REGINA – A financial restructuring of Regina’s NewGrade Heavy Oil Upgrader promises to put the debt-burdened company on firmer ground.
Despite being considered an operating success, the plant has never been able to pay off its debt. The deal, which provides needed cash injections, cut the project’s debt to $400 million from $635 million.
“(The restructuring) will certainly put the upgrader on a sounder financial footing than it was before,” said Saskatchewan energy minister Doug Anguish. He said money would be applied toward Canadian and U.S. debts, and also to ongoing operating costs.
Read Also
August rain welcome, but offered limited relief
Increased precipitation in August aids farmers prior to harvest in southern prairies of Canada.
Where the profit lies
The upgrader makes its money on the difference between the price it pays for heavy crude oil and the price it receives for selling upgraded lighter crude.
The agreements, completed Oct. 21, implement the terms of a memorandum of understanding signed by the province, Ottawa and Consumers Co-operative Refineries Ltd. in June.
An order-in-council also passed last month, repealed The NewGrade Energy Inc. Protection Act. The controversial bill passed in 1993 would have seen the province take control of the upgrader.
If the bill had not been repealed, the province was required to pay a $25-million penalty.
Under the terms of the restructuring agreement, Ottawa has made a one-time payment of $125 million and is no longer responsible for any loan guarantees.
CCRL, owned by Federated Co-operatives Ltd., is contributing $50 million for asset purchases and a $5 million grant. In 1995 and 1996, CCRL will loan NewGrade $20 million. It is also responsible to pay up to $40 million in cash deficiencies.
Saskatchewan’s Crown Investments Corporation has provided an equity share of $50 million and a $5 million grant. CIC also will contribute $20 million in loans over the next two years and must match CCRL’s cash shortfall payments up to $40 million.
NewGrade opened in 1989.
