NewPage expects approval of its biomass power plant in Nova Scotia

NewPage in Port Hawkesbury, Nova Scotia, is waiting for a decision from the Nova Scotia Utility and Review Board over their desire to build a biomass-fueled power generation station.

The plan would see the mill burning 650,000 tonnes of wood a year to fire a steam generator to produce about 3% of the province's electricity. Nova Scotia Power, NewPage's partner in the proposal, will spend about $200 million, including $80 million to buy NewPage’s boiler, with an additional $93 million in construction costs.

NewPage plans to use the $80 million from boiler's sale to enhance its liquidity. Much concern has been raised recently regarding NewPage's stability. NewPage has reported having only $7 million in cash and $113 million available on a line of credit. The company is $3.3 billion in debt and is facing debt-servicing charges of US$330 million annually.

Despite increasing its sales in its second quarter, NewPage reported a loss of $174 million.

Consultants hired by the Nova Scotia Utility and Review Board were vocal during the recent project hearings, pointing out that the project poses "significant risks" to Nova Scotia Power customers. The consultants, from Liberty Consultants in California, made a recommendation to the board that Nova Scotia Power should go back and negotiate with two other biomass proposals from Northern Pulp and Cape Breton Explorations Ltd.

A financial analyst, Kevin Mason of Equity Research Associates, has also raised serious concerns over NewPage's viability.

“Bankruptcy/restructuring is inevitable for the company, as it will never generate enough cash to meet its obligations,” Kevin Mason wrote recently. “Many of NewPage’s existing debt holders have no hope of ever being repaid” because of the big paper maker’s “impossible debt load.”

NewPage has been assuring analysts that they soon have approval for the project. Just yesterday, the company presented to the Credit Suisse Paper Forest Products conference, saying the company expects the regulatory review to be complete in October, with the sale of the existing boiler closed shortly thereafter.

Read more:

NewPage expects approval - Firm projects green light for wood waste power generation by end of year (Chronicle Herald)

NewPage difficulties complicating NSP biomass generation project (Chronicle Herald)

Is Bankruptcy Inevitable for NewPage? (Dead Tree Edition)