Under their non-binding agreement, Abitibi-Consolidated Company of Canada would divest its 60% stake in the plant to Hydro-Quebec in return for gross proceeds of Can$615M (US$483M).

The 60-year old plant has an installed capacity of 335MW, and the deal is conditional upon satisfactory due diligence and obtaining necessary consents and approvals. A long-term power supply deal with the group’s Baie-Comeau paper mill, in Quebec, is also wanted.

The other hydro power assets owned by AbitibiBowater, including a share of 162.5MW of capacity in Quebec, are unaffected by the proposed transaction.

AbitibiBowater said the deal through its subsidiary was consistent with the group’s recapitalisation plan to boost liquidity and financial flexibility.