Catalyst Paper Corporation is facing another financial challenge due to the provincial government’s announcement of BC Hydro rate increases.
The new rate structure will add $25 million a year of increased costs across all three divisions just in the next two years, said Joe Nemeth, Catalyst’s president and CEO. “We are a company that is trying to fight for its survival and this is a $25-million impact,” he said. “This is an extremely big hit.”
The government announced the electricity increases on Tuesday, November 26. They include a 28 per cent rate hike over five years, with a nine per cent jump coming April 1, 2014. That’s to be followed by six per cent, four per cent, 3.5 per cent and another three per cent in the first five years.
Bill Bennett, minister of energy and mines, said the rate hikes are part of a 10-year plan to keep rates as low as possible, while still allowing BC Hydro to invest in infrastructure and future power projects.
Catalyst, BC Hydro’s largest industrial customer, just emerged from CCAA (Companies’ Creditors Arrangement Act) protection last year and the rate hikes threaten its survival.
“We’re doing a whole bunch of really great things that we think can take real costs out of the business and that make us competitive,” Nemeth said. “This makes it extremely difficult for us.”
The government and BC Hydro have communicated they are making available programs that will allow industrial users to mitigate the rate hikes, Nemeth said. “Catalyst is currently working with them to make that a reality.”
Examples of the programs are time-of-use and interruptible power, both of which Nemeth described as a win-win for Catalyst and the government.
As long as the government follows through on those programs, it will strengthen the company’s ability to be competitive, Nemeth said. “If they don’t, it will be very challenging to survive. What we need them to do is continue to work with us to give us legitimate ways to mitigate, so we have a business that’s sustainable.”
Behind the scenes, City of Powell River Mayor Dave Formosa was instrumental in setting up meetings with government officials. Formosa said Catalyst is challenged by a combination of the return to PST along with the hydro increase. “I think the mill has a good shot at survival, but they’ve just come out of CCAA and they’re not in the black. They’re still getting organized and are fighting a tough world economy.”
Formosa first approached Jack Barr, president of Powell River Chamber of Commerce, who organized a meeting with the BC Chamber of Commerce and Catalyst representatives about requesting a meeting with government officials. The BC chamber set up a meeting with Bennett and the mayors from North Cowichan and Port Alberni, as well as Formosa. That meeting went well, Formosa said, and Bennett wanted to set up another discussion, this time including Mike de Jong, minister of finance, and Steve Thomson, minister of forests, lands and natural resource operations.
“We all agreed it was a fruitful meeting,” Formosa said. “They all understand the issue, they understand the problem.”
Catalyst now has key people from both the energy and finance ministries to work with, Formosa added.
Nemeth confirmed that Formosa was instrumental in arranging the meetings with government officials. “He’s been a great supporter of Catalyst,” Nemeth said of Formosa.
