Mill has lost $57M since ’04 restart Fraser official vows to reopen Millinocket plant if biomass talks succeed

MILLINOCKET – It has lost at least $57 million since its June 2004 restart, but the Katahdin Avenue paper mill “has a world-class machine” and a commitment from Fraser Papers to reopen the mill if biomass energy negotiations end favorably, a Fraser executive said Tuesday.

“The mill has good equipment and [the mill’s No. 11 paper machine] has always been categorized as a world-class machine,” said Glenn McMillan, whose Toronto-based company manages the Katahdin Paper Co. LLC mills in East Millinocket and Millinocket for multibillion-dollar conglomerate Brookfield Asset Management of Toronto.

“The equipment is new and relatively good,” McMillan said Tuesday. “The biggest issue we face is oil.”

A senior vice president and chief financial officer of Fraser Papers, McMillan is the highest-ranking official in the mill’s hierarchy to publicly discuss the mill’s future since the parent company announced on Aug. 26 that the mill would be shutdown indefinitely beginning this week.

Brookfield had announced on May 29 that the mill would be shut down in 60 days, but the closure was repeatedly delayed as Gov. John Baldacci intervened, mill paper customers supported the mill with purchase orders and Katahdin Paper managers reported significant energy savings.

Then on Aug. 26, Brookfield surprised mill workers and state officials with another announcement that the mill would be shut down by about Sept. 2. The mill was finishing its final orders Tuesday before workers began the mothballing and layoff processes, which are expected to take another two weeks.

Peter Gordon, a managing partner at Brookfield and chief executive officer of Fraser Papers, has not returned telephone messages seeking comment since the shutdown notice. A local union president called on Brookfield last week to state its commitment to the mill, saying he was “tired of being lied to” by mid-level managers.

A multibillion-dollar conglomerate, Brookfield Asset manages $95 billion in holdings in North and South America and Europe. It owns a controlling interest in Fraser and is a parent company to Brookfield Renewable Energy and Katahdin Paper. Katahdin Paper operates mills in East Millinocket and Millinocket.

The governor has said he will hold Brookfield to its commitment to reopen the Millinocket mill in 2009 if negotiations to install a biomass boiler are favorable. The shutdown will put as many as 208 workers from both mills on unemployment, devastating the Katahdin region’s already-fragile economy.

Workers had said that they have heard from mill management that negotiations are within a month of culmination, but McMillan declined to divulge any restart dates, saying that negotiations are ongoing.

“We will restart the mill when we can operate it profitably. That’s the same thing we said in our May announcement and the same thing we said when anybody’s asked us,” McMillan said.

McMillan bristled at Baldacci’s criticism that the Aug. 26 announcement of a Sept. 2 shutdown was abrupt and poorly handled and at union claims that the mill is actually making money.

But he seemed to agree with Baldacci that it would have been helpful to have a restart plan in hand on Aug. 26.

“Would we have liked to have had a plan in place where we could assure people that the mill would be operating in the future? Yes, we would have liked to have done that,” he said.

Despite Brookfield’s consistent support, the No. 11 machine lost $22 million in 2004; $11 million in 2005; $14 million in 2006; and more than $10 million in 2007, McMillan said.

In 2008, the machine was projected to record $6.6 million in profits, but it has lost money so far this year as of Aug. 31, McMillan said, due to the high cost of oil.

“The [Brookfield] commitment to the Millinocket mill has been evident by the support of it when it was not making money,” McMillan said.

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