Bowater Announces Decision in Arbitration Matter

Greenville, South Carolina, USA, 12 September 2007 --(BUSINESS WIRE)-- Bowater Incorporated (NYSE: BOW; TSX: BWX) today announced that Bowater Canadian Forest Products Inc., its subsidiary, had received a decision in an arbitration related to the 1998 sale to Weyerhaeuser Company of Bowater's former pulp and paper facility in Dryden, Ontario.

As reported in Bowater's annual report on Form 10-K, Bowater and Weyerhaeuser have been arbitrating a claim regarding the cost of certain environmental matters related to the mill. On 07 September 2007, the arbitrators in the matter awarded Weyerhaeuser approximately CAD 44 million.

"Although we disagree with the arbitrators' decision and are disappointed with this result, this matter is now behind us," said David J. Paterson, chairman, president, and chief executive officer of Bowater.

"We are focused on operational excellence to improve our financial performance," he continued. "During these challenging times, we are stringently managing capital spending. We expect to spend $120 million in 2007, about 38% of depreciation, and $30 million less than previously estimated."

As a result of the arbitrators' decision, which is binding upon Bowater and not subject to appeal, Bowater currently expects to record a pre-tax charge of approximately CAD 29 million in its third quarter 2007 results.

About Bowater

Bowater Incorporated, headquartered in Greenville, South Carolina, is a leading producer of coated and specialty papers and newsprint. In addition, the company sells bleached market pulp and lumber products. Bowater employs approximately 6900 people and has 12 pulp and paper mills in the United States, Canada, and South Korea. In North America, it also operates a converting facility and owns 10 sawmills. Bowater's operations are supported by approximately 708,000 acres of timberlands owned or leased in the United States and Canada and 28 million acres of timber cutting rights in Canada. Bowater operates six recycling plants and is one of the world's largest consumers of recycled newspapers and magazines. Bowater common stock is listed on the New York Stock Exchange. A special class of stock exchangeable into Bowater common stock is listed on the Toronto Stock Exchange (TSX: BWX). To learn more, visit www.bowater.com.