NOVA SCOTIA (From news reports) -- Northern Pulp has announced it will initiate a court-supervised sales process of its assets after it confirmed it wasn't able to secure funding for a new mill project.

In a news release Monday night, the insolvent company said the decision follows completion of a comprehensive feasibility study that concluded Northern Pulp could not achieve the 14 per cent internal rate of return required in a settlement agreement with the province to develop a bleached softwood kraft pulp mill and bioproducts hub near Liverpool, N.S.

"Northern Pulp is thankful for the support and collaboration of the Province of Nova Scotia and local stakeholders throughout the feasibility study," the company said in the release.

Northern Pulp, owned by Paper Excellence Group in British Columbia, said proceeds from the asset sales will repay debt incurred throughout the Companies' Creditors Arrangement Act process, fund pension plans and contribute to site maintenance and closure costs. Remaining money will be allocated to the province.

In an affidavit filed ahead of a hearing later this week in British Columbia Supreme Court where the creditor protection process has played out, Jean-Francois Guillot, chief operating officer of Paper Excellence Canada, said officials have been working since May to prepare the sales and investment solicitation process for the mill assets.

According to Guillot, the court-appointed monitor is now working through submissions from parties for a stalking horse bid, the initial submission against which all other competitive bids for the assets will be judged.

Officials with EY, the monitor, want to extend the stay until Aug. 29 because they need more time to complete the negotiation of the stalking horse bid and then enter into an agreement, subject to court approval.

'Not the outcome we had hoped for'
Northern Pulp has been under creditor protection since June 2020 after it closed its kraft pulp mill in Pictou County, eliminating 300 jobs and affecting another 2,000 positions in the forestry sector.

The government ordered the shutdown after Northern Pulp failed to meet the province's environmental requirements for a new effluent treatment plant. At the time, the province's Liberal government said the mill in Abercrombie Point could no longer dump its waste into Boat Harbour near the Pictou Landing First Nation.

In May of last year, a settlement agreement between the province and Paper Excellence ended years of legal wrangling. Paper Excellence withdrew a $450-million lawsuit against the province and abandoned plans to reopen its idled mill.

The agreement said that if the company resumed operations elsewhere, it required an internal rate of return of 14 per cent.

The company's most significant asset is 192,000 hectares of timberland in Nova Scotia. The province loaned the company $75 million in 2009 to make the purchase in an effort to protect jobs.

Nova Scotia's minister of natural resources said Northern Pulp's announcement was "not the outcome we had hoped for." Tory Rushton said in a release that the province did everything it could to make a new sustainable pulp mill a reality in Nova Scotia.

"From the outset, our government was at the table, working closely with the company to explore every viable option. We provided meaningful support and discussed programs like our Capital Investment Tax Credit that could have offered significant financial assistance."

Rushton said the province remains "a steadfast partner with the industry in exploring how we might work together -- and with the federal government -- in attracting a new partner that sees the potential in doing business here," he said.

He said the province will continue to support forestry families and communities.

"We remain open to bold ideas and strong partnerships that put our natural resources to work in ways that benefit all Nova Scotians," he said.

Earlier this year, officials with Northern Pulp received an extension of the company's creditor protection as they sought to determine if there was a viable future for its operation in Nova Scotia at the site of the former Bowater Mersey Paper Company outside Liverpool. Monday's announce brings a conclusion to that effort.