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Shaky finances and 25-year-old boilers left Stoneywood paper mill more exposed as energy prices ‘sky rocketed’

The Press and Journal has been reporting news on Stoneywood Mill for years. Image: Paul Glendell/DC Thomson.
The Press and Journal has been reporting news on Stoneywood Mill for years. Image: Paul Glendell/DC Thomson.

Ageing plant machinery powering a centuries-old Aberdeen paper mill “absolutely contributed” to its owner’s financial straits, administrators say.

A potential sale of Stoneywood Mill fell through only hours before hundreds of its workers were made redundant on Thursday.

Bosses have revealed they have been forced to pay cash prices for gas to power the plant.

Financial struggles had left them unable to negotiate a fixed contract.

Administrators were last week called into the historic Aberdeen site, now in crisis for the second time in three years.

Stoneywood Mill in 2019, just after a buyout was negotiated with £7m of public cash. It's now back in administration due, in part, to soaring energy prices. Picture by Kath Flannery/DCT Media.
Stoneywood Mill in 2019, just after a buyout was negotiated with £7m of public cash. It’s now back in administration due, in part, to soaring energy prices. Picture by Kath Flannery/DC Thomson

It was saved from administration after months of talks in 2019.

But on Thursday, Interpath Advisory were appointed at 10 Arjowiggins subsidiaries across the UK.

Across the country, 368 people were made redundant immediately.

In Aberdeen, 301 lost their jobs with just 90 minutes notice. Only 71 have been retained for now.

The devastating news broke after a potential buyout fell through earlier in the week.

An emergency response is now being fleshed out for hundreds of Stoneywood employees impacted by the announcement.

Stoneywood Mill: Why were administrators brought in now?

Coronavirus lockdowns, loss of trade, spiralling costs of raw materials and soaring energy prices have been blamed for Stoneywood mill’s downfall.

During the pandemic, 74 people were told they no longer had jobs.

Arjowiggins claimed modernisation plans revealed last year were a sign of intent to fight to survive.

Rolls of paper at Stoneywood mill, now plunged into financial crisis for the second time in three years. Picture taken in 1988 by Aberdeen Journals.
Rolls of paper at Stoneywood Mill, now plunged into a financial crisis for the second time in three years. Picture taken in 1988 by Aberdeen Journals

Financial worries meant the 25-year-old combined heat and power plant onsite was never replaced as proposed.

Those plans were drawn up after a publicly-funded £125,000 environmental study.

Scottish Enterprise propped up the mill with a £7m investment in 2019, £6.9m in loans.

By summer 2019, another loan of £3.5m from the government’s business quango was required.

And STV reports an additional £1.6m of public cash was lent in January.

Energy prices made worse by Stoneywood Mill’s financial woes

Asked to spell out what factors had caused the collapse, joint administrator Alistair McAlinden outlined a storm beginning in early 2020.

It started with the inability to have people at work during the Covid pandemic.

Then, he said, customers scaled back their orders.

As the world emerged from the clutches of coronavirus, it was the “rocketing” cost of raw materials like pulp and chemicals.

Some of these increased “two-fold”.

The combined heat and power plant at Stoneywood mill is more than 25 years old. Administrators say the ageing equipment, paired with current energy prices, "absolutely contributed" to the financial struggles. Picture by Kenny Elrick/DCT Media.
The combined heat and power plant at Stoneywood Mill is more than 25 years old. Administrators say the ageing equipment, paired with current energy prices, “absolutely contributed” to the financial struggles. Picture by Kenny Elrick/DC Thomson

Now the escalating energy prices have hit Stoneywood Mill, even harder than most as owners weren’t paying a fixed cost.

They were forced to match the volatile price of gas as it soared and soared.

Mr McAlinden, managing director of his firm in Scotland, added: “Because the business wasn’t in the strongest of financial positions, they were having to buy energy in the spot market. They didn’t have hedges in place.

“Unfortunately that left them exposed to the vagaries of prices bouncing about.

“Clearly ageing boilers and other facilities would use more of that very, very expensive energy. That would absolutely have been a contributing factor.”

Are administrators confident of finding a buyer for Stoneywood Mill?

The business only just made it through administration in 2019.

Government ministers admitted it was “touch and go” as they put together the rescue bid with the owners and unions.

When business minister, Jamie Hepburn said the last talks to save Stoneywood mill were "touch and go" at points. Picture by Chris Sumner/DCT Media.
When business minister, Jamie Hepburn admitted talks to save Stoneywood Mill in 2019 were “touch and go” at points. Picture by Chris Sumner/DC Thomson

Then, 450 jobs were saved. Now only 95 nationwide have been retained after the latest buyout fell through.

Mr McAlinden said: “It is very hard to say we are confident of finding a buyer at this stage.

“The business has already gone through an administration process in 2019.

“We’ll certainly give it our best shot. It’s still early and time will tell.”

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