AUGUSTA, Maine — The installation of natural gas lines and “a separate renewable fuel project” involving wood are part of a New Hampshire-based investor’s plans to buy and run the two Katahdin region paper mills, Gov. Paul LePage’s office said Tuesday.
Cate Street Capital of Portsmouth, N.H., which describes itself as a national leader in developing green energy companies, signed an asset purchase agreement on Tuesday for the Millinocket and East Millinocket mills for an undisclosed price. The closure of the deal could come as early as mid-September, state officials said.
“This is a significant milestone in our efforts to not only restore papermaking in the Katahdin region, but to create job opportunities for Mainers,” LePage said in a statement. “I want to commend the hard work and commitment of Brookfield [Asset Management, the mills’ owner] and Cate Street. We look forward to continuing to work toward a closing.”
If all goes well, as many as 500 workers could be employed in East Millinocket and Millinocket in several months, said George Gervais, commissioner of the Maine Department of Economic and Community Development.
As many as 200 East Millinocket papermakers could return to work to fill already-placed orders for virgin newsprint, one of the plant’s specialties, by early October, with the plant’s recycled newsprint operations resuming as orders arrive, said Rosaire Pelletier, the governor’s adviser on forest product industries.
“They want to start No. 6 [East Millinocket’s papermaking machine] as soon as possible,” Pelletier said.
The Millinocket mill’s production of magazine-style catalog and newspaper inserts is not expected for several months. It again depends on whether orders are placed, Pelletier said.
“The full intent of Cate Street is to restart No. 11 [Millinocket’s sole papermaking machine] and it would be driven by the market,” Pelletier said.
All terms of the agreement were not immediately available, but Cate Street said in a statement that it has been “studying the mills’ feasibility for months” and has about 30 days to meet several conditions for the deal to proceed.
“Signing this agreement is a great first step, but there remain significant hurdles to overcome in a relatively short period of time,” Cate Street Capital Senior Vice President Richard Cyr said Tuesday in a statement. “We will work diligently to resolve all outstanding issues over the next few weeks so this project may proceed.”
“It will take great effort and compromise from all parties,” Cyr added.
LePage’s press secretary, Adrienne Bennett, characterized the potential mill restart as one of the most significant economic achievements of the LePage administration but agreed that much work needed to be done before the Katahdin region could return to papermaking. The region’s last paper mill, East Millinocket’s plant, closed on April 1, idling about 450 workers.
“This is a significant step in the right direction. … We don’t want to say this is a done deal yet,” Bennett said Tuesday. “Clearly Cate Street has shown a commitment to these mills. We are very excited about moving forward.”
Gervais said he believed that the signing of the intent-to-purchase agreement was the largest hurdle all sides would have to overcome.
Katahdin region leaders greeted the news with great satisfaction. Millinocket Town Manager Eugene Conlogue expressed hope that the reopened mills would relieve the Katahdin region of its brutal unemployment rate — 21.1 percent in July, down from 21.8 percent in June.
“This is obviously very exciting news that brings new hope to the Katahdin region,” Conlogue said Tuesday.
“If I could turn a cartwheel, I would,” East Millinocket Administrative Assistant Shirley Tapley said.
“If I had a tail I would be wagging it,” Millinocket Town Council Chairman John Davis said. “I am feeling pretty good about this.”
“I am really delighted because everybody has been hanging on edges and nails for so long,” said state Rep. Herbert Clark, D-Millinocket. “This is some good news going in the right direction.”
Based in Portsmouth, N.H., Cate Street Capital is a private equity firm that has raised more than $6 billion to finance more than 40 projects in the last 15 years. The firm specializes in renewable energy and green technology projects.
The company most recently made the news when it opened the new 100-acre Red Desert Water Reclamation center in Wyoming on Aug. 24. The facility recycles water from the drilling of oil and natural gas wells in the Greater Green River, Hanna, Laramie and Wind River basins. Red Desert Water Reclamation will have capacity to treat approximately 20,000 barrels of “produced” water from Wyoming oil and gas drilling daily, according to the company’s website, reddesertwater.com.
Cate Street Capital was among investors looking earlier this year to buy the Gorham Paper LLC mill in Gorham, N.H., but that deal fell through before Patriarch Partners bought the mill in May. The company also has proposed a biomass plant in Berlin, N.H., according to media reports.
Through its Katahdin Paper Co. subsidiary, Brookfield Asset Management of Toronto owns the two Katahdin region mills and the company that operated the East Millinocket mill, Twin Rivers Paper Co. It also owns Brookfield Renewable Power, which owns 186 megawatts of electricity-producing dams on the Penobscot River and other bodies of water in Maine, according to Brookfield’s website.
East Millinocket’s mill was an integrated pulp and paper facility and a leading North American supplier with the capability to offer products with high recycled fiber content. It operated two paper machines that can produce 250,000 tons a year of uncoated groundwood papers for directory, catalog, book, insert and newsprint applications.
The Millinocket mill has a 180,000-ton-per-year supercalendered paper machine capable of producing paper for catalogs, magazines and retail industry fliers. It closed in September 2008, eliminating about 200 jobs.
In recent months, senior staff from the governor’s office and the commissioner of the Maine Department of Economic and Community Development met with several potential buyers before completing the signed purchase agreement on Tuesday.
Among the conditions is a tax deal with the mills’ host towns. Those details have yet to be decided, but Conlogue said he expected that Cate Street and Millinocket residents would live comfortably with the tax deal. No cuts to town services deeper than those in the town’s 2011-12 fiscal year budget are likely to occur, he said.
Mark Scally, chairman of East Millinocket’s Board of Selectmen, said he was unsure how any looming tax deal would affect his town. The town’s attorneys have met with Cate Street’s attorneys to discuss taxes, but Scally said he has no details from those discussions.
Another condition: the installation of natural gas lines to heat the water needed in the Millinocket mill’s papermaking. The mill’s oil needs were blamed for its closure in September 2008.
The state is fully committed to helping Cate Street install the lines within two years, Gervais said. The Millinocket mill will operate without gas, possibly on oil, until then, he said.
The installation of natural gas lines will greatly broaden the region’s industrial potential, Gervais said, and possibly lead to the commercial manufacture of “an alternative energy product,” occurring at the Millinocket site.
The Millinocket plant is located at one end of the Golden Road, one of the state’s primary industrial conduits into the North Woods, and near the Penobscot River and its hydropower dams. The mill site also has industrial electricity and a rail spur for freight hauling, making it one of the Katahdin region’s prime industrial sites, officials have said.
The East Millinocket mill has a pipeline that connects its pulp-making facilities to the Millinocket plant, one of several factors that make them a tandem operation.
“This company wants to grow the assets of Millinocket and East Millinocket into clean energy because that is their core product,” Pelletier said.
He and Gervais declined further comment. Cate Street officials did not return telephone messages seeking comment.
Scally complimented Brookfield for twice extending the mills’ decommissioning dates to help state officials in their search for a mills buyer and state Rep. Clark for helping engineer the state Legislature’s vote to clean up an old landfill used by the paper mills in East Millinocket, the contamination of which was seen as a major roadblock in any mills deal.
“It is not the end of the race but it is at least a good start,” Scally said, advising residents to “keep your fingers crossed.”
U.S. Sens Susan Collins and Olympia J. Snowe, R-Maine, commended the LePage administration for its work to this point.
“Averting the loss of this critical component of Maine’s paper industry is of paramount importance, and I will continue fighting at the federal level to improve the economic climate for these key economic engines in the Katahdin region,” Snowe said in a statement Tuesday. “Going forward, I am committed to help the new buyer invest in these mills to bring innovative and diverse energy sources to the region.”
“These facilities are critical to the economy of our state, especially the Katahdin region,” Collins said, pledging to “do all I can to assist, at the federal level, to help get these mills up and running, and allow people to go back to work, as soon as possible.”
A home to papermaking for more than 100 years, the Katahdin region has endured years of speculation about a potential investor in the Millinocket mill, and weeks of negotiations with another would-be buyer, Meriturn Partners, before Meriturn pulled out of the possible deal in late April.
Meriturn had signed a letter of intent Feb. 11 to purchase the two mills from Brookfield for $1 by April 29 if several conditions were met. Meriturn sought a $48 million tax break over 10 years from East Millinocket and Millinocket, which the towns never accepted.
The towns were in negotiations with Meriturn and the paper mills’ unions had agreed to a tentative deal that would have made them the state’s lowest-paid papermakers when the company opted to pull out.
Town leaders are hopeful that things will go better with Cate Street. Conlogue, Scally and Gervais praised LePage and Pelletier for their success at getting Cate Street to sign a purchase agreement — an arduous task, Gervais said, given the many moving parts to a mills deal.
“If either of them [LePage and Pelletier] had not been on board through this critical time we would not be talking about the sale of the mills. We would be talking about a salvage operation,” Conlogue said. “The governor and Mr. Pelletier have given this area new hope for a prosperous future.”
“He has been there as the voice of expertise from the state’s perspective in dealing with these mills. He understands what it takes to get a deal like this done,” Gervais said of Pelletier. “He speaks the language of the mill operators, the potential investors and politics.”
Originally employed under the Baldacci administration, Pelletier was retained by LePage for his familiarity with the mills deal.