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@evelopments, including the powers on the Mississagi River, for the purpose PA Aetri rtnininaad thcs.s. ns Ens wwv;- NEEC the Mississagi River, for the purpose of providing such a supply of power. While the Commission was proceeding with its inquiries, representatives of the Abitibi Power and Paper Company, Lamited, reported that that company intended to extend And enlarge its paper mill at Iroquois Falls and in connection therewith to construct a large power development at Abitibi Canyon, and it was suggested to the Commission that, instead of its pro-- cceding to construct developments on the Mississagi River, it should pur-- chase power from the proposed Can-- yon development. MN» 'nower system' except the Nipizon System existed at this time in the Northern Ontario district; that is to say, there were no municipalities under contrart with the Commission to pay the costs of power on the established Hydro municipal basis, and it was nlain that if the re-- quirements of the Northern Ontario district for mining and other purposes were to be supplied, the Government would have to assume soms respon-- gibility. There were no municipalities Teady to assume the construction costs or the operating expenses or to pro-- vide for the amortization of any plants in the usual way in which these matters are taken care of by the estab-- lIstment of power systems under the act relating to the Hydro Power Com-- mission. Kegotiations Start. "Negotiations were then entered | ; upon in the spring and summer of | 1930 with the Hudson's Bay Power| Company, Limited, and with the| Abitisi Power and Paper Company, Limited, which at that time was con--| ducting a very large and profitable business, producing over 500,000 tons of paper per annum, equal to approxi-- | mately 19%:; per cent. of the total| production of all Canadian minerals, "The consolidated surplus and gx("ofi:. and loss account of Abitibi wer and Paper Company, Limited, for the year ending Dec. 31, 1929, showed a from from operations for the year of $8,377,246.35, and after deducting therefrom provision for de-- preciation and depletion amounting to $1,713.211.06 and interest on finded debt and other interest amounting to $2,552.231.17, disclosed net profits for the year of $4,111,-- £04.12, and after paying thereout dividends amounting to $2,162,908, the balance to the credit of surplus ac-- count carried forward was no less than $61,0094,287.53. Under these cir-- cumstances, Hudson's Bay Power Company, Limited, having indicated that it was ready to commence the: development of the water power to its full capacity of 275,000 h.p., ap-- plied for an extension of the term of water power lease No. 26, and an amendment was made in the lease ex-- tending the term thereof and making certain modifications which seemed necessary to enable the Hudson's Bay Power Company to finance the de-- velopment, and at the same time to ensure an abundant supply of power for the needs, mining and otherwise, Oof Northern Ontario. Contract Signed. "A power contract was negotiated between the Hydro--Electric Power Commission of Ontario and Hudson's Bay Power Company whereby the Commission agreed to purchase from WVZOHadan ns C 85,000 to 100,000 h.p. at the price of $13 per hAp., and the Government, by agreement dated July 29, 1930, agreed to indemnify and zave harmless the Commission from any loss or liability by rcason of any inability or fallure on the part of the Commission to secure custo:ners;' '1"2: | *4 MB . _1 ca cac dihdntnt Lo lon to secure customers. The of the Government and the contracts was to secure on the best terms possible a large amount of power to scrve the nceds of Northern Ontario. It is known that there are enormous deposits of low--grade gold ore which are waiting development and can be developed profitably only by cheap power., _ _ _ :" _ 00 30 0005 "The Abitibi Power and Paper Company, Limited, entered into an agreement with the Commission guar-- anteeing that the Hudson's Bay Power Company, Limited, would per-- form all its obligations in its contract with the Commission; and the Abittbi Power and Paper Company, Limited, also entered into an agreement with the Commission to purchase 10,000 h.p. for a period of twenty years for its paper plant at Espanola at $22 pet hLp. A con'tract, was atb _ @éa PCE A1p"% £R WEERPERAET 0 ME also negotiated _ and subsequently executed by which Abitibi Electric Development Company, Limited, a wholly owned subsidiary of Abitibi Power and Paper Company, Limited, agreed to purchase from the Com-- mission 35,000 h.p. for a period of forty years, reserving, however, to the Commission the right for a period of ten years to withdraw this power in blocks of not less than 500 h.p. each, on giving notice as therein provided. Q.P.S,. Appears. "About this time the Hudson's Bay | Power Company, Limited, changed its | name to Ontario Power Service Cor-- poration, Limited, and the Abitibi Power and Paper Company, Limited, agreed with the Ontario Power Ser-- vice Corporation, Limited, to purchase from it for a period of forty years all power available from the Abitibi Canyon site not required to be de-- livered to the Commission and guar--| antred to the Ontario Power Service Corporation, Limited, that the net earnings of the latter company avail-- able for bond interest and reserve should in the year 1932--1933 equal $2,172,000, increasing to $2,868,500 for the year 1938--1939 and thereafter. "The Commission also entered into a contract with the International Nicke!l Company, Limited, to sell to the Nickel Company its power Te« quirements, beginning with 16,000 h.p., and proceeded to build a transmission line to Sudbury of the heaviest type of steel construction and with an ultimate carying capacity of 200,000 h.p. "It was felt by the Government that there had thus been arranged a new source of power for Northern Ontario: contracts had been arranged for most of the Qower which the On-- tario Power Service Corporation, Lim-- ited, would have available, and of the 160,000 hp. which the Commission was obliged to take it seemed that the Commission was already assured of the sale of 61,000 hp. as follows: "To Abitibi Power and Paper Com-- pany, Limited, for Espanola, 10,000 hp.; to Abitibi Electric Development Company, Limited, 35,000 h.p.; to International Nickel Company, Lim-- ited, 16,000 hp.; making a total of 61.000 hp.; leaving the Commission y t ana! Aac Ee PIOF C not only with 39,000 hp. to supply demands from new customers, but also with the right to withdraw from the Abitibi Electric Development Company, Limited, a further amount of 25,000 hp. as the expected de-- mands of customers might increase. ice Corporation, Limited, had been advised by Mr. George F. Hardy of New A Pvi + Ti (heee" with °& whiy eapelionee in The ern | construction of fower devermments are | that it would t $s oohode ao fals old | complete thecotft '123'000'000 oo' nsl maig with sn instaled capmcny : af nly | 275,000 hp'n a.xt:fu ie tfi:'t'"'k'{,m'g{ ger | antared 'Tnto 20 sercement wigs tue oo | Montreal Trust Company, tns irastce iar-- | under the rxlrllirtg . io " ooare g':}' gonds cgzmantin:g that ti:urgntatrl}g er= | Power Corpo Limi {ta'Ct would fully %%mplet.e r:tio";')ower t:g.' es | en Paper Company, inolce. Somg P ¥. , wou'ld \33% ;);'og;i:d all moneys that would be | fars | 5f 'the aale of the bones. -- The mork C e mort-- :?;: gage' securing the $20.000,000 of bonds iY glcw &fd t}l&t the proceeds of the wA Moen tre:lieo "Saouég be deposited with :. @|to be applied to tfimgyh"tm;sm' itibi | terest during construction of the J m sed. | fiant g cons ion of the power om-- pian ba.nd to the payment of amounts rerl payable to contractors and with a o U proviso that the Montreal Trust Com-- 100 gamé as trustee should retain in its y wer ands cash and securitiees to an f.p. amouiréc of $2,000,000, and should not reim {)firmo the same'to be withdrawn by i e Ontario Power Service Corpora-- t(lm,ml..imlt/ed, until that company 8 ;31 have produced to the trustee | Bay | evidence tpat gdequate funds were d its| actually available to the company or' Cor-- | ;deguatel); pgovlded for by Abitibi : pitibi t:)\ser and Paper Company, Limited, ited, | t9 complete the plant. The bonds Ser--| Fere underwritten at 90 per cent. of hase p'ar. netting approximately $18,000,000, years which sum was deposited with Mont-- bitibi rgal Trust Company,,in accordance "'We.| with the trust deed./ Early in 1932 ruar--| it appeared doubtful"if Abitibi Power Tvice and Paper Company, Limited, owing' net to tvhe falling off in the demand for ;vall-1"9"59r'"t'» would _ be able to supply serve Qntario Power Service Corporation equal' with moneys necessary to complete )0 for the plant, and the President of the ter. Apitxbx Power and Paper Company, into Limited, approached the Government tional | and suggested that the Government or ell to| the Hydro--Electric Power Commission: r re-- should_ in some way or other assist ) h.p., Ontario Power Service Corporation, ission Limited, to ensure the completion of . type the plant. The Government consult-- i 'an|ed the auditors of the Hydaro--Electric 00,000 | Power Commission and counsel in the matter because it was felt that it was iment | desirable in the interests of the Prov-- ged a | ince at large that the moneys already thern| spent upon the plant should not be angeq| wasted, and that some plan should e On--| be evolved which would result in the Lim.| completion of the development. Pro-- of the| posals were imade that the Govern-- ission| ment or the Commission should ad-- | that| vance moneys to Ontario Power Serv-- ssured| ice Corporation on the security of lows: |second mortgage bonds to be guar-- Com--| anteed oy Abitibi Power and Paper 10.000| Company, Limited, but as time went npERELANEREY 3 ADOOOERNUARg AUCCC stccre on the condition of the newsprint in-- dustry was such as to indicate to the Government that the Abitibi Power and Paper Company, Limited, might not be able to meet its obligations and, consequently, _these proposals were rejected. On June 1. 1932, Abi-- tibi Power and Paper Company, Lim-- ited, made default in payment of the interest on its bonds, and it has since passed into the hands of a receiver. Correspondence Indicated. "On June 23, 1932, Ontario Power | Service Corporation, Limited, wrote to the Prime Minister, stating that they found it difficult under existing finan-- cial conditions to find the money necessary to complete its development and requested the Government to consider the position with a view to" taking such steps as might be desir--| able to ensure the completion of the| uroiect. and on the same date Abitibi project, and on the same Gda Power and Paper Company,