February 26, 2020
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Restart of East Millinocket mill delayed as firms clash on electricity agreement

EAST MILLINOCKET, Maine — Negotiations between two companies over electricity sales that would help restart a local paper mill have devolved into finger-pointing and delayed indefinitely the mill’s resumption of production, officials said Wednesday.

Brookfield Asset Management’s attorney said that Great Northern Paper Co. LLC officials have refused to divulge financial information critical to the sharing of earnings from Brookfield hydroelectric dams that use GNP equipment — particularly since GNP has at least $6.8 million in liens and attachments filed against it.

Great Northern’s spokeswoman said Brookfield has enough data to complete the deal and restart the mill but is “delaying.”

“Brookfield has said it would help [restart the paper mill] conditioned on [GNP] providing us their list of creditors and the amount owed, how ongoing mill operations will be capitalized, sources of capital — in short, information that will enable us to assess whether [GNP] will reopen the mill and for whatever it buys to operate the mill,” attorney Harold Pachios said.

“Their refusal to disclose meaningful financial information is a huge problem. We cannot understand why they won’t be open about this,” Pachios added.

“Great Northern Paper has shared sufficient financial information to date in order to move the negotiations forward,” GNP spokeswoman Alexandra Ritchie responded. “Great Northern feels that the ongoing reference to this is really a means to delaying the entire process.

“The proposal received from Brookfield is not in line with what is required for our restart plan,” she added.

The impasse comes a week after Gov. Paul LePage signed a bill into law that allows Brookfield to negotiate the shared profit “as long as there is no reduction in labor force associated with the cessation or reduction of paper production.” The Legislature unanimously approved the bill on April 2.

The dams were built to accommodate Katahdin region mills exclusively. Legislators passed the original law in 2002 to prevent mill owners from closing the mill just to generate electricity. Under state law, Maine people own the water that powers the dams, giving the Legislature a say in how that electricity is used, officials have said.

Mill officials announced the mill’s shutdown in late January and the layoff of 212 of its 256 workers on Feb. 6. The company needs to complete several steps involving the revenue-sharing agreement and increase its papermaking efficiencies to make a restart feasible, officials have said.

The mill’s restart was set for May 1, but “this date is no longer realistic,” Ritchie said.

Ritchie said she didn’t know when a restart would occur and declined to say what steps have been achieved or are still required in GNP’s restart proposal.

LePage offered the revenue-sharing proposal on Feb. 12. Talks between Brookfield and Great Northern began shortly thereafter. LePage’s spokeswoman, Adrienne Bennett, declined to comment on Wednesday.

The mill is a key component of state government efforts to aid the Katahdin region economy with papermaking and a pellet factory proposed for a Millinocket industrial park. The factory would employ 55 workers and possibly be the springboard to a new type of pellet manufacture in Maine, said officials from Cate Street Capital, the New Hampshire-based investment firm bankrolling the project.

The Finance Authority of Maine is due on Thursday to review the pellet-factory proposal offered by Cate Street leaders who helped form Thermogen Industries to oversee the pellet mill. A FAME spokesman said Monday that FAME officials are reviewing two Internal Revenue Service liens totaling $2.49 million filed against GNP on April 10.

FAME had approved a $25 million loan guarantee for the project in October but its board of directors opted to revisit the project after Thermogen officials informed board members in February they were changing the technology involved.

Ritchie has conceded that significant debts have accumulated with GNP and said that the company has never made a profit but remains dedicated to operating the mill. GNP officials are working closely with the IRS to resolve the tax issue, Ritchie said.

Thermogen, she said, is an entity separate from Great Northern and shouldn’t be held liable for GNP debts. Bob Desrosiers, managing director of compliance at Cate Street, described Cate Street as a management company that provides strategic oversight and services to Great Northern and Thermogen, but does not own those companies.

Cate Street officials clarified the relationships between the companies on Wednesday because they felt that confusion over those relationships was hurting the company’s ability to complete the Thermogen project, Ritchie said.

At least $6.8 million in liens, attachments and other debts have been accrued by the GNP companies since February 2013, according to records at the Penobscot County Registry of Deeds.

That total includes about $3 million in property taxes GNP owes East Millinocket and Millinocket. FAME officials have said that the property taxes must be paid before the guarantee is made final. Ritchie has said the taxes would be paid.

Beyond the dispute over financial disclosures, both sides have declined to say what impediments remain to an agreement. Documents both sides shared with the Bangor Daily News indicate that Brookfield has made $4 million to $5 million per month selling wholesale electricity since GNP shut down the mill. A revenue-sharing deal would generate for GNP about $1 million per month during peak-demand times such as winter.

A proposal from GNP contained in a letter dated March 28 and shared with the BDN sought an 80-20 split between GNP and Brookfield of electricity revenues during specified periods each year, with GNP receiving the larger percentage. Financially, GNP sought an initial $1.5 million payment from Brookfield, forgiveness of all its electricity debt to Brookfield until the mill restarts, and $2.1 million in revenues split evenly between Great Northern and Brookfield from Feb. 3 to April 23 based partly on windfall revenue estimates.

Pachios has said that any sharing arrangement would break a 10-year contract both sides signed in 2011 that gives GNP a stable and exceptionally low electrical rate. Brookfield, he said, has declined to collect about $2.4 million in electrical debts GNP owes it and extended its contract several times to help the mill restart.

“That is all in support of business in the Katahdin region,” said Pachios, who didn’t seem fazed by the implied pressure of the revenue-sharing law.

“The Legislature and Gov. LePage made their position clear when they got behind the bill to force us to meet some demands that went beyond the power contract we have with Cate Street. We know the position of the Legislature and governor on this because they back the bill,” he said. “We have made our position on this clear many times.”


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