council was made.

"Finding out that the government did this deal somewhat in secrecy, I guess, that becomes part of the problem," Wakeham said.

Kruger has said it plans to use the six-month period to conduct a trio of studies on ways to diversify its Corner Brook business and get away from its reliance on newsprint. The leading contender is a biofuel production facility.

Furey said they're going to hold the company accountable to those plans.

"They've said that they're going to diversify and we'll hold them to that," he said. "This isn't a forever agreement. This is a 'please help us understand how you're going to diversify' [agreement]."

Wakeham says the Liberal government should have had a plan to diversify the forestry industry years ago, when the writing was on the wall for the newsprint sector.

"What's the long-term strategy here for our forestry industry? You know, when we think about all the people that are employed in even the sawmill industry, and everything that depends on this. That's what's important."

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