EAST MILLINOCKET, Maine — The Katahdin Paper Co. LLC paper mill on Main Street will close in 60 days if a pending deal to buy it and a closed sister mill in Millinocket is not consummated, company officials say.
Katahdin Paper parent company Brookfield Asset Management of Toronto will issue the Worker Adjustment and Retraining Notice, which provides a 60-day warning of a closure, on Tuesday, said Andrew Willis, a company spokesman.
Willis could not say whether the closure would occur even if the deal was still in the works. Nor would he say why the plant would close, though officials from Meriturn Partners LLC, the San Francisco-based investment group that announced last week that it has signed a letter of intent to acquire the mills, have said the mill has not made money for several years.
To Duane Lugdon, Maine’s United Steelworkers Union international representative of the 320 USW members at the East Millinocket plant, the shutdown talk is no bluff.
“I have talked with the prospective ownership and he [Meriturn partner Lee C. Hansen] has assured me that this is not a tactic he dreamed up,” Lugdon said. “They told me that they didn’t even know about it until it was announced. … I am convinced there was no collusion between them [Brookfield and Meriturn] to do this.”
Besides the mill’s losses, Brookfield is leaving the papermaking business because it was never comfortable in it, Lugdon said.
“It’s an energy company and they ended up with the ownership of these mills simply to get the energy assets. They have never had an affinity to run these paper mills,” he said.
Through its Katahdin Paper Co. subsidiary, Brookfield Asset Management owns the two mills and the company that operates the East Millinocket mill, Twin Rivers Paper Co. It also owns Brookfield Renewable Power, which owns 186 megawatts of electricity-producing dams on the Penobscot River which supply the mills with electricity, according to brookfieldpower.com.
According to the U.S. Department of Labor, the federal Worker Adjustment and Retraining Notification Act requires “employers to provide notice 60 days in advance of covered plant closings and covered mass layoffs.” In general, employers are covered by WARN if they have 100 or more employees.
If the WARN notice is filed Tuesday, the warning period would end April 22, going by calendar days.
The deadline for the Meriturn-Brookfield deal is April 29. Union agreements are among several issues to be addressed before the deal is completed, Willis has said. The others include arrangements to establish a biomass cogeneration facility at the Millinocket mill to relieve the mill of the dependence on oil that forced its closure in September 2008; to set property taxes — and seek tax breaks — with local municipalities; and to finish environmental and commercial reviews begun in December, he said.
Mark Scally, chairman of East Millinocket’s Board of Selectmen, said that with negotiations with unions over wages and with the state and municipalities over tax breaks due to begin, the WARN notice is both a negotiating tactic and a reality check.
“The mill is not making any money. They are losing money every day,” Scally said Monday. “The former governor has said they had four or five suitors [possible mill buyers] left, but they [Meriturn] have left us to believe that there is nobody left.”
Former Gov. John Baldacci said last week that several investors have expressed interest in buying the mills. Baldacci was involved in attempts to restart the Millinocket mill since it closed and in efforts to sell both mills for several months. His forest products adviser, Rosaire Pelletier, has stayed on with Gov. Paul LePage’s administration to help close the deal.
The shutdown notice is a bad move, Lugdon said, in that it imperils the mill’s customer base.
“Whenever you announce that a supply line may be closing, that has an impact on customers. They become sensitive to the news and begin looking for other suppliers. Orders kind of walk away at that point,” Lugdon said. “Brookfield is having an impact on customers here and that’s not wise. We need to retain customers for these mills as opposed to endangering them.”
If completed, the deal would help secure the East Millinocket mill’s future and restore as many as 150 full-time manufacturing jobs at the Millinocket mill plus dozens more to help operate and supply a new biomass boiler that would replace the mill’s oil burners, state officials said.
East Millinocket’s mill employs about 450 workers, state officials have said. The Millinocket mill employed about 175 workers when it closed. Brookfield officials said the mill was closed because of its reliance upon oil to create steam needed for its papermaking.
The Millinocket mill has a 180,000-ton-a-year supercalendered paper machine capable of producing paper for catalogs, magazines and retail industry fliers.
The East Millinocket mill is an integrated pulp and paper facility and a leading North American supplier capable of offering products with high recycled fiber content. It operates two paper machines that can produce 250,000 tons a year of uncoated groundwood papers for directory, catalog, book, insert and newsprint.
Scally, who was among several municipal officials to meet Meriturn officials last week, said, “The impression I got from the people that represent them is, ‘This is it.’ Their big line is, ‘There will be pain.’ My line is, ‘That which does not destroy us makes us stronger.’”
“The most important thing is, we can make this work. We can get through this,” Scally added. “We can do it, but also, it’s a circuitous route, because there are several parties that have to agree on everything.”
Achieving that agreement will take a great deal of responsible planning on all sides, Lugdon said, as the deal will affect all of the subsidiary industries that profit from the papermaking industry and the families of all involved.
“We intend to be absolutely responsible here. We are easily talking about 5,000 individual lives here and nobody can afford to be irresponsible with those lives,” Lugdon said. “If we are all responsible, then we will all be OK and build a secure future for these mills.”