Quebec fund manager takes stake in Abitibi hydro venture

Paper and forest products company Abitibi-Consolidated announced an agreement Jan. 26 in which institutional fund manager Caisse de depot et placement du Quebec will take a 25 percent stake in a joint venture to operate Abitibi’s eight Ontario hydroelectric facilities.

Abitibi-Consolidated said it will retain a 75 percent interest in the joint venture, ACH Limited Partnership, while Caisse will acquire the 25 percent interest. Caisse also will provide a 10-year unsecured loan of C$250 million (US$211.4 million) to ACH to help fund the acquisition. The transaction is expected to yield gross proceeds of C$297.5 million (US$251.6 million) to Abitibi-Consolidated.

Closing of the transaction is expected by the end of June, subject to execution of a definite agreement and other conditions and approvals. Scotia Capital and CIBC World Markets advised Abitibi-Consolidated about the transaction.

Abitibi-Consolidated said its substantial ownership interest in the joint venture reflects the ongoing strategic importance of its hydro assets. The company added that it plans to continue to operate and manage the facilities.

Facilities involved in the transaction have an aggregate installed capacity of 136.8 MW, and annual generation of about 828 GWh. Abitibi-Consolidated did not identify the facilities. However, the company’s Ontario projects include 12.8-MW Fort Frances, 25.2-MW Iroquois Falls, 47-MW Island Falls, and 22-MW Twin Falls.

Abitibi-Consolidated to merge with Bowater

In another announcement, Abitibi-Consolidated disclosed Jan. 29 it plans to merge with Bowater Inc. to form AbitibiBowater Inc., the third largest publicly traded paper and forest products company in North America.

AbitibiBowater’s headquarters will be in Montreal, with a U.S. regional manufacturing and sales office in Greenville, S.C.

At one time, Bowater owned a number of hydroelectric facilities. However, in 1999 it sold its Great Northern Paper unit, including six hydro plants and 18 dams in Maine, to Quebec-based investment group Inexcon Maine Inc., for US$250 million (C$295.6 million). A Duke Energy subsidiary subsequently made a multi-million-dollar investment in Great Northern Paper.

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