N.L. is paying $22 million for electricity from Kruger — and it has been for 6 weeks

A $22-million deal between the Newfoundland and Labrador government and paper giant Kruger has been in effect since Feb. 1, though the first scant details of it were not released until last Friday afternoon as the provincial government headed into the St. Patrick's Day long weekend.

The province — through Newfoundland and Labrador Hydro — had been paying for electricity from Kruger's hydroelectric dam at Deer Lake for six weeks by the time Kruger sent a press release saying the two parties had reached a deal.

Kruger has been mired in financial trouble since at least November, when it had to shut down operations at the Corner Brook Pulp and Paper Mill for a week. At the time, Premier Andrew Furey pledged his support for the 300 workers who were temporarily out of work. 

According to the province's orders-in-council database, approval was granted Jan. 22 for Hydro to enter into an agreement with Kruger's struggling Corner Brook Pulp and Paper operation. 

But details were slim. There were no dollar figures in the order in council, nor in the press release from Kruger on Friday. Kruger's vice-president Roman Gallo refused to disclose financial information about the deal in an interview Monday morning.

Late Monday afternoon, however, a spokesperson for Newfoundland and Labrador Hydro said the Crown corporation will be paying $275 per megawatt hour for an anticipated 80,000 megawatt hours of electricity — a total of $22 million.

This isn't the first time the province has stepped in to help the struggling newsprint mill. Kruger was on the receiving end of a $110-million loan in 2014, which has grown to more than $117 million with interest. The company has not made a payment in over two years.

Deal sprang from talks with government, not utility

Kruger has said the new power purchase deal is between its company and the provincial government — not Newfoundland and Labrador Hydro. 

Hydro spokesperson Jill Pitcher confirmed the arrangement on Monday but said the utility is footing the bill. 

"Hydro supported government's discussions with Kruger and provided insight into the operational flexibility that would be most beneficial to Hydro," Pitcher said. "Hydro is party to the agreement with [Corner Brook Pulp and Paper] and is responsible for payment."

Pitcher said the money will come out of Hydro's unregulated operations, which means costs will not be passed on to the province's ratepayers.

When asked why the excess energy is necessary, Pitcher said, "The certainty of excess energy reserves is always beneficial." She said Hydro will draw more power from the agreement in February and March than it will for the summer months. 

Kruger's vice-president said the company will use this six-month period to explore ways to diversify its business to include more than just newsprint. A leading contender so far, he said, is the production of biofuel. 

CBC News asked for comment from three provincial departments Monday but did not hear back during the St. Patrick's Day holiday.

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