On Tuesday this week, Paper Excellence executives told the parliamentary standing committee on natural resources that there is no link between Asia Pulp & Paper (APP), headed by Teguh Ganda Wijaya, and Paper Excellence, which they said is owned solely by his son, Jackson Wijaya.
Paper Excellence is now the largest pulp and paper company in Canada, controlling 21% of the market and 22 million hectares of Canadian forests, according figures from the Forest Products Association of Canada.
Replying to questions from NDP MP and natural resources critic Charlie Angus about leaked correspondence showing close collaboration between APP and Paper Excellence, the Chief Operating Officer of Paper Excellence companies Fibre Excellence in France, Northern Pulp Nova Scotia, and Prince Albert Pulp, Jean-François Guillot said Paper Excellence has not had a “relationship with APP since 2015.”
This flies in the face of the leaked correspondence showing close collaboration between APP and Paper Excellence in years after 2015, as reported by the Halifax Examiner, CBC, Glacier Media, and Le Monde in France as part of their recent Deforestation Inc. investigation coordinated by the International Consortium of Investigative Journalists (ICIJ).
But more importantly for people in Nova Scotia, what Guillot told the natural resources committee in Ottawa does not jibe with what the provincial government of Stephen McNeil knew about Paper Excellence as recently as 2017.
As the Halifax Examiner reported here, in 2014 then-Premier McNeil met with Paper Excellence executives — not in Vancouver where the company says it is based, but in Shanghai, where APP China has its offices. A Saltwire media report at the time said he met in Shanghai with “Pedro Chang, deputy CEO, David Kerr, VP operations Paper Excellence Canada and Jackson Wijaya, chairman Paper Excellence.”
Briefing note contradicts Paper Excellence statements
Documents obtained through a Freedom of Information (FOIPOP) request submitted to Nova Scotia Lands and Forestry (now Natural Resources and Renewables) in December 2019, and brought to the attention of the media today by an active member of the Clean up the Pictou County Pulp Mill Facebook group, paint a very different picture from the one Paper Excellence executives were presenting to the parliamentary committee on Tuesday.
A 2017 ministerial briefing note on Northern Pulp prepared by the Department of Finance and Treasury Board contradicts what Paper Excellence executives said on Tuesday about the company having no links with APP or China.
Here is what the ministerial briefing note says about corporate ownership of Northern Pulp, Paper Excellence, and APP:
NP [Northern Pulp] together with its sister company Northern Timber NS (NT) are held by Northern Resources NS that is ultimately owned by PEC [Paper Excellence Canada]. Through acquisitions, PEC has become Canada’s second largest pulp and paper company with 7 mills located in BC, SK [Saskatchewan] and NS. PEC is ultimately controlled by Asia Pulp and Paper (APP), an integrated pulp and paper company (division of conglomerate SinarMas) based out of Indonesia. APP is banking on rising paper/ tissue consumption in China. [emphasis added]
APP’s annual pulp and paper production volume exceeds 20,000,000 tons; therefore, NP is likely a relatively small player within APP family of companies. APP defaulted on a USD$13.9B debt issuance in 2001, being one of the largest defaults in emerging market. [In fact, it was and remains the largest such default.] In addition, APP hasn’t publicly released an audited financial statement following its delisting from NY [New York] Stock Exchange in 2001. APP hasn’t been rated by any major rating agency since the early 2000’s. Consequently, PNS [the province of Nova Scotia] has little visibility into APP’s financial wellbeing, despite the fact that the long-term sustainability of NP is ultimately tied to APP. Despite its lack of financial transparency, APP has been in an expansion mode over the recent past. Specifically, in 2016 APP put on line a massive mill in Indonesia with a total capacity of 2,800,000 tones of hardwood pulp a year. By comparison, the largest pulp mill in Canada has a capacity of 650,000 tons. It does not appear that APP had difficult accessing capital required for expansion over the recent past, however it is unclear who are the bank(s)/financier(s) that have been bankrolling APP group of companies.
As part of the Deforestation Inc. investigation into Paper Excellence and APP, CBC revealed that in 2012 Paper Excellence benefited from $1.25 billion in financing from the state-owned China Development Bank for its acquisitions in British Columbia. On Tuesday, Paper Excellence Group non-executive chair John Williams told the parliamentary committee on natural resources that the company repaid that loan in 2020.
“So we have no relationship with Chinese banks whatsoever at this point in time,” said Williams.
In addition to its mills in Nova Scotia, Saskatchewan, and in British Columbia, acquired since 2007, in 2019 Paper Excellence swallowed Catalyst Paper in British Columbia, followed by the pulp and paper giant Domtar in 2021, and on March 1 this year, through its new subsidiary Domtar, Paper Excellence acquired Canada’s Resolute Forest Products.
Angus asked Williams if this expansion was, as some sources told the media, “a fibre grab to feed the Chinese machine.”
“The truth is there is no fibre grab,” Williams replied. He said Paper Excellence is a “large exporter” of pulp “into North America, into Asia, of course, and across the world.” He said the U.S. is the biggest customer for Paper Excellence pulp, followed by China and Southeast Asia.
However, the 2017 Nova Scotia government ministerial briefing note shows that when it came to the Northern Pulp mill, the vast majority of its pulp went to China. The note states:
On an annual basis, NP produces and exports over 290,000 tons of Bleached Softwood Kraft Pulp (BSKP) that is used in household products like tissue, toilet paper, paper towel and print Paper. NP’s request to increase its production limit to 330,000 tons was approved by PNS [province of Nova Scotia] …
Over 85% of NP’s output in 2016 or $171M worth of pulp was exported to its affiliates in China, as the country consumes approx. 30% of overall global pulp output.
“Nearly 1 in 10 of all containers handled at the Port of Halifax is associated with the pulp export from NP,” according the briefing note.
Lots of loans, no corporate taxes
The ministerial briefing note provides insights into how much it contributed to provincial coffers — spoiler alert, no mention of corporate taxes.
In 2017, Northern Pulp had 340 full-time employees whose payroll taxes to the province amounted to $10 million a year.
The briefing note on Northern Pulp also lists all the public financing given to Northern Pulp between 2009 and 2013. This includes a federal grant for $28 million in 2011, and a total of $111.7 million from the province and outstanding balance in 2017 of $93.6 million.
Northern Pulp and its affiliates still owe the province more than $86 million, which is not being repaid while the companies are enjoying creditor protection in the British Columbia Supreme Court. In December 2021, Paper Excellence filed a $450 lawsuit in the Supreme Court of Nova Scotia against the province for losses incurred by the 2020 closure of the Northern Pulp mill, which is part of the forced mediation process in the creditor protection case in the British Columbia court.
‘Tax efficiency’ and tax havens
The subsequent discussion in the ministerial briefing note of the company’s “solvency prospects” is telling in light of the mind-boggling complexity of Paper Excellence’s ownership, with holding companies scattered around the world in popular tax havens.
Asked about this opaque corporate structure at Tuesday’s committee meeting, John Williams replied, “There are a series of holding companies, most of which exist actually for tax efficiency, but they’re not abnormal for an international business.”
The ministerial briefing note spells this strategy out far more clearly and candidly:
Multinational firms often employ transfer pricing between integrated units across jurisdictions to minimize tax liabilities for the integrated operation. This can potentially impact the profitability of a particular unit if the profit is sheltered to another unit to achieve lower tax burdens. Therefore, for NP the measurement of sustained losses for a company that is integrated overseas is not by itself a strong indication of its long-term viability. Nonetheless, FTB [NS Department of Finance and Treasury Board] is unable to assess APP’s financial strength due to its lack of financial transparency. [emphasis added]
Ironically, given that mention of transparency, the last line of that paragraph has been redacted in the public release of the document.
APP backstopping Northern Pulp?
If all of those statements clearly linking APP with Paper Excellence and Northern Pulp were not enough to raise thorny questions about Paper Excellence claims that there are no links and no Chinese influence, the ministerial briefing note then lists several key “non-financial” assumptions about Northern Pulp and APP. Among them:
- APP maintains its commitment to source from NP and will backstop NP if needed
- APP maintains continuous uninterrupted access to the growing Chinese market
- APP remains financially solvent into the foreseeable future despite past default
Much of the rest of the document is redacted.
On Friday morning the parliamentary standing committee on natural resources will reconvene for a second time to scrutinize Paper Excellence and the Canadian pulp and paper industry, with a particular focus on the company’s March 2023 acquisition of Resolute Forest products and whether the federal government did due diligence when it approved that takeover.
It is also possible that a motion from Charlie Angus to issue a summons to Jackson Wijaya, said to be the sole owner and shareholder of Paper Excellence, to appear before the committee, as he failed to accept an earlier invitation.
The natural resources meeting, which will start at 9:45am Nova Scotia time, can be watched live here.