Recording a save

Quick work keeps endangered mill in operation

Published March 1, 2019 by Gary Robertson

Editor's note: After this story was published, the Richmond Tines-Dispatch reported on March 8 that the Bear Island newsprint mill has again being idled. White Birch Paper had planned to operate the plant for two years before Cascades Inc., a packaging and tissue products company, took over and converted the facility to make recycled paper products. White Birch said the plant's transition to Cascades will still take place.

In April 2017, Linwood Thomas reported to his new job as Hanover County’s economic development director.

Within a month, one of the county’s largest taxpayers — the Bear Island paper mill — announced it was being idled. 

During the same month, Thomas’ wife had their first child.

“It was a very challenging but blessed year,” the 39-year-old Thomas says.

For Hanover, loss of the plant would jeopardize 165 jobs and about a million dollars in annual tax receipts.

“All of a sudden, it was all hands are on deck to fill a facility that very shortly will be vacant, understanding that it could take years to fill it,” Thomas says.

The plant’s owner, Connecticut-based White Birch Paper Co., cited “difficult market pricing, challenging cost fundamentals and declining demand” for newsprint as reasons for closing the facility.

Thomas reached out to site consultants to see whether another company might be interested in the property.

Meanwhile, Danny Holly, a vice president with the commercial real estate firm JLL, had seen a notice about Bear Island being idled. The next morning, he called White Birch officials to see whether they had found someone to market the property. In the ensuing discussions, JLL was hired for the job.

Holly says White Birch was looking for a buyer with a local and national presence. The company didn’t want to sell the plant to a competitor.

“They wanted a lot of information,” Holly says. “We acted more like a business adviser. Clearly, the best-use value was as a paper facility. The last thing you want to do is sell the raw land and salvage” the plant.

Subsequently, JLL began vetting offers, evaluating which ones had the highest probability of success and the best fit for all concerned.

Quebec-based Cascades emerged as the leading suitor. The largest recycled paper collector in Canada, Cascades is a leader in green packaging and paper tissues manufacturing.

At about this point, the Bear Island story took an improbable turn.

Cascades wanted to purchase the plant and revamp it to produce linerboard, which is used in corrugated containers, boxes and related products.

But the project would require reconfiguring the plant’s newsprint paper machine. That raised the possibility that the facility would stand vacant, with substantial job losses, as the revamped machine was readied.

While purchase negotiations were underway, the newsprint market improved. White Birch decided it could operate the plant profitably as a newsprint mill for 27 months under a contract with Cascades.

“A plant that is running is better than a plant that is closed,” Holly says.

Cascades’ interest in the property triggered a burst of activity in Hanover’s economic development office. Thomas worked with state and county officials to prepare an incentive package for the Canadian company, which was being pursued by other states.

Virginia offered a $1.95 million grant through its Commonwealth’s Opportunity Fund. Cascades also is eligible to receive sales and use tax exemptions on manufacturing equipment, plus funding and services to support the company’s employee training activities through the Virginia Jobs Investment Program.

Under the performance agreement with Cascades, the money would be disbursed as the company meets certain investment and employment goals.

They include 140 jobs at the plant paying an average of $75,551 a year — Hanover’s average annual wage is $42,824 — and a Cascades investment of at least $275 million.

On July 26, Cascades announced that it would buy the Bear Island plant for $34.2 million, while investing $275 million to $300 million to upgrade its equipment.

“This project is directly in line with the goals of our strategic plan which include, among other things, to invest in our core sectors of packaging and tissues through modernization, and expand our geographical footprint,” Cascades CEO Mario Plourde said when announcing the deal.

New operations are expected to come online in 2021.

Cascades’ investment makes it one of the state’s biggest industrial projects in 2018, Thomas says.

“I will say it’s the biggest project Hanover has ever seen,” he adds.