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The steel mill is leasing the port to itself. Here's why

On Wednesday, members of the Sault's committee of adjustment were wanting to know

Algoma Steel Inc. received the blessing of Sault Ste. Marie's committee of adjustment yesterday for an arrangement essentially leasing its port lands back to itself for 49 years and 364 days.

There was no opposition to the 50-years-less-a-day circular deal, but committee members were curious about the details and rationale.

"I have a few questions before you speak," committee chair Arthur Gualazzi asked lawyer Brian DeLorenzi, who appeared on Algoma Steel's behalf.

"Is this all going to be consolidated as a part of Algoma Steel?" asked Gualazzi, who knows a thing or two about the steel mill, having worked there for 42 years.

"I'm quite familiar with everything about Algoma," said Gualazzi, who then sharply criticized the controversial previous arrangement that placed the steel mill and Port of Algoma under separate ownership.

"The other group had a separate identity to this, and that never should have been. I understand now that it's part of Algoma Steel and that's the way it's going to be operated," Gualazzi said.

Historically, Sault Ste. Marie's steel mill and port have been as complementary and interdependent as chips and dip.

Algoma Steel doesn't really work without unrestricted access to its docks.

The port has always been used almost exclusively by Algoma, always operated by Algoma workers.

Two years ago, Superior Court Judge Frank Newbould ruled that Essar Global Fund Ltd. and related company Essar Capital Ltd. acted unfairly and oppressively when they split the operation and leased the docks to Port of Algoma Inc.

"I conclude and find that the port transaction was in itself unfairly prejudicial to, and unfairly disregarded, the interests of Algoma's trade creditors, employees, pensioners and retirees," the judge said.

Answering Gualazzi at yesterday's committee of adjustment hearing, DeLorenzi said that re-uniting the aging docks with the steel mill was a condition of bringing Algoma out of insolvency protection.

"It was a condition coming out of CCAA [Companies' Creditors Arrangement Act] that the company that owns the port is a wholly owned subsidiary of the new Algoma Steel Inc. So yes, it's the same company. It's a partnership owned by Algoma Steel," said DeLorenzi.

Committee member Sean Meades then asked DeLorenzi why his client felt it necessary to lease the port back to itself.

DeLorenzi said it needed to happen because the port and steel mill had different lenders.

"It's essentially a lenders' requirement. There are two separate lenders now," he said.

"Once Algoma Steel came out of CCAA, there's a separate company that holds the ownership to the port lands...When they came out, the lender to the company that holds that property was a separate lender than the lenders that took over Algoma Steel. As a covenant to that lending agreement, initially...there was a 50-year lease granted for the use of it. It was a condition for the advancement of those funds. It's a covenant on the loan of that money, there's a requirement that we come to the committee to seek approval of the 50-year lease," DeLorenzi said.

Meades also asked DeLorenzi to identify the lenders to the steel mill and port.

At that point, he was advised by Michelle Kelly, the committee's secretary-treasurer, that he might be seeking a little too much information that wasn't relevant to the application.

So Algoma Steel and the new port owner Algoma Docks GP Inc. – asked the committee yesterday for consent to lease its 830-hectare port land assembly for 50 years less one day.

They also won consent for all road and rail access easements and all utility and service easements considered necessary to operate the port lands independently from Algoma Steel and other immediate neighbours.

The port lands are located on the south side of Base Line, east of Leigh's Bay Road, alongside the St. Mary's River.

Those properties are under the jurisdiction of Sault Ste. Marie Conservation Authority, which has control over any interference with wetlands or alterations to shoreline or watercourses.

Any development on the leased port lands will need a site plan review and possibly a permit from Sault Ste. Marie Conservation Authority.


David Helwig

About the Author: David Helwig

David Helwig's journalism career spans six decades beginning in the 1960s. His work has been recognized with national and international awards.
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