UPDATE 1-Abitibi says Newfoundland expropriation illegal - Fri Dec 19, 2008 4:57pm EST By Allan Dowd VANCOUVER, British Columbia, Dec 19 (Reuters) - Papermaker
AbitibiBowater Inc - (ABH.N) warned on Friday it will file a trade complaint if Newfoundland and Labrador follows through on its plan to expropriate the company's assets in the Canadian province.
Legislation passed this week in Newfoundland that allows the province to take control of Abitibi's timber rights and hydroelectric facilities is "clearly and unequivocally" illegal, the company said in a letter to Premier Danny Williams.
"Quite apart from the illegality of Bill 75, the legislation is an entirely unfounded and unscrupulous attack by the province of Newfoundland and Labrador on Abitibi Canadian entities and on the parent company, AbitibiBowater Inc," Chief Executive David Paterson wrote.
"AbitibiBowater urges the government of Newfoundland and Labrador to reconsider its hasty action, which can only serve to discourage further investment in the province, and to repeal Bill 75," he wrote.
Williams unveiled the legislation on Tuesday, saying Abitibi had lost its right to continue using the province's natural resources after the company announced it would close its century-old paper mill in Grand Falls-Windsor, Newfoundland, by the end of March.
The province's plan violates the company's rights under the Chapter 11 investor protection measures of the North American Free Trade Agreement (NAFTA) that prohibit private property from being nationalized, Abitibi said.
Abitibi's headquarters are in Canada but it is incorporated as a U.S. company. It was created through a merger of Canadian papermaker Abitibi Consolidated and U.S. lumber company Bowater in 2007, and is North America's largest maker of newsprint.
Williams' office declined comment on the letter on Friday, but said that it stands by its opinion that it has the legal authority to expropriate.
Williams has said Abitibi might be compensated for the hydro facilities, which also sell electricity to the provincial grid, but it has not said how much money might be involved.
The company says it had no choice but to shut down the Newfoundland newsprint mill because it is losing money and workers had refused to agree to cost-cutting measures. The mill employs about 750 workers.
The company repeated on Friday its offer to work with the province on the future of its assets. Newfoundland has not proposed to take over the mill property itself.
Abitibi closed its Stephenville, Newfoundland, mill in 2006, so the shutdown of the Grand Falls plant will leave it with no paper production operations in the province. (Reporting Allan Dowd, editing by Peter Galloway)
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