Katahdin mill looks for orders to sustain operations past July

MILLINOCKET – A Fraser Papers executive who oversees the Katahdin Paper Co. LLC mill expressed confidence Thursday that the mill will operate beyond July 28, but even he doesn’t know for how long.

Glen McMillan, a senior vice president and chief financial officer of Fraser Papers of Toronto, rebutted millworker claims Wednesday that the mill will operate into September, possibly until Oct. 1. He also doubted an alternative energy plan to wean the mill from the oil dependence will be ready by then.

“As of today, we have no confirmed orders beyond July 28, only through to July 28,” McMillan said Thursday. “If we don’t have any profitable orders for Aug. 1, then we won’t start on Aug. 1. If we have profitable orders until Aug. 31, then we will run until Aug. 31.”

He added that company officials “are optimistic that we will get orders beyond July 28 that will have that mill operate on a cash-profit basis in the short term.”

Echoing Gov. John Baldacci’s declaration of the reprieve Wednesday, McMillan said the mill must get orders and positive cash flow beyond the shutdown date, which was announced May 29. It needs an adequate backlog to schedule production efficiently, he said.

Company officials are discussing orders with 20 customers, he said, and working with timberland owners and local merchants that supply the mill to see how they can help.

“It takes awhile to get through to all of our customers,” McMillan said. “I am hopeful that in the next few weeks we will have some clarity on the number of orders we get and how much longer we will be able to run.”

With its steam production powered by oil, Millinocket’s mill faces extinction unless oil prices drop or another energy source is used. It used about 400,000 barrels in 2007.

If the Katahdin Avenue mill closes, 208 jobs will be lost. While the Katahdin Paper Co. mill in East Millinocket, which employs about 350, would remain operational, senior workers from the Millinocket mill could take the jobs of their less-experienced peers at the neighboring facility.

Fraser operates the mills for owner Brookfield Asset Management. East Millinocket’s facility makes telephone directory paper. Millinocket’s creates catalog, magazine and retail industry fliers.

A shutdown would devastate a Katahdin region economy already suffering higher-than-average unemployment and an exodus of people that nearly halved the region’s population. Both were caused by the closure of two mills in 2002. The mills reopened in 2003 under new owners and with vastly reduced work forces.

Baldacci said he discussed the mill with Fraser Chief Executive Officer Peter Gordon on Thursday and got further reassurances that the mill’s owners were committed to staying open as long as is feasible.

“They want to take this one step at a time,” Baldacci said Thursday. “Right now what we are looking at is their committing to go beyond July 28. That’s very important.”

Maine’s federal delegation expressed optimism Thursday with news of the reprieve.

The announcement “is welcome news, and I am hopeful that it demonstrates a commitment to the region and the future of the mill’s operations,” U.S. Rep. Michael Michaud said in a statement.

“It will hopefully provide the time needed to refine operations and keep the mill open long-term,” Sen. Olympia J. Snowe said. “Moving forward, we need to continue to work hand-in-glove to ensure that support is in place to help the mill’s workers should the company shut down at the end of September.”

The delegation has worked with federal and state agencies, and visited the mill, to discuss options for keeping the mill open and ensure that workers have access to every government resource.

Summer is a major part of the mill’s ability to survive despite its oil addiction, McMillan said. He explained that the warmer summer temperatures cut the mill’s oil needs by about a third.

“If we were making this decision in the middle of winter, it would be challenging for us to keep the mill running on a cash-profit basis,” he said.

With that, McMillan’s doubts about an alternative energy source plan being ready by fall create a gloomy long-term outlook for the mill.

“I can’t see us making any announcement on that before the end of September. We won’t make an announcement before that time,” McMillan said. “Any alternative energy source would likely involve biomass [boiler systems], and there are many parties that need to sign off on that. Large projects like that require capital. It will take awhile.”

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