JAY — Verso Corp. announced Thursday that it plans to shut down its No. 1 pulp dryer and No. 2 paper machine at the Androscoggin Mill to reduce production, which will permanently eliminate about 300 jobs, according to a company release.
Verso also plans to idle its Wickliffe, Ky., mill, which will result in the layoff of approximately 310 workers.
“One of Verso’s founding principles is to do what’s right for the company as a whole,” Verso President and Chief Executive Officer David J. Paterson said. “This includes maintaining a balance between Verso’s supply of products and our customers’ demand for them. Remaining true to this principle, and after a comprehensive review of our assets, inventory and demand forecasts, Verso has decided to make significant reductions in our coated paper and pulp production capacity at our Androscoggin and Wickliffe mills.”
Foreign competition, high operating costs in Maine, especially high energy costs and local property taxes, were cited as contributing factors.
Verso had challenged Jay’s assessment of valuation and property tax bills for the mill and associated property for the tax years of 2013 and 2014. The town values the mill and property, minus about $74 million in tax-exempt property, for the 2014 tax year at about $593 million. Verso says it should be valued at about $400 million.
Jay granted a tax abatement of $829,258 in January and reduced the mill’s value from $815 million to $591.9 million for 2013. Verso believes the property should be valued at $460 million for that year. The company appealed its case to the state Board of Property Tax Review, which will hear it in late fall, early winter.
Verso plans to reduce production by 430,000 tons of coated paper and 130,000 tons of dried market pulp, according to a release, starting in the fourth quarter of 2015.
The shutdown of the No. 1 pulp dryer and the No. 2 paper machine at the Androscoggin Mill will reduce Verso’s production capacity by 150,000 tons of coated paper and 100,000 tons of dried market pulp. In addition, to help mitigate the high energy and other operating costs in Maine and to make the Androscoggin Mill more competitive in the future, Verso will optimize the mill’s pulp, power and recovery assets. The optimization efforts are expected to take place in the fourth quarter of 2015 and the first quarter of 2016.
“I am at a loss for words,” Town Manager Shiloh LaFreniere said. “We all realize that the paper industry is facing many immediate challenges. Our thoughts are with the many employees, their families and others in the community that will be directly and indirectly affected. As a town, we will get through this together. We are committed to work diligently with the mill during this transition while addressing the needs of our community.”
The Wickliffe Mill has one machine with the capacity to produce 280,000 tons of coated paper and 30,000 tons of dried market pulp.
The notice follows Wednesday’s announcement that the New York Stock Exchange has notified Verso that it has fallen below the NYSE’s continued listing standard requiring that Verso’s average market capitalization be at least $50 million over a consecutive 30-trading-day period. As of Aug. 13, the date of the NYSE notification, Verso’s average market capitalization over the past 30 consecutive trading days was approximately $44.2 million, according to a release.
The decision to reduce its production capacity was driven by several factors. North American coated paper demand is in decline, down 4.7 percent in the first half of 2015, following declines of 3.4 percent and 4.3 percent in 2014 and 2013, respectively, according to the Pulp and Paper Products Council.
The effects on U.S. producers have been made significantly worse by a change in the net trade balance due to the strengthening of the U.S. dollar relative to foreign currencies, which has resulted in increased foreign imports from Asia, Europe and Canada and decreased U.S. exports.
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