Newsrelease

March 3, 1998
Edmonton, Alberta

"We’ve got a deal - the best deal possible for Alberta taxpayers. An opportunity presented itself for us to exit the Al-Pac arrangement and get our principal investment back -- dollar for dollar -- plus another $10 million. Getting our money out now is better than playing a guessing game in a volatile market."

Alberta Sells its Stake in Al-Pac for $260 Million

The government has agreed today to accept an offer from Mitsubishi and Oji Paper Company to buy back the province’s interest in the Al-Pac Joint Venture. Under this agreement, the province will receive a total of $260 million for its loans covering the Al-Pac Pulp Mill. The deal includes a cash payment of $250 million in principal and $10 million in interest, to be paid once certain banking and shareholder conditions are met.

"A bird in the hand is worth two in the bush," said Provincial Treasurer Stockwell Day. "In May, when the transaction is complete, we’ll be able to have those dollars working for us. By investing this $260 million today, in an almost risk-free vehicle like government bonds, we’ll have earned close to $250 million by the time 2010 rolls around."

This deal also includes modifications to the Forest Management Agreement (requires an Order in Council) as follows:

• returns 177,000 cubic metres (Forest Management Unit S14) to the province without compensation to the joint venturers. This means additional forest lands will be available for other projects.
• confirms that the province is not obligated to provide any financing for a future paper mill.
• enhances the province’s ability to attract a third party to build a paper mill.
• requires the joint venturers to supply additional pulp at market price if a third party builds the paper mill.

The following conditions must be met before a cash payment can be made to the province:

• Crestbrook minority shareholders approve the sale of Crestbrook’s interest in Al-Pac (scheduled for April 1998).
• Joint venturers to arrange replacement bank financing for the project.
• FMA changes as noted above.

The Provincial Treasurer added: "Goepel Shields is finalizing their fairness opinion. I will make that opinion available before the end of the week."

"This government would like nothing more than to collect the full principal and interest owing on these loans," said the Provincial Treasurer. "We are selling the Al-Pac loan at a price that is financially fair for Albertans and eliminating any future repayment risk."

For more information, please contact:

Trish Filevich
Director of Communications
Alberta Treasury
Telephone (780) 427-5364
e-mail: webmaster@treas.gov.ab.ca

March 3, 1998
Edmonton, Alberta

Al-Pac Chronology

• The Al-Pac project began as a joint venture between Crestbrook Forest Industries Ltd. (40%), MC Forest Investment Inc. (35%) and Kanzaki Paper Canada Inc. (25%) in 1991.
• In 1991, the Alberta Government approved a loan, from the Heritage Fund, to help build the Al-Pac pulp mill. Interest accrued and was capitalized until February 28, 1997.
• Cash advanced by the province on the Heritage Fund loans totals $249.3 million. By February 28, 1997, $122 million in interest had been accrued and added to the principal in accordance with the loan agreements.
• According to the original agreement, the principal amounts of the Al-Pac loans (including capitalized interest to February 28, 1997) are repayable in five equal annual instalments commencing February 2006, whether or not there is sufficient cash flow from the project.
• Interest from March 1, 1997, was payable monthly from project cash flow, but due to depressed pulp prices, no payments have been received to date.

  For more information, please contact:

  Trish Filevich
  Director of Communications
  Alberta Treasury
  Telephone (780) 427-5364
  e-mail: webmaster@treas.gov.ab.ca

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  Updated by walkej@treas.gov.ab.ca - March 3, 1998