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Edmonton, AB T6J 1A4
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FAX: 403-437-0719
September 20, 1991
Good news!
Reliable reports from Japan indicate that Japanese forestry giant
Daishowa has recklessly over-expanded its production facilities,
is in deep financial trouble and consequently plans to sell its
Peace River bleached kraft pulp mill. Hopefully nobody will be
dopey enough to buy this billion dollar monument to outmoded
technology and it will have to shuttered.
Obviously caught off-guard by news of Daishowa's plans to sell
its Peace River bleached kraft pulp mill, representatives of the
Alberta Provincial Government scrambled to reassure Alberta
voters that this multi-million dollar misadventure with the
taxpayers' money isn't headed for economic disaster. Facing an
equal 19-19-19 split in the latest polls between Alberta's three
main political parties, the last thing in the world the
Provincial Government needs is collapse of its much heralded
initiative to diversify Alberta's largely petroleum-based economy
by selling off the Province's trees as well as its oil.
The news of Daishowa's serious financial difficulties followed
wave after wave of less spectacular but no less significant bad
news for Daishowa, for Daishowa's Peace River bleached kraft pulp
mill and for the Alberta Provincial Government. At least partly
due to Daishowa's heady over-expansion of production facilities,
the market is awash with pulp, the price of pulp has plummeted
from $800 to $500 per metric ton and pulp companies are stuck
with record pulp inventories. In addition a leaked Canadian
Government study recently confirmed that the bleached kraft
process used by Daishowa's Peace River pulp mill produces deadly
toxins which threaten human health, environmentalists are
pressing for a total ban of bleached kraft pulp and the U.S.
Government has proposed to outlaw the sale of un-recycled paper -
- all on top of a very real question of whether Daishowa properly
owns the rights to the Lubicon trees upon which its very
existence is premised.
Thus contrary to the nervous public assurances of obviously off-
balance Provincial Government representatives, Albertans do
indeed have cause for concern over the loss of millions of
dollars in taxpayers' money. In fact it's hard to imagine who,
except perhaps a desperate Alberta Provincial Government for
purely political reasons, would want to take over Daishowa's
loss-leading Peace River white elephant. From all indications
doing so would be tantamount to going into large-scale buggy whip
production after invention of the horseless carriage -- to say
nothing about the problem of expressed Lubicon intentions to
block the cutting of Lubicon trees by any means necessary until
there's a settlement of long outstanding Lubicon land rights and
a tree harvesting agreement taking into account Lubicon wildlife
and environmental concerns.
Bad news for Daishowa, for Daishowa's Peace River bleached kraft
pulp mill and for the Alberta Government unfortunately doesn't
automatically translate into less pressure on Daishowa and/or the
Provincial Government to clear-cut Lubicon trees this fall.
Rather both Daishowa and the Alberta Government will be
frantically trying to create the illusion that Daishowa's Peace
River bleached kraft pulp mill is still economically viable in
spite of everything -- an illusion which clearly depends to no
small extent upon somehow keeping the mill in operation. And
keeping the mill in operation at anything like its 1,000 metric
tons of pulp per day capacity will almost certainly require trees
from the unceded Lubicon territory.
Proliferating problems for Daishowa and the Alberta Government
consequently should not be seen as victory allowing for
relaxation of effort but as opportunity calling for renewed
effort to be fully realized. As always, but even more so under
the current circumstances, the biggest threat to companies like
Daishowa and governments like the Getty Provincial Government is
public information and education, through whatever means
available -- including demonstrations, writing letters to the
editors of newspapers, phoning talk shows, raising the issue with
friends and associates and joining the growing international
boycott of Daishowa paper products. Each of these things,
thoughtfully done, will serve to sharpen the public debate and
clarify the involved issues.
Daishowa's Peace River $580 million bleached kraft pulp mill is
advertised as the largest hardwood bleached kraft pulp mill in
Canada and is reportedly the largest hardwood bleached kraft pulp
mill in the world. Only time will tell whether it will be
possible to shut it down. However a number of potent factors now
operating in combination make shutting it down at least
conceivable. And shutting it down would not only remove a major
threat to the embattled Lubicon people, and give the Lubicon
people some badly needed political leverage, it would contribute
greatly to the phasing out of the environmentally disastrous
bleached kraft process in Alberta and Canada.
* * * * *
Attachment #1: THE EDMONTON JOURNAL, Thursday, July 18, 1991
PULP MILL EFFLUENT IS TOXIC -- STUDY
Organochlorides a potential threat to humans, scientists say
Dennis Bueckert
The Canadian Press
Ottawa
Effluent from pulp mills that use bleaching is toxic even if
dioxins are removed, a two-year assessment by scientists at the
Environment Department has concluded.
The study says that compounds known as organochlorines, discharged
as byproducts of bleaching, represent a potential threat to human
health.
It is the first official federal confirmation of what
environmentalists have been saying for about 10 years.
The study has been submitted to Environment Minister Jean Charest
but not publicly released. It was summarized by a federal official
involved in its preparation.
The assessment, carried out under the terms of the Canadian
Environmental Assessment Act, recommends controls on
organochlorines, but does not suggest precise standards.
"They (the scientists) recommend controls of one form or another,
but they don't say in what form those controls will be," said the
official, who declined to be named.
He said it's up to the minister to decide on an appropriate
response, and costs to industry will have to be taken into account.
Ottawa is unlikely to take measures that would force mills to
close, he added.
Industry officials have warned that tight controls on
organochlorines could impose huge costs beyond the $4 billion to
$5 billion they are already spending to virtually eliminate dioxins
and furans.
A spokesman for the Canadian Pulp and Paper Association declined
to comment on the report, saying she had not seen it.
Under the environmental assessment act, a toxicity assessment is
the first step toward new regulations. But Ottawa may choose to
rely on voluntary efforts by industry rather than using
regulations.
The official noted that industry has already made progress in
reducing chlorine use, partly due to market pressures. More
consumers are demanding unbleached paper products.
The average amount of organochlorines released from bleaching
mills across Canada is about three kilograms per tonne of pulp, less
than half the level of about five years ago, he said.
Pulp mills use bleaching to produce white paper products.
* * * * *
Attachment #2: THE EDMONTON JOURNAL, Tuesday, September 3, 1991
U.S. RECYCLING WORRIES PULP INDUSTRY
Dennis Bueckert
OTTAWA
The Canadian pulp and paper industry is deeply worried about
moves in the U.S. Congress to introduce legislation requiring the
use of recycled fibre in newsprint.
Numerous proposals to promote use of recycled fibre are being
considered in both houses of Congress and some of them could
seriously threaten the Canadian industry, says Brian McClay of
the Canadian Pulp and Paper Association.
The fear is that Congress might decide to go with countrywide
standards similar to those pioneered by California, which McClay
described as radical.
"Every sheet of paper that goes into California has to have 40
per cent recycled content," said McClay. "If you don't recycle,
you don't sell into that market."
He said the majority of Canadian producers would be adversely
affected if such a standard were adopted nationally by the United
States.
"Clearly there are many companies in Canada that are just not
going to be in a position to recycle economically," he said.
California-type standards "would effectively keep them out of the
market."
Lat year, Canada exported about $5 billion worth of newsprint to
the United States. The push for recycling is being driven by
soaring landfill costs in many areas, combined with general
sensitivity to environmental issues.
The Canadian industry is scrambling to increase recycling
capacity, and will invest $1.2 billion over the next few years
for that purpose.
But the industry faces a big disadvantage because there is not
enough waste paper in Canada to meet demand. Large quantities of
waste paper are already being imported from the United States.
Geoffrey Elliot, vice-president of Noranda Forest, said the
minimum-content recycling standards in the United States could
further erode the Canadian industry's position in its biggest
export market.
"If the United States were to match at the national level some of
the regulations that have been taken at the state level we would
have a very difficult time in maintaining our market share," he
said.
The Canadian share of the U.S. market already has declined to
between 50 and 60 per cent from 70 to 80 per cent in recent
years, partly due to recycling requirements in many states and
municipalities.
Ten states have introduced laws requiring the use of recycled
fibre, and 11 have adopted voluntary programs.
Arizona and Florida have adopted the California approach, but the
other states have taken softer measures, said McClay.
A number of states require publishers and commercial printers to
use recycled fibre equal to 20 per cent of their paper
consumption. This allows blending of paper from different
sources.
The Canadian industry greatly prefers that approach to the
California mode, said McClay.
* * * * *
Attachment #3: Transcript of Broadcast News Report, Wednesday,
September 04, 1991
EDMONTON: The Alberta Government is looking into rumours that
Daishowa Canada plans to sell its Peace River pulp mill.
Forestry Minister LeRoy Fjordbotten says a report in a Japanese
newspaper says Daishowa may sell its 500-million-dollar mill
because of money problems.
He says the company is under financial strain but hasn't said
anything about unloading its Peace River operation.
The minister says he's aware that the company has some financial
difficulties and is carrying too much debt load.
Fjordbotten says if the mill is put up for sale, Alberta will
have a say in the deal because of the company's forest management
agreement with the province.
If Daishowa doesn't live up to the agreement, he says the
province could fine the company or restrict its timber supply.
* * * * *
Attachment #4: Transcript of CBC Radio News Broadcast (4:30
P.M.), Wednesday, September 4, 1991
Krysia Jarmicka, CBC News
A business newspaper in Tokyo says the Daishowa Paper Company is
trying to sell its giant pulp mill in northern Alberta. The
plant, near Peace River, cost more than 1/2 billion dollars and
has only been open a year. According to this week's issue of the
"Nikkei Weekly" Daishowa is in severe financial shape. The paper
says Daishowa lost more than $120 million last year and is
expected to lose another $80 million this year. Edmund Klamann,
who works for the "Nikkei Weekly" says Daishowa wants to unload
its plant in Peace River.
Edmund Klamann, Nikkei Weekly
Company sources were reported here as saying that one measure
that the company was going to take to respond to its financial
difficulties was to sell off or try to sell off the plant, as
well as make reductions in its workforce and close some of its
facilities here in Japan.
Jarmicka
The paper says that Daishowa has put a price tag of $1 billion on
the Peace River plant. It says Daishowa's first choice is to
sell off only half of the plant to a trading company that is
partly owned by Daishowa. The Minister of Forestry says he's had
no official word on the sale of Daishowa's Peace River mill.
LeRoy Fjordbotten says he's heard rumors that the company's
looking for a partner to take part in a joint venture, but again,
he says he's had no official confirmation. But Fjordbotten says
the Province would have to approve any sale of the mill.
LeRoy Fjordbotten, Alberta Minister of Forestry
If they were to sell the entire mill the Forest Management
Agreement that is with Daishowa, and all the infrastructure and
everything, the agreements are with Daishowa -- if they were to
sell with those agreements in place they would have to get
approval from the Province for the new purchaser. But if they
are looking at bringing in a partner and they're still honoring
the commitment that they've signed, then that's different.
Jarmicka
Fjordbotten says the Province put in $65 million for
infrastructure for the mill. That includes roads and bridges and
up-grading. But he says there were no loans or loan guarantees
for Daishowa. A company representative in Peace River says he
doesn't know anything about a possible sale. Daishowa's Canadian
Vice-President in Vancouver is out of the country and couldn't be
reached for comment.
* * * * *
Attachment #5: Transcript of CBC Radio News Broadcast (5:30
P.M.), Wednesday, September 4, 1991
Krysia Jarmicka, CBC News
A business paper in Japan says the Daishowa Pulp Mill near Peace
River is for sale. The "Nikkei Weekly" says the proposed sale is
part of a sweeping restructuring program to make up for
Daishowa's huge losses and high debts. James Wark reports.
James Wark, CBC News
The article appeared last Friday in the "Nihoon Kai-Sei Shimbun"
(spelled phonetically), Japan's version of the Wall Street
Journal. It was reprinted in the paper's English outlet, "The
Nikkei Weekly). The paper quotes sources in Daishowa as saying
as well as selling the Peace River plant, the company plans to
close mills in Japan and slash its debt almost in half. Edmund
Klamann works for the "Nikkei Weekly". He says Daishowa has
turned in a disastrous financial performance.
Edmund Klamann, Nikkei Weekly
They recorded a massive loss in their last fiscal year through
March of 14.9 billion yen, and analysts here expect them to incur
another 10 billion yen loss of so in the current fiscal year. So
they're faced with some pretty serious financial difficulties,
certainly the most hard-pressed of the paper companies here in
Japan.
Wark
According to the paper, Daishowa is asking $1 billion for the
plant in Peace River. It was only officially opened a year ago
and employs about 600 people. The paper goes on to say that
Daishowa's first option is to sell only half the plant to the
Japanese trading company Marubeni. However, Marubeni officials
are quoted as saying the price is too high. If that deal falls
through, the paper says, it's not clear if Daishowa will sell the
plant to any other company. James Wark, CBC News, Edmonton.
Linda Warford, CBC News
This is Linda Warford at the Alberta Legislature. Cabinet
Ministers here say they don't know anything about the possible
sale of the Peace River mill, but the Minister of Forestry, LeRoy
Fjordbotten, says if Daishowa sells it has to have the approval
of the Provincial Government because of the timber rights that
have been given to the company.
LeRoy Fjordbotten, Alberta Minister of Forestry
They have signed legal documents that are so binding that if they
were to bring in a joint venture partner they'd have to come to
the Province and talk to us about it, officially notify us. But
the documents are so secure that there are no risks to the mill
or to Peace River or to our contractual arrangements by what
they've done, or what they might do.
Warford
The Provincial and Federal Governments put $65 million into
infrastructure for the mill, things like roads and bridges. The
bulk of that money came from the Province. But Fjordbotten says
there were no loans or loan guarantees to Daishowa. He says he's
heard rumors about Daishowa restructuring and possibly looking
for a partner. But he says he's heard nothing official. The
Minister of Economic Development, Peter Elzinga, says he's heard
about the story in the Japanese newspaper but he hasn't heard
anything official either. He's asked his staff to look into it,
but Elzinga doesn't see any big risk to the Province.
Peter Elzinga, Alberta Minister of Economic Development
I think very little risk. We were involved with some
infrastructure costs but that was the limits of our involvement.
Warford
A company official in Peace River says he doesn't know anything
about a possible sale. Daishowa's Canadian Vice-President in
Vancouver is out of the country and couldn't be reached for
comment. Linda Warford, CBC News, at the Alberta Legislature.
* * * * *
Attachment #6: Transcript of CBC TV News Broadcast (6:00 P.M.),
Wednesday, September 4, 1991
Kathy Daley, CBC News
There is word tonight that a company which the Alberta Government
spent millions of dollars to attract to the Province may be in
big financial trouble. Daishowa built a pulp and paper mill in
Peace River. And now a Japanese newspaper says the company is
planning to sell it to get rid of some of its debt. Rick Boguski
reports.
Rick Boguski, CBC News
It was just one year ago that the Alberta Government and Daishowa
executives celebrated the mill's opening. The Alberta Government
poured more than $60 million to the plant and leased the company
24,000 kilometres of forest. But now there are reports that
Daishowa is in financial trouble -- big trouble. According to
this week's issue of the "Nikkei Weekly", a Japanese publication,
Daishowa lost more than $120 million last year and is expected to
lose another $80 million next year. To reduce some of its debt,
the paper says the pulp mill is now up for sale. The price tag -
- $1 billion Canadian. A spokesman for Daishowa says if it's
true, it's news to him.
Wayne Crouse, Spokesman for Daishowa, Peace River
I assume that if that were the case that we would know about it.
It would be something that we would be aware of internally.
Boguski
It comes as a big surprise to the Alberta Government too.
Economic Development and Trade Minister says this is the first
he's heard of any possible sale.
Peter Elzinga, Alberta Minister of Economic Development
I've asked the departmental people to give me an update as to the
legitimacy of the stories. Other than that, we don't have any
comment. But we do feel very comfortable that things will
proceed as they should and the mill will prove productive in
itself.
Boguski
Right now there are problems throughout the whole lumber and pulp
industry, and many companies, not just Daishowa, are financially
pressed. Since it opened last year, the Daishowa plant hasn't
been operating at full capacity. If in fact the company is up
for sale, Forestry Minister LeRoy Fjordbotten says the Alberta
Government would have to give its approval first; that's because
the forestry leases are for Daishowa and Daishowa only. Any new
players would have to strike a new deal with the Province. Rick
Boguski, CBC News, Edmonton.
* * * * *
Attachment #7: THE EDMONTON JOURNAL, Thursday, September 5, 1991
DAISHOWA'S PEACE RIVER MILL REPORTEDLY UP FOR SALE
Jack Danylchuk
Journal Staff Writer
PEACE RIVER
Daishowa Canada's Peace River pulp mill is for sale, says a
leading Japanese business publication.
The asking price is $1 billion for the mill -- valued at $550
million when it opened last September, Tokyo's NIKKEI WEEKLY
reported in a story based on interviews with company executives
who aren't identified.
"That's a bolt out of the blue," Wayne Crouse, a company
spokesman in Peace River, said Wednesday when he was told about
the story which appears in NIKKEI'S latest edition. Senior
company officials in Vancouver did not respond to several
telephone calls.
Alberta Forestry Minister LeRoy Fjordbotten said Wednesday that
he was aware of financial problems in Daishowa's Japanese parent
company, but stressed that "there won't be a sale without our
involvement. Albertans won't lose any money in this."
Economic Development Minister Peter Elzinga said his staff are
looking into the possible sale.
The province has invested $65.2 million in roads and bridges and
the federal government spent $20 million on the first phase of
the project which was to double in size by 1995 and cost $1.3
billion.
Alberta also granted Daishowa access to thousands of hectares of
northern forests, and the company has gained rights to trees in
Wood Buffalo National Park as a result of a deal with Canfor Ltd.
"The first thing I thought when I saw the story was that they
were including those (harvesting rights) as assets, but that's
not necessarily so," said Fjordbotten, who agreed that without
the wood the mill is worthless.
Under the terms of its forest-management agreement, Daishowa is
to double the size of the mill within five years and "unless it
or a new owner meets those terms, it could have its forest-
management area reduced," Fjordbotten said.
Jim Darwish, a spokesman for Friends of the North, an
environmental group which remains vigorously opposed to the
project, called the reported asking price "a fantastic gain on
capital investment, considering they've only been operating the
mill for a year."
New Democrat environment critic John McInnis, who was touring
Peace River Wednesday, said local residents were stunned by the
news.
"I've been meeting with a lot of shocked Peace River residents,"
he said, adding some were concerned for their jobs."
The NIKKEI story said the Peace River mill has been offered to
Daishowa Marubeni, International, a joint venture between
Daishowa Canada's Japanese parent and Marubeni, a major trading
house.
NIKKEI sources suggest the price may be too rich for Marubeni,
and the paper said it "is not clear whether Daishowa will go
ahead with plans to sell the facility to any other company."
Japanese industry analysts said that an over-supply of paper
forced Daishowa Paper Mfg. Co. to launch a sweeping restructuring
program that will cuts its workforce in Japan by 40 per cent.
* * * * *
Attachment #8: THE EDMONTON SUN, Thursday, September 5, 1991
MILL SALE PONDERED
Daishowa looking at pulp 'options'
By Tim Seefeldt and David Bray
Staff Writers
Daishowa International is considering selling off some of its
Canadian assets -- including the Peace River pulp mill, a company
spokesman said yesterday from Tokyo.
"We are trying to reduce our costs to help profitability," Terao
Makota, who works in the company's overseas division, told THE
EDMONTON SUN in a telephone interview.
Sagging profits in pulp and paper are forcing Daishowa to look at
options, but there are no firm plans yet, said Makoto.
"We may need help from another company," he said, adding that a
partnership in some of its ventures was a possibility.
Makoto said it could take another three years before the Canadian
pulp and paper industry "reaches some point of profitability."
But he wouldn't speculate on when a deal on its Canadian
operations might be made.
Alberta Forestry Minister LeRoy Fjordbotten said Daishowa is
trying to restructure operations in Japan in a bid to bring down
a large debt load.
But he's had no notification of plans to sell the Peace River
mill.
Fjordbotten said the government's forest management agreement
with Daishowa prevents the company from getting rid of the mill
without government agreement.
"They have signed legal documents that are so binding...there's
no risk to the mill or to Peace River."
He said Daishowa could bring in a partner and live up to its
commitment.
Economic Development Minister Peter Elzinga said a sale of the
mill would have little impact.
New Democrat environment critic John McInnis said he was appalled
the company would sell out less than a year after signing a deal
giving it access to 40,000 sq. km. of Alberta forest.
"It's absolutely unacceptable. It's a gift to Daishowa Corp. of
a few hundred million dollars from the taxpayers of Alberta,"
McInnis said from Peace River, after touring the company's forest
lease area.
"The reaction of people in Peace River is one of absolute shock."
McInnis said he was concerned that Daishowa, which reportedly
wants $1 billion for its $525-million plant, is poised to reap
$500 million from its deal with the province.
The province has provided $100 million in infrastructure,
including a 17-km rail spur and a bridge, he said.
* * * * *
Attachment #9: Transcript of CP News Broadcast, Thursday,
September 05, 1991
EDMONTON:
A report in the Japanese media that Daishowa Canada's Peace River
pulp mill is for sale is "speculative," the company's Edmonton
general manager said Thursday.
"It's just one small option amongst a myriad of options that are
being looked at," James Morrison said in an interview.
Nikkei Weekly of Tokyo reported that the year-old mill is on the
block for $1 billion as part of a financial restructuring program
being drafted by Daishowa Paper Mfg. Co.
"All of the companies in the forest industry are facing difficult
times. We're no different than that," said Morrison.
"Everybody in the industry is looking at a pretty bad balance
sheet because the market depression has been deeper and longer
than all of us anticipated. So all of us are looking at
different ways to survive.
"It's not a crisis. But we've made the provincial government
aware of the dire straits that Daishowa's facing and that the
company is looking at different restructuring options."
Forestry Minister LeRoy Fjordbotten said that if the mill is
sold, a new owner would have to meet terms Daishowa agreed to or
the government might cut back its timber supply.
The provincial and federal governments have invested $85.2
million in road and rail services for the mill which was valued
at $550 million when it opened a year ago. Plans call for it to
double in size by 1995.
The story in Nikkei said the mill had been offered to Daishowa
Marubeni International, a joint venture between Daishowa canada's
Japanese parent and Marubeni, a major trading house.
Ross HayRoe, an analyst with the Toronto-based Research Capital
brokerage, said Daishowa has been running up debts on mill
purchases.
He said Daishowa has over-extended itself with a series of North
American acquisitions in recent years. Its assets include a
paper mill in Washington, a newsprint mill near Quebec City and a
pulp and paper operation at Quesnel River, B.C.
* * * * *
Attachment #10: Transcript of CP News Broadcast, Thursday,
September 05, 1991
PEACE RIVER, Alta.
A year after it opened, Daishowa Canada's pulp mill in northern
Alberta is up for sale, according to a Japanese business
publication.
The asking price is $1 billion for the mill which was valued at
$550 million when it opened last September, Tokyo's Nikkei Weekly
reported in a story based on interviews with unnamed company
executives.
"That's a bolt out of the blue," Wayne Crouse, a company
spokesman in Peace River said Wednesday when told about the
report.
Senior company officials in Vancouver did not respond to several
telephone calls.
Alberta Forestry Minister LeRoy Fjordbotten said Wednesday that
he was aware of financial problems in Daishowa's Japanese parent
company but stressed that "there won't be a sale without our
involvement. Albertans won't lose money in this."
The province has invested $65.2 million in roads and bridges and
the federal government spent $20 million on the first phase of
the project that is to cost $1.3 billion in total.
Alberta also granted Daishowa access to thousands of hectares of
northern forests.
Under the terms of its forest-management agreement, Daishowa is
to double the size of the mill within five years and "unless it
or a new owner meets those terms, it could have its forest-
management area reduced," Fjordbotten said.
The Nikkei story said the mill has been offered to Daishowa
Marubeni International, a joint venture between Daishowa Canada's
Japanese parent and Marubeni, a major trading house.
Nikkei sources suggest the price may be too rich for Marubeni,
and the paper said it "is not clear whether Daishowa will go
ahead with plans to sell the facility to any other company."
Japanese industry analysts said that an over-supply of paper
forced Daishowa Paper Mfg. Co. to launch a sweeping restructuring
program that will cut its workforce in Japan by 40 per cent.
"As a result of the market's overcapacity, leading paper makers
such as Oji Paper Co. are operating at less than 80 per cent
capacity for some key products," Nikkei reported.
"At Daishowa, the latest restructuring plan centres on the sale
of a hardwood kraft pulp mill in Peace River." The mill is about
485 kilometres northwest of Edmonton.
* * * * *
Attachment #11: Transcript of CBC TV News Broadcast (6:00 P.M.),
Thursday, September 5, 1991
Kathy Daley, CBC News
(Daishowa issued a statement today that news of the sale of
Daishowa's Peace River pulp mill is "speculative"). Nobody knows
for certain what that will mean for the plant, the workers, the
town of Peace River, or Alberta taxpayers. Lynda Steele reports.
Lynda Steele, CBC News, Peace River
The Daishowa pulp mill in Peace River appeared to be operating at
full steam today. Pulp was cut and bundled as usual. The
workers went about their business despite the shocking news last
night that the future of this multi-million dollar plant may be
in jeopardy. As CBC News reported last night, a highly respected
Japanese business magazine is quoting Daishowa's chairman as
saying the company is in big financial trouble. It lost $120
million last year. It's expected to lose another $80 million in
the next fiscal year. To offset some of that debt, the magazine
says, Daishowa is thinking about selling off its brand new Peace
River plant. The reported price tag -- $1 billion Canadian
dollars.
Wayne Crouse, Daishowa Spokesman, Peace River
It's just speculation. It's simply an idea that the company's
put forward, one of many ideas that they have, for easing their
financial situation.
Steele
Should employees be worried?
Crouse
No.
Steele
Should the town of Peace River be worried?
Crouse
Certainly not.
Steele
What about the Provincial Government?
Crouse
No reason for anyone to worry.
Steele
Plant employees didn't seem to be taking the news too seriously.
Al Jacobs, Daishowa Millwright
I just laughed. I know all about it. I heard about the rumor
yesterday. We pay no attention to it. It's just a rumor. Hey,
if there's any fact to it it will come out in the wash.
Steele
In fact Daishowa sent a letter to all of its plant workers today
promising they'll be the first to know if and when there are any
developments concerning the ownership of the Peace River plant.
And while rumors of a potential sale made for good gossip at the
local pub, most towns folk here didn't seem too concerned about
the potential impact on their community.
Bennie Briep, Peace River Resident
Do we want to see them sit here and go broke and shut down? No.
If they sell it, the thing will continue to operate. I don't see
it as any big thing at all.
Steele
But it is a big deal to New Democrat Environment critic John
McInnis. He says the Province has already pumped more than $60
million into construction of the Japanese-owned plant, and given
the pulp and paper giant access to more than 40,000 sq. km. of
Alberta forest land. McInnis says he wants assurances Alberta
taxpayers won't be forced to bail the company out.
John McInnis, Alberta New Democrat Environment Critic
I don't think people are very comfortable with LeRoy Fjordbotten,
Don Getty and the forest service in the driver's seat. They're
not confident that all the promises that have been made are going
to be lived up to.
Steele
No one from the Provincial Government would comment today, but
yesterday Economic Development Minister Peter Elzinga offered
assurances that taxpayers' money would not be put at risk.
Peter Elzinga, Alberta Economic Development Minister
...But we do feel very comfortable that things will proceed as
they should and the mill will prove productive in itself.
Steele
Daishowa is said to be trying to sell part of all of the Peace
River plant to a Japanese trading company called Marubeni. The
two firms are already joint owners of a pulp mill operation in
Quesnel, B.C. Officials from Marubeni Company are reportedly not
interested yet, but even so, Peace River plant officials are
optimistic about the plant's future.
Crouse
I think there's a lot of confidence here among the employees that
the company will do what's best for Peace River pulp and for
Daishowa.
Steele
Lynda Steele, CBC News, Peace River.
Bob Chelmick, CBC
Daishowa's financial problems have raised questions about the
future of pulp mills and forestry development in Alberta. The
Getty Government has hundreds of millions of dollars invested in
forestry projects, from saw mills to pulp mills to newsprint
plants. Reporter Matt McClure has been talking to economists
today about the future of forestry. He joins us now from our
Edmonton news room. Matt, is the future looking that grim for
pulp and paper?
Matt McClure, CBC
Bob, it is looking grim. But that's not unusual for this
industry because it's a cyclical one with peaks and valleys.
This is definitely a valley right now.
Chelmick
How long is this valley going to last?
McClure
Industry analysts say that generally this industry operates on a
15-year cycle. The only difference this time is that -- we're at
the bottom right now, but the bottom seems to be taking longer
and it's deeper than ever before. A year ago pulp and paper was
selling on the spot market for $800 per metric ton. Right now
it's fetching just a little over $500.
Chelmick
What are the other variables here, besides this general cycle?
McClure
A lot of people, especially environmentalists, point to our move
toward recycling and conservation. For example, in the United
States where 50% of our pulp and paper goes, there's a move --
there may be federal legislation that would require newspapers to
use up to 40% of recycled newsprint. That would have an effect
on sales here in Canada and world-wide.
Chelmick
Clearly the market is soft. Is competition getting stronger out
there?
McClure
Competition is getting tougher. There's competition from Brazil,
where it only takes 20 years to grow a tree where here in Alberta
it takes 80 years. But ultimately the cost of production is low
here in Alberta, many industry analysts say, because the
companies like Daishowa cut a pretty good deal on the costs they
have for their timber.
Chelmick
Clearly we're going to see some tougher times ahead as the mills
try and hold on?
McClure
I think so. Companies like Daishowa find themselves, I think, in
a unique situation among pulp and paper companies to the extent
that they took on a lot of debt in order to build the plant and
right now they're having problems with cash flow and are having
to fight that.
Chelmick
Thank you, Matt.
* * * * *
Text of Daishowa letter to employees referred to in CBC News
report:
ADVISORY
September 5, 1991
Like other companies in the forest products industry, Daishowa is
considering alternatives to counteract adverse global economic
factors and...depressed market condition.
Recent news reports on the possible sale of the Peace River pulp
mill are speculative.
The media report originated with personal comments by Daishowa's
Honorary Chairman to journalists in Japan. He indicated a number
of options are being considered in an effort to improve the
financial position of the company.
However, no decision has been made by the parent company to offer
the mill for sale.
Any developments concerning ownership of the mill would be...
Mark Takehira
Vice President
* * * * *
Attachment #12: Transcript of CBC TV News Broadcast (11:00
P.M.), Thursday, September 05, 1991
Larry Langley, CBC
An official with Daishowa Canada says its pulp mill near Peace
River isn't for sale, yet. James Morrison says Daishowa does
have some financial problems and is considering what to do about
them. He says the company has not decided to sell the $500
million mill. Morrison concedes that all of part of the
operation could be on the block in the future, but for now he
says it's business as usual. What could be affected are plans to
double the mill's capacity. He says if pulp markets remain
depressed, those plans could go on hold.
* * * * *
Attachment #13: THE EDMONTON JOURNAL, Friday, September 6, 1991
DAISHOWA SAYS SALE OF MILL 'SPECULATIVE
Potential buyer would be obliged to build a paper machine --
forestry minister
Jack Danylchuk and Brian Laghi
Journal Staff Writers
Edmonton
A story in a leading Japanese business journal about the possible
sale of Daishowa Canada's Peace River pulp mill is "speculative,"
the company's Edmonton general manager said Thursday.
"It's just one small option amongst a myriad of options that are
being looked at," James Morrison said in an interview.
NIKKEI WEEKLY of Tokyo reported that the year-old mill is on the
block for $1 billion as part of financial restructuring by
Daishowa Paper Mfg. Co.
"All of the companies in the forest industry are facing difficult
times; we're no different than that," said Morrison.
"Everybody in the industry is looking at a pretty bad balance
sheet because the market depression has been deeper and longer
than all of us anticipated. So all of us are looking at
different ways to survive.
"It's not a crisis. But we've made the provincial government
aware of the dire straits that Daishowa's facing and that the
company is looking at different restructuring options."
Forestry Minister LeRoy Fjordbotten said if the mill is sold, the
new owner would have to meet terms Daishowa agreed to or the
government might cut back its timber supply.
A company buying the mill will be obliged to build a paper
machine or Alberta could kill the sale, he said.
Fjordbotten acknowledged that it's possible Daishowa wants to
sell the mill and then buy back the pulp for its Japan paper-
making operations. But he said Thursday it's not his intention
to renegotiate the contract.
"That's hypothetical (but) my answer now is no."
The provincial and federal governments have invested $85.2
million in road and rail services for the mill, which was valued
at $550 million when it opened last year. Plans call for it to
double in size by 1995.
The story in NIKKEI said the mill had been offered to Daishowa
Marubeni International, a joint venture between Daishowa Canada's
Japanese parent and Marubeni, a major trading house.
The joint venture company has owned and operated a pulpmill at
Quesnel, B.C. since 1972.
"It's no surprise that options like a sale or bringing in another
partner are being considered," Morrison said.
"That kind of thinking and planning has been under way in Japan
for some time and in those general terms we have been aware that
they were looking at various things among the mix of pulp mills
and paper mills."
NIKKEI attributed Daishowa's debt-reduction plan to Ryoei Saito,
Daishowa's chairman emeritus who has made international headlines
by paying record prices for van Gogh and Renoir paintings.
Currently, Daishowa's pulp is sold to companies outside Alberta.
* * * * *
Attachment #14: THE EDMONTON JOURNAL, Friday, September 6, 1991
PROFLIGATE PATRIARCH BURDENS DAISHOWA
Paid $160M for Renaissance works
Duncan Thorne
Journal Staff Writer
Edmonton
Daishowa is seeking a buyer for its Peace River pulp mill because
of debts that may partly relate to grandiose spending habits of
its retired chairman, forestry analysts said Thursday.
Japanese Daishowa Paper Manufacturing Co., which owns Daishowa
Canada Co., reported pretax losses of $108 million US for the
year ending March 31.
Its former chairman, the still-powerful Ryoei Saito, paid $160
million US last year for two van Gogh and Renoir paintings. In
May he threatened to have them burned with him when he died --
abandoning the threat only after facing international outrage.
Saito, 75, has boasted he's Japan's biggest individual taxpayer.
Published reports have also portrayed him as a profligate spender
who spent his company's money as easily as his own.
The Sumitomo Bank once persuaded Saito to step aside briefly as
chairman so it could sell assets -- including other paintings --
to cover debt.
A leading Japanese business journal, NIKKEI WEEKLY of Tokyo, has
reported the year-old mill is on the block for $1 billion as part
of a financial restructuring program being drafted by Daishowa.
A profile by THE WALL STREET JOURNAL likened him to a feudal lord
who retains power through his personal financial stake in the
company and through his son's and brother's control of the top
positions.
Ross HayRoe, an analyst with the Toronto-based Research Capital
brokerage, said Daishowa has been running up debts on mill
purchases. And that's probably because spending is in character
for Saito, HayRoe said.
He said Daishowa has over-extended itself with a series of North
American acquisitions in recent years. Its assets include a
paper mill in Washington State, a newsprint mill near Quebec City
and a pulp and paper operation at Quesnell River, British
Columbia.
Daishowa's plans have also included a recycled liner-board mill
in California and an Oregon pulp mill.
Unlike HayRoe, most Canadian forestry analysts are with
brokerages which don't want them commenting publicly.
But one analyst, asking not to be identified, said Daishowa
recently offered its Peace River Mill to a related company
because of massive debts, the result of a corporate spending
spree. He said the related firm, the joint-venture Daishowa
Marubeni International, turned it down because there's a world
glut of pulp mills.
The Toronto analyst said Daishowa has been snapping up North
American forestry assets, and Saito possibly considered the
paintings simply another form of assets.
* * * * *
Attachment #15: THE EDMONTON SUN, Friday, September 6, 1991
UNEASY NEWS FOR TORIES
Don Wanagas
There are undoubtedly some very nervous Tories sitting around the
Alberta cabinet table these days.
And with darned good reason, considering news coming out of Japan
that Daishowa Canada's Peace River pulp mill is being shopped
around for new owners.
As a straight business deal, the sale of the Japanese-owned
Daishowa plant shouldn't mean the end of the world for the
provincial government. But, symbolically, it has got the
potential to be a pretty hard kick in the gut for Tory claims
that Alberta's economy has been successfully diversified into the
forestry sector.
After all, it was the Daishowa project that kicked off Premier
Don Getty's diversification-through-forestry strategy when he
first announced plans for the mill amidst much hoopla almost four
years ago. Indeed, back in February 1988, the premier packed his
executive council chamber with cabinet ministers, bureaucrats and
Japanese forestry bigwigs -- not to mention the media throng --
to let the world know that Alberta was open for pulp-and-paper
business. It was one of the biggest gatherings ever in Getty's
cabinet room. And for good reason. Because the premier wanted
to stress the importance of forestry development and the jobs it
would create -- more than 600 in the Peace River area alone as a
result of the Daishowa mill's construction.
>From that moment on, pulp mills, sawmills and newsprint plants
became the cornerstone of Alberta's new economic policy and the
provincial Conservatives' political strategy. Throughout the
1989 election campaign, called one year after the Daishowa plant
got the official go-ahead, Getty constantly referred to an arc of
forestry-related projects that stretched across north-central
Alberta. They were the proof he held out to support claims his
government had diversified a provincial economy once almost
solely dependent on oil and gas revenues.
That's why the uncertainty over the future of the Daishowa pulp
mill's ownership should be more than a little bothersome to the
Tories. And not just because the government sank more than $65
million of taxpayer funds into building roads, bridges and rail
spurs to service the project and gave the paper company access to
forests the size of a European country.
What's really got to worry the government is the very real
possibility it diversified Alberta's economy into an industry
that has already reached its peak and is now on a downward slide.
It shouldn't go unnoticed that Japanese industry analysts are
saying an oversupply of paper is what's forcing Daishowa Paper
Mfg. to do a major restructuring of its corporate investments.
Indications are that such a move will mean Daishowa cuts its
Japanese workforce by 40 percent. Could the same sort of thing
happen here?
"We are trying to reduce our costs to help profitability," a
spokesman for Daishowa's overseas division told THE EDMONTON SUN
Wednesday.
So, if the company can't find a buyer or an investment partner
for its Peace River operation there's a good possibility it will
have to do something else. Like lay off workers at the plant or
perhaps just shut it down.
One would certainly hope this doesn't happen, but it's
understandable that Peace River-area residents working at the
pulp mill are concerned about their jobs.
There's also another aspect of the possible sale of the Daishowa
mill to new owners. It's the one New Democrat environment critic
John McInnis outlined after hearing reports Daishowa is asking $1
billion for a plant that cost an estimated $525 million to build.
That would see the company reap a $475-million profit on a
project thanks, in no small part, to the largesse of the
provincial taxpayers.
Such a windfall may not be possible if the paper over-supply
problem is the reason Daishowa is trying to sell the plant. But
if it does happen, you can be sure the government will take
plenty of heat for helping a foreign investor make mammoth
profits at the expense of the public purse.
So, any way you look at the situation, the Tories have good
reason to be more than a little anxious right about now.
* * * * *
Attachment #16: Transcript of CBC Radio Broadcast (8:30 A.M.),
Friday, September 6, 1991
Phil Henry, CBC
Daishowa Canada describes as "speculative" reports it wants to
sell its pulp mill in Peace River. But an official with the
company's office in Edmonton admits his company's parent firm in
Japan is looking at every option, and he says that includes
selling the mill in Peace River. Dave Cooper reports.
Dave Cooper, CBC
Daishowa issued a statement yesterday saying no official decision
has been made to sell the company's pulp mill in Peace River.
The statement was made after word that a Japanese paper reported
the company was offering to sell the mill for $1 billion. But
Jim Morrison with Daishowa's office in Edmonton admits the mill
could be sold just like every other asset owned by the Japanese
parent company. He says because of its poor financial situation
the company is trying to decide what to do with all of its
assets.
Jim Morrison, Daishowa Canada, Edmonton Office
Sale of any asset in the company, exactly. All of those things
are alternatives. The addition of partners in one or several of
the assets, the infusion or the sale of shares, the company
trades on the Tokyo stock exchange, you know. So all of these
things are options.
Cooper
Morrison says there's nothing wrong with the Peace River mill.
He says Daishowa's problems are the same as those of any other
forest products company.
Morrison
We're dealing with a deeper recession in our particular part of
the economy and a much longer one than the industry had
anticipated. So you're seeing not just Daishowa, but a lot of
companies, looking at their balance sheet.
Cooper
Daishowa also issued a statement to its employees in Peace River
yesterday telling them not to worry about the prospect of the
mill being sold. Dave Cooper, CBC News, Edmonton.
Henry
The Lubicon Indians say they'll continue opposing Daishowa in
spite of news the company may sell the Peace River mill. The
Cree Indians are against plans by Daishowa to clear-cut forests
on land claimed by the Band. Fred Lennarson, a Band advisor,
says Chief Bernard Ominayak will go ahead with his trip to Japan
next week. Ominayak plans to meet with officials from Daishowa.
He wants to convince them not to cut down any trees in the
disputed territory until his land claim is settled. Ominayak
also hopes to meet with Japanese environmentalists, politicians
and reporters. Lennarson says a planned European boycott of
Daishowa paper products this fall is also going ahead. He says
Daishowa deserves to fail.
* * * * *
Attachment #17: NIKKEI WEEKLY, September 7, 1991
DEBT-RIDDEN DAISHOWA RESTRUCTURES
No. 2 papermaker plans to shred work force,
sell off recently built Canadian pulp plant
By Edmund Klamann
Staff Writer
Daishowa Paper Mfg. Co., Japan's debt-burdened, number-two paper
manufacturer, has launched a sweeping restructuring program that
includes plans to sell a recently completed pulp plant in Canada.
Daishowa also intends to shut some of its facilities in Japan and
slash its work force by 40%, company sources said.
The move reflects the papermaker's difficulties in getting its
house in order after recording a massive pretax loss of Y14.9
billion in the fiscal year through March, 1991.
Daishowa has accumulated heavy debts in recent years through
aggressive expansion of production facilities, which analysts say
has contributed to the industry's current overcapacity. The
result of that overcapacity has been falling prices, record
inventories and plunging profits for Japan's papermakers.
In the fiscal year through March 1992, analysts predict pretax
profits will fall at seven of Japan's eight big paper producers,
with Daishowa incurring another loss of about Y10 billion.
In the spring of this year, Daishowa adopted a long-term
management plan designed to slash its massive debt from the
current Y450 billion to Y250 billion within five years.
The plan called for freezing new investments, selling off assets,
cutting inventories and issuing new equities.
But with the continuing recession in the paper industry and the
poor climate for new equity financing, more drastic measures were
required.
Enfant terrible
According to company sources, the latest plan was fashioned by
Ryoei Saito, Daishowa's chairman emeritus and de facto leader.
The eccentric tycoon grabbed international headlines last year by
spending tens of millions of dollars purchasing Renoir and van
Gogh paintings.
Analysts also claim the company is the enfant terrible of the
paper industry, tending to pursue reckless expansion plans that
other paper manufacturers follow to protect their market shares.
As a result of the market's overcapacity, leading papermakers
such as Oji Paper Co. are operating at less than 80% capacity for
some key products. The industry also anticipates a double-digit
drop in capital investment this fiscal year, while most other
major manufacturing industries continue to boost capital
spending.
At Daishowa, the latest restructuring plan centers on the sale of
a hardwood kraft pulp mill in Peace River, Canada. The plant,
with a 340,000-ton annual production capacity, was completed just
last year.
The company has put a price tag on the facility of 1 billion
Canadian dollars, or about Y120 billion. Company sources said
they hope that Daishowa Marubeni International, an equally owned
joint venture between Daishowa and Marubeni Corp., a major
trading house, will buy the mill.
Reluctant to buy
So far, though, Marubeni officials have scoffed at the idea.
"The Y60 billion investment that Marubeni is supposed to put up
in the plan is too large for a trading company," said one
executive. "There is little benefit for us in such an
investment."
If Marubeni formally refuses to allow the joint venture to
purchase the plant, it is not clear whether Daishowa will go
ahead with plans to sell the facility to any other company.
On the domestic front, Daishowa plans over the next four years to
close 70% of its plants in Fuji, in Shizuoka Prefecture, about
110 kilometres southwest of Tokyo.
The company's total labor force will also be cut to 3,000 from
5,000, through early retirements and transfers of employees to
subsidiaries.
Daishowa also plans to lease idle land at its Fuji plant and to
place some of the facilities at its plant in Yoshinaga, also in
Shizuoka, under the management of a separate company.
There is no indication, though, that Saito intends to sell his
paintings.
* * * * *
Attachment #18: THE GLOBE AND MAIL, Thursday, September 19, 1991
PULP PRICES SLIDE AS INVENTORY GROWS
Newsletter points to six-year high
The price of premium grade softwood pulp, which has been falling
for more than a year, started sliding faster in recent weeks
under pressure from the mountains of pulp that have been piling
up in Canadian warehouses, a leading pulp and paper industry
newsletter says.
An effort to build up pulp inventories in anticipation of a
possible strike in British Columbia -- averted this month when
B.C. pulp and paper workers agreed to extend their current
contracts for 10 months -- pushed up industry-wide inventories to
a six-year high, statistics collected in August show.
Pulp & Paper Week, a San Francisco-based newsletter that tracks
events in the business, said the 1,745,000 tonnes of pulp sitting
in producers' warehouses in North America and Scandinavia is the
highest since March, 1985.
In response to this oversupply, the price for northern bleached
softwood kraft pulp, the premier grade made from the long, strong
fibres of the northern conifer, dropped to $520 (U.S.) a tonne
from $540 in Europe last month, and has started selling for even
less than that in the past two weeks, the newsletter reported.
The same pulp now sells for about $500 a tonne in U.S. markets.
This is putting pressure on traditionally less expensive grades
made from southern U.S. pine. Kraft (the term is used to
describe pulp made by dissolving unwanted materials with strong
chemicals) pulp made from southern pine is now selling for about
$450 in the United States and between $450 and $480 in Europe.
Hardwood pulps, made from deciduous trees and eucalyptus, are
lower priced (in the $400-$460 range) but more stable, Pulp &
Paper Week said.
Industry analysts are calling for more downtime at northern
mills. Canada's pulp mills ran at 89 per cent of their capacity
in August and have averaged 86 per cent for 1991. North American
and Nordic (Swedish, Finnish and Norwegian) producers have, as a
group, run their pulp mills an average of 87 per cent of their
full capacity this year, industry statistics show.
Canadian operating rates are expected to fall further in
September as a number of plants close temporarily to do routine
maintenance, install environmental clean-up equipment, or try to
reduce inventories in order to bring their supply in better line
with current demand.
B.C. members of the Canadian Paperworkers Union and the Pulp,
Paper and Woodworkers of Canada and 14 companies have agreed to
extend their existing labour agreements until April, 1992, at
which time bargaining will start from scratch.