Last Millinocket paper machine up for auction

The paper mill in Millinocket is seen last year.
The paper mill in Millinocket is seen last year. Buy Photo
Posted May 20, 2014, at 6:49 p.m.
Last modified May 21, 2014, at 9:37 a.m.

MILLINOCKET, Maine — The end of more than a century of paper manufacturing in this town looks to be at hand with the auction of the No. 11 paper machine and other equipment from the shuttered mill site.

Koster Industries, which advertises itself as one of the leading industrial auctioneers, appraisers and liquidators in the United States, has a listing on its website, kosterindustries.com, of a live on-site and webcast auction of paper mill equipment owned by Great Northern Paper Co. LLC. The website’s listing has no date, but another listing indicates that the auction will be held June 19 at the Great Northern Paper paper mill in East Millinocket.

Cate Street spokeswoman Alexandra Ritchie said the sale of the No. 11 comes after more than two years of searching, with state officials and other stakeholders, for a strategic partner to operate the Millinocket mill. The company determined that it could not restart the mill and be profitable without one, she said.

“While we were not successful finding such a partner, we are confident that we exhausted all options and must move forward with the [auction] sale at this time,” Ritchie said in a statement released Tuesday night.

 

The No. 11 is the last papermaking machine on the Katahdin Avenue site, which in its heyday employed more than 4,000 workers as part of a company formed in 1897 that opened in 1900 under the direction of Garrett Schenck. The mill’s industrial might peaked after World War II, when it owned more than 2 million acres of timberland. It began producing specialty papers for magazines, newspaper supplements, paperbacks and catalogs in the 1950s, according to a history compiled by the University of Maine.

Koster Industries owner Randy Koster did not return telephone messages on Tuesday.

Cate Street Capital is a New Hampshire-based investor that bought the two paper mills in Millinocket and East Millinocket for $1 in October 2011.

“This is a business decision on behalf of the company, of which the state does not have control,” Adrienne Bennett, a spokeswoman for Gov. Paul LePage, said in an email Tuesday. “However, we continue to work with Cate Street to help ensure economic stability within the Katahdin region.”

LePage brokered the deal with the understanding that Cate Street would restart the Millinocket mill when market conditions and enough orders from customers made that possible, officials said at the time.

Whether market conditions ever again would allow the mill to reopen was the subject of debate within the region since the sale. The debate intensified when Cate Street started removing old buildings and equipment from the Katahdin Avenue industrial park in November 2012.

Many residents and millworkers believed that the mill’s closure in September 2008 was premature. They claimed that the mill, which produced catalog, magazine and retail industry fliers, was making about $2 million per month in sales when it closed.

Representatives of then-mill owner Brookfield Asset Management admitted that they had booked the No. 11 machine with orders through 2008 and were running the machine 24 hours per day, seven days per week. The machine’s most productive year, they said, was 2006.

Brookfield officials said the booming cost of No. 2 heating oil, upon which the mill relied to produce steam critical to papermaking, made profitability impossible.

“It wasn’t an issue of quality or our workers or can we get the orders,” Brookfield spokesman Glenn Saucier said of the looming shutdown in 2008. “It’s strictly that we can’t afford to pay so much for oil.”

The East Millinocket paper mill maintained operations until it shut down in April 2011. About 450 workers were laid off. It reopened in September 2011 with about 220 workers. Then it closed again in late January 2014. Cate Street representatives said they hoped to restart the mill in 16 weeks with the completion of an energy and management makeover.

Many residents said that the No. 11 machine would never restart in Millinocket because the removal of too many of its adjacent components made restarting impossible. Cate Street officials said, however, that they were maintaining their purchase agreement with the state so long as No. 11 remained on the site.

They also said that revenues from the razing of the buildings on the Millinocket mill site would be allocated to East Millinocket mill operations, a statement that Ritchie reiterated.

The building that houses the No. 11 will be the home of the $140 million pellet mill that Thermogen Industries LLC, which Cate Street manages, hopes to build later this year or early next, Ritchie said.

“Time is required to appropriately remove the machine and retrofit the building for these efforts, which is why this auction has been scheduled at this time,” Ritchie said.

Auction funding will also “resolve some of the outstanding debts associated with Great Northern Paper’s ceasing operations in January inclusive of all outstanding tax payments to Millinocket and East Millinocket,” Ritchie said.

Records show Cate Street’s Great Northern Paper companies are at least $6.81 million in debt to the federal government, East Millinocket and Millinocket, and several vendors who have sued or filed liens since February 2013.

The Internal Revenue Service is the largest single Great Northern Paper creditor. It filed two liens totaling $2.49 million for nonpayment of corporate income taxes on April 10. Before the IRS filings, vendors supplying the companies had gone to civil court or filed liens for unpaid bills totaling $1.32 million and been paid $117,587, Penobscot County records show.

East Millinocket and Millinocket are owed about $3 million in property taxes. A search of the Penobscot County Registry of Deeds on Tuesday revealed no new liens filed against Great Northern Paper since April 10.

SEE COMMENTS →

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business

Similar Articles

More in Business