The Gazette from Montreal, Quebec, Canada • 53

SECTION PAYLINK" Tta PAYROLL CMMKtloA Ulwwn yow MICRO PC in COMTECH 382-3330 1 MONTREAL, THURSDAY, SEPTEMBER 11, 1986 Domtar's Smith fannrnhianeU its Change of command is seen to be brewing at Hydro-Quebec the 1981-82 recession." It seems Guy Coulombe's davs as the too TO; i tk. Hugh Anderson SmI named him head of the Societe generate de financement du Quebec, a government investment company, and in 1982 it put him in charge of Hydro-Quebec. At the news conference last year where Coulombe voiced his worries about Bourassa's plan to generate an additional 12,000 megawatts of power and sell it to U.S. utilities, he was flanked by the PQ's energy minister, Jean-Guy Rodrigue. Bourassa and his Liberals were then still in opposition, of course.

Coulombe warned that Quebec could get locked into unprofitable long-term power contracts with U.S. customers. That kind of negative thinking about a project Bourassa made much of during his successful election campaign does not go down well with the premier and his circle. It's also seemingly not shared by the rising star on Hydro-Quebec's top management team, Laurent Hamel, the executive vice-president for installations. Hamel was named a member of the board of directors in June by the premier.

Insiders say he is enthused about Bourassa's scheme. Interestingly, the key post of executive vice-president for external markets is vacant with the very recent departure of Georges Lafond, a former financial chief at Hydro-Quebec. Lafond has gone to the Federation des caisses populaires. It's true, of course, that any head of Hydro-Quebec would be finding things tough right now. After many years of expansion and financial success, the giant organization is struggling to cope with adversity.

Annual profits have fallen sharply from a peak of $800 million in 1982 to $209 million last year. Its own forecast of 1986 profit envisages a further drop to $133 million. That same forecast, issued in February this year, spoke of "a serious deterioration of the company's financial position," brought on by a "profound imbalance between supply and demand, exacerbated by The company's problem, in a nutshell, is that it geared up for more of the same thing in the 1980s that it experienced in the two previous decades that is, constantly rising demand for electric power. And when that did not materialize, it was badly squeezed. For instance, it borrowed huge amounts of money in foreign currencies during the years of plenty.

And it's costing a bundle to pay the interest with shrunken Canadian dollars now. The slump in the price of a competitive energy source, oil, crimps its ability to raise revenues. The company's development plan predicts that profits will turn around next year. But that is based on an estimated 8-per-cent jump in sales revenue. This year, however, the forecasters felt they could count on only a negligible increase of 0.5 per cent in revenue.

Whether that is closer to next year's reality as well is very much in question. boss at Hydro-Quebec are numbered. He's highly unlikely to serve out the full two-year term to which he was reappointed three months ago. That's the message that emerges from informed sources, despite Premier Robert Bourassa's public expression of confidence in the power utility's president and chief executive officer at the weekend. The principal reason? Bourassa can hardly rely on Coulombe to put heart and soul into pushing through the premier's pet James Bay II hydro project.

After all, this is the man who a little over a year ago declared publicly that such a scheme posed "immense danger" for Quebec. It's all highly ironic, of course. Coulombe's departure would undoubtedly be seen as the latest in a series of moves by the Bourassa team to put its own stamp on the machinery of government. Yet Coulombe held high and politically sensitive civil-service jobs during the previous Bourassa government, culminating in his appointment in mid-1975 to the No. 1 job as general secretary to the government's executive council.

True, he was also able to accommodate himself comfortably to the change of political masters in 1976. He remained in the top civil-service job until 1978. Then the Parti Quebecois government sales not Imperial signals end of tobacco price war U.S customers "i Vx Ik i By KEVIN DOUGHERTY of The Gazette Hydro-Quebec's American customers do not share concerns that exports of Canadian electricity are unfair to utilities in the United States. Canadian power is available in New England "at fair market value, without subsidies," James Sandler, chairman of the Connecticut Energy Advisory Board, said yesterday in a telephone interview from Hartford. "Hydro-Quebec electricity is highly dependable, efficient, environmentally sound and a primary resource," Sandler added.

Peter Murphy, the chief United States negotiator in free-trade talks with Canada, agreed Tuesday to take up the issue of Canadian electricity exports at the bargaining table. Murphy made the commitment after hearing arguments from North Dakota Governor George Sinner and other U.S. officials that Canada is subsidizing and underpricing electricity sales to the United States. Canadian policy makers also were accused of trying to cripple U.S. competition through costly acid-rain standards that were not applied to Canadian producers.

Robert Murray, president of the Cleveland-based North American Coal cited electricity sales by Manitoba Hydro to the U.S. Midwest and Premier Robert Bourassa's dream of harnessing more rivers in the James Bay basin to export electricity as examples of Canada's unfair trade practices. But Jamess Parmelee, of the New York state energy office in Albany, told The Gazette yesterday that his agency "does not share the view that less expensive Canadian electricity is hurting American jobs." Parmelee noted that, ironically, Canadian opponents of power exports argue that selling cheap elec tricity to American utilities gives manufacturers in the United States a competitive edge and robs jobs from Canadian workers. "We purchase quite a bit of electricity from Canada and will want to continue," said Mary Wallen of Boston Edison, a major utility in Massachusetts. "We are very much in need of that power." But Wallen also sounded a discordant note, saying that New Eng-landers remember the threat posed by energy-supply bottlenecks when the Organization of Petroleum Exporting Countries began to wield its oil weapon in the 1970s.

People in New England don't want to be dependent on any one source of power in future, she said. Quebec Energy Minister John Ciaccia told reporters yesterday that Hydro-Quebec's exports to the United States are not subsidized and have no place in the free-trade talks. "Because we're not subsidizing the product, there is no need to make it part of the negotiations," he said. The minister added that Quebec's power sales to the United States benefit Americans. Hydro-Quebec official Jacques-Andre Couture noted that, under its governing legislation, the provincial-ly owned utility pays dividends to the Quebec government If there is a case of subsidization, he said, it is Hydro-Quebec that is subsidizing the province, not vice versa.

In Winnipeg, Manitoba Premier Howard Pawley said his government will not allow its hydro exports to be part of the free-trade talks. In Halifax, the president of the Nova Scotia Power Corp. said putting electricity exports on the free-trade negotiating list would ensure that his province's project to export to New England would go ahead. By JAY BRYAN of The Gazette Canada's biggest cigarette maker, Montreal-based Imperial Tobacco signalled yesterday that it is determined to end a year-old cigarette price war, announcing that it will phase out all its existing retail price discounts by Oct. 20 and impose a 1.5-per-cent price hike on its wholesale clients Sept.

29. Imperial, which makes more than half the cigarettes sold in Canada, has been discounting its Peter Jackson brand at retail by $4 a carton or 50 cents per pack of 25 for seven months, responding to similar industry-wide discounting on selected brands that was touched off by Roth-mans Inc. 12 months ago. The Peter Jackson discount will end Sept. 29, and similar regional discounts announced by the company Monday for seven new package for mats or brands will end Oct 20, Imperial said.

The company appears to be using its dominance of the industry to offer a way out of the price-cutting stalemate, which has slashed the industry's pretax profits by an estimated $200 million a year, said analyst Neil Wickham of Walwyn Stodgell Cochran Murray Ltd. But by preceding its peace offer with the introduction of several new discount brands, which will remain at cut prices for a month after Peter Jackson returns to regular prices, Imperial is also issuing a threat to the competition, Wickham suggested. "They're saying: 'We're giving you a chance. Take it or we'll kill The interpretation that Imperial is asking competitors to choose between an olive branch and all-out war "is one way of interpreting our move," said company official Michel Descoteaux. He said Imperial would certainly "re-evaluate our decision" if competitors do not respond by ending their own discounts.

Imperial Tobacco's president, Wil-mat Tennyson, said the price discounting hasn't helped any company much. Although the discounting "has been a bargain for smokers, it has proven both expensive for the companies involved and non-productive in the sense that the market share of the companies has remained essentially the same as it was before price discounting began," Tennyson said. He estimated Imperial's share in the last 12 months to be 52.5 per cent of the market, compared with 52.6 per cent in the comparable period a year earlier. Officials for the other major tobacco companies, Benson and Hedges (Canada) Inc. of Montreal and Toronto-based RJR-MacDonald Inc.

and Rothman's said they will study Imperial's move before deciding on a response. Gazette, George Bird Calling all inventors Contest to pick an inventor and a company unveiled yesterday by Roland Roux (right) to represent Canada at international inven- of Centre for Industrial Innovation and tions exhibition in Geneva next spring was chief juror George Khoury. Story Page E-3. Second giant discount shopping club set to open in Montreal for 1987 include one to open in Toronto in the spring. The other two will be built in Ottawa, Montreal or Quebec City.

Meanwhile, Titan, which says it has considerable financial backing from a group of venture-capital companies, expects to have a Montreal club and five Ontario clubs in operation by the Feb. 28 end of its current financial year. Shipton said the company expects to open two more clubs in Montreal and a total of eight across Canada next year. Titan's clubs are the same size as Price Club Canada's. Unlike Price, Titan is willing to let most individual shoppers become club members.

Shipton said membership at Titan clubs is available to almost any credit-card holder. and Price Co. of San Diego, the biggest U.S. operator of warehouse shopping clubs. The St.

Laurent club's sales floor will have 117,000 square feet of area. The lure of the shopping clubs, which have grown into a $10-billion business in the U.S. since the first was opened by Price Co. nine years ago, is their low prices on products ranging from groceries to typewriters, television sets and tires. The shopping clubs are cash-and-carry warehouses aimed mainly at such small businesses as neighborhood retailers and restaurants, but also open to a limited number of retail customers.

Unlike traditional warehouses, they offer no credit or delivery service. Most goods are stacked on pal ernment workers, teachers and employees of government corporations or transportation agencies, said Marie-France Gibson, director of marketing for Price Club Canada. Mignault said the retail membership has to be limited because about 60 per cent of sales are to business people who resell at retail, and Price Club Canada has to avoid losing these small businesses by stealing their customers. The company is looking for about .50,000 retail members and 10,000 business members for its first Montreal club. Mignault said the company expects each club to generate $60 million or more in annual sales.

Mignault said he expects to open three more clubs a year for a total of 16 in five years. The three scheduled By JAY BRYAN of The Gazette By early December, Montreal shoppers can expect to see at least two of the giant discount shopping clubs that have swept across North America, according to the president of Toronto-based Titan Warehouse Club John Shipton. Shipton said in a telephone interview that he expects to open a Titan club in Montreal as early as Dec. 1. Shipton's statement followed an announcement yesterday by Price Club Canada Inc.

that it will open the city's first warehouse shopping club in mid-November in the Le Bazar shopping centre in St. Laurent. Price Club Canada is a Montreal-based joint venture of Steinberg Inc. lets or in shipping cases. But the clubs slash prices to levels substantially lower than most small businesses could get even at wholesale, said Price Club Canada president Pierre Mignault Price Club Canada estimates it undercuts supermarket prices by about 12 per cent and department-store prices by as much as 37 per cent for business customers.

Retail customers pay 5 per cent more than businesses. The catch is that while any busi-, ness can sign up to use a Price Club for a $25 annual fee, only certain individuals are allowed to become retail customers. Generally, retail memberships, at $15 a year, will be offered to public-sector employees. That includes gov Dome Pete asks lenders to write off debt SHEW 3096.13 Up 1.44 1558.77 Up 1.14 In return, Dome will offer the lenders a complicated series of debt securities whose value hinges on the price of oil, the sources said. Details of the proposed securities issue were sketchy.

Dome executives are trying to get the the restructuring paper ready for a series of high-level meetings with lenders next week. Dome, drowning in a sea of red ink since 1981, has undergone a string of debt reschedulings in the past. But top-level acknowledged that this round of negotiations will be different because the lenders are thinking what was previously un thinkable possible liquidation. "It has been serious all along but this time it is far more serious," a senior Canadian banking official said on condition of anonymity. Banking sources said Dome will be going into this round of negotiations with a considerably weakened bargaining position from the last The latest restructuring package is being prepared on the basis of negotiations that have been going on with lenders for several weeks.

Dome, which recently rounded up the furniture from 200 empty Banking sources acknowl-. edged that Dome has a couple of bargaining chips in its favor. They believe it might take the courts on two continents five to 10 years to thrash out the order in which creditors would be paid. "By the time that was over, with all the legal costs, there wouldn't be anything," one said. In addition, the collapse of Dome, which employs 4,500, would be the last thing the Alberta economy needs right now.

Canadian banks have been reporting huge loan losses from Alberta in its earnings for the past two quarters. OTTAWA (CP) Dome Petroleum Ltd. is asking its 54 lenders to write off $3 billion of the company's $6-billion debt in a complicated restructuring package that hinges on the future recovery of oil prices, the Press has learned. Banking sources in Canada 'and the United States said yesterday the Calgary company is preparing a bargaining paper to be delivered to its lenders tomorrow or early next week in which creditors will be asked to accept that the value of the collateral that stands behind the loans has been cut in half by the collapse in oil prices. offices to raise cash, is facing a crucial Oct.

28 deadline with its lenders. However, a Swiss banking official said lawyers on both sides of the Atlantic are looking for ways around the regulation. One of the avenues being explored is a legal precedent in which Swiss banks, acting as trustees, are allowed to decide for note holders. Another possible escape route is moving trusteeship for the Dome debentures to the Canadian subsidiary of Credit Suisse, the Europeans' lead banker. Dome spokesman David An-nesley refused all comment.

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