A new report reveals the corporate ownership of Paper Excellence, poised to become the largest logging company in Canada, exposing its secretive and complex ownership structure and links.
A new and potentially explosive report shows that Paper Excellence is very much part of the same corporate group as Asia Pulp & Paper (APP) and the Sinar Mas Group (SMG), which have “a record of extensive deforestation and social conflict” and are owned by members of the billionaire Sino-Indonesian Widjaja family.
Responding to the findings on the corporate links detailed in the report, APP said, “Your suggestion that Paper Excellence is part of the same corporate group as Asia Pulp & Paper (APP) is not correct. There is no such company within the Asia Pulp & Paper (APP) group.”
Paper Excellence vice president of corporate communications, Graham Kissack, stated:
Paper Excellence is entirely independent of APP/Sinar Mas. Of course, it is well known that Jackson Wijaya [alternatively Widjaja], the ultimate owner of PE [Paper Excellence], is the son of the current leader of APP/SMG. But Jackson continues to operate PE completely independently.[. . .] There are no ownership or control links with APP/Sinar Mas or anybody else.
There is not, and never has been, an intention to create a corporate structure at Paper Excellence that is intended to hide anything. There are various factors to think about when building the corporate structure of a business. This is all the more relevant in the case of an international business such as that of the PE Group. These include tax, corporate finance, allocation of corporate liability, and the like.
In spite of Kissack’s and APP’s denials, the investigative report, “Papering over corporate control: Paper Excellence’s relationship with Asia Pulp & Paper and the Sinar Mas Group,” published by the Environmental Paper Network, Greenpeace, Woods & Wayside, and the Rainforest Action Network, goes into extraordinary detail to reveal the secretive ownership of Paper Excellence and its close ties with the Sinar Mas Group and APP.
Graphics in the report provide useful, albeit headache-inducing, glimpses into the complexity of the corporate structures.
They also show the liberal use of corporate tax havens — such as British Virgin Islands, Bermuda, Netherlands, Hong Kong, Singapore, and Mauritius — which the Tax Justice Network ranks based on which jurisdictions are “most complicit in helping multinationals underpay corporate income tax.”
“Despite a multi-layered corporate structure with holding companies in numerous jurisdictions, the report’s findings clearly demonstrate a series of factors such as family ties, overlapping management, and lobbyist filings providing strong evidence that the Sinar Mas Group controls Paper Excellence,” says a press release from Greenpeace Canada.
“This report shines a light on the power of a relatively few multinationals over the fate of the world’s forests,” according to Shane Moffatt, Greenpeace Canada head of nature and food. “It’s no coincidence that forests across Canada are in crisis from unsustainable logging, loss of wildlife and climate change.”
“With the Sinar Mas Group rapidly expanding its empire into Canada, it’s clear we need much stronger laws to protect nature and ensure the rights of Indigenous Peoples are respected. As host of the global biodiversity negotiations in December, the Canadian government needs to make passing such legislation a top priority,” Moffatt adds.
The report is of particular significance to Nova Scotians.
Northern Pulp is ‘insolvent’ — its corporate relatives aren’t
Paper Excellence is the parent company of Northern Pulp Nova Scotia Corporation and its six affiliates that in June 2020 declared themselves “insolvent.”
They have been enjoying creditor protection in the British Columbia Supreme Court ever since. Court documents show this includes a holiday on repaying an outstanding debt of more than $85 million to the province of Nova Scotia, and also Northern Pulp’s failure to fulfill $2.5 million in special pension payments for 2021.
In December 2021, Paper Excellence, together with one of its owners domiciled in the corporate tax haven of the Netherlands and nine Northern Pulp affiliates, launched a lawsuit against the province in the Nova Scotia Supreme Court for “indemnified losses expected to exceed $450 million or more” because of the legislated 2020 closure of the Pictou pulp mill’s effluent treatment facility in Boat Harbour.
The new report documenting the close links between “insolvent” Paper Excellence companies and the multi-billion-dollar Sinar Mas corporate empire, which should be of interest to people in Nova Scotia who are on the hook for the $450-million lawsuit Paper Excellence et al. have filed against them.
Regular readers of the Halifax Examiner will not be surprised by these findings, as we have covered the complex Northern Pulp and Paper Excellence corporate structure extensively in recent years.
Related: Corporate shell game. Part 2: Northern Pulp-affiliated companies say that without major concessions, they won’t be able to pay back nearly $86 million they owe to the province of Nova Scotia. So far, however, the government has not caved, and is not agreeing to new financing.
Paper Excellence rapidly expanding in Canada
The report delves into some of the reasons the corporate link between Paper Excellence, which represents itself as a Canadian company established in 2006, and APP, is concerning for people not just in Nova Scotia, but across Canada and internationally.
It says this of APP’s environmental and financial record:
In Indonesia, APP and its wood suppliers have converted over 2 million hectares of tropical rainforests to establish pulpwood plantations, including in areas providing critical habitat for Sumatran elephants, orangutans and tigers, according to civil society analyses.
Many of APP’s wood suppliers have unresolved conflicts with local and Indigenous communities over land used for industrial tree plantations. APP’s plantation operations in Indonesia, which involve draining hundreds of thousands of hectares of carbon-rich peatlands, have been linked to catastrophic fires and globally significant levels of greenhouse gas emissions. On the financial side, APP set an emerging markets record in 2001 for the largest corporate debt default of nearly US$14 billion.
As the Examiner reported in July 2022, Paper Excellence has been rapidly expanding its influence and control of the pulp and paper industry in Canada, the U.S., and Brazil.
The Greenpeace Canada press release notes that, “Paper Excellence now owns mills in half of Canada’s provinces: British Columbia, Nova Scotia, Ontario, Quebec and Saskatchewan. The past year, in particular, has seen them grow exponentially with the purchase of controversial and litigious logging giant Resolute Forest Products. When the sale of Resolute is concluded, Paper Excellence will become the largest logging company in Canada based on revenues generated.”
That means Canadians should know who controls and benefits from Paper Excellence, in the view of Greenpeace Canada legal counsel, Priyanka Vittal.
“We’re at a critical time where we need greater forest protection and oversight,” Vittal tells the Halifax Examiner. “And what’s happening now is these bigger companies are gobbling up smaller companies.”
“I don’t want to say monopoly, but these bigger companies are having a bigger share of the forestry industry,” she says. “So there are fewer and fewer companies running our logging.”
When those companies are not publicly traded, as is the case for Paper Excellence, their corporate structure and ownership are of particular importance, according to Vittal.
“This is a private company,” she says. “So it’s possible that there could be less accountability or less clarity on who controls the company, where the money is coming from and where the money is going to.”
If it’s going to be this one company that dominates the pulp industry and thus forestry in Canada, Vittal says, it is important to know how accountable it is to Canadians, to know who owns or is responsible for the jobs in Canada’s forests, who’s responsible or accountable for the clearcutting, managing the forests, and the clean-up and remediation of mill sites, who’s dealing with labour and unions.
“Corporations can often hide behind complicated corporate structures to avoid financial and environmental responsibility,” according to Vittal. “When it comes time for clean up or paying unpaid wages, they restructure themselves, claim bankruptcy, pack up shop or hide behind shell companies with no assets. Local communities and Indigenous Peoples should be able to fully understand any company’s plans and hold them accountable.”
Financial institutions and governments take note
The report states that this detailed analysis should be of interest to “financing institutions providing loans and/or loan commitment letters to Paper Excellence and/or Domtar — such as Barclays, Bank of Montreal, CoBank, the Royal Bank of Canada, Wells Fargo, Credit Suisse, and U.S. Bank.”
“To fund its expansion in North America, Paper Excellence is borrowing billions of dollars from U.S. and Canadian banks, including a half billion-dollar loan from the U.S. Farm Credit System,” reads the report.
And there are others whom the report authors feel should take note of their findings:
Indigenous, national, provincial and municipal governments may find this analysis useful in determining to what extent Paper Excellence and its affiliated companies have access to public benefits and incentives such as forestry resources, government financing, tax breaks, preferential trade access, and energy subsidies.
Canada negotiating a free trade agreement with Indonesia
The report comes at a crucial time.
As the Examiner reported in July 2022, Canada is currently negotiating a free trade agreement — officially called a Comprehensive Economic Partnership Agreement or CEPA — with Indonesia.
Priyanka Vitta, with Greenpeace Canada, worries that the free trade agreement “risks further entrenching the control of corporations like Paper Excellence linked to the Sinar Mas Group over forests to the detriment of local communities.”
“We need a full, independent review of the agreement to understand how transnational corporations like Paper Excellence and the Sinar Mas Group will benefit and to ensure it contains effective environmental policies and frameworks if it goes ahead,” Vittal says.
The report should also be useful to competition authorities such as the Competition Bureau Canada and the U.S. Federal Trade Commission’s Bureau of Competition, who, it states:
… may consider this analysis useful in assessing market concentration issues related to their respective reviews of the Resolute Forest Products acquisition by Domtar Corporation, Paper Excellence’s wholly-owned subsidiary, and any future acquisitions related to Paper Excellence.
The report touches briefly on the ongoing Northern Pulp saga and legal wrangling with Nova Scotia, and should be of great interest to the provincial government, which is being asked by Graham Kissack and other Northern Pulp promoters to approve a new treatment facility for, and refit and reopening of the Northern Pulp mill, even as Paper Excellence and its Northern Pulp family of companies are suing Nova Scotians for hundreds of millions of dollars.
Paper Excellence’s Northern Pulp has, as the Examiner has reported, a history of taking governments to court when things don’t go its way.
The report contains this disclaimer at the beginning:
This analysis does not allege that any of the companies or individuals named in this report have committed legal or regulatory violations in Canada, the United States, Brazil, France, the Netherlands, China, Indonesia, or any other jurisdiction.
The report authors received no response to their main findings from the Sinar Mas Group or Jackson Wijaya Limantara. They provide the full responses they received from Paper Excellence and Asia Pulp & Paper in appendices.