It’s official: NH investor buys 2 Katahdin region paper mills

This shuttered paper mill in East Millinocket and the one in Millinocket were purchased by New Hampshire investor Cate Street Capital on Friday, Sept.16.
This shuttered paper mill in East Millinocket and the one in Millinocket were purchased by New Hampshire investor Cate Street Capital on Friday, Sept.16.
Posted Sept. 16, 2011, at 9:38 p.m.
Last modified Sept. 17, 2011, at 6:22 p.m.
A town worker mows the Main Street median in front of the shuttered East Millinocket paper mill Friday morning, Sept. 16, 2011. This mill and the one in the Millinocket were purchased by New Hampshire investor Cate Street Capital on Friday, Sept.16.
A town worker mows the Main Street median in front of the shuttered East Millinocket paper mill Friday morning, Sept. 16, 2011. This mill and the one in the Millinocket were purchased by New Hampshire investor Cate Street Capital on Friday, Sept.16.
In their office off Golden Road in Millinocket, woods camp foreman Larry Pelletier (right) and his brother Eldon Pelletier, president of Gerald Pelletier, Inc., talk with the BDN about the effect the paper mill closings have had on the region. "All these businesses are suffering," said Eldon Pelletier who said he hopes the deal goes through. He and his brother Larry Pelletier said their family has supplied wood to the paper mills for at least the past 40 years. The shuttered paper mills in Millinocket and the one in East Millinocket were purchased by New Hampshire investor Cate Street Capital on Friday, Sept.16.
In their office off Golden Road in Millinocket, woods camp foreman Larry Pelletier (right) and his brother Eldon Pelletier, president of Gerald Pelletier, Inc., talk with the BDN about the effect the paper mill closings have had on the region. "All these businesses are suffering," said Eldon Pelletier who said he hopes the deal goes through. He and his brother Larry Pelletier said their family has supplied wood to the paper mills for at least the past 40 years. The shuttered paper mills in Millinocket and the one in East Millinocket were purchased by New Hampshire investor Cate Street Capital on Friday, Sept.16.

EAST MILLINOCKET, Maine — Two days of intensive work culminated late Friday with a New Hampshire investor’s purchase of two paper mills that will employ as many as 250 workers by mid-October and ignite a rebirth of a Katahdin region suffering a 21 percent unemployment rate.

Gov. Paul LePage’s office announced the creation of the new Great Northern Paper Co. with parent company Cate Street Capital of Portsmouth, N.H., signing a purchase deal with mills owner Brookfield Asset Management late Friday. Participants spent 12 hours signing documents on Friday, finishing at about 10 p.m, said George Gervais, commissioner of the Maine Department of Economic and Community Development.

Great Northern is expected to employ as many as 250 workers in East Millinocket and may hire as many as 500 between it and the Millinocket mill over the next two years.

“Job creation has been a top priority for my administration,” LePage said in a statement released at 10 p.m. Friday that commended Cate Street and state officials for their efforts. “This effort demonstrates not only will papermaking be revitalized in the Katahdin region, but that new opportunities for growth are being developed which will provide long-term stability for Mainers.”

The closing in escrow means Cate Street will operate the mills while it awaits the transfer of environmental permits from Brookfield, which legally cannot occur until Sept. 27. It culminates a years-long sales effort that began with LePage’s predecessor, Gov. John Baldacci, and exhausted a dozen mill suitors before Cate Street appeared.

A final sale is expected later this month.

Reactions to the late-night deal started to flow in on Saturday. U.S. Sen Olympia Snowe was among the first to proffer congratulations, calling the sale “a seminal moment for the Katahdin region.

The last three years have been challenging for these communities, yet the

announcement demonstrates that ingenuity and the hard work of Mainers

can rejuvenate our economy and bring jobs back to our state,” Snowe said in a statement released Saturday. “I welcome Cate Street to Maine and look forward to working with them and the workers to successfully open a new chapter for Maine’s forest products industry.”

“We have a proud tradition of papermaking in the region that has been around since my father and grandfather worked in the mills,” Rep. Mike Michaud, a former papermaker at Great Northern Paper in East Millinocket, said in a statement Saturday. “So many in this region have worked hard to bring it back, and despite the sale and the announcement of hires, there are many that remain without work. While this isn’t a solution to all of our challenges, it’s clearly an important and positive step in the right direction that we can work to build on moving forward. I’d like to thank the Maine Legislature and the governor for their support of the landfill legislation that helped pave the way for this purchase.”

Cate Street Senior Vice President Richard Cyr complimented “the state, the communities of East Millinocket and Millinocket and the mill employees who have all put a lot of hard work and faith into the mills’ rebirth. We look forward to rolling up our sleeves, re-starting papermaking, and exploring potential opportunities to introduce exciting new technologies to the region moving forward.”

Cate Street officials announced Thursday that they would close the sales deal in escrow as soon as possible. Cate Street, Brookfield and state officials worked through Thursday and Friday in Augusta and Portland double-checking line-by-line a massive amount of paperwork.

The approximately 250 workers hired in East Millinocket starting next week will help it fill already-placed orders for virgin newsprint by Oct. 30.

“We still have a great deal of work ahead of us to meet our orders by Oct. 30, but we are very confident in the team of experienced papermakers we are bringing back,” Cyr said.

Market conditions months later will dictate the restart of the Millinocket mill, which closed in September 2008, idling 150 workers. The company also said it plans to invest $20 million to $25 million in the East Millinocket plant.

The tight Oct. 30 deadline — and regional skepticism created by the decades-long shrinkage of the mills and agonizing wait for a mills restart — won’t leave much room for celebrating, officials said.

“You know the bottle of wine I told you I had? I don’t plan on opening it until I see smoke coming from the mill stacks,” said Mark Scally, chairman of the East Millinocket Board of Selectmen.

Under the five-year contract the mills’ unions voted overwhelmingly to approve on Wednesday, the two mills’ papermakers will be the lowest-paid in the state, said Duane Lugdon, a United Steelworkers international representative who helped negotiate the new contracts.

Cate Street Capital will pay returning workers the same wages — $14.98 to $21.63 per hour — Brookfield subsidiary Katahdin Paper Co. LLC paid when when it shuttered the East Millinocket mill in April, idling 450 workers.

However, new workers will get $11 per hour until they complete an 8,000-hour probation period, the lowest wage ever paid starting workers, and the mills’ two USW unions will merge. No wage increases are likely until 2016 except undefined, unscheduled bonuses if Cate Street — an investment company specializing in developing alternative-energy resources — finds its first foray into papermaking profitable.

The workers’ health insurance plan “will be better than what they had when they left the mill, and at the same cost,” said Lugdon, calling the improved health care package and same wages a significant win for the workers.

Being the state’s lowest-paid papermakers is difficult for the workers to swallow, given the excellence of their work and the gradual, painful descent of the mills since the 1980s, when thousands of papermakers worked in the two towns, Lugdon said.

“There has been a long struggle up there,” Lugdon said late Friday. “They have been through a number of ownership changes and a number of those owners extracted [salary and benefits] concessions and portrayed it like it would save the business. It didn’t play out that way.”

Many workers will spend months recovering from the four-month layoff’s financial impact.

“At least this company has not hit them in the pocket in a tremendous way,” said Lugdon, whose negotiators spent hundreds of hours working on the deal. “It is just time to put legs back under those mills and put them back to work so the workers can sleep at night.”

East Millinocket will get $700,000 and Millinocket $900,000 annually in property taxes under their deals with Great Northern. East Millinocket’s Board of Selectmen secured a property tax arrangement with Cate Street on Friday setting the mill property’s value at $30 million.

East Millinocket’s tax arrangement with Cate Street “will remove uncertainty,” Scally said Friday. “We already built our budget on a $30 million valuation [from Great Northern]. With the fear of abatement beginning to go away, that means now the budget we do have planned can be carried forward without further cuts.”

Cate Street’s Millinocket tax payment is the same Katahdin Paper would have paid had it remained the Millinocket mill’s 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.

The Katahdin region endured mill shutdowns before, but perhaps never has the area come so close to losing its mills and cultural heritage. Twice after the shutdown LePage pressed Brookfield to extend its deadline for scrapping the paper mills. The extensions came after the sole mill suitor to agree to buy the mills abandoned the deal on April 8, precipitating the mills’ shutdown.

“The persistence and resolve of Gov. LePage to keep this deal alive, without a suitor in place, and then to search endlessly to find somebody with a project to continue the papermaking in that region, brought us to a damn happy ending,” Gervais said.

“The long-term payoff for attracting a company like Cate Street Capital to Maine could pay dividends to many other regions throughout the state,” he added.

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