by David Shipley

The AV Nackawic and AV Cell pulp mills are prepared to invest tens of millions of dollars to upgrade and expand the two New Brunswick facilities, providing long-term stability and dozens of new jobs, says the mills’ president.

But before investments are made in a new co-generation facility, bio-refineries, a chemical plant overhaul and other efficiency upgrades, the Indian-Canadian joint venture is going to need access to more wood and a possibly financial help from the provincial government.

“This is where we want to go, but there are a couple of things we need to put in place first,” Peter Vinall, president and CEO of the Aditya Birla/Tembec joint venture companies, said Wednesday.

The upgrades would help the two mills produce up to 420,000 air-dried metric tonnes of dissolving pulp a year. The dissolving pulp is used to make rayon, a multi-use fibre.

Vinall said the AV Group will need 25 to 30 per cent more wood from Crown and private lands. Then there’s co-generation, which uses waste forest products as fuel for steam to power electricity-generating turbines. Vinall said it’s essential for his company to become self-sufficient in electrical energy, which it can do with improved co-generation.

“(the provincial government) decided to provide this special deal for the paper mills only,” he said.

Pulp and paper mills are consumers of a large amount of electricity, which accounts for a significant part of their costs. The provincial government has announced a $16-million property tax-assistance package that is designed to erase a 10.6-per-cent power rate hike for four paper mills in the province. That deal will last for two years and is contingent on the mills staying open.

“We’ll be talking to the province about getting assistance to help us, rather than a short-term subsidy to relieve short-term pain, where we need help is we some need money to put in turbines,” he said. “I’d rather my assistance be in the form of a long-term solution than a short-term solution.”

Francis McGuire, co-chairman of the province’s Self-Sufficiency Task Force, has said that the government should help forestry firms invest in co-generation facilities.

Vinall said the AV Group’s plans are being driven by growing demand worldwide for rayon.

“In the last couple of years we’ve seen a renaissance of rayon,” he said. “The demand for rayon is increasing. We’ve seen some growth rates that are strong particularly in China, where rayon is a preferred fibre. We’re also seeing pressure on the alternatives, i.e. cotton and polyester.”

Rayon is a versatile fibre used in everything from clothes to furniture and medical products.

Among the AV Group’s upgrade plans is the construction of two bio-refineries at the Nackawic and Atholville mills. A bio-refinery would help the speciality pulp mills more efficiently extract hemi-cellulose, a component of wood fibre not needed in dissolving pulp. The hemi-cellulose, a form of sugar, in turn can be used to make ethanol or artificial sweeteners.

“There’s a whole range of bio-products we could make,” said Vinall. “It works for us because not only can you make a little bit of revenue off of these bio-products, but it also enables you to de-bottleneck your mill.”

New Brunswick’s forest industry has been beset by permanent and temporary closures of paper mills and sawmills. The largest of those closures will come later this month when Finnish paper giant UPM-Kymmene’s shuts its Miramichi paper and ground wood mills for up to nine months, tossing 600 people out of work.

Charles Cirtwill, acting president of the Atlantic Institute for Market Studies, said Wednesday the provincial government has put itself in a tough situation when it crafted a special deal for paper mills.

“They’ve done it for someone else, so it’s only appropriate that this group comes and asks for (the province) to do it for them,” he said. “It’s interesting that, at least in this case, they’re saying we’ve got a business model here, we’re a growth industry and that’s why you should be supporting us.”

Cirtwill said the provincial government is better off in the long run avoiding industry-specific or company specific deals.

“It’s far better to set up an environment where any industry can grow.”

Sarah Ketcheson, a spokeswoman for Business New Brunswick, said the provincial government is actively pursuing discussions with the AV Group about the plans to upgrade the mills in Nackawic and Atholville.

“This is about a company looking to make enhancements, looking to be more productive and more competitive. So we regard this as a good partnership opportunity.”