The provincial government has accepted a proposal from Corner Brook Pulp and Paper to secure the future of the company’s pension plans.
The company will obtain an “irrevocable letter of credit” from a financial institution, backed by a government guarantee. The province will take security interest in the company’s power assets in Deer Lake and Watson’s Brook. The letter of credit will be held in trust with the government and the company as co-trustees.
If the company ceases operations, the letter of credit would be called by the trustees to secure any outstanding pension obligations. Should the government have to pay, the amount would be deducted from the purchase price of the power assets and water rights. The province has a pre-existing obligation to buy the power assets in the event that the paper mill closes.
An amendment to the schedule of the 1957 Loan and Guarantee Act is required and will be introduced during the current session of the House of Assembly. Amendments will also have to be made to the Pension Benefits Act regulations.
“Our government is committed to protecting the interests of pension plan members and this arrangement helps ensure the sustainability of the pension plans into the future,” Service NL Minister Perry Trimper said in a statement. “This innovative solution will enable the company to meet its pension funding obligations, while allowing it to focus on meeting its commitments to capital investments and operations under agreements made in 2014.”