Paper mills pulled in varied directions as pandemic weakens

MADISON, Wis. -- A flurry of activity has hit pulp and paper mills across the Great Lakes States, as one closed mill was purchased and state politicians in Wisconsin and Minnesota moved to assist mills trying to gain secure footing for future operations.

The Minnesota assistance helped move the Verso mill in Duluth to new ownership in May.

The state of Minnesota assisted the move of the shuttered Verso mill in Duluth to new ownership in May.

Meanwhile, Republican legislators in Wisconsin and Democratic Gov. Tony Evers pointed toward two different sources of federal money as possible avenues for $50 million of loan funding to support the efforts of a cooperative of forest businesses and community leaders in their effort to buy Verso’s huge Wisconsin Rapids pulp and paper mill, which has been closed since June.

Two Republican legislators suggested that the funding could be drawn from COVID-19 relief funding from the federal government. Rep. Scott Krug (R-Rome) and Sen. Patrick Testin (R-Stevens Point) said they want to introduce legislation by the end of May that would authorize the state’s economic development agency, the Wisconsin Economic Development Corporation (WEDC), to lend $50 million for the effort to buy and reopen the mill.

But after the U.S. Treasury announced a $500 million reduction in Wisconsin’s share of relief funding, Evers suggested an alternative source of federal funding. However, Evers’ proposal to accept $1 billion of funds from an expansion of the federal Medicaid program was immediately rejected by the Republican controlled legislature. Evers had suggested that money could provide some of the necessary financing to reopen the Verso Wisconsin Rapids mill, perhaps under the ownership of the business cooperative.

The Wisconsin Rapids mill situation was further complicated by a fire in the huge mill complex that broke out on May 25. The fire was extinguished by firefighters from nearby communities. Its cause is under investigation.

The fate of the smaller Verso paper mill in Duluth appears on a smoother and more definite course. S.T. Paper of Oconto Falls, Wisconsin closed on purchase of that mill in May and announced that it will convert it from manufacturing general printing paper to making tissue paper, a product with a more secure level of demand. The acquisition was the subject of proposed state of Minnesota funding of $3 million in a forgivable loan. S.T. Paper pledged to invest $25 million in the mill to convert it to tissue paper.

S.T. Paper has a successful track record of converting general printing paper mills to other products in Oconto Falls and also in Virginia.

Adding to the confused paper mill situation, the Canadian company Paper Excellence, agreed on May 3 to buy Domtar, a leading U.S. manufacturer of printing paper. Domtar operates mills in Nekoosa and Rothschild, Wisconsin.

Paper Excellence has offered $55.50 per share for Domtar stock (a 37% premium over the stock price when the deal was announced). In announcing the transaction, Paper Excellence said it “intends to continue the operations of Domtar as a stand-alone business entity”.

Evers' doomed financing for the Wisconsin Rapids effort also included $15 million in a financing package to reopen the Park Falls, Wisconsin paper mill. The mill was formerly owned by Flambeau Paper Company. It was purchased as Park Falls Pulp and Paper in September by an ownership group led by Yong Liu, President of Faith Group, Inc. The group bought the mill out of receivership in November, 2019. They projected converting the mill to manufacturing of packaging materials. The mill had been previously owned by Flambeau Paper Company before going into receivership.