The Finance Authority of Maine has approved $12 million in tax credits under the Maine New Markets Capital Investment Program for a Chinese paper company to restart pulp manufacturing operations in the closed Old Town mill.

The deal also includes additional financing for Nine Dragons Paper Ltd. for a total investment of $31.8 million, according to a FAME news release issued Thursday. The tax credits will be awarded over the next seven years.

Nine Dragons and its U.S. subsidiary, ND Paper, will receive the financing through six community development entities, acting as intermediaries.

The companies will use the investment proceeds for various capital improvements, working capital, construction, equipment purchases and other related improvements in order to restart and optimize the pulp manufacturing facility, the release said.

When Nine Dragons bought the mill, CEO Ken Liu said the company planned to make capital investments and restart it in the first quarter of 2019 with the capability of annually producing 275,000 metric tons of unbleached kraft pulp, the raw material used in paper products. Nine Dragons is Asia’s largest producer of container board.

The New Markets financing is expected to create or retain roughly 130 direct and 635 indirect jobs related to the site, according to FAME.

The Old Town mill site has been idle for about 3½ years. In October, OTM Holdings sold the mill to ND Paper, which operates three pulp and paper mills in North America, including the former Catalyst paper mill in Rumford. ND Paper pledged to invest $111 million in the Rumford mill, including an equipment upgrade that would increase a paper machine’s capacity by 20 percent, and to build a greenfield recycled pulp facility there.

The Old Town mill has gone through multiple owners and some controversy in the past five years.

A Connecticut-based liquidation consortium, MFGR LLC, bought the Old Town Mill in January 2016 after it was closed in 2015. It was initially feared that MFGR would sell the mill for scrap, but instead MFGR worked with city officials on a plan to redevelop the site. In January 2018, OTM Holdings purchased the mill with plans to redevelop it into a wood fiber-based complex.

But OTM later found itself involved in a complicated plan to sell renewable power to the nearby University of Maine campus in Orono. The plan called for reviving the mill’s biomass plant and then leasing those power-generating assets to ConEdison Solutions, which was negotiating a $100 million contract to deliver renewable power to the university.

Secret recordings of some of the partners involved in the plan led to charges of conflict of interest and improper use of insider information. The deal was ultimately abandoned.

Old Town also won’t be the first mill to tap New Markets investments.

The now-defunct Great Northern Paper was the first company to take advantage of the program, which provides tax credits to investors who back businesses in low-income communities. Tax credits can be used to reduce the amount of Maine income tax they owe. The tax credits are worth 39 percent of the recipient’s total investment.

The program, approved by the Legislature in 2011, later faced criticism for lacking accountability after the Great Northern mill in East Millinocket was shut down by its owner, private equity firm Cate Street Capital of Portsmouth, New Hampshire, and more than 200 workers were laid off.

In all, investors received about $16 million in tax credits despite the mill project’s ultimate failure.

After an investigation by the Portland Press Herald, the New Markets program was changed to close certain loopholes and narrow eligibility.

J. Craig Anderson can be contacted at 791-6390 or at:

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Twitter: @jcraiganderson