MILLINOCKET, Maine — Having already invested about $70 million in the Katahdin Paper Co. LLC mill, multibillion-dollar conglomerate Brookfield Asset Management won’t restart it without help, Fraser Papers Chief Executive Officer Peter Gordon said Wednesday.
Gordon’s message to mill-workers and Gov. John Baldacci this week is that Brookfield, the mill’s parent company, has hired two companies to study installing a biomass boiler at the Millinocket mill to relieve its crippling addiction to oil, but will probably not restart the mill without an investor to finance, install and operate the boiler.
“They have invested $70 million and they are done,” United Steel Workers Local 152 President Louis Ouellette said Wednesday. “They are not doing it anymore. So they are telling Fraser Papers, ‘Look, we are paying you to manage this place. This is your ball, you do it,’ and Fraser doesn’t have the money to do it. That’s why we are where we are at.”
Ouellette said that was the answer he got Tuesday when he asked Gordon, who is also a managing partner at Brookfield, whether Brookfield, which has about $95 billion in assets, would be restarting the mill on its own.
An asset management firm, Toronto-based Brookfield pays Fraser Papers to manage the Katahdin Avenue and East Millinocket paper mills, which as Katahdin Paper Co. LLC are the Katahdin region’s largest single employer.
Gordon met workers at the East Millinocket mill on Tuesday while Brookfield Asset officials met with Baldacci in Augusta on Wednesday.
The Millinocket mill shut down on Sept. 2, and as many as 208 workers will be laid off from it. As of Monday, 39 workers had been laid off as mill mothballing and winterization efforts continue.
Baldacci saw the latest news from Brookfield as another in a series of signs that the mill would restart in 2009.
“We continue to work together to ensure the shutdown is a temporary measure and that the hard-working employees can get back to work as soon as possible,” Baldacci said in a statement. “I appreciate the commitment of Fraser Paper and Brookfield to address the energy costs that led to the shutdown of the mill.”
Brookfield first announced the shutdown on May 29, but Baldacci’s intervention helped keep it open beyond the original shutdown date. Brookfield, Fraser and mill managers have been working on a business plan to restart the mill since June.
Brookfield had tried to sell the mills to Fraser last year for $80 million, but Fraser’s stock-holders rejected the proposal. If both mills had been purchased as originally planned, Fraser would have paid $50 million plus working capital of about $30 million and royalty payments based on the performance of the supercalendered paper line from Millinocket’s mill. Brookfield is among Fraser’s largest shareholders.
With its $150 million No. 11 paper machine, dedicated customer base and highly skilled work force, the Millinocket mill is a state-of-the-art facility. At one point early this year, the machine had sold out its papermaking capacity for the year and mill operations were going 24-7, but it makes steam by burning oil, which, given skyrocketing energy costs, has all but destroyed its ability to make money.
The mill burned about 400,000 barrels of oil in 2007.
Brookfield has hired Cianbro Inc. and Babcock & Wilcox Inc. to provide an engineering assessment of the mill and its existing boiler and steam equipment, Gordon said in a press release. Mill managers hope to refit the company’s No. 4 boiler as a biomass boiler to save time and money.
“We have told the governor that we will report back to him by the end of November to brief him on our progress, specifically as it relates to project feasibility, equipment costs, electric transmission needs and environmental permitting schedules,” Gordon said.
“That is encouraging to me,” Ouellette said. “They want to make sure that this is going to work. If there are snags or problems, then they will turn to a brand-new project. That’s what they told us, and by project I mean a new biomass boiler instead of a refit, but they are confident they can refit No. 4.”