LePage says state helping GNP find partner, but his patience with nonpayment ‘is running thin’

Posted Aug. 21, 2014, at 4:09 p.m.
Last modified Aug. 21, 2014, at 8:45 p.m.

EAST MILLINOCKET, Maine — The local paper mill won’t restart unless its owner finds a financial partner, and that likely won’t happen until at least the November election, if ever, Gov. Paul LePage told millworkers on Thursday.

LePage partly chided and defended mill investor Cate Street Capital and the Great Northern Paper Co. LLC it formed to operate the town and Millinocket paper mills. The LePage administration gave its full support to Cate Street when it bought the mills for $1 from Brookfield Asset Management in October 2011.

He pledged his full support of Great Northern Paper’s efforts to restart the mill and for the 212 of 256 workers laid off from the newsprint manufacturer since Feb. 6, but said his patience “is running thin” with its inability to pay creditors or local property taxes.

“We would love to see everybody paid off here,” LePage said after a 1½-hour meeting with members of United Steelworkers Local 137, the mill’s largest bargaining unit, at the town office on Thursday. “But [Cate Street] took over something that was a lot bigger than they thought it was.

“We are trying to find them a partner or investor,” LePage added, saying that the state has no program or funding that would allow it to operate or partner with a private investor on a mill.

LePage, his forest products adviser, Rosaire Pelletier, and his economic adviser, John Butera, had a delicate line to walk in appearing before the union. LePage and Pelletier continued the work Pelletier began under former Gov. John Baldacci in wooing someone to replace Brookfield.

They vetted Cate Street and supported the purchase deal. And according to filings with the Maine Ethics Commission, Cate Street Capital is a campaign contributor. It donated $2,500 to LePage’s campaign for re-election, while its CEO and president, John R. Halle, gave $3,000, and Alexandra Ritchie, its government and community relations officer, gave $500.

Cate Street and the company it recently formed, Thermogen Industries LLC, also represent a new industry, industrial pellet manufacturing. Thermogen said it plans to build plants in Millinocket and Eastport, pending state permit review and further investment.

Slated for Millinocket, the first $140 million pellet facility has been repeatedly delayed, although if it is successful in launching in late 2015, it reportedly would represent 55 jobs directly, 281 indirectly and produce 300,000 tons of high-energy biofuel pellets annually for distribution to European and United Kingdom electricity plants as a coal substitute.

LePage and Butera acknowledged their support of Cate Street but said that the company has not taken advantage of financial aid from the state. The Finance Authority of Maine’s $16 million loan for Thermogen has been approved, but Thermogen hasn’t yet closed on it, Butera said.

Part of the problem, LePage said, is that aside from Sappi Fine Paper North America, Maine no longer has any of what he called Tier 1 investors in the paper industry — proven worldwide or major players who know the market and what it takes to survive.

Maine’s Tier 2 investors, such as Lincoln Paper and Tissue LLC, are hardy but able only to hang on as the industry takes one buffeting after another, and Maine’s industrial energy costs render it unable to compete in the larger world economy, he said.

For that, LePage blamed Democratic state legislators, who he said have pet energy projects such as wind-to-energy sites that don’t produce enough consistent electricity to be industrially competitive.

“It has taken me four years to talk about [the state's] long-term energy needs, and I still have got Democrats who don’t understand what” the state needs, LePage said. “They fight everything I do.”

LePage called Cate Street a “third-tier investor” — a less than prime-time player in the paper industry, learning the hard way how difficult the business is. LePage added that he had his doubts about Cate Street right from the beginning.

“When they came in and told us how much they wanted to invest, I said, ‘That’s way too little to make it go,’” the governor said. “But they were the only game in town.”

LePage said Cate Street hasn’t set deadlines for completion of the search for a partner, or for restarting the East Millinocket mill. Efforts to scrap the Millinocket mill have been grinding onward, with the town slowly getting payouts toward the $1.08 million Great Northern Paper owes the municipality in back property taxes, not counting interest.

“There is no question in my mind that [an East Millinocket restart] won’t happen before the election,” LePage said. Investors, he said, are unlikely to jump into the state’s paper market without first knowing who will be in the governor’s office. LePage is running against Democrat Mike Michaud and independent Eliot Cutler.

Alexandra Ritchie, GNP spokeswoman, didn’t dispute LePage’s restart timeline when she released a brief statement Thursday.

“The timing of a potential restart depends fully on when the necessary due diligence can be appropriately completed by potential investors,” she said. “GNP is very appreciative of the on-going support of the state, the union and of GNP’s employees, as they collectively continue to work towards future plans for the mill’s success, and understands that this has been a difficult time for all those involved.”

LePage’s promises to search far and wide for a new mill partner heartened the workers who attended his appearance at the town office, said Chris Morin, a wrapper operator at the East Millinocket mill and guard-trustee with Local 137.

Morin said they found LePage’s presentation a good mix of realism, hope and pragmatic detail. LePage, meanwhile, placed some of his hopes in Pelletier, an industry veteran who has helped rescue several paper mills during his time in both administrations.

“Rosaire,” he said, “is working feverishly to find people to invest in this mill.”

BDN Writer Mario Moretto contributed to this report.

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