Brookfield grants Katahdin paper mills another reprieve

Posted July 26, 2011, at 7:34 p.m.

EAST MILLINOCKET, Maine — The Toronto-based corporation that owns the two Katahdin region paper mills is giving Gov. Paul LePage more time to close a deal with a potential buyer of the mills, he said Tuesday.

“We are cautiously optimistic that a deal can be reached to re-establish the long history of papermaking in the Katahdin region to create economic prosperity,” LePage said in a brief statement.

But neither LePage nor Dan Whyte, vice president of Brookfield Asset Management, which owns the East Millinocket and Millinocket mills, would say how much of an extension on the mills’ decommissioning deadline Brookfield has granted. Whyte declined to comment when contacted on Tuesday.

Under the previous deadline, disassembly of the two mills was due to start on or sometime after July 31. Brookfield originally had intended to start the decommissioning shortly after the end of April, but local outrage about the plan helped motivate the company to grant LePage a 90-day extension on April 29. Since then, Maine Department of Economic and Community Development officials have been courting potential buyers.

Adrienne Bennett, the governor’s spokeswoman, said that the new decommissioning deadline “doesn’t belong” in the news media, but hastened to assure the approximately 600 workers that could regain jobs with the revitalization of both mills “that the discussions are ongoing.”

“We hope to consummate a deal and do so in a timely manner,” Bennett said.

While the mills are inactive and could suffer the degradation that inactivity creates, decommissioning is the biggest threat to their future because the papermaking machinery would be sold to other papermakers for use elsewhere or scrapped, local leaders say.

The Millinocket mill closed in September 2008, idling about 150 workers. Another 450 workers were left unemployed when the East Millinocket paper mill temporarily closed due to a supposed wood shortage on April 1.

The Main Street mill never reopened because a San Francisco investor, Meriturn Partners, announced on April 8 that it was backing out of its tentative agreement to buy the mills for $1 by April 29 if certain conditions were met.

Since then, several potential buyers have been courted.

Whyte said on June 14 that International Grand Investors Corp. of Delaware, owner of a mill in Baileyville, was interested in buying the mills for $1.

Rep. Herbert Clark, D-Millinocket, and Millinocket Town Manager Eugene Conlogue told the Millinocket Town Council during its meeting on June 25 that the potential deal had run into several snags. Clark identified one: a lack of wood in the area to make the purchase agreeable. Others in the industry said the area’s wood supply was plentiful, but perhaps not at a price the corporation was seeking.

Mark Scally, chairman of East Millinocket’s Board of Selectmen, said town officials have heard from state leaders that negotiations with “some interested parties” were progressing. A Millinocket resident and Medway businessman has also offered to buy the mills, though he admitted that he lacks the deep pockets typical of mill investors.

In mid-April, Scally proposed that East Millinocket and Millinocket buy the mills for $1 under terms of a deal that Meriturn dropped, form an employee stock option plan and with it give the employees and towns each 45 percent and the mills’ management 10 percent of the company.

The key, Scally said, would be getting “a consortium of banks” to loan about $100 million to totally revitalize the mills, with the loans’ collateral coming from the mills themselves and the employee pension funds. None of that would be easy, Scally said.

LePage and the Maine Legislature agreed to purchase a former paper company landfill in the Dolby section of East Millinocket to help make the mills’ revitalization possible.

In recent weeks Katahdin region leaders have expressed hope that a deal would be made, but have said they have little direct or specific information from state officials about any progress.

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