Newsrelease

May 19, 1998
Edmonton, Alberta

"Throughout our negotiations with Al-Pac, I promised Albertans we would release the market valuation once we had cash in hand. Today, I am more than happy to live up to that promise and provide taxpayers with a valuation that clearly states that we got a good deal for Alberta taxpayers"

Alberta receives $260 million for its Al-Pac loans

The Alberta government fulfilled its commitment today to release the Goepel Shields valuation on the Alberta Pacific Pulp Mill. Goepel Shields is an independent investment firm the government hired to conduct a valuation of the Alberta Heritage Savings Trust Fund loans before selling its loan investment in the Al-Pac Joint Venture.

"With the deal finalized and the money in hand, we are now free to release the Goepel Shields valuation as promised," said Provincial Treasurer Stockwell Day. "The valuation shows that we negotiated a good deal for Alberta taxpayers."

Goepel Shields valued the Heritage Fund loans between $180 and $200 million. The government accepted an offer of $260 million from Mitsubishi and Oji Paper Company on March 3, 1998 to buy back the province’s loans to the Al-Pac Joint Venture. Under the agreement, the province received $250 million in principal and $10 million in interest.

"We are out of the pulp business. It’s done. Now we can put the money we received back to work, earning interest for taxpayers," said Day. "By investing today in high quality bonds, we’ll have earned approximately $250 million in interest by the time 2010 rolls around." The money will be invested through the Transition portfolio of the Alberta Heritage Savings Trust Fund.

This deal also includes modifications to the Forest Management Agreement 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.
• requires the Joint Venturers to supply additional pulp at market price if a third party builds the paper mill.

The principal and accrued interest on the Al-Pac loans totalled $415 million at May 15, 1998.

For a copy of the Goepel Shields market valuation report, please call (780) 427-5364.

Backgrounder: 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.
• 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.
• The principal and accrued interest on the Al-Pac loans totalled $415 million at May 15, 1998.

For more information, please contact:

Stockwell Day
Provincial Treasurer
Telephone (780) 427-8809

or

Hal Danchilla
Special Advisor to the Treasurer
(780) 427-8809

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