LePage optimistic that Katahdin mills will restart

The East Milloinocket paper mill is seen at night in February.
The East Milloinocket paper mill is seen at night in February.
Posted Sept. 14, 2011, at 4:22 p.m.
Last modified Sept. 14, 2011, at 5:30 p.m.

AUGUSTA, Maine — Gov. Paul LePage is optimistic that a New Hampshire investor will close a deal to buy the two Katahdin region paper mills by midnight Thursday, putting several hundred people back to work, his spokeswoman said Wednesday.

“We are getting very close to that deadline but we are optimistic,” press secretary Adrienne Bennett said. “There are a lot of meetings and discussions with lawyers going on. We are working in the right direction and hopefully we will have a positive outcome to all of this.”

Leaders of the mills’ host towns, East Millinocket and Millinocket, did their part Tuesday in helping set tentative property tax and tax increment financing deals with Cate Street Capital, the Portsmouth, N.H.-based energy investor making its first foray into the paper manufacturing business with the new Great Northern Paper Co. LLC.

Like LePage, Cate Street continues to work to close the deal, company spokesman Scott Tranchemontagne said Wednesday.

“We are pleased with the agreements, and pleased to have cleared a few more hurdles in the process,” Tranchemontagne said. “We remain cautiously optimistic that we will be able to overcome remaining challenges and close the purchase on Thursday.”

If all continues to go well, as many as 500 workers could be employed at the mills within several months, state officials have said. As many as 200 East Millinocket papermakers could return to work to fill orders for virgin newsprint, one of the plant’s specialties, by early October, with the plant’s recycled newsprint operations resuming as orders arrive.

The mill employed as many as 450 workers when it shut down in April.

The mills’ unions are meeting at 7 p.m. Wednesday at Schenck High School in East Millinocket to vote on a possible contract with Cate Street. More than 400 workers are expected to attend, said Duane Lugdon, a United Steelworkers international representative.

Cate Street continues to work to finish its deal with the mills’ parent company, Brookfield Asset Management of Toronto, by Thursday, Tranchemontagne said. The company signed a tentative agreement on Aug. 30 to buy the mills for an undisclosed price. Part of the deal is the immediate restart of and an estimated $20 million investment in the East Millinocket mill.

The company received financing last week to start building a $275 million biomass boiler in Berlin, N.H. Cate Street specializes in the development of alternative-energy resources, including torrefied wood. Also known as biochar, torrefaction involves roasting wood chips until they store enough energy to compare to coal — which scientists say is responsible for more than one-third of the world’s carbon dioxide emissions — without many of the pollutants involved in coal burning.

As part of the Cate Street deal, the Millinocket mill’s production of magazine-style catalog and newspaper inserts is not expected to resume for several months. It again depends on whether orders are placed, state officials have said. That mill employed as many as 150 workers when it closed in September 2008.

Richard Cyr, a senior vice president of Cate Street Capital and possible chief executive officer of the new Great Northern Paper Co., has stressed that all conditions of the agreement Cate Street signed with Brookfield must be met by the deadline or the deal would die.

By virtue of the number of people employed, the restart of the mills would be the largest single economic development accomplishment of the LePage administration.

“The governor has invested a lot of time and resources into this,” Bennett said. “It certainly is a priority for the administration. We want to get people back to work.”

As part of the tax and TIF deals Millinocket’s Town Council voted 7-0 to accept on Tuesday, Cate Street would pay the town $900,000 in property taxes annually, the same amount Katahdin Paper Co., the mill’s present owner, would have paid had it remained the owner.

Katahdin Paper removed equipment from the site over the last several years that reduced its annual property tax payment by $1.7 million to $900,000, Town Manager Eugene Conlogue said.

“It is a fair level of taxation. It gives the town stability and it gives the company predictability,” Conlogue said. “That is a good deal for both parties.”

As part of the new agreement, the TIF, which currently would lapse on the property in the 2020-2021 fiscal year, would be extended on qualified investments installed after the sale to the 2030-31 fiscal year. An unnamed portion of the tax would be paid for by a Finance Authority of Maine loan, a copy of the proposed agreement states.

Cate Street would “use its best efforts to pay the outstanding 2011-12 property taxes as soon as possible following closing” of the deal, the agreement states. “Both GNP and the Town realize that there is a ‘ramp up’ period for the mills following acquisition and that cash flow will be limited during that period.”

For that reason, interest on the first half-year payment due in November would not begin to accrue until Jan. 1, 2012 — and then the interest would be 7 percent per annum.

Tax Increment Financing dedicates portions of tax gains, or tax increments, from new or redeveloped business — in this case, a revitalized paper mill — within certain defined districts to finance debt created by the project and to finance improvements in those zones or within the municipalities that employ TIFs.

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