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long-term pulp supply relative to its ownership interest in the
venture; the parties were to have access to the output of the
pulp mill "in proportion to their interests in the venture and on
mutually agreeable commercial terms."
GNN selected the engineering firm of Brown & Root to prepare
preliminary studies of the parameters for the pulp mill and to
prepare a detailed study to set the specifications and
construction standards for the mill. The controller departments
of GNN and KKO also prepared a joint financial projection in
1981, which projected the amount of retained earnings for their
joint venture for each year through 1990. GNN's employees and
officers anticipated that the venture would generally suffer
losses from 1982 through 1989 and that LRFP would have negative
retained earnings as of 1989.
In October 1981, Brown & Root reported substantial cost
escalation in constructing the pulp mill, and the partnership
proposal was revised so that KKO would have no debt portion.
Later that year, KKO suggested to GNN that KKO sell the sawmill
to GNN for cash and that negotiations continue only on a
long-term pulp sales contract. GNN expressed a preference for a
continued joint venture, mainly because of KKO’s experience in
building pulp mills; KKO had recently built a very large pulp
mill in Finland and had the experience of procuring and using the
latest equipment. KKO's recent experience in building a pulp
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